UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~June 30, ~~2003~~2004

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

oFor ~~TRANSITION~~the ~~REPORT~~transition ~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~period from to .

For the transition period from __________________to __________________.

Commission File Number 1-16567

AT&T WIRELESS SERVICES, INC. ~~(Exact name of registrant as specified in its charter)~~

~~DELAWARE~~ (~~State~~Exact name of ~~Incorporation)~~registrant ~~91-1379052~~as ~~(IRS~~specified ~~Employer~~in ~~Identification~~its ~~No.~~charter)


DELAWARE		91-1379052
(State of Incorporation)		(IRS Employer Identification No.)

7277 — 164TH AVENUE NE, BUILDING 1
REDMOND, WASHINGTON 98052
(Address of principal executive offices)

(425) 580-6000
(Registrant’s telephone number)

Indicated 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 [X] No o[ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2):

Yes x [X] No o[ ]

As of ~~October 31~~July 30, ~~2003~~2004, 2,~~714~~729,~~479~~557,~~448~~562 shares of the registrant’s Common ~~Stock~~ Stock were outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION			3
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures About Market Risk			5248
Item 4. Controls and Procedures			5249
PART II — OTHER INFORMATION			5350
Item 1. Legal Proceedings			5350
Item 2. Changes in Securities and Use of Proceeds			5350
Item 3. Defaults Upon Senior Securities			5350
Item 4. Submission of Matters to a Vote of Security Holders			5350
Item 5. Other Information			5351
Item 6. Exhibits and Reports on Form 8-K			5351
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AT&T WIRELESS SERVICES, INC.
AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

		FOR THE THREE MONTHS	~~FOR THE THREE MONTHS~~							FOR THE SIX MONTHS	~~FOR THE NINE MONTHS~~
			ENDED SEPTEMBER 30,								ENDED SEPTEMBER 30,
		ENDED JUNE 30,								ENDED JUNE 30,
			2003				2002				2003			2002
		2004				2003				2004			2003
REVENUE
Services		$	$3,871	~~4,073~~		$	3,939	~~$3,765~~		$	$7,617	~~11,755~~	$	$7,682	~~10,745~~
Equipment			348	~~301~~			219	~~298~~			677	~~725~~		424	~~839~~
Total revenue			4,219	~~4,374~~			4,158	~~4,063~~			8,294	~~12,480~~		8,106	~~11,584~~
OPERATING EXPENSES
Costs of services (excluding depreciation of $655 and $548 for the three months ended September 30, and $1,772 and $1,561 for the nine months ended September 30, which is included below)				1,267				1,173				3,571			3,387
Costs of services (excluding depreciation of $748 and $541 for the three months ended June 30, and $1,480 and $1,117 for the six months ended June 30, which is included below)			1,057				1,190				2,223			2,304
Costs of equipment sales			620	~~495~~			473	~~620~~			1,206	~~1,437~~		942	~~1,702~~
Selling, general, and administrative			1,408	~~1,321~~			1,309	~~1,200~~			2,765	~~3,885~~		2,564	~~3,586~~
Depreciation and amortization			896	~~841~~			735	~~703~~			1,783	~~2,311~~		1,470	~~2,029~~
Impairment of licensing costs				83				1,329				83			1,329
Total operating expenses			3,981				3,707				7,977			7,280
Total operating expenses				4,007				5,025				11,287			12,033
OPERATING INCOME			238				451				317			826
OPERATING INCOME (LOSS)				367				(962	)			1,193			(449	)
Other income			24				50				66			20
Other income (expense)				16				(164	)			36			(188	)
Interest expense			189				207				385			391
Interest expense				202				180				593			490
INCOME (LOSS) BEFORE INCOME TAXES AND NET EQUITY EARNINGS (LOSSES) FROM INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES			73				294				(2	)		455
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND NET EQUITY (LOSSES) EARNINGS FROM INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES				181				(1,306	)			636			(1,127	)
Provision for income taxes			34				57				—			103
Provision (benefit) for income taxes				9				(139	)			112			(70	)
Net equity earnings (losses) from investments in unconsolidated subsidiaries, net of tax			22				(9	)			5			18
Net equity (losses) earnings from investments in unconsolidated subsidiaries, net of tax				(16	)			(882	)			2			(1,017	)
NET INCOME			61				228				3			370
INCOME (LOSS) FROM CONTINUING OPERATIONS				156				(2,049	)			526			(2,074	)
Accretion of mandatorily redeemable preferred stock			—				6				—			13
INCOME FROM DISCONTINUED OPERATIONS (net of tax provision of $5 and $29 for the three and nine months ended September 30, 2002)				—				8				—			47
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	61			$	222			$	3		$	357
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE				156				(2,041	)			526			(2,027	)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS PER BASIC AND DILUTED SHARE		$	0.02			$	0.08			$	0.00		$	0.13
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (net of tax benefit of $103)				—				—				—			(166	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME PER SHARE:
NET INCOME (LOSS)				156				(2,041	)			526			(2,193	)
Basic			2,728				2,712				2,724			2,711
Accretion of mandatorily redeemable preferred stock				—				6				13			13
Diluted			2,744				2,714				2,739			2,713
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS			$	156			$	(2,047	)		$	513		$	(2,206	)
INCOME (LOSS) PER BASIC AND DILUTED SHARE:
Income (loss) from continuing operations available to common shareholders			$	0.06			$	(0.76	)		$	0.19		$	(0.77	)
Income from discontinued operations				—				—				—			0.01
Cumulative effect of change in accounting principle				—				—				—			(0.06	)
Net income (loss) available to common shareholders			$	0.06			$	(0.76	)		$	0.19		$	(0.82	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE INCOME (LOSS) PER SHARE:
	Basic			2,713				2,708				2,712			2,678
	Diluted			2,718				2,708				2,714			2,678

The accompanying notes are an integral part of these ~~Consolidated~~consolidated ~~Condensed~~condensed ~~Financial~~financial ~~Statements~~statements.

AT&T WIRELESS SERVICES, INC.
AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

		AT			AT	AT			AT
					SEPTEMBER 30,				DECEMBER 31,
		JUNE 30,				DECEMBER 31,
					2003				2002
		2004				2003
ASSETS			~~ASSETS~~
Cash and cash equivalents		$	4,088		$	~~4,205~~$	4,339		$	~~2,353~~
Short-term investments			172			~~132~~	202			—
Accounts receivable, less allowances of $277 and $240						2,328				2,215
Accounts receivable, less allowances of $232 and $334			2,050				2,301
Inventories			195			~~215~~	309			~~325~~
Income tax receivable						—				56
Deferred income taxes			264				303
Deferred income taxes						277				—
Prepaid expenses and other current assets			369				361
Prepaid expenses and other current assets						408				332
TOTAL CURRENT ASSETS			7,138				7,815
TOTAL CURRENT ASSETS						7,565				5,281
Property, plant, and equipment, net of accumulated depreciation and amortization of $11,704 and $10,146			16,299				16,374
Property, plant, and equipment, net of accumulated depreciation and amortization of $9,313 and $7,810						16,069				16,263
Licensing costs, net			14,496				14,500
Licensing costs						14,426				13,959
Investments in and advances to unconsolidated subsidiaries			1,152				1,169
Investments in and advances to unconsolidated subsidiaries						1,816				2,225
Goodwill			7,444				7,390
Goodwill						7,311				7,199
Other assets, net of accumulated amortization of $345 and $378			455				554
Other assets, net of accumulated amortization of $345 and $251						569				879
TOTAL ASSETS		$	46,984			$	47,802
TOTAL ASSETS					$	47,756			$	45,806
LIABILITIES
		LIABILITIES
Accounts payable		$	934			$	1,174
Accounts payable					$	988			$	780
Payroll and benefit-related liabilities			307				500
Payroll and benefit-related liabilities						499				465
Advertising and promotion accruals			101				149
Advertising and promotion accruals						137				173
Business tax accruals			250				289
Business tax accruals						312				375
Interest payable on long-term debt			238				240
Interest payable on long-term debt						158				245
Current portion of long-term debt			259				7
Other current liabilities			1,047			~~1,143~~	1,093			~~1,055~~
TOTAL CURRENT LIABILITIES			3,136			~~3,237~~	3,452			~~3,093~~
Long-term debt			10,063			~~10,607~~	10,459			~~11,057~~
Mandatorily redeemable preferred stock (liquidation value of $286 as of September 30, 2003)						171				—
Mandatorily redeemable preferred stock, $0.01 par value, 1,000 shares authorized, .208 and .233 shares issued (liquidation values of $290 and $291)			176				177
Deferred income taxes			4,537			~~4,867~~	4,699			~~3,788~~
Other long-term liabilities			588			~~385~~	658			~~308~~
TOTAL LIABILITIES			18,500			~~19,267~~	19,445			~~18,246~~
COMMITMENTS AND CONTINGENCIES (NOTES (j) AND (k))MINORITY INTEREST						84				48
COMMITMENTS AND CONTINGENCIES (NOTES (j) AND (k))
MANDATORILY REDEEMABLE PREFERRED STOCK, $0.01 par value, 1,000 shares authorized, .233 shares issued and outstanding (liquidation value of $273 as of December 31, 2002)						—				151
MINORITY INTEREST			32				30
MANDATORILY REDEEMABLE COMMON STOCK, $0.01 par value, 406 shares issued and outstanding (redemption values of $11,214 and $10,748)						7,664				7,664
MANDATORILY REDEEMABLE COMMON STOCK, $0.01 par value, 406 shares issued and outstanding, redemption values of $11,708 and $11,372 (Note (j))			7,664				7,664
SHAREHOLDERS’ EQUITY	~~SHAREHOLDERS’ EQUITY~~
Common stock, $0.01 par value, 10,000 shares authorized, 2,308 and 2,303 shares issued and outstanding						23				23
Common stock, $0.01 par value, 10,000 shares authorized, 2,322 and 2,308 shares issued and outstanding			23				23
Additional paid-in capital			23,823			~~23,680~~	23,688			~~23,667~~
Receivable from former parent, AT&T			(25	)		~~(25~~	)(25	)		~~(461~~	)
Accumulated deficit			(3,029	)		~~(2,948~~	)(3,032	)		~~(3,474~~	)
Accumulated other comprehensive income (loss)						11				(58	)
Accumulated other comprehensive (loss) income			(4	)			9
TOTAL SHAREHOLDERS’ EQUITY			20,788			~~20,741~~	20,663			~~19,697~~
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	46,984		$	~~47,756~~$	47,802		$	~~45,806~~

The accompanying notes are an integral part of these ~~Consolidated~~consolidated ~~Condensed~~condensed ~~Financial~~financial ~~Statements~~statements.

AT&T WIRELESS SERVICES, INC.
AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(IN MILLIONS)
(UNAUDITED)

														Accumulated			Total
								Receivable
	Common				Additional			Receivable						Other			Share-
								From						Accumulated			Total
	Shares		Common		Paid-in			From Former			Accumulated			Comprehensive			Holders'
	Common				Additional			Former						Other			Share-
	Outstanding		Stock		Capital			Parent, AT&T			Deficit			Income (Loss)			Equity
	Shares		Common		Paid-in			Parent,			Accumulated			Comprehensive			Holders'
	Outstanding		Stock		Capital			AT&T			Deficit			Income (Loss)			Equity
Balance at December 31, 2003		2,308	$	23	$	23,688		$	(25	)	$	(3,032	)	$	9		$	20,663
Net income												3						3
Proceeds from AT&T Wireless Services common stock issued for employee plans and other		14				135												135
Other comprehensive loss															(13	)		(13	)
Balance at June 30, 2004		2,322	$	23	$	23,823		$	(25	)	$	(3,029	)	$	(4	)	$	20,788
Balance at December 31, 2002		2,303	$	23	$	23,667		$	(461	)	$	(3,474	)	$	(58	)	$	19,697
Net income												~~526~~370						~~526~~370
Proceeds from AT&T Wireless Services common stock issued for employee plans and other		53				2616												2616
Cash received from former parent, AT&T									436									436
Accretion of mandatorily redeemable preferred stock						(13	)											(13	)
Other comprehensive income															6983			6983
Balance at September 30, 2003		2,308	$	23	$	23,680		$	(25	)	$	(2,948	)	$	11		$	20,741
Balance at June 30, 2003		2,306	$	23	$	23,670		$	(25	)	$	(3,104	)	$	25		$	20,589
Balance at December 31, 2001		2,125	$	21	$	20,515		$	—		$	(1,150	)	$	(105	)	$	19,281
Net loss												(2,193	)					(2,193	)
Issuance of AT&T Wireless Services common stock and stock options for TeleCorp PCS, Inc. acquisition		146		2		2,280												2,282
Proceeds from AT&T Wireless Services common stock issued to DoCoMo		27				382												382
Proceeds from AT&T Wireless Services common stock issued for employee plans and other		4				40												40
Accretion of mandatorily redeemable preferred stock						(13	)											(13	)
Other comprehensive income															49			49
Balance at September 30, 2002		2,302	$	23	$	23,204		$	—		$	(3,343	)	$	(56	)	$	19,828

	FOR THE THREE MONTHS						FOR THE ~~NINE~~SIX MONTHS
	ENDED SEPTEMBER 30,						ENDED SEPTEMBER 30,
	ENDED JUNE 30,						ENDED JUNE 30,
	2003			2002			2003			2002
	2004			2003			2004			2003
SUMMARY OF TOTAL COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	156		$	(2,041	)	$	526		$	(2,193	)
Net income	$	61		$	228		$	3		$	370
Net revaluation of investments (net of taxes of $5 and $13 for the three and nine months ended September 30, 2002)		—			5			—			20
Net revaluation of financial instruments (net of taxes of $1 and $2 for the three and six months ended June 30, 2004 and $34 for the three and six months ended June 30, 2003)		2			36			3			3
Net revaluation of financial instruments (net of taxes of $2 and $(32) for the three and nine months ended September 30, 2003, and $1 and $1 for the three and nine months ended September 30, 2002)		3			4			6			3
Net foreign currency translation adjustments (net of taxes of ($5) and ($9) for the three and six months ended June 30, 2004 and $54 for the three and six months ended June 30, 2003)		(9	)		30			(16	)		80
Net foreign currency translation adjustments (net of taxes of $(11) and $43 for the three and nine months ended September 30, 2003, and $(2) and $17 for the three and nine months ended September 30, 2002)		(17	)		(6	)		63			26
TOTAL COMPREHENSIVE INCOME (LOSS)	$	54		$	294		$	(10	)	$	453
TOTAL COMPREHENSIVE INCOME (LOSS)	$	142		$	(2,038	)	$	595		$	(2,144	)

The accompanying notes are an integral part of these ~~Consolidated~~consolidated ~~Condensed~~condensed ~~Financial~~financial ~~Statements~~statements.

AT&T WIRELESS SERVICES, INC.
AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)

			FOR THE NINE MONTHS
		FOR THE SIX MONTHS
			ENDED SEPTEMBER 30,
		ENDED JUNE 30,
			2003				2002
		2004				2003
OPERATING ACTIVITIES
Net income (loss)			$	526			$	(2,193	)
Net income		$	3			$	370
Deduct: Income from discontinued operations				—				47
Adjustments to reconcile net income, to net cash provided by operating activities:
Net income (loss), excluding discontinued operations				526				(2,240	)
Net gains on sale/exchange of assets, businesses, and cost method unconsolidated subsidiaries			(30	)			(5	)
Adjustments to reconcile net income (loss), excluding discontinued operations, to net cash provided by operating activities of continuing operations:
Depreciation and amortization			1,783				1,470
	Cumulative effect of change in accounting principle, net of tax			—				166
Amortization of debt premium/discount, interest accretion, and deferred financing fees			(4	)			25
	Losses on early extinguishments of debt			40				20
Deferred income taxes			(99	)			128
	Losses from impairments of cost method unconsolidated subsidiaries			—				245
Net equity earnings from investments in unconsolidated subsidiaries			(5	)			(18	)
	Net gains on sale/exchange of assets, businesses, and cost method unconsolidated subsidiaries			(53	)			(8	)
Provision for uncollectible receivables			241				256
	Depreciation and amortization			2,311				2,029
Cash received from NOL carryback			—				511
	Impairment of licensing costs			83				1,329
Proceeds received from termination of interest rate swap agreements			—				245
	Amortization of debt premium/discount, interest accretion, and deferred financing fees			28				43
Decrease (increase) in accounts receivable			18				(247	)
	Deferred income taxes			137				(326	)
Decrease in inventories			113				114
	Net equity (earnings) losses from investments in unconsolidated subsidiaries			(9	)			1,017
Decrease in accounts payable			(144	)			(155	)
	Provision for uncollectible receivables			395				414
Net change in other operating assets and liabilities			(320	)			11
	Cash received from NOL carryback			511				—
NET CASH PROVIDED BY OPERATING ACTIVITIES			1,556				2,705
	Proceeds received from termination of interest rate swap agreements			245				—
INVESTING ACTIVITIES
	Increase in accounts receivable			(498	)			(440	)
Capital expenditures, including internal use software			(1,745	)			(874	)
	Decrease in inventories			111				146
Net disposition of licenses			2				5
	Decrease in accounts payable			(47	)			(92	)
Distributions and sales of unconsolidated subsidiaries			30				12
	Net change in other operating assets and liabilities			(47	)			(41	)
Contributions, advances, and purchases of unconsolidated subsidiaries			(9	)			(13	)
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS				3,733				2,262
Acquisitions of consolidated businesses, including cash acquired			(112	)			(12	)
INVESTING ACTIVITIES
Net redemptions of held-to-maturity securities			30				—
	Capital expenditures and other additions			(1,649	)			(3,031	)
Other investing activities, net			2				(5	)
	Net dispositions (acquisitions) of licenses			12				(32	)
NET CASH USED IN INVESTING ACTIVITIES			(1,802	)			(887	)
	Distributions and sales of unconsolidated subsidiaries			80				27
FINANCING ACTIVITIES
	Contributions, advances, and purchases of unconsolidated subsidiaries			(57	)			(402	)
Repayment of debt due to others			(134	)			—
	Acquisitions of consolidated businesses, including cash acquired			(46	)			(75	)
Proceeds from AT&T Wireless Services common stock issued			127				14
	Purchases of held-to-maturity securities			(115	)			—
Cash received from former parent, AT&T			—				436
	Issuance of long-term note receivable to unconsolidated subsidiary			—				(100	)
Other financing activities, net			2				(9	)
	Other investing activities, net			19				—
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(5	)			441
NET CASH USED IN INVESTING ACTIVITIES OF CONTINUING OPERATIONS				(1,756	)			(3,613	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(251	)			2,259
FINANCING ACTIVITIES
NET INCREASE IN CASH DUE TO ADOPTION OF FIN 46			—				16
	Repayment of debt due to others			(591	)			(1,619	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			4,339				2,353
	Proceeds from issuance of long-term debt to others, net of issuance costs			—				2,959
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	4,088			$	4,628
	Proceeds from AT&T Wireless Services common stock issued			22				421
	Cash received from former parent, AT&T			436				—
	Other financing activities, net			(8	)			(3	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES OF CONTINUING OPERATIONS				(141	)			1,758
NET CASH USED BY DISCONTINUED OPERATIONS				—				(8	)
NET INCREASE IN CASH AND CASH EQUIVALENTS				1,836				399
NET INCREASE IN CASH DUE TO ADOPTION OF FIN 46				16				—
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				2,353				3,352
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	4,205			$	3,751

The accompanying notes are an integral part of these ~~Consolidated~~consolidated ~~Condensed~~condensed ~~Financial~~financial ~~Statements~~statements.

AT&T WIRELESS SERVICES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(a) BASIS OF PRESENTATION

AT&T Wireless Services, Inc. (AT&T Wireless Services), which presently operates in a single business segment, is a provider of wireless voice and data services and products primarily in the U.S., ~~which presently operates in a single business segment.~~ AT&T Wireless Services also holds equity interests in U.S. and international wireless communications ventures, corporations, and partnerships.

The ~~Consolidated~~consolidated ~~Condensed~~condensed ~~Financial~~financial ~~Statements~~statements have been prepared in in accordance with accounting principles generally accepted in the United ~~States~~ States of America (GAAP) and pursuant to the rules and regulations of the ~~Securities~~ Securities and Exchange Commission (SEC) for interim financial statements and do not include all annual disclosures required by GAAP. These financial statements should be read in conjunction with the audited consolidated ~~Consolidated~~financial ~~Financial Statements~~statements and notes thereto included in Form 10-K for the fiscal year ended December 31, ~~2002~~2003. These ~~Consolidated~~consolidated ~~Condensed~~condensed financial ~~Financial Statements~~statements, in the opinion of management, include all normal and recurring adjustments necessary for a fair statement of the consolidated results of operations, financial position, and cash flows for each period presented. The results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 are not necessarily indicative of results to be expected ~~for~~ for the full fiscal year ~~2003~~2004 or any other future ~~periods~~period.

Certain reclassifications have been made to prior year amounts to conform to current year presentations.

(b) ~~SUMMARY~~MERGER ~~OF SIGNIFICANT ACCOUNTING POLICIES~~ANNOUNCEMENT

~~MANDATORILY~~ On ~~REDEEMABLE~~February 17, ~~FINANCIAL~~2004, ~~INSTRUMENTS~~AT&T Wireless Services entered into a merger agreement with Cingular Wireless LLC (Cingular) and certain of its affiliates. Under the terms of the agreement, which were approved by the boards of directors of AT&T Wireless Services, BellSouth Corporation, SBC Communications Inc., and Cingular, AT&T Wireless Services’ common shareholders will receive $15 cash per common share and AT&T Wireless Services’ preferred shareholders will receive the then applicable liquidation preference of their preferred shares, for an aggregate of approximately $41 billion, upon consummation of the transaction. On May 19, 2004, AT&T Wireless Services’ shareholders approved the merger agreement with Cingular. The transaction is subject to approval by regulatory authorities and other closing conditions. The companies currently anticipate closing the transaction in the fourth quarter of 2004.

InAlthough ~~May 2003,~~AT&T ~~the~~Wireless ~~Financial~~Services ~~Accounting~~believes Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Specifically, it requires that financial instruments within the ~~scope~~ oftransaction ~~the~~will ~~statement~~ be ~~classified as liabilities because they embody an~~ ~~obligation~~completed ofin the ~~issuer.~~fourth ~~Under previous guidance~~quarter, ~~many of these instruments could be classified as equity or be reflected as mezzanine equity between liabilities and equity on~~ the ~~balance~~underlying ~~sheet.~~accounting Aswithin ~~a result of~~ the ~~adoption of~~ ~~this~~consolidated ~~statement~~financial onstatements July 1, 2003, AT&T Wireless Services reclassified its mandatorily redeemable preferred stock to long-term liabilities within its Consolidated Condensed Balance Sheet. Additionally, effective with the adoption and onrelated adisclosures ~~prospective~~assumes ~~basis, the accretion relating to~~ AT&T Wireless Services~~’ mandatorily~~ ~~redeemable~~continues ~~preferred~~as ~~stock~~a isstand-alone ~~classified~~entity as ~~interest~~the ~~expense~~completion ~~within its Consolidated Condensed Statements~~ of ~~Operations. AT&T Wireless Services~~ ~~also has certain mandatorily redeemable noncontrolling interests subject to~~ the ~~disclosure~~ ~~provisions~~merger ofis ~~SFAS~~deemed ~~No. 150~~not ~~due~~probable tountil ~~the~~all ~~issuance~~required ofregulatory ~~FASB Staff~~approvals ~~Position~~have ~~No. FAS~~been ~~150-3~~received. ~~These mandatorily redeemable noncontrolling interests~~ ~~include minority interests in entities with finite lives. The estimated~~ ~~settlement amount of these entities as of September 30, 2003 was $96 million of~~ ~~which AT&T Wireless Services has $52 million reflected within minority interest on its Consolidated Condensed Balance Sheet.~~

~~DERIVATIVE~~(c) SUMMARY ~~INSTRUMENTS~~OF ~~AND~~SIGNIFICANT ~~HEDGING~~ACCOUNTING ~~ACTIVITIES~~POLICIES

InSTOCK-BASED ~~April 2003,~~COMPENSATION ~~the FASB issued SFAS No. 149, “Amendment of Statement 133~~EXPENSE ~~on Derivative Instruments and Hedging Activities.” This statement amends and~~ ~~clarifies accounting for derivative instruments, including certain derivative~~ ~~instruments embedded in other contracts, and for hedging activities under SFAS~~ No. 133, “Accounting for Derivative Instruments and Hedging Activities.” AT&T Wireless Services’ initial adoption of this statement on July 1, 2003, did not have a material impact on its results of operations, financial position, or cash flows.

~~REVENUE~~ As ~~ARRANGEMENTS~~permitted ~~WITH~~by ~~MULTIPLE~~Statement ~~DELIVERABLES~~of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” AT&T Wireless Services measures compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by the Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” AT&T Wireless Services has adopted the disclosure-only provisions of SFAS No. 123. The following table illustrates the effect on Net income available to common shareholders and Earnings (loss) per share if AT&T Wireless Services had elected to recognize compensation costs based on the fair value at the date of grant for AT&T Wireless Services common stock awards granted subsequent to the split-off in 2001, AT&T Wireless Group tracking stock awards granted to AT&T Wireless Services employees prior to the split-off, AT&T common stock awards granted to AT&T Wireless Services employees prior to the split-off, and AT&T Wireless Services shares issued under the Employee Stock Purchase Plan (ESPP) consistent with the

provisions ~~must be allocated among the separate units~~ of ~~accounting~~SFAS ~~based on their relative fair values, with certain limitations~~No. ~~In certain cases, the sale of~~ ~~wireless service with an accompanying handset constitutes a revenue arrangement~~123: ~~with multiple deliverables, which resulted in a reclassification of certain~~ ~~activation revenues (which were previously classified as services revenue) to~~ equipment revenue. AT&T Wireless Services adopted this statement on July 1, 2003, and is applying it on a prospective basis. AT&T Wireless Services’ initial adoption of this statement did not have a material impact on its results of operations, financial position, or cash flows.

VARIABLE INTEREST ENTITIES


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
(In Millions, Except Per Share Amounts)	2004		2003		2004			2003
Reported net income available to common shareholders	$	61	$	222	$	3		$	357
Add: Total stock-based employee compensation expense included in reported net income available to common shareholders, net of any related tax effect		6		1		12			3
Less: Total stock-based employee compensation expense determined under the fair value method for all employee stock awards, net of any related tax effect		26		17		51			82

Adjusted net income (loss) available to common shareholders	$	41	$	206	$	(36	)	$	278

Basic and diluted earnings per share:
Reported net income available to common shareholders	$	0.02	$	0.08	$	0.00		$	0.13
Adjusted net income (loss) available to common shareholders	$	0.02	$	0.08	$	(0.01	)	$	0.10

InAT&T ~~January~~Wireless Services granted zero and 0.7 ~~2003,~~million stock options during the ~~FASB~~three ~~issued~~and ~~FASB~~six ~~Interpretation~~months ~~No.~~ended June 4630, ~~(FIN~~2004. ~~46),~~As no options were ~~“Consolidation~~granted offor ~~Variable~~the ~~Interest~~three ~~Entities~~months ended June 30, an2004, ~~interpretation~~no weighted-average fair value calculation was required. The weighted-average fair value at date of ~~ARB~~grant Nowas $4. ~~51.”~~74 for all AT&T Wireless Services stock options ~~FIN~~granted 46during ~~requires~~the ~~certain~~three ~~variable~~months ~~interest~~ended ~~entities~~March 31, to2004 beand ~~consolidated~~was byestimated using the Black-Scholes option-pricing model. Although AT&T ~~primary~~Wireless ~~beneficiary~~Services ofhas used the Black-Scholes ~~entity~~option ifpricing model in the ~~equity~~footnotes ~~investors~~to inits financial statements, the ~~entity~~Black-Scholes dooption pricing model does not necessarily ~~have~~provide a reliable measure of the ~~characteristics~~fair value of aits ~~controlling~~employee ~~financial~~stock options ~~interest~~as orit dowas ~~not~~developed for use in estimating the fair value of short-lived exchange traded options that have no vesting restrictions and ~~sufficient~~are ~~equity~~fully attransferable, ~~risk~~and ~~for~~it ~~the~~is ~~entity~~not designed to ~~finance~~take ~~its~~into ~~activities~~account ~~without~~the ~~additional~~impact ~~subordinated~~of ~~financial~~AT&T ~~support~~Wireless ~~from~~Services’ ~~other~~pending ~~parties~~merger. ~~FIN~~The 46following ~~also~~weighted-average assumptions ~~requires~~were ~~disclosure~~applied for the three months ended March 31, 2004: (i) expected dividend yield of ~~significant~~0 percent, ~~variable~~(ii) expected ~~interests~~volatility inrate ~~variable~~of 59 percent, (iii) expected life of five years, and (iv) risk-free annual interest ~~entities~~rate ~~for~~of ~~which~~3.5 percent. aAs ~~company~~discussed in Note (b), as the completion of the merger is ~~not~~uncertain at this time, the ~~primary~~assumptions ~~beneficiary~~to calculate the weighted-average fair value of stock options granted during the first three months of 2004 assume AT&T Wireless Services continues as a stand-alone entity. Under the provisions of AT&T Wireless Services’ Long-Term Incentive Plan (LTIP) and the merger agreement with Cingular, the vesting of all equity-based awards will accelerate upon the closing of the merger between AT&T Wireless Services isand ~~required~~Cingular toand ~~apply~~each ~~FIN~~option shall 46be converted into the right to ~~new~~receive ~~variable~~the ~~interest~~excess, ~~entities~~if ~~created~~any, of $15 orover ~~acquired~~the ~~after~~exercise ~~January 31,~~price ~~2003~~of each option. ~~For~~As ~~variable~~a ~~interest~~result, ~~entities~~the ~~created~~options orgranted ~~acquired~~during onthe orthree ~~prior~~months toended ~~January~~March 31, ~~2003~~2004, ~~AT&T~~each ~~Wireless~~of ~~Services~~which ~~elected~~has toan ~~early~~exercise ~~adopt~~price ~~FIN~~below 46the ~~effective~~$15 ~~April 1~~per share to be paid in the merger, ~~2003.~~will be converted into the right to receive an aggregate of approximately $4 million upon consummation of the merger.

~~AT&T~~For ~~Wireless Services has significant variable interests in several of its unconsolidated subsidiaries for which AT&T Wireless Services is deemed to be~~ the ~~primary~~three ~~beneficiary.~~and ~~These~~six ~~variable~~months ~~interests~~ended ~~typically consist of a combination of any or all of voting equity interests~~June 30, ~~non-voting equity interests~~2004, ~~loans~~respectively, ~~and put options that provide the other owners the right to~~0.4 ~~require~~million ~~AT&T Wireless Services to purchase their ownership interest if~~ and ~~when certain events occur~~1.1 million ~~These~~shares ~~entities~~ were ~~formed~~purchased tounder ~~acquire~~the ~~licenses~~ESPP. ~~that were~~The ~~restricted~~weighted-average byfair ~~FCC~~values ~~rule~~at ~~to businesses with limited assets and revenues, and to provide a means through which AT&T Wireless Services can invest in these licenses. To~~ date, ~~the activity~~ of ~~these~~grant ~~entities~~were ~~has~~$2.08 ~~consisted primarily of acquiring licenses through acquisitions~~ and ~~FCC auctions, and network construction~~$1.71 ~~AT&T Wireless Services previously accounted~~ for ~~these ventures~~ ~~under~~ the ~~equity~~option ~~method~~values of ~~accounting~~the asshares ~~AT&T~~of ~~Wireless Services does not have voting control and~~ AT&T Wireless Services ~~has~~common ~~recognized virtually 100 percent~~stock ofissued during the ~~entities’~~three ~~operating~~and ~~losses~~six ~~due~~months toended ~~its significant variable interests. AT&T Wireless Services’ maximum loss exposure related to these entities as of September~~June 30, ~~2003 was approximately $145 million~~2004, ~~which represented the value~~respectively, ofunder the ~~put~~ESPP, ~~options~~and ~~that~~were ~~provide~~estimated ~~the~~using ~~other owners~~ the ~~right~~Black-Scholes ~~to require AT&T~~option-pricing ~~Wireless~~model. ~~Services~~The tofollowing ~~purchase~~weighted-average ~~their~~assumptions ~~ownership~~were ~~interest~~applied: ~~under certain~~(i) ~~circumstances.~~expected Asdividend ayield ~~result~~ of ~~the~~0 percent ~~adoption~~for ofthe ~~FIN~~three ~~46,~~and ~~AT&T~~six ~~Wireless~~months ~~Services~~ended ~~consolidated these entities at their carrying values effective April~~June 130, ~~2003. Additionally~~2004, ~~AT&T~~(ii) expected ~~Wireless~~volatility ~~Services~~rates ~~has~~of ~~determined~~7 percent itand ~~has a significant~~34 percent ~~variable~~for ~~interest and is deemed to be~~ the ~~primary~~three ~~beneficiary in an entity that holds assets~~ and ~~liabilities~~six ~~associated~~months ~~with~~ended ~~synthetic~~June 30, ~~leases.~~2004, ~~As a result~~respectively, (iii) ~~upon~~expected ~~adoption,~~life ~~AT&T~~of ~~Wireless~~three ~~Services~~months ~~consolidated~~for the ~~assets~~three and ~~liabilities associated~~six ~~with~~months ~~two~~ended ~~synthetic~~June 30, 2004, ~~leases~~and ~~that~~(iv) risk-free ~~were previously disclosed as off~~three-~~balance~~month ~~sheet~~interest ~~arrangements.~~rate ~~The impact~~ of ~~early-adopting~~1.4 percent ~~FIN~~and ~~46 to AT&T~~1.1 ~~Wireless~~percent ~~Services’~~for ~~Consolidated~~the ~~Condensed~~three ~~Balance~~and ~~Sheet~~six asmonths ofended ~~April~~June 130, ~~2003~~2004, ~~was~~respectively. ~~as follows:~~

	Cash and		Property,				Investments in and						Other		Long-		Deferred		Other
	cash		plant, and		Licensing		advances to unconsolidated			Other			current		term		income tax		long-term		Minority
(In Millions)	equivalents		equipment		costs		subsidiaries			assets			liabilities		debt		liabilities		liabilities		interest
Unconsolidated subsidiaries	$	16	$	—	$	636	$	(506	)	$	(18	)	$	8	$	30	$	47	$	5	$	38
Synthetic leases				63												63

AT&T Wireless Services granted 17.0 million and 25.1 million stock options during the three and six months ended June 30, 2003, respectively. Fair value was estimated using the Black-Scholes option-pricing model. Using this model, the weighted-average fair value at date of grant was $4.00 and $4.07 for all AT&T Wireless Services stock options granted during the three and six months ended June 30, 2003, respectively. The following weighted-average assumptions were applied: (i) expected dividend yield of 0 percent for the three and six months ended June 30, 2003, (ii) expected volatility rates of 62 percent and 63 percent for the three and six months ended June 30, 2003, respectively, (iii) expected life of six years for the three and six months ended June 30, 2003, and (iv) risk-free interest rate of 3.4 percent for the three and six months ended June 30, 2003.

At adoption, the cumulative effect of change in accounting principle was not material to AT&T Wireless Services’ results of operations. Effective with the adoption of FIN 46 on April 1, 2003, AT&T Wireless Services removed $239 million of outside basis deferred tax assets, which had full valuation allowances, associated with the unconsolidated subsidiaries for which AT&T Wireless Services is deemed to be the primary beneficiary.

AT&T Wireless Services has no material variable interests for which it is not deemed to be the primary beneficiary.

ASSET RETIREMENT OBLIGATIONS

In July 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This statement provides accounting and reporting standards for costs associated with the retirement of long-lived assets. This statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.

~~AT&T~~For ~~Wireless~~the ~~Services~~three isand ~~subject~~six tomonths ~~asset~~ended ~~retirement~~June 30, ~~obligations associated~~2003, ~~with~~0.7 million ~~its~~and 1.5 million ~~cell~~shares, ~~site~~respectively, ~~switch~~were ~~site,~~purchased ~~retail,~~under ~~and~~the ~~administrative~~ESPP. ~~location~~Fair ~~operating~~value ~~leases,~~was ~~which~~estimated ~~are~~using ~~subject~~the toBlack-Scholes option-pricing model. Using this model, the ~~provisions~~weighted-average fair value at date of ~~this~~grant ~~statement.~~was ~~These~~$1.39 ~~lease~~and ~~agreements~~$1.40 ~~may~~for ~~contain~~the ~~clauses~~option ~~requiring~~value ~~restoration~~ of the ~~leased~~shares ~~site~~of AT&T Wireless Services atcommon stock issued under the ~~end~~ESPP ofduring the ~~lease~~three ~~term,~~and ~~creating~~six anmonths ~~asset~~ended June 30, ~~retirement~~2003, ~~obligation~~respectively. ~~AT&T~~The following weighted-average assumptions ~~Wireless~~were ~~Services’~~applied: ~~initial~~(i) expected ~~adoption~~dividend yield of ~~this~~0 percent ~~statement~~for ~~did~~the ~~not~~three ~~have~~and six amonths ~~material impact~~ended onJune 30, ~~its~~2003, ~~results~~(ii) expected volatility rates of ~~operations~~65 percent and 73 percent for the three and six months ended June 30, ~~financial~~2003, respectively, ~~position~~(iii) expected life of three months for the three and six months ended June 30, or2003, ~~cash~~and ~~flows~~(iv) risk-free three-month interest rates of 0.9 percent and 1.0 percent for the three and six months ended June 30, 2003, respectively.

~~STOCK-BASED~~PROPERTY, ~~COMPENSATION~~PLANT, ~~EXPENSE~~AND EQUIPMENT

AsDuring ~~permitted~~the byfirst ~~SFAS~~half ~~No. 123,~~of ~~“Accounting for Stock-Based Compensation~~2004,” AT&T Wireless Services ~~measures~~continued accelerating ~~compensation~~the ~~expense~~depreciation ~~for~~on ~~its~~wireless ~~stock-based~~communications equipment, ~~employee~~primarily ~~compensation~~electronics ~~plans~~related ~~using~~to ~~the~~its ~~intrinsic~~second-generation, ~~value~~or ~~method~~TDMA, ~~prescribed by the~~network ~~Accounting~~in ~~Principles~~certain ~~Board~~markets. ~~(APB) Opinion~~This ~~No. 25,~~acceleration ~~“Accounting~~resulted ~~for~~from ~~Stock~~a ~~Issued~~more aggressive tomigration ~~Employees.”~~from ~~Compensation~~its ~~costs~~TDMA ~~associated~~network ~~with~~to ~~stock~~its next-~~based~~generation, ~~awards charged~~GSM/GPRS/EDGE, ~~against~~network ~~AT&T~~than ~~Wireless~~originally ~~Services’~~planned ~~results~~in ofthese ~~operations~~markets. ~~were~~The ~~not~~pretax ~~material~~impact of this change for the three and ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 ~~and~~was ~~2002. AT&T Wireless Services~~an ~~has~~increase ~~adopted~~in ~~the~~depreciation ~~disclosure-only~~expense ~~provisions~~ of ~~SFAS~~approximately ~~No.~~$35 ~~123.~~million ~~The~~and ~~following table~~$92 ~~illustrates~~million, ~~the~~respectively, ~~effect~~a ondecrease to net income ~~(loss)~~ available to common ~~shareholders~~ ~~and~~shareholders ~~income~~of ~~(loss)~~approximately $22 ~~per~~million ~~basic~~ and diluted share if AT&T Wireless Services had elected to recognize compensation costs based on the fair value at the date of grant for AT&T Wireless Services common stock awards granted subsequent to its split-off from AT&T in July$57 ~~2001~~million, ~~AT&T~~respectively, and ~~Wireless~~a ~~Group~~decrease ~~tracking stock awards granted~~ to ~~AT&T~~net ~~Wireless~~income ~~Services~~available ~~employees prior~~ to ~~the split-off, AT&T~~ common ~~stock~~ ~~awards~~shareholders ~~granted~~per ~~to AT&T Wireless Services employees prior to the~~basic ~~split-off,~~ and ~~AT&T~~diluted ~~Wireless~~share ~~Services~~of ~~shares~~$0.01 ~~issued~~and ~~under~~$0.02, ~~the Employee Stock Purchase Plan (ESPP) consistent with the provisions of SFAS No~~respectively. ~~123:~~

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
(In Millions, Except Per Share Amounts)	2003		2002			2003		2002
Reported net income (loss) available to common shareholders	$	156	$	(2,047	)	$	513	$	(2,206	)
Less: Total stock-based employee compensation expense determined under the fair value method for all employee stock awards, net of tax		41		55			120		165
Adjusted net income (loss) available to common shareholders	$	115	$	(2,102	)	$	393	$	(2,371	)
Income (loss) per basic and diluted share:
Reported net income (loss) available to common shareholders	$	0.06	$	(0.76	)	$	0.19	$	(0.82	)
Adjusted net income (loss) available to common shareholders	$	0.04	$	(0.78	)	$	0.14	$	(0.88	)

REVENUE RECOGNITION

~~AT&T~~In ~~Wireless~~certain ~~Services~~cases, ~~granted~~customer ~~2.4 million~~activation ~~and~~fees, ~~27.5 million~~along ~~stock~~with ~~options during~~ the ~~three and nine months ended September 30, 2003, respectively. Fair~~related ~~value~~costs ~~was~~up ~~estimated~~to ~~using~~but ~~the~~not ~~Black-Scholes~~exceeding ~~option-pricing~~these ~~model. Using this model~~fees, ~~the~~are ~~weighted-average fair value at date of grant was $4~~deferred.95 ~~and~~The ~~$4.14 for~~customer ~~all~~activation ~~AT&T~~fees ~~Wireless~~are ~~Services~~amortized ~~stock~~into ~~options~~services ~~granted~~revenue ~~during~~and the ~~three~~related ~~and nine~~costs ~~months~~are ~~ended~~amortized ~~September 30~~into selling, ~~2003~~general, ~~respectively.~~and ~~The~~administrative ~~following~~expenses ~~weighted~~over ~~average~~the ~~assumptions~~estimated ~~were~~customer ~~applied:~~relationship ~~(i) expected~~period. ~~dividend~~During ~~yield~~the ofsecond ~~0 percent~~quarter ~~for the~~of ~~three~~2004, ~~and~~AT&T ~~nine~~Wireless ~~months~~Services ~~ended~~reassessed ~~September 30,~~the ~~2003,~~estimated ~~(ii) expected volatility rates~~customer ofrelationship ~~60 percent~~period ~~and 63 percent~~ for ~~the~~its ~~three~~subscribers and ~~nine~~reduced ~~months~~the ~~ended September 30,~~amortization ~~2003,~~period ~~respectively, (iii) expected life~~ of ~~six~~these ~~years~~fees ~~for~~from ~~the three and nine~~ 36 months ~~ended~~to ~~September~~28 ~~30,~~months. ~~2003,~~The ~~and~~impact ~~(iv) risk-free annual interest rates~~ of this ~~3.5 percent~~change ~~and~~was ~~3.4 percent~~not ~~for~~material ~~the~~to ~~three~~AT&T ~~and~~Wireless ~~nine~~Services’ ~~months~~results ~~ended~~of ~~September 30,~~operations ~~2003,~~or ~~respectively~~financial position.

For the three and nine months ended September 30, 2003, 0.5 million and 2.0 million shares, respectively, were purchased under the ESPP. Fair value was estimated using the Black-Scholes option-pricing model. Using this model, the weighted-average fair value at date of grant was $1.37 and $1.39 for the option value of the shares of AT&T Wireless Services common stock issued under the ESPP during the three and nine months ended September 30, 2003, respectively. The following weighted average assumptions were applied: (id) ~~expected~~GOODWILL ~~dividend yield~~AND ofOTHER ~~0 percent~~INTANGIBLE ~~for the three and nine months ended September 30, 2003, (ii)~~ASSETS ~~expected volatility rates of 38 percent and 65 percent for the three and nine~~ ~~months ended September 30, 2003, respectively, (iii) expected life of three~~ ~~months for the three and nine months ended September 30, 2003, and (iv)~~ ~~risk-free three-month interest rates of 0.9 percent and 1.0 percent for the three and nine months ended September 30, 2003, respectively.~~

~~AT&T~~In ~~Wireless~~accordance ~~Services~~with ~~granted~~the ~~1.1 million~~requirements ~~and~~of 39SFAS No.3 ~~million~~142, ~~stock~~“Goodwill ~~options~~and ~~during~~Other ~~the~~Intangible ~~three~~Assets,” ~~and~~which ~~nine~~prohibits ~~months~~amortization ~~ended~~for ~~September 30,~~goodwill ~~2002~~and indefinite-lived intangible assets, ~~respectively.~~AT&T ~~Fair value~~Wireless ~~was~~Services ~~estimated~~does ~~using~~not amortize ~~the~~acquired ~~Black-Scholes~~goodwill ~~option-pricing~~or ~~model.~~Federal ~~Using~~Communications ~~this~~Commission (FCC) ~~model,~~licensing ~~the~~costs. ~~weighted-average~~Excess ~~fair~~net book value atassociated ~~date~~with ofits ~~grant~~equity ~~was~~method unconsolidated ~~$3.05~~subsidiaries ~~and~~related ~~$5.57~~to ~~for~~goodwill or licensing costs are ~~all~~also ~~AT&T~~not ~~Wireless~~amortized. ~~Services~~Although ~~stock~~FCC ~~options~~licenses ~~granted~~are ~~during~~issued ~~the~~with ~~three~~a ~~and~~stated ~~nine~~term, ~~months~~generally ~~ended September~~10 30years, ~~2002,~~the ~~respectively.~~renewal ~~The~~of ~~following~~FCC ~~weighted~~licenses ~~average~~is a routine matter ~~assumptions~~involving ~~were~~a ~~applied:~~nominal ~~(i) expected~~fee ~~dividend~~and ~~yield~~AT&T ofWireless ~~0 percent~~Services ~~for~~has ~~the three~~determined ~~and~~that ~~nine~~no legal, ~~months~~regulatory, ~~ended~~contractual, ~~September 30~~competitive, ~~2002~~economic, ~~(ii) expected~~or ~~volatility~~other ~~rate~~factors ofcurrently ~~65 percent~~exist ~~for~~that limit the ~~three~~useful ~~and~~life ~~nine~~of ~~months~~its ~~ended~~FCC ~~September 30,~~licenses. ~~2002, (iii)~~AT&T ~~expected~~Wireless ~~life~~Services periodically reevaluates its determination of ~~six~~an indefinite ~~years~~useful ~~for~~life ~~the~~with ~~three~~regard ~~and~~to ~~nine~~FCC ~~months~~licenses. ~~ended~~AT&T ~~September 30,~~Wireless ~~2002,~~Services’ U.S. and ~~(iv) risk-free~~Canadian ~~annual~~unconsolidated ~~interest~~subsidiaries ~~rate~~have ofalso determined ~~5.2 percent~~that ~~for~~their ~~the~~licensing ~~three~~costs have indefinite lives and ~~nine~~ ~~months~~do ~~ended~~not amortize ~~September 30,~~those ~~2002~~costs.

AT&T Wireless Services is required to test both acquired goodwill and other indefinite-lived intangible assets, consisting of U.S. licensing costs, for impairment on an annual basis based upon a fair value approach. Additionally, goodwill must be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an entity below its carrying value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If AT&T Wireless Services’ market value is less than its book value for an extended period of time, it could trigger the need for impairment tests of acquired goodwill between annual tests. Other indefinite-lived intangible assets must be tested between annual tests if events or changes in circumstances indicate that the asset might be impaired.

In the absence of a current transaction for the sale of its business enterprise, AT&T Wireless Services believes a

~~For~~discounted cash flow (DCF) model, rather than the ~~three~~market ~~and~~price ~~nine~~of ~~months~~its ~~ended~~common ~~September 30~~stock, ~~2002,~~is ~~1.0 million~~the ~~and~~best ~~2.8 million~~technique ~~shares,~~with ~~respectively,~~which ~~were~~to ~~purchased~~estimate ~~under~~ the ~~ESPP.~~fair ~~Fair~~ value ~~was~~of its business ~~estimated~~enterprise. ~~using~~The ~~the~~closing ~~Black-Scholes~~price ~~option-pricing~~of ~~model.~~AT&T ~~Using~~Wireless ~~this~~Services ~~model,~~common ~~the~~stock as ~~weighted-average~~of ~~fair~~the ~~value~~last atbusiness ~~date~~day of ~~grant~~the month was $08.9621, $8.18, $7.99, $13.61, and $114.4232 for the ~~option~~quarters ended June 30, 2003, September 30, 2003, ~~value~~December 31, of2003, ~~the~~March 31, ~~shares~~2004, ofand ~~AT&T~~June 30, ~~Wireless~~2004, ~~Services~~respectively, reflecting ~~common~~market ~~stock~~capitalizations, ~~issued~~in ~~under~~some ~~the~~cases, that were significantly ~~ESPP~~lower ~~during~~than the ~~three~~fair ~~and~~values ~~nine~~as ~~months~~determined ~~ended~~using ~~September 30,~~discounted ~~2002,~~cash ~~respectively~~flows. If ~~The~~market ~~following~~prices ~~weighted~~(adjusted ~~average~~for ~~assumptions~~items ~~were~~that ~~applied:~~may ~~(i) expected~~affect ~~dividend yield~~the offair ~~0 percent~~value ~~for~~of the reporting ~~three~~unit, ~~and~~such ~~nine~~as ~~months~~a ~~ended~~control ~~September 30,~~premium) ~~2002,~~were ~~(ii) expected~~used ~~volatility~~to ~~rate~~derive the fair value of ~~80 percent~~AT&T ~~for~~Wireless ~~the~~Services’ ~~three~~business ~~and~~enterprise ~~nine~~instead ~~months~~of ~~ended~~a DCF ~~September 30~~model, ~~2002,~~it ~~(iii) expected~~could ~~life~~result ofin ~~three~~a ~~months~~lower ~~for~~fair ~~the~~value ~~three~~of ~~and~~the ~~nine~~business enterprise. ~~months~~This ~~ended~~lower ~~September 30,~~fair ~~2002,~~value ~~and~~might ~~(iv) risk-free~~result ~~three-month~~in ~~interest~~an ~~rates~~impairment charge that might not ofotherwise ~~1.6 percent~~result ~~and~~from 1using a DCF model.~~7 percent~~ ~~for~~While ~~the~~AT&T ~~three~~Wireless ~~and~~Services does ~~nine~~not ~~months~~use ~~ended~~its ~~September~~market price to determine the fair value of its ~~30,~~reporting ~~2002~~unit, ~~respectively~~AT&T Wireless Services expects convergence between its market capitalization and DCF valuation to occur over time.

~~GUARANTEES~~ On January 22, 2004, AT&T Wireless Services announced that its board of directors was exploring strategic alternatives. On February 17, 2004, AT&T Wireless Services and Cingular and certain of its affiliates signed an agreement such that, subject to certain conditions, Cingular would acquire AT&T Wireless Services for approximately $41 billion, which AT&T Wireless Services deems to reflect fair value. The announcement in January, along with the agreement signed in February, constituted triggering events under SFAS No. 142 requiring AT&T Wireless Services to perform impairment tests for both its goodwill and strategic licensing costs during the first quarter of 2004. AT&T Wireless Services determined the fair value of its business enterprise based upon the purchase price of $41 billion reflected in the agreement. As the business enterprise fair value of $41 billion exceeded its net book value, the first step of the goodwill impairment test was passed and no impairment was recorded. AT&T Wireless Services determined the fair value of its strategic licensing costs using a DCF model that took into consideration its business enterprise fair value. This test resulted in no impairment charges for AT&T Wireless Services’ strategic licensing costs.

InThe ~~November 2002,~~following ~~the~~table ~~FASB~~provides ~~issued~~information ~~Interpretation~~about ~~No. 45, “Guarantor’s~~transactions ~~Accounting~~impacting ~~and~~goodwill ~~Disclosure Requirements~~ for Guarantees, Including Indirect Guarantees of Indebtedness of Others — an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” This interpretation expands on the ~~existing~~six ~~accounting~~months ~~guidance~~ended ~~and disclosure requirements for most guarantees~~June 30, ~~including~~2004 indemnifications. It requires that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligations it assumes under that guarantee if that amount is reasonably estimable, and must disclose that information in its interim and annual financial statements. The provisions for initial recognition and measurement of the liability are to be applied on a prospective basis to guarantees issued or modified on or after January 1, 2003~~. AT&T Wireless Services’ initial adoption of this statement on January 1~~, ~~2003, did~~ ~~not have a material impact on its results of operations, financial position, or~~respectively: ~~cash flows. Guarantees issued or modified after January 1, 2003, will be~~ ~~recognized at their fair value in AT&T Wireless Services’ financial statements. See Note (j) for additional disclosures related to indemnifications made by AT&T Wireless Services.~~

RESTRUCTURING COSTS


	Six Months
	Ended June 30,
(In Millions)	2004		2003
Goodwill balance at beginning of period	$	7,390	$	7,199
Net impact from market exchanges, acquisitions and dispositions		54		79

Goodwill balance at June 30	$	7,444	$	7,278

InSee ~~June 2002,~~further ~~the~~discussion ~~FASB~~of ~~issued~~market ~~SFAS No. 146~~exchanges, ~~“Accounting~~acquisitions ~~for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting~~ and ~~reporting for costs associated with exit or disposal~~ ~~activities~~dispositions ~~and~~at ~~nullifies~~Note ~~EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity~~ (~~including Certain Costs Incurred in a Restructuring~~h).~~” This statement requires~~ ~~that a liability for a cost associated with an exit or disposal activity be~~ ~~recognized at fair value when the liability is incurred. AT&T Wireless~~ ~~Services’ initial adoption of this statement on January 1, 2003, did not have a material impact on its results of operations, financial position, or cash flows.~~

~~(c)~~ Intangible assets with indefinite lives at June ~~GOODWILL~~30, ~~AND~~2004 ~~OTHER~~and December 31, ~~INTANGIBLE~~2003 ~~ASSETS~~consisted of U.S. licensing costs of $14,483 million and $14,492 million, respectively. Amortizable intangible assets at June 30, 2004 and December 31, 2003 consisted of values assigned to subscribers acquired of $267 million and $304 million, net of accumulated amortization of $345 million and $378 million, respectively. Intangible assets related to subscribers acquired are being amortized on a straight-line basis over five years. Pretax amortization expense for the three and six months ended June 30, 2004 totaled $32 million and $67 million, respectively. Pretax amortization expense for the three and six months ended June 30, 2003 totaled $31 million and $61 million, respectively. The aggregate pretax amortization expense for the years ended December 31, 2004, 2005, 2006, 2007, and 2008 are estimated to be $128 million, $107 million, $47 million, $31 million, and $19 million, respectively.

During the first quarter of 2002, AT&T Wireless Services recorded a cumulative effect of change in accounting principle of $166 million, net of tax, associated with its portion of transitional impairment losses recognized by its equity method investments upon adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.” Of the total aftertax charge, $72 million and $7 million represented AT&T Wireless Services’ proportionate share of impairments recognized by TeleCorp PCS, Inc. (~~TeleCorp~~e) ~~of its licensing costs and goodwill, respectively. The remaining $87~~ ~~million~~RESTRUCTURING ~~represented AT&T Wireless~~CHARGES ~~Services’ proportionate share of an impairment of licensing costs recognized by~~ ~~American Cellular Corporation.~~

~~SFAS~~During ~~No. 142~~the ~~requires~~second quarter of 2003, AT&T Wireless Services tolaunched ~~test its acquired goodwill~~a ~~and other indefinite~~company-~~lived~~wide ~~intangible~~initiative ~~assets,~~known ~~consisting~~as of“Project ~~U.S.~~Pinnacle” ~~licensing costs,~~in ~~for impairment on~~ an ~~annual~~effort ~~basis~~to improve ~~based~~operating ~~upon~~efficiency aand ~~fair value approach~~margins. During the ~~third~~first ~~quarter~~and second quarters of ~~2003~~2004, AT&T Wireless Services ~~completed~~recorded ~~its~~$6 million ~~second~~and $1 ~~annual~~million, ~~impairment~~respectively, ~~tests~~of ~~for~~additional ~~both~~restructuring ~~goodwill~~charges ~~and~~within selling, ~~U.S.~~general ~~licensing~~and ~~costs.~~administrative ~~Such testing~~expenses ~~resulted~~associated inwith noadditional employee ~~impairment~~separations ~~charge~~anticipated to ~~goodwill~~occur during 2004. ~~The~~During ~~second~~the ~~annual~~first ~~assessment~~and second quarters of 2004, AT&T Wireless Services’ ~~U.S.~~reversed ~~licensing~~$12 million and ~~costs~~$25 million, ~~resulted~~respectively, inalso awithin ~~pretax~~selling, general and ~~impairment~~administrative ~~charge~~expenses, offor ~~$83 million.~~charges ~~See~~taken ~~Note~~during ~~(d) for~~2003 ~~further~~that ~~information~~are no longer ~~regarding~~required ~~these~~based ~~tests.~~on a reevaluation of certain restructuring activities, primarily related to employee

The following table provides information about transactions impacting goodwill for the period from December 31, 2002 to September 30, 2003:

(In Millions)
Goodwill balance at December 31, 2002	$	7,199
Net impact from market exchanges and acquisitions		112
Goodwill balance at September 30, 2003	$	7,311

On August 1, 2003, AT&T Wireless Services completed an exchange transaction with U.S. Cellular Corporation resulting in an increase to goodwill of $31 million. On June 17, 2003, AT&T Wireless Services completed an exchange transaction with a subsidiary

separations within ofits ~~Dobson~~customer ~~Communications~~care ~~Corp~~and information technology functions. ~~(Dobson)~~AT&T ~~resulting~~Wireless inServices established a ~~net~~restructuring ~~increase~~plan during the fourth quarter of 2003 related to its customer care function. ~~goodwill~~During the second quarter of ~~$75 million~~2004, the restructuring plan needed to be modified due to volumes of calls into its customer care centers that were higher than anticipated in the original plan. ~~See~~The ~~Note~~adjustments ~~(g)~~ to the plan for ~~further~~employee separations related to the information ontechnology ~~these~~function ~~transactions.~~resulted from a reassessment of the economic and performance risk associated with utilizing third parties for certain functions, as well as higher levels of voluntary employee attrition.

~~Intangible assets with indefinite lives at September 30,~~ During 2003 and ~~December 31,~~the ~~2002~~first ~~consisted~~half of ~~U.S.~~2004, ~~licensing~~AT&T ~~costs~~Wireless ofServices ~~$14,417 million~~recorded ~~and $13,949~~net ~~million,~~restructuring ~~respectively.~~charges ~~Amortizable~~reflecting ~~intangible~~its ~~assets~~plan atto ~~September 30,~~separate ~~2003 and~~approximately ~~December 31~~2,000 ~~2002~~employees. ~~consisted~~Approximately ~~of customer lists of $646~~80 ~~million~~percent ~~(net~~ of ~~accumulated~~ ~~amortization~~these ofemployees ~~$345 million)~~would ~~and~~be expected ~~$595 million~~to ~~(net~~be ofexempt ~~accumulated amortization~~employees ofand ~~$251~~20 ~~million),~~percent ~~respectively.~~would ~~Customer~~be ~~lists~~expected ~~are~~to ~~being amortized~~be ~~on a straight~~non-~~line basis over five years~~exempt. ~~Pretax~~Approximately ~~amortization~~1,800 ~~expense associated~~of ~~with customer lists for~~ the ~~three months ended September 30~~2,000 ~~2003 and~~employees ~~2002~~had ~~totaled~~left ~~$32 million and $30 million, respectively, and $93 million and~~their ~~$87 million~~positions ~~for~~as ~~the~~of ~~nine months ended September~~June 30, ~~2003 and 2002, respectively~~2004. The ~~aggregate~~majority ~~pretax~~of ~~amortization~~the ~~expense associated with~~remaining ~~customer~~approximately ~~lists~~200 ~~for~~anticipated ~~the~~employee ~~years~~separations ~~ended~~are ~~December 31,~~currently ~~2003,~~on ~~2004, 2005, 2006, and~~hold ~~2007~~pending ~~are~~AT&T ~~estimated~~Wireless toServices’ bemerger ~~$124 million,~~with ~~$122 million,~~Cingular ~~$95 million,~~(see ~~$35 million, and~~Note ~~$14 million, respectively~~(b)).

~~(d) ASSET~~ The ~~IMPAIRMENT~~following ~~AND~~table ~~RESTRUCTURING~~displays ~~CHARGES~~the activity and balances of the restructuring reserve, which is reflected in payroll and benefit-related liabilities on the Consolidated Condensed Balance Sheets for the three and six months ended June 30, 2004:

AT&T Wireless Services’ completed its second annual impairment tests for both goodwill and U.S. licensing costs during the third quarter of 2003, using methodologies consistent with those applied at the time of the initial adoption of SFAS No. 142 on January 1, 2002 as well as its first annual impairment test in the prior year quarter. Such testing resulted in no impairment charge to goodwill as the fair value calculated using a discounted cash flow model was sufficient to pass the first step of the impairment test as defined by SFAS No. 142. FCC licenses that support AT&T Wireless Services’ U.S. strategic plan, which represent a majority of the licensing costs’ carrying value, were aggregated and valued using a discounted cash flow model. The fair value of AT&T Wireless Services’ aggregated U.S. strategic licenses, calculated using a discounted cash flow model, was greater than the carrying value, and therefore, no impairment was recorded. AT&T Wireless Services’ non-strategic U.S. licenses and licenses held by AT&T Wireless Services’ variable interest entities (see Note (b)) were valued on a license-by-license basis using primarily comparative market transaction data to determine a fair value. These tests resulted in pretax impairment charges of $26 million for its non-strategic licenses and $57 million for licenses held by AT&T Wireless Services’ variable interest entities, which were recorded as impairments of licensing costs during the third quarter of 2003. AT&T Wireless Services believes that the declines in the fair value of certain licenses are reflective of recent comparable transactions that have occurred in the market. These impairment charges did not impact any of AT&T Wireless Services’ debt covenants.


	Employee Separation
	For the Three			For the Six
	Months Ended			Months Ended
(In Millions)	June 30, 2004			June 30, 2004
Beginning Balance	$	43		$	64
Additions		1			7
Payments		(12	)		(27	)
Adjustments		(25	)		(37	)

Balance at June 30, 2004	$	7		$	7

~~In the third quarter of 2003, AT&T Wireless Services recognized a pretax impairment charge of $62 million within net equity~~ (~~losses~~f) ~~earnings~~EARNINGS ~~from investments~~PER inSHARE ~~unconsolidated subsidiaries associated with its non-strategic investment in Far EasTone Telecommunications Co., Ltd~~ (~~Far EasTone~~EPS)~~. This~~ ~~impairment charge was recognized due to a decline in the fair value of the~~ ~~investment that management deemed to be other than temporary.~~

During the second quarter of 2003, AT&T Wireless Services launched a company-wide initiative known as “Project Pinnacle” in an effort to improve operating efficiency and reach its goal of industry leading margins in 2005. In the second quarter, in accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits — an Amendment of FASB Statements No. 5 and 43,” AT&T Wireless Services recorded a business restructuring charge for workforce reductions, including reductions resulting from AT&T Wireless Services’ plans to consolidate national corporate functions primarily in Redmond, Washington and northern New Jersey. This charge included $47 million related to employee separation costs for actions taken during the second quarter of 2003, and is reflected in the Consolidated Condensed Statements of Operations as $42 million in selling, general, and administrative expenses and $5 million in costs of services. An additional business restructuring charge of $10 million was recorded during the third quarter of 2003, approximately one half of which related to new actions taken during the period, and the other half resulting from a higher number of employee separations than originally planned for in the second quarter charge. The ~~third~~following ~~quarter~~table ~~charge~~presents ~~is reflected in~~ the ~~Consolidated~~ ~~Condensed~~computation ~~Statements~~ of ~~Operations~~basic ~~for the three months ended September 30, 2003 as $9 million in selling, general,~~ and ~~administrative~~diluted ~~expenses~~earnings ~~and~~per ~~$1 million in costs of services. Approximately 1,900 employees are~~share: ~~expected to be separated in conjunction with these plans, of which~~ approximately 80 percent are exempt employees and 20 percent are non-exempt employees. The majority of these employee separations will be involuntary, although approximately one-third of the workforce reductions are anticipated to be the result of employees who decline the opportunity to relocate. Several hundred of those positions will be filled in AT&T Wireless Services’ consolidated headquarters. The employee separation number is not adjusted for anticipated hiring to fill these positions. Approximately 800 employees had left their positions as of September 30, 2003; the remaining employees are anticipated to leave their positions by the end of 2004.

The following table displays the activity and balances of the restructuring reserve, which is reflected in payroll and benefit-related liabilities on the Consolidated Condensed Balance Sheet:


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
(In Millions, Except per share amounts)	2004		2003		2004		2003
Net income	$	61	$	228	$	3	$	370
Less: Accretion of mandatorily redeemable preferred stock		—		6		—		13

Net income available to common shareholders	$	61	$	222	$	3	$	357

Weighted average common shares outstanding		2,728		2,712		2,724		2,711
Net effect of dilutive stock options, restricted stock units and performance share units (1)		16		2		15		2

Weighted average common shares and equivalents outstanding		2,744		2,714		2,739		2,713

Net income available to common shareholders per basic and diluted share	$	0.02	$	0.08	$	0.00	$	0.13

(1)

The effect of dilutive stock options, restricted stock and performance share units for three and six months ended June 30, 2004 and 2003 was determined under the treasury stock method. As of June 30, 2004 and 2003 there were 193 million and 213 million, respectively, AT&T Wireless Services common stock options, restricted stock and performance stock units, as well as the 41.7 million warrants issued to NTT DoCoMo, Inc. (DoCoMo) that were anti-dilutive and therefore were excluded from the calculation of diluted earnings per share.

(g) VARIABLE INTEREST ENTITIES

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,” which was further revised in December 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do

(In Millions)	Employee Separation
Balance at December 31, 2002	$	—
Additions		57
Payments		(12	)
Balance at September 30, 2003	$	45

not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 also requires disclosure of significant variable interests in variable interest entities for which a company is not the primary beneficiary.

~~(e)~~ AT&T Wireless Services has significant variable interests in several entities for which AT&T Wireless Services is deemed to be the primary beneficiary. These variable interests typically consist of a combination of any or all of voting equity interests, non-voting equity interests, loans, and put options that provide the other owners the right to require AT&T Wireless Services to purchase their ownership interest if and when certain events occur. These entities were formed to acquire licenses that were restricted by FCC rules to businesses with limited assets and revenues, and to provide a means through which AT&T Wireless Services could invest in these licenses. To date, the activity of these entities has consisted primarily of acquiring licenses through acquisitions and FCC auctions, and network construction. Prior to April ~~DISCONTINUED~~1, ~~OPERATIONS~~2003, AT&T Wireless Services accounted for these ventures under the equity method of accounting as AT&T Wireless Services does not have voting control and AT&T Wireless Services has recognized virtually 100 percent of the entities’ operating losses due to its significant variable interests. AT&T Wireless Services’ maximum loss exposure related to these entities as of June 30, 2004 was approximately $145 million, which represented the value of the put options that provide the other owners the right to require AT&T Wireless Services to purchase their ownership interest under certain circumstances. As a result of the adoption of FIN 46, AT&T Wireless Services consolidated these entities at their carrying values effective April 1, 2003. Additionally, AT&T Wireless Services has determined it has a significant variable interest and is deemed to be the primary beneficiary in an entity that holds assets and liabilities associated with synthetic leases. As a result, upon adoption, AT&T Wireless Services consolidated the assets and liabilities associated with two synthetic leases that were previously disclosed as off-balance sheet arrangements.

~~In December 2001,~~ AT&T Wireless Services ~~finalized~~has ~~plans~~no ~~and~~material ~~received approval~~variable ~~from~~interests ~~its~~for ~~board of directors to exit the fixed wireless business. AT&T~~which ~~Wireless~~it ~~Services~~is ~~completed~~not ~~the~~deemed disposal of the fixed wireless business during 2002. During the first, second, and third quarters of 2002, AT&T Wireless Services recorded aftertax gains on disposal of the fixed wireless business totaling $12 million, $27 million, and $8 million, respectively. The gains consisted of adjustments to ~~the~~be ~~recoverability of assets and accruals associated with exit costs from~~ the ~~fixed~~primary ~~wireless business and are reflected in income from discontinued operations~~beneficiary. ~~Revenue from discontinued operations~~ ~~was $0 and $1 for the three and nine months ended September 30, 2002,~~ ~~respectively.~~

(fh) ~~EARNINGS~~ACQUISITIONS ~~PER~~AND ~~SHARE (EPS)~~DISPOSITIONS

~~The~~In ~~following~~February 2004, ~~table~~AT&T ~~presents~~Wireless Services completed the ~~computation~~purchase of U.S. ~~income~~Cellular’s ~~(loss)~~TDMA wireless operations in south central Texas for $95 million in cash. AT&T Wireless Services completed this transaction to expand its TDMA and GSM/GPRS networks. The allocation of the purchase price included $35 ~~per~~million, ~~basic~~$29 million, $20 million, and $11 million to net tangible assets, licensing costs, other acquisition-related intangible assets, and ~~diluted~~goodwill, ~~share:~~respectively. The results of the operations acquired have been included in the Consolidated Financial Statements of AT&T Wireless Services since the acquisition date.

		For the Three Months Ended					For the Nine Months Ended
		September 30,					September 30,
(In Millions, Except Per Share Amounts)		2003		2002			2003		2002
Income (loss) from continuing operations		$	156	$	(2,049	)	$	526	$	(2,074	)
Less: Accretion of mandatorily redeemable preferred stock			—		6			13		13
Income (loss) from continuing operations available to common shareholders			156		(2,055	)		513		(2,087	)
Income from discontinued operations			—		8			—		47
Cumulative effect of change in accounting principle			—		—			—		(166	)
Net income (loss) available to common shareholders		$	156	$	(2,047	)	$	513	$	(2,206	)
Weighted average common shares outstanding			2,713		2,708			2,712		2,678
Net effect of dilutive stock options (1)			5		—			2		—
Weighted average common shares and equivalents outstanding			2,718		2,708			2,714		2,678
Income (loss) per basic and diluted share:
	Income (loss) from continuing operations available to common shareholders	$	0.06	$	(0.76	)	$	0.19	$	(0.77	)
	Income from discontinued operations		—		—			—		0.01
	Cumulative effect of change in accounting principle		—		—			—		(0.06	)
	Net income (loss) available to common shareholders	$	0.06	$	(0.76	)	$	0.19	$	(0.82	)

In March 2004, AT&T Wireless Services completed the sale of its ownership interest in a cost method investment for $26 million in cash and recorded a pretax gain of $26 million within other income (expense).

~~(1)~~ In ~~The~~July 2004, ~~effect~~AT&T ofWireless ~~dilutive~~Services ~~stock~~signed ~~options~~a ~~was~~non-binding ~~determined~~letter ~~under~~of intent ~~the~~with ~~treasury~~Cingular ~~stock~~and ~~method.~~Triton ~~Due~~PCS tofor the ~~loss~~exchange ~~recognized~~of ~~from~~wireless properties. ~~continuing~~As ~~operations~~contemplated ~~available~~in ~~to common shareholders during~~ the ~~three~~letter ~~and~~of ~~nine~~intent, ~~months~~Cingular ~~ended~~would receive ~~September~~Triton ~~30,~~PCS’s ~~2002,~~network ~~the~~assets ~~effects~~and ofcustomers ~~dilutive~~in ~~stock~~Virginia. ~~options~~Triton ~~and~~PCS would ~~the~~receive ~~41.7~~certain ~~million~~of ~~warrants~~AT&T ~~issued~~Wireless toServices’ ~~NTT~~network ~~DoCoMo,~~assets ~~Inc.~~and customers ~~(DoCoMo)~~ in ~~January~~North ~~2001~~Carolina ~~were~~and ~~considered~~Puerto toRico, beplus ~~anti-dilutive,~~$175 million ~~and~~in ~~therefore~~cash from ~~were~~Cingular. ~~not~~Additionally, ~~included~~Triton inPCS ~~the~~and ~~calculation~~AT&T ofWireless ~~diluted~~Services ~~earnings~~have entered ~~per~~into ~~share.~~definitive Asagreements ofto ~~September~~terminate 30the stockholder agreement, ~~2003~~which ~~and~~includes ~~2002,~~termination ~~there~~of ~~were~~an ~~202~~exclusivity ~~million~~arrangement ~~and~~in return ~~218~~for ~~million,~~the ~~respectively,~~surrender of AT&T Wireless Services’ ~~common~~equity ~~stock~~in ~~options~~Triton ~~outstanding,~~PCS. Both astransactions ~~well~~are ascontingent upon the ~~41.7~~closing ~~million~~of ~~warrants~~the ~~issued~~merger toagreement between ~~DoCoMo,~~AT&T ~~that~~Wireless ~~were~~Services ~~anti-dilutive~~ and ~~therefore~~Cingular ~~were~~as ~~excluded~~discussed ~~from~~in ~~the~~Note ~~calculation of diluted earnings per share~~(b).

(gi) ~~ACQUISITIONS~~LONG-TERM ~~AND DISPOSITIONS~~DEBT

OnTeleCorp ~~November 3~~Wireless, ~~2003, Pinnacle Cellular Limited Partnership (Pinnacle) was dissolved and the assets were distributed to the partners~~Inc. ~~AT&T Wireless Services had a 50 percent ownership interest in Pinnacle, which held primarily a non-controlling interest in the Pittsburgh, Pennsylvania market~~ and ~~a controlling~~Tritel ~~interest in several markets in Arkansas. Prior to the dissolution~~PCS, ~~AT&T~~ ~~Wireless Services accounted for this investment under the equity method~~Inc. In ~~the~~Debt ~~distribution, AT&T Wireless Services received the non-controlling~~Repurchases ~~Pittsburgh interest, which increased AT&T Wireless Services’ direct interest in~~ ~~the Pittsburgh market to 100 percent. The distribution will be recorded at fair~~ ~~value for which AT&T Wireless Services expects to record a pretax gain of~~ ~~approximately $55 million in the fourth quarter of 2003.~~

In ~~October~~March and April ~~2003~~2004, respectively, AT&T Wireless Services exercised ~~sold~~the ~~its~~call ~~ownership~~provisions ~~stake~~for inthe ~~Far~~remaining outstanding principal of ~~EasTone~~the toTeleCorp ~~member~~Wireless, ~~companies~~Inc. of11.625% and the ~~carrier’s~~Tritel ~~majority shareholder~~PCS, ~~Far~~Inc. ~~Eastern~~12.75% ~~Group,~~Senior Subordinated Discount Notes for 11cash totaling $58 million.3 During the six months ended June ~~billion~~30, NT2004, ~~dollars~~AT&T Wireless Services repurchased notes with face values totaling $19 million and $33 million of the TeleCorp Wireless, orInc. ~~approximately~~10.625% and the Tritel PCS, Inc. 10.375% Senior Subordinated Notes, respectively, for cash totaling $~~330~~62 million. The net loss on retirement of debt for the six months ended June 30, 2004 was not material to AT&T Wireless Services’ results of operations.

On September 22, 2003, AT&T Wireless Services sold all of its ownership interest in Dobson’s common stock and recorded a pretax gain of $35 million within other income (expense) during the three months ended September 30, 2003.

OnAccounts ~~August 1,~~Receivable ~~2003,~~Securitization ~~AT&T Wireless Services completed an exchange~~Program ~~transaction with U.S. Cellular Corporation. AT&T Wireless Services transferred~~ ~~cash and wireless licenses in the Midwest and Northeast to U.S. Cellular~~ ~~Corporation. In exchange, AT&T Wireless Services received wireless properties~~ ~~in Florida and Georgia. AT&T Wireless Services recorded a net pretax loss of $13 million in connection with this transaction.~~

OnIn February 2004, AT&T Wireless Services renewed its $1.6 billion accounts receivable securitization program. As of June 1830, ~~2003~~2004, availability under the program was approximately $1.4 billion, based on the accounts receivable balance allowed for under the program. The program allows AT&T Wireless Services ~~and~~to ~~Verizon~~obtain ~~Communications~~financing ~~Inc~~collateralized by subscriber trade accounts receivable. Under the program, AT&T Wireless ~~jointly~~Services ~~signed~~can anassign ~~agreement~~subscriber trade accounts receivable on a revolving basis to ~~sell~~a ~~their~~special-purpose, ~~combined~~wholly-owned ~~49 percent~~subsidiary of AT&T Wireless Services. The wholly-owned subsidiary of AT&T Wireless Services would then sell an undivided interest in such receivables to an unrelated ~~Eurotel~~third-party ~~Praha,~~financing ~~which~~entity upon drawing on the facility. The financing is ~~held~~subject byto a ~~50/50~~program ~~joint~~fee ~~venture,~~of 15 to ~~Cesky~~25 ~~Telecom~~basis ~~for~~points and a liquidity fee $1of 22.~~05 billion.~~5 ~~Cesky~~to ~~Telecom~~50 ~~currently~~basis ~~owns~~points, ~~51 percent~~both of ~~Eurotel~~which ~~Praha.~~are based on AT&T ~~Wireless~~ Wireless Services’ ~~expects~~Senior Notes rating. This financing arrangement is to ~~receive~~be ~~$525 million~~used for ~~from~~general ~~the~~corporate ~~sale~~purposes, is subject to customary securitization covenants, and awill ~~$100~~be recorded as an on-balance sheet transaction. ~~million~~Included ~~dividend~~in ~~upon~~the ~~distribution~~covenants ofare provisions for the ~~cash~~termination ~~from~~of the program ~~joint~~in ~~venture~~the byevent ~~early 2004.~~AT&T ~~The~~Wireless ~~sale~~Services’ ~~transaction~~long-term unsecured Senior Notes rating is ~~subject~~less tothan ~~Cesky Telecom~~BB+ by Standard & Poor’s ~~ability~~or toBa1 ~~finance~~by Moody’s. As of June 30, 2004 and December 31, 2003, AT&T Wireless Services had no amounts outstanding under the ~~purchase~~accounts receivable securitization program and was in compliance with its covenants.

OnCredit ~~June 17, 2003, AT&T Wireless Services completed a transaction with a~~Facilities ~~subsidiary of Dobson. AT&T Wireless Services transferred to Dobson its wireless~~ ~~properties in two Alaska markets and its shares of Dobson Series AA preferred~~ ~~stock. In exchange, AT&T Wireless Services received Dobson’s wireless~~ ~~properties in two California markets. As a result of the transaction, AT&T Wireless Services recorded a pretax gain of $39 million within other income (expense) during the second quarter of 2003.~~

OnIn ~~February~~March 152001, ~~2002,~~ AT&T Wireless Services ~~acquired~~entered into Competitive Advance and Revolving Credit Facilities in the ~~remaining~~aggregate 77amount of $2.5 ~~percent~~billion consisting of ~~TeleCorp~~a ~~that~~$1.25 billion it364-day ~~did~~Competitive ~~not~~Advance ~~previously~~and Revolving ~~own.~~Credit AsFacility and a ~~result~~$1.25 billion ofFive-Year Competitive Advance and Revolving Credit Facility (the ~~closing~~Five-Year Facility). The 364-day Credit Facility expired in March 2004. The Five-Year Facility is subject to a facility fee of ~~the~~10 ~~acquisition~~to 25 basis points, which is based on AT&T Wireless Services’ noSenior ~~longer~~Notes ~~treats~~rating, ~~its~~and ~~previously~~is payable quarterly on ~~owned~~the ~~interest~~total incommitment. ~~TeleCorp~~The asFive-Year anFacility ~~equity~~is ~~method~~also ~~unconsolidated~~subject ~~subsidiary~~to a utilization fee of 25 basis points if borrowings exceed certain levels as defined in the agreement. The Five-Year Facility bears interest at ~~purchase~~variable ofrates ~~TeleCorp~~based ~~was~~upon, ~~consistent~~in ~~with~~various cases, (i) LIBOR plus 65 to 200 basis points depending on AT&T Wireless Services’ ~~strategy~~Senior Notes rating, or (ii) the greater of the prime rate or the federal funds effective rate plus 50 basis points. The Five-Year Facility is to be used for general ~~expand~~corporate ~~its~~purposes ~~footprint~~and inis ~~major~~subject ~~markets~~to incustomary ~~North~~covenants, representations, ~~America~~warranties, ~~through~~and ~~acquisitions~~events of ~~wireless~~ ~~carriers~~default. ~~where~~The ~~there~~Five-Year ~~are~~Facility ~~opportunities~~contains financial covenants requiring AT&T Wireless Services to ~~improve~~maintain ~~operating~~certain ~~results~~financial ratios. In addition, an obligation by AT&T Wireless Services to ~~TeleCorp~~repurchase ~~provided~~equity ~~wireless~~interests ~~voice~~from ~~services~~DoCoMo inmay, ~~portions~~under certain circumstances, constitute an event of default. Effective March 2003, the ~~Midwestern~~Five-Year Facility ~~and~~was guaranteed by TeleCorp Wireless Inc., TeleCorp ~~Southeastern~~Communications, ~~United~~Inc., ~~States~~Tritel, ~~areas~~Inc., ~~which~~Tritel ~~complemented~~PCS, Inc. and Tritel Communications, Inc. This guarantee expired in April 2004 with AT&T Wireless Services’ repurchases of certain debt of TeleCorp Wireless, Inc. ~~footprint~~and Tritel PCS, Inc. As of ~~licenses~~June 30, 2004 and ~~service~~December 31, ~~territory~~2003, inAT&T Wireless Services had no amounts outstanding under the ~~United~~Five-Year Facility, ~~States~~and was in compliance with its covenants.

~~The~~Commercial ~~following~~Paper ~~unaudited pro forma consolidated results of operations for~~Program ~~the nine months ended September 30, 2002 assume the TeleCorp acquisition had~~ ~~been completed on January 1, 2002:~~

	For the Nine Months Ended
(In Millions, Except Per Share Amounts)	September 30, 2002
Revenue	$	11,669
Loss before cumulative effect of change in accounting principle available to common shareholders	$	(2,080	)
Loss before cumulative effect of change in accounting principle available to common shareholders per share — basic and diluted	$	(0.77	)
Net loss available to common shareholders	$	(2,166	)
Net loss available to common shareholders per share — basic and diluted	$	(0.80	)

During June 2001, AT&T Wireless Services finalized agreements with a group of commercial paper dealers to issue up to $2.5 billion of private placement commercial paper notes. The notes will be unsecured, ranking pari passu with AT&T Wireless Services’ other unsubordinated and unsecured indebtedness. Maturity of the notes will be up to 365 days from date of issue. AT&T Wireless Services’ commercial paper notes are rated A2 by Standard & Poor’s and P2 by Moody’s. If AT&T Wireless Services decides to issue commercial paper notes, the rates would be reflective of these commercial paper market rates at the time of issuance. The commercial paper program is subject to customary commercial paper program covenants. As of June 30, 2004 and December 31, 2003, AT&T Wireless Services had no notes outstanding under this program.

(h) INCOME TAXES

For the tax return period July 10, 2001, through December 31, 2001, AT&T Wireless Services incurred a tax net operating loss (NOL) of $1.3 billion. Under the tax-sharing agreement with AT&T, the net operating loss was carried back for a refund of taxes paid by AT&T, as the common parent of an affiliated group that included AT&T Wireless Services. A receivable was established in shareholders’ equity in the amount of $461 million, with a corresponding increase to additional paid-in capital as of December 31, 2002. The 2001 NOL carryback was reflected as a capital contribution from AT&T as AT&T Wireless Services required a full valuation allowance on its deferred tax assets as of December 31, 2002. Accordingly, it was determined that AT&T Wireless Services would not have been able to realize this NOL carryback as a stand-alone entity. In January 2003, AT&T Wireless Services received $436 million relating to the refund claim. The remaining $25 million will be held in escrow pursuant to the terms of an agreement between AT&T and AT&T Wireless Services and will be reflected as a receivable from former parent, AT&T, until distribution from the escrow.

For the year ended December 31, 2002, AT&T Wireless Services generated a NOL of $2.8 billion, of which $1.5 billion was carried back during the second quarter of 2003 for a refund of taxes paid by AT&T totaling $536 million. Prior to the filing of the refund claim, AT&T Wireless Services’ deferred tax liabilities (excluding the deferred tax liabilities related to licensing costs and goodwill) exceeded AT&T Wireless Services’ deferred tax assets. Therefore, AT&T Wireless Services determined that it no longer required a valuation allowance against its deferred tax assets, other than those deferred tax assets associated with actual and potential capital losses and state NOLs that were deemed more likely than not to expire unused. As AT&T Wireless Services no longer required a full valuation allowance on its deferred tax assets, the 2002 NOL carryback was reflected as a reduction of AT&T Wireless Services’ long-term deferred tax assets. AT&T Wireless Services received $511 million of this refund during the second quarter of

AT&T ~~2003;~~Wireless ~~the~~Services’ ~~remaining~~accounts ~~$25 million~~receivable ~~will~~securitization beprogram and ~~held~~its incredit ~~escrow~~facility ~~pursuant~~are toterminable ~~the terms~~upon ofa anchange ~~agreement~~of ~~between~~control. AT&T ~~and AT&T~~ Wireless Services’ ~~and~~commercial ~~will~~paper ~~be reflected~~program, asSenior aNotes, ~~receivable~~and ~~in other assets until distribution from the escrow.~~Senior ~~The~~Subordinated ~~balance~~Notes ofare ~~the 2002 NOL~~ not ~~carried~~terminable ~~back~~upon ~~can~~a bechange ~~carried forward to offset taxable income~~ of ~~AT&T Wireless Services in future years~~control.

(i) LONG-TERM DEBT

TeleCorp Wireless, Inc. and Tritel PCS, Inc. Debt Repurchase

On July 24, 2003, AT&T Wireless Services announced offers to repurchase for cash any and all outstanding 11.625 percent TeleCorp Wireless, Inc. Senior Subordinated Discount Notes due April 15, 2009, and 12.75 percent Tritel PCS, Inc. Senior Subordinated Discount Notes due May 15, 2009. The TeleCorp Wireless, Inc. notes had a face value of $374 million and a carrying value of $361 million as of June 30, 2003. The Tritel PCS, Inc. notes had a face value of $242 million and a carrying value of $237 million as of June 30, 2003. AT&T Wireless Services is a guarantor of these notes. During the third quarter of 2003, AT&T Wireless Services retired $350 million face value of the TeleCorp Wireless, Inc. notes and $209 million face value of the Tritel PCS, Inc. notes for $588 million in cash. As a result of the debt repurchase, AT&T Wireless Services recorded a loss of $40 million on the early extinguishment of debt within other income (expense) during the three months ended September 30, 2003.

Termination of Interest Rate Swap Agreements

During the first quarter of 2003, AT&T Wireless Services terminated all of its interest rate swap agreements, which had a total notional value of $2.8 billion. AT&T Wireless Services received cash of which $245 million represented the fair value as of the termination dates of the portion of its long-term debt that was hedged. In accordance with SFAS No. 133, the associated hedged portion of long-term debt will no longer be adjusted for changes in fair value. The existing fair value adjustment recorded in long-term debt related to the terminated interest rate swaps will continue to be amortized against interest expense over the remaining life of the previously hedged debt.

Renewal of Accounts Receivable Securitization Program

In March 2003, AT&T Wireless Services renewed its accounts receivable securitization program and increased the size of the program from $1.2 billion to $1.6 billion. As of September 30, 2003, availability under the program was approximately $1.5 billion, based on the accounts receivable balance allowed for under the program. The program allows AT&T Wireless Services to obtain financing collateralized by subscriber trade accounts receivable. Under the program, AT&T Wireless Services can assign subscriber trade accounts receivable on a revolving basis to a special-purpose, wholly owned subsidiary of AT&T Wireless Services. The wholly owned subsidiary of AT&T Wireless Services would then sell an undivided interest in such receivables to an unrelated third-party financing entity upon drawing on the facility. The financing is subject to a program fee of 15 to 25 basis points and a liquidity fee of 22.5 to 50 basis points, both of which are based on AT&T Wireless Services’ Senior Notes rating. This financing arrangement is to be used for general corporate purposes, is subject to customary securitization covenants, and will be recorded as an on-balance sheet transaction. Included in the covenants are provisions for the termination of the program in the event AT&T Wireless Services’ long-term unsecured Senior Notes rating is less than BB+ by Standard & Poor’s or Ba1 by Moody’s. As of September 30, 2003 and 2002, AT&T Wireless Services had no amounts outstanding under the accounts receivable securitization program and was in compliance with its covenants.

Renewal of Credit Facilities

In March 2001, AT&T Wireless Services entered into Competitive Advance and Revolving Credit Facilities (the Facilities) in the aggregate amount of $2.5 billion consisting of a $1.25 billion 364-day Competitive Advance and Revolving Credit Facility and a $1.25 billion Five-year Competitive Advance and Revolving Credit Facility. In both March of 2002 and 2003, AT&T Wireless Services renewed the 364-day Facility. The Facilities are subject to a facility fee of 10 to 25 basis points, which is based on AT&T Wireless Services’ Senior Notes rating, and is payable quarterly on the total commitment. The Facilities are also subject to a utilization fee of 25 basis points if borrowings exceed certain levels as defined in the agreement. The Facilities bear interest at variable rates based upon, in various cases, (i) LIBOR plus 65 to 200 basis points depending on AT&T Wireless Services’ Senior Notes rating, or (ii) the greater of the prime rate or the federal funds effective rate plus 50 basis points. The Facilities are to be used for general corporate purposes and are subject to customary covenants, representations, warranties, and events of default. The Facilities contain financial covenants requiring AT&T Wireless Services to maintain certain financial ratios. In addition, an obligation by AT&T Wireless Services to repurchase equity interests from DoCoMo may, under certain circumstances, constitute an event of default. As of September 30, 2003 and 2002, AT&T Wireless Services had no amounts outstanding under the facilities, and was in compliance with its covenants.

(j) COMMITMENTS AND GUARANTEES

AT&T Wireless Services’ has various purchase commitments for network equipment. ~~and handsets~~Those commitments totaled $~~1.0~~501 ~~billion~~million as of ~~September~~June 30, ~~2003~~2004, with remaining payments to be made by the end of 2004. In July 2004, AT&T Wireless Services was released from $360 million of these commitments.

Pursuant to the Investor Agreement, as amended in December 2002, between AT&T Wireless Services, AT&T, and DoCoMo, DoCoMo may require AT&T Wireless Services to repurchase its investment at DoCoMo’s original purchase price, plus interest, if under certain circumstances, and subject to the exceptions identified in the Investor Agreement:

•

AT&T Wireless Services fails to launch service based on W-CDMA technology in certain areas of Dallas, San Diego, San Francisco, and Seattle, or permitted alternate cities prior to December 31, 2004; or

•

AT&T Wireless Services’ board of directors approves changes prior to December 31, 2004 in its use of W-CDMA technology as its primary standard for delivery of services based on third-generation technology.

On July 20, 2004, AT&T Wireless Services ~~believes~~began ~~that~~offering customers in Detroit, Phoenix, San Francisco, and Seattle broadband mobile wireless services with its launch of the ~~likelihood~~first commercially-available true third-generation UMTS (Universal Mobile Telecommunications System) network in the United States. The launch of itservice ~~being~~in ~~required~~these four cities satisfied the UMTS service launch obligations under the Investor Agreement. As a result of the market launches, and because the remaining contingency relating to ~~repurchase~~the board of directors approval of changes in its use of W-CDMA technology is solely within AT&T Wireless Services’ control, during the third quarter of 2004, AT&T Wireless Services will reclassify the 406 million common shares held by DoCoMo, which are currently reflected on AT&T Wireless Services’s ~~original~~consolidated ~~investment~~condensed balance ~~plus~~sheet ~~interest~~as ismandatorily ~~remote~~redeemable common stock, to shareholders’ equity.

In November 2000, AT&T Wireless Services joined with others in the formation of a venture, Alaska Native Wireless, LLC (ANW). On November 11, 2002, AT&T Wireless Services and the other owners of ANW amended the terms of the venture. As a result of this amendment, in March 2007, the other owners of ANW may elect to require AT&T Wireless Services to purchase their interests in ANW for $145 million., of which $63 million was reflected within other long-term liabilities as of June 30, 2004. Under certain circumstances, this right may be exercised earlier, in which case the amount payable would be reduced by 5 percent per annum.

In conjunction with the split-off from AT&T in July 2001, AT&T ~~Wireless~~ Wireless Services entered into a Master Carrier Agreement with AT&T to purchase certain voice and data telecommunications services. Under the Master Carrier Agreement, as amended in December 2002, ~~and~~ May 2003 and April 2004, AT&T Wireless Services is required to purchase certain amounts of wholesale long-distance services from AT&T until July 31, 2007. For any shortfall in cumulative usage, AT&T Wireless Services is required to pay AT&T at the rate of $0.01 per minute at the end of the period. AT&T Wireless Services’ maximum remaining commitment as of ~~September~~June 30, ~~2003, was~~2004 ~~approximately $754 million. AT&T Wireless Services is also required to~~was purchase long-distance services associated with its administrative phone usage equal to $70 million for each of three years following the split-off. As of September 30, 2003, AT&T Wireless Services had fulfilled all of the first and second year’s commitments and approximately $15607 million ~~of the third year’s commitment under the agreement~~. In addition, AT&T Wireless Services is required to purchase certain network data services from AT&T in an amount equal to $41 million for each of the three years following the split-off. AT&T Wireless Services had fulfilled all of the first and second year’s data commitments and approximately $19 million of the third year’s commitment under the agreement as of September 30, 2003. In October 2002, AT&T Wireless Services committed to purchase certain amounts of international long-distance services over a two-year period beginning November 1, 2002, and is required to pay AT&T any shortfall in cumulative usage based on the period’s average rate. Based on the average rate for the ~~eleven~~twenty months ended ~~September~~June 30, ~~2003~~2004, AT&T Wireless Services’ maximum remaining commitment as of ~~September~~June 30, ~~2003~~2004, was approximately $244 million.

AT&T Wireless Services enters into ~~purchase~~agreements ~~orders~~ in the ~~ordinary~~normal course of business that provide for ~~materials~~indemnification of counterparties. These include split-off, ~~supplies~~tax sharing, and ~~other~~tax ~~items.~~refund ~~Additionally,~~agreements with AT&T, as well as certain asset ~~Wireless~~sales, ~~Services~~outsourcing ~~has~~arrangements, and financing and intellectual property agreements with other ~~wireless~~parties. ~~carriers~~The ~~regarding~~term of the indemnification varies by ~~subscriber~~agreement. ~~activity~~The onevents ~~other~~or ~~carriers’~~circumstances ~~wireless~~that ~~systems.~~would ~~These~~require ~~agreements~~AT&T Wireless ~~establish~~Services ~~general~~to ~~terms~~perform ~~and~~under ~~charges~~these ~~for~~indemnities ~~system~~are ~~usage~~transaction specific, however ~~and~~these inagreements ~~some~~may ~~cases~~require ~~also~~AT&T Wireless Services to indemnify ~~establish~~the ~~minimum~~counterparty ~~usage~~for ~~requirements.~~costs and losses incurred from changes in laws or

~~AT&T Wireless Services enters into agreements in the normal course of~~14 business that provide for indemnification of counterparties. These include split-off, tax sharing, and tax refund agreements with AT&T, as well as certain asset sales, outsourcing arrangements, and financing, intellectual property, services, and purchase agreements with other parties. The term of the indemnification varies by agreement. The events or circumstances that would require AT&T Wireless Services to perform under these indemnities are transaction specific, however these agreements may require AT&T Wireless Services to indemnify the counterparty for costs and losses incurred from changes in laws or regulations, and/or from litigation or claims arising from the underlying transaction. AT&T Wireless Services is unable to estimate the maximum potential liability for these types of indemnifications as the agreements generally do not specify a maximum amount, and the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time. Historically, AT&T Wireless Services has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying Consolidated Condensed Financial Statements.

regulations, and/or from litigation or claims arising from the underlying transaction. AT&T Wireless Services is unable to estimate the maximum potential liability for these types of indemnifications as the agreements generally do not specify a maximum amount, and the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time. Historically, AT&T Wireless Services has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated condensed financial statements.

(k) CONTINGENCIES

AT&T Wireless Services is defending ~~two~~several class-action or representative lawsuits challenging the quality of its wireless service. ~~These~~ These cases include allegations of breach of contract, statutory consumer fraud, and similar claims. In one case filed in Texas, the named plaintiffs ~~have~~at one time asserted claims for compensatory and punitive damages totaling $100 million. That case was dismissed, and then reversed by the court of appeals; AT&T Wireless Services is seeking review in the Texas Supreme Court. In a case filed in California, the court denied class certification and ~~subsequent to September 30, 2003~~ also denied all remaining claims for monetary relief, although claims for injunctive relief remain pending.

A series of class-action cases have been filed against AT&T Wireless Services as well as its major competitors, alleging that defendants have violated federal and state antitrust laws and/or committed unfair or deceptive trade practices by allegedly restricting the portability of wireless handsets between carriers. Plaintiffs assert both tying and monopolization claims, but have not asserted specific claims for damages. ~~The~~ In the consolidated federal cases, the court has dismissed the monopolization claims, and the per- se tying claim against all defendants.

Various class -action or representative lawsuits are pending against AT&T Wireless Services that challenge a variety of billing practices and ~~the~~ the adequacy of AT&T Wireless Services’ disclosures concerning those practices, including billing in full-minute increments, billing from send to end, out-of-cycle billing, charging early termination fees, post-cancellation billing practices, billing for recovery costs associated with government-mandated regulatory programs, and billing for roaming calls. The plaintiffs in ~~three~~two of these cases specified damages in excess of $100 million. ~~One~~In one of these cases ~~settled; and another case was voluntarily dismissed (though plaintiffs have stated their intent to re-file the case). In the third case~~, the court denied certification of a class, leaving the claims of five individual customers (three of whom have now offered to settle for nominal amounts). After this ruling, ~~plaintiffs~~ ~~have~~plaintiffs nonetheless asserted a claim for restitution on behalf of a ~~nationwide~~ nationwide class of customers in excess of $318 million.

Numerous class -action lawsuits were filed against AT&T and several wireless phone manufacturers and carriers asserting products liability ~~and~~ and similar claims relating to radio-frequency transmissions to and from ~~wireless~~ wireless phones. The court dismissed all but one of these cases on preemption grounds;, and the remaining case was voluntarily dismissed. An ~~plaintiffs~~appeal ~~have~~is ~~appealed~~pending in the cases that were dismissed based on preemption.

In 1993, shareholders of a former competitor of AT&T Wireless Services’ air-to-ground business sued AT&T Wireless Services, alleging breach of a confidentiality agreement, misappropriation of trade secrets, and tortious interference with the competitor’s business. The ~~trial court initially~~jury ~~dismissed~~returned ~~all~~a ofverdict ~~plaintiffs’~~in ~~claims,~~favor ~~but~~of ~~that~~AT&T ~~decision~~Wireless ~~was~~Services ~~reversed~~on byall ~~the~~claims. ~~court~~During ofa ~~appeals~~trial, ~~and~~which ~~the~~concluded ~~case~~in ~~was~~October 2003, ~~remanded~~the ~~for~~plaintiff ~~trial. Plaintiffs~~ asserted ~~claims for~~ damages totaling ~~$8.2 billion.~~up ~~Subsequent~~ to ~~September~~$438 30million, ~~2003,~~but the jury returned a verdict in favor of AT&T Wireless Services on all claims. Plaintiff has filed certain motions challenging the verdict and has filed for bankruptcy protection.

Several class -action lawsuits have been filed against AT&T, certain executives of AT&T and AT&T Wireless Services, and a group of investment banking firms asserting claims under federal securities laws. The ~~complaints~~ complaints assert claims that AT&T made material misstatements concerning earnings and financial condition, while omitting other material information, allegedly to maximize proceeds from the offering of AT&T Wireless Group tracking stock in in April 2000 and/or to avoid paying a cash guarantee in connection with ~~the~~ the MediaOne acquisition. The ~~complaints~~plaintiffs dohave ~~not~~demanded ~~specify~~damages ~~the~~in ~~amount~~ excess of ~~damages claimed,~~$2.1 billion ~~although~~related ~~the plaintiffs are seeking~~ to ~~recover~~the ~~for~~offering ~~declines in stock prices~~ of AT&T ~~securities, including the AT&T~~ Wireless Group tracking stock. In connection with the split-off, certain provisions of the Separation Agreement between AT&T Wireless Services and AT&T may result in AT&T Wireless Services being allocated a portion of the liabilities, if any, arising out of these actions to the extent they relate to AT&T Wireless Group tracking stock.

A former executive and shareholder of Tritel, Inc. (which, as a ~~subsidiary~~ subsidiary of TeleCorp PCS, Inc. was acquired by AT&T Wireless Services ~~as part of its acquisition of TeleCorp~~) filed a lawsuit against Tritel, Inc., Tritel Communications, Inc., ~~and~~ and two board members seeking to rescind an earlier settlement agreement. The plaintiff alleged that the defendants withheld material ~~information about an~~ ~~initial public offering that occurred after he settled his prior claims, and~~ ~~asserted claims for fraud, breach of fiduciary duty, and breach of the duty of~~ good faith and fair dealing. The plaintiff sought $60 million in damages and/or restitution, and $450 million in punitive damages. An arbitration panel awarded the plaintiff $57 thousand. An appeal is pending that challenges the referral of the case to arbitration.

~~AT&T Wireless Services has been named as a defendant, along with another~~15 wireless carrier and several wireless phone manufacturers, in three class action lawsuits alleging that existing phone equipment does not meet FCC requirements for 911 emergency call processing. Damages have not been specified, although plaintiffs are seeking injunctive and equitable relief.

AT&TTable Wireless Services received a series of payments from MCI WorldCom Network Services, Inc., within the 90 days preceding WorldCom’s July 21, 2002 bankruptcy filing under Chapter 11 of the Bankruptcy Code, and WorldCom asserted that it is Contents

information about an initial public offering that occurred after he settled his prior claims, and asserted claims for fraud, breach of fiduciary duty, and breach of the duty of good faith and fair dealing. The plaintiff sought $60 million in damages and/or restitution, and $450 million in punitive damages. An arbitration panel awarded the plaintiff $57 thousand. Plaintiff challenged the referral to arbitration in an appeal to the Mississippi Supreme Court, but the Supreme Court affirmed the trial court.

AT&T Wireless Services has been named as a defendant, along with another wireless carrier and several wireless phone manufacturers, in three class-action lawsuits alleging that existing phone equipment does not meet FCC requirements for 911 emergency call processing. Damages have not been specified, although plaintiffs are seeking injunctive and equitable relief.

AT&T has demanded arbitration of a claim that AT&T Wireless Services has breached agreements that were part of the split-off of AT&T Wireless Services from AT&T by agreeing with Cingular in the context of the pending merger that certain stock options originally granted by AT&T and later converted into options for AT&T Wireless Services stock will be cancelled if the merger is consummated. AT&T asserts that AT&T Wireless Services is obligated to pay compensation to option holders (even for those options that are “under water”) and asserts a claim for restitution from AT&T Wireless Services in the amount of $201 million.

AT&T Wireless Services is currently a party to various claims and legal proceedings, including those noted above. AT&T Wireless Services also makes routine filings with the FCC and state regulatory authorities, as well as federal, state, and local tax authorities. Additionally, AT&T Wireless Services is currently under audit by the IRS and various state and local taxing jurisdictions. If management believes that a loss arising from these actions and/or filings and audits is probable and can reasonably be estimated, an amount is recorded for the estimated loss. As additional information becomes available, the potential liability related to the actions is assessed and the estimates are revised, if necessary. Based upon currently available information, management does not believe that the ultimate outcome of these actions beyond that provided for as of June 30, 2004, individually and in the aggregate, will have a material adverse effect on AT&T Wireless Services’ Consolidated Financial Statements. However, litigation is subject to inherent uncertainties and unfavorable rulings could occur. If so, it could have a material adverse impact on AT&T Wireless Services’ Consolidated Financial Statements in future periods. While it is not possible to predict the ultimate outcome of the matters discussed above, historically, AT&T Wireless Services has been successful in defending itself against claims and suits that have been brought against it, and payments made in such claims and actions have not been material to AT&T Wireless Services’ Consolidated Financial Statements.

As discussed in Note (b), on February 17, 2004, AT&T Wireless Services entered into a merger agreement with Cingular and certain of its affiliates. In conjunction with the merger, AT&T Wireless Services has entered into fee arrangements with investment bankers and law firms, which are contingent upon the completion of the merger. As of June 30, 2004, AT&T Wireless Services estimated that these contingent fees approximated $105 million and will be paid if, and when, the merger is completed.

(l) CONCENTRATIONS

AT&T Wireless Services purchases a substantial portion of its wireless infrastructure equipment and multi-network handsets from only a few major suppliers. AT&T Wireless Services relies on only one or two key vendors in each of the following areas: billing services, payables and payroll processing, network build-out, Local Number Portability capabilities, customer care, and information services. Loss of any of these suppliers could adversely affect operations temporarily until a comparable substitute could be found.

AT&T Wireless Services relies on one wireless carrier, Cingular, to provide both a portion of GSM services within certain markets in which AT&T Wireless Services has network coverage, and the vast majority of all of its customers’ GSM roaming services outside of AT&T Wireless Services’ network coverage areas. The roaming agreement with this wireless carrier has become increasingly significant during the second quarter of 2004 due to both the increase in GSM subscribers and the launch of national GSM rate plans during the quarter. Discontinuation of this roaming agreement could adversely impact AT&T Wireless Services’ ability to attract and retain customers.

Local and long-distance telephone and other companies provide certain communication services to AT&T Wireless Services. Disruption of these services could adversely affect operations in the short term until alternative telecommunication providers were found.

~~entitled to certain credits under its reseller contract with~~ AT&T Wireless Services. ~~The~~does ~~parties~~not have ~~settled~~a ~~these~~concentration ~~claims,~~of ~~and AT&T Wireless Services’~~available ~~creditor~~sources ~~claims~~of inlabor anor ~~agreement that provides AT&T Wireless Services with an unsecured claim for $83 million~~services, ~~and~~nor ~~requires~~does AT&T Wireless Services tohave ~~pay~~any ~~$475~~significant ~~thousand.~~concentration ~~The~~of ~~court~~business ~~has~~transacted ~~approved~~with ~~the settlement. AT&T Wireless Services currently has~~ a ~~full reserve against the $83 million in claims and will record~~particular ~~this~~customer ~~benefit~~that ~~when~~could, ~~and~~ if ~~the~~suddenly ~~cash~~eliminated, isseverely ~~received~~affect operations.

~~TeleCorp~~Financial ~~shareholders~~instruments ~~filed~~that acould ~~class~~potentially ~~action~~subject ~~lawsuit against~~ AT&T Wireless Services ~~challenging its acquisition of TeleCorp. The lawsuit alleged conflicts of interest and breach of fiduciary duties by the TeleCorp directors and claimed that the consideration paid~~ to ~~TeleCorp~~credit ~~shareholders~~risk ~~was~~consist ~~inadequate. Plaintiffs~~principally ~~claimed damages in excess~~ of ~~$330 million.~~trade ~~An agreement was reached~~accounts ~~with plaintiffs’ counsel to settle this case for a total payment of $48 million, and that settlement has been approved by the court~~receivable. ~~Included in other current liabilities on~~ AT&T Wireless Services’ ~~balance~~believes ~~sheet~~that asthe ofcredit ~~September 30,~~risk ~~2003~~with ~~is $48 million related~~ respect to ~~this~~trade ~~settlement.~~accounts ~~AT&T~~receivables ~~Wireless Services~~ is ~~seeking~~ ~~reimbursement~~limited ~~from~~due ~~insurance~~to ~~carriers,~~the ~~and~~diversity ~~will~~of ~~record any~~its ~~reimbursement~~customer ~~when and if the cash is received~~base.

AT&T Wireless Services is currently a party to various claims and legal proceedings, including those noted above. AT&T Wireless Services also makes routine filings with the FCC and state regulatory authorities, as well as federal, state, and local tax authorities. If management believes that a loss arising from these actions and/or filings is probable and can reasonably be estimated, an amount is recorded for the estimated loss. As additional information becomes available, the potential liability related to the actions is assessed and the estimates are revised, if necessary. Based upon currently available information, management does not believe that the ultimate outcome of these actions beyond that provided for as of September 30, 2003, individually and in the aggregate, will have a material adverse effect on AT&T Wireless Services’ Consolidated Financial Statements. However, litigation is subject to inherent uncertainties and unfavorable rulings could occur. If so, it could have a material adverse impact on AT&T Wireless Services’ Consolidated Financial Statements in future periods. While it is not possible to predict the ultimate outcome of the matters discussed above, historically, AT&T Wireless Services has been successful in defending itself against claims and suits that have been brought against it, and payments made in such claims and actions have not been material to AT&T Wireless Services’ Consolidated Financial Statements.

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

You should read the following discussion and analysis in conjunction ~~with~~ with the ~~Consolidated~~consolidated ~~Condensed~~condensed ~~Financial~~financial ~~Statements~~statements and accompanying notes included elsewhere in this report. Except for the historical information, the following discussion contains forward-looking statements that involve risks and uncertainties, such as our objectives, expectations, and intentions. Actual results could differ materially from results that may be anticipated by such forward-looking statements and discussed elsewhere in this report. Factors that could cause or contribute to such differences include, but are not limited to, ~~those~~ those discussed in the section below, and those discussed under “Additional Factors That May Affect Our Business, Future Operating Results, and ~~Financial~~ Financial Condition.” Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in our other filings made with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects, and results of operations. We make our periodic and ~~current~~ current reports available, free of charge, on our website as soon as reasonably practicable after such material is electronically filed with the Commission.

~~INTRODUCTION~~OVERVIEW

We are the second-largest wireless communications service provider in the United States based on revenues for the four quarters ended ~~September~~ June 30, ~~2003~~2004. We seek to expand our customer base and revenue stream by ~~providing~~ providing high-quality, innovative wireless voice and data services. As of ~~September~~June 30, ~~2003~~ 2004, we had 21.97 million consolidated subscribers. For the three ~~nine~~and six months ended ~~September~~ June 30, ~~2003~~2004, we had $124.52 billion and $8.3 billion of total consolidated revenues, respectively. Net income available to common shareholders for the three and six months ended June 30, 2004 was $61 million and $3 million, respectively.

We currently provide wireless voice and data services principally over two separate, overlapping networks in the U.S. ~~One~~and Caribbean. One network uses ~~time~~the ~~division~~signal ~~multiple~~transmission ~~access~~technology known as global system for mobile communications, or ~~TDMA~~GSM, for voice services, and general packet asradio ~~its~~service, ~~signal~~or ~~transmission~~GPRS, ~~technology~~and enhanced data rates for global evolution, or EDGE, for data services. As of ~~September~~June 30, ~~2003~~2004, itthis network covered an aggregate population, which we refer to as “POPS,” of approximately ~~207~~220 million POPS, or 7176 percent of the U.S. population. We also provide voice ~~and~~ ~~enhanced data~~ services over a ~~separate~~ network ~~that~~using ~~uses~~time ~~the~~division ~~signal transmission~~multiple ~~technology~~access, ~~known~~or ~~as global system for mobile communications~~TDMA, oras ~~GSM,~~its ~~and~~signal ~~general~~transmission ~~packet radio service, or GPRS~~technology. As of ~~September~~June 30, ~~2003~~2004, ~~this network~~our TDMA network covered approximately ~~217~~208 million ~~POPS~~, or 7571 percent of the U.S. population. As of ~~September~~June 30, ~~2003~~2004, these two networks within our consolidated markets covered an aggregate of approximately ~~224~~226 million POPS, or 77 78 percent of the U.S. population, and operated in 87 of the 100 largest U.S. metropolitan areas. We refer to this ~~area~~ as our network footprint or service area. ~~Coverage~~Our network footprint coverage is estimated using signal mapping technology and population data compiled by third parties. We also provide voice service on our analog network, as mandated by the Federal Communications Commission (FCC), and data service over a network utilizing packet switched data technology, or CDPD. We are phasing out our CDPD network inas ~~connection~~we ~~with~~increase ~~our~~data ~~launch~~capabilities ofon our GSM/GPRS/EDGE/UMTS ~~service~~network.

We supplement our own networks with roaming agreements that allow ~~our~~ our subscribers to use other providers’ wireless services in regions where we do not have network coverage. We refer to the area covered by our network footprint and roaming agreements as our ~~service~~coverage area. With these roaming agreements, as of ~~September~~June 30, ~~2003~~2004, we were able to offer our TDMA customers wireless services covering virtually the entire ~~United States~~ U.S. population and to provide ~~GSM~~voice and data services through our GSM and GPRS ~~service~~networks ~~covering~~over approximately 8393 percent and 8091 percent, respectively, of the U.S. population. We ~~offer a multi-mode device that allows our customers to access analog, TDMA, and GSM/GPRS networks, providing them access to wireless service across the U.S. We~~ plan to continue to expand our ~~coverage~~ ~~and~~ service and coverage area and increase the capacity and quality of our GSM/GPRS/EDGE network ~~through new network construction, acquisitions, affiliations, joint ventures, and roaming arrangements with other wireless providers~~.

~~DESCRIPTION~~ On OFJuly 20, ~~FINANCIAL~~2004, ~~AND~~we ~~OPERATING~~began ~~METRICS~~offering customers in Detroit, Phoenix, San Francisco, and Seattle broadband mobile wireless services with our launch of the first commercially-available true 3G UMTS (Universal Mobile Telecommunications System) network in the United States, and that we are deploying UMTS technology in Dallas and San Diego, and will likely offer certain services in these markets before the end of this year. NTT DoCoMo, Inc. (DoCoMo) has confirmed to us that the launch of service in these four cities satisfied the UMTS service launch obligations under the Investor Agreement (see further discussion under Capital Requirements – Contractual Obligations below).

Non-GAAP Financial Measures:

OIBDA and OIBDA Margin: OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA margin is calculated as OIBDA divided by services revenue. See “OIBDA DISCUSSION” within the Results of Operations section below for a discussion of why management believes these measures to be important indicators of our operating performance and also for a reconciliation of these measures to their most comparable measures under generally accepted accounting principles (GAAP).

Free Cash Flow: Free Cash Flow, as we have defined it, is calculated as the net cash provided by operating activities of continuing operations less cash payments for capital expenditures and other additions. See “Free Cash Flow Discussion” within the Liquidity section below for a discussion of why management believes this measure to be an important liquidity measure and also for a reconciliation of this measure to its most comparable measure under GAAP.

~~Operational~~SUMMARY ~~Measures:~~OF SECOND QUARTER RESULTS

~~ARPU~~ Total (revenue for AT&T Wireless was $4,219 million in the second quarter, an increase of $61 million, or 1.5 percent, compared with the prior year quarter. Services revenue in the second quarter was $3,871 million, down $68 million, or 1.7 percent, from the second quarter of 2003. Average Revenue per User): (ARPU) was is$58.80 ~~used~~in ~~to measure~~ the ~~average~~second ~~monthly~~quarter ~~services~~of ~~revenue~~2004, ondown afrom ~~per~~$60.60 ~~subscriber~~in ~~basis.~~the ~~ARPU~~prior isyear ~~calculated~~quarter. asBoth services revenue ~~generated~~and ARPU were positively impacted by ~~subscribers~~higher data and roaming revenues, ~~including~~as ~~both~~well as an increase in regulatory program fees. More than offsetting these increases were lower monthly recurring charges received from our ~~subscribers’~~postpaid ~~revenue~~subscriber base despite an increase in Minutes of Use (MOUs), and higher promotional incentives to support customer retention efforts during the ~~roaming~~quarter. ~~revenues~~We expect ARPU to continue to decline as we offer ~~collect~~increased ~~from~~incentives ~~other~~as ~~carrier’s~~part ~~subscribers~~of our customer retention efforts. As a result, ~~divided~~our byability to increase revenue will be dependent on our ability to grow our ~~average~~subscriber ~~subscribers~~base ~~for~~sufficiently to offset the ~~period~~expected ARPU decline.

~~CPGA~~ MOUs ~~(Cost~~ per ~~Gross~~subscriber ~~Subscriber~~per ~~Addition):~~month ~~CPGA~~were is600 ~~used~~in ~~to measure~~ the ~~average cost~~second ofquarter, ~~adding~~up ~~a new subscriber~~8.9 percent ~~CPGA~~from is551 ~~calculated~~in asthe ~~our~~year-ago ~~sales~~quarter. ~~and~~This ~~marketing expenses~~is ~~(included~~consistent ~~within~~with ~~selling, general, and administrative expenses on our~~the ~~Consolidated~~recent ~~Condensed~~trend ~~Statements~~in ofthe ~~Operations)~~growth ~~and equipment subsidies (included within costs~~ of ~~equipment~~wireless ~~sales~~minutes, onas ~~our~~subscribers ~~Consolidated Condensed~~continue ~~Statements~~to ofshift ~~Operations)~~toward ~~related~~calling toplans ~~new~~that ~~customer~~include ~~acquisitions,~~larger ~~divided~~buckets ~~by the number~~ of ~~new gross subscribers added in the period~~minutes.

~~CCPU~~ We ~~(Cash~~ended ~~Cost~~the ~~per~~quarter ~~User):~~with ~~CCPU~~21.7 million issubscribers, ~~used~~a to1.1 percent increase ~~measure~~versus the ~~average~~prior ~~monthly~~year ~~cost~~and a 0.2 percent increase from the first quarter of 2004. Net subscriber additions during the quarter were 15 ~~serving~~thousand, ~~our~~down ~~subscribers~~96.6 percent ~~CCPU~~from is446 ~~calculated~~thousand asnet ~~our~~subscriber ~~total~~additions ~~operating~~in the ~~expenses~~prior year quarter; however an increase from the negative 367 ~~less~~thousand ~~equipment~~in ~~revenue~~the first quarter of 2004. Net subscriber additions versus the prior year were positively impacted by higher gross subscriber additions, ~~depreciation~~which were more than offset by a significant increase in subscriber deactivations. Gross subscriber additions grew 21.7 percent versus the prior year and ~~amortization~~were ~~expenses~~driven primarily by growth in postpaid subscriber sales. During the second quarter, ~~licensing~~more ~~cost~~than 72 percent of our ~~impairments~~gross subscriber additions were on our GSM/GPRS network. Additionally, ~~and~~we made progress in our plans to shift more sales to our direct channels during the ~~costs~~quarter. This ofrapid ~~acquiring~~increase in our new GSM/GPRS subscribers, ~~(as~~along ~~described~~with ~~above~~an increase in offers ~~under~~and ~~CPGA)~~rate plans, ~~divided~~has strained the capacity of our customer care organization. We are attempting to address the increased load by increasing staffing in our ~~average~~call ~~subscribers~~centers. ~~for~~In the ~~period~~interim, the volume of customer calls into our care centers and our response times have been affected. If we are unable to better manage the volume and reduce response times, it could lead to increased churn. In addition, AT&T has notified us that it believes we are in violation of certain performance metrics under our brand license agreement in respect to certain customer care performance levels and otherwise. We are taking steps to address AT&T’s concerns and are in discussions with them concerning the validity of their claims.

~~SUMMARY~~ Our OFchurn ~~THIRD~~rate ~~QUARTER~~rose ~~RESULTS~~to 3.4 percent, up from 2.2 percent in the prior year quarter; however an improvement from the 3.7 percent churn during the first quarter of 2004. We experienced higher churn rates in both our postpaid and prepaid products. Additionally, our churn rate versus the prior year was negatively impacted by higher deactivations within Go Phone, our pay-in-advance product, which was launched during the second quarter of 2003. Churn reduction continues to be a major issue and focus of the business. Our ability to increase future subscriber growth, and in turn, grow our services revenue and OIBDA, is dependent upon successfully decreasing the current elevated churn level.

~~Services~~Cost ~~revenue~~per ~~for~~Gross ~~the~~Subscriber ~~third quarter was $4~~Addition,~~073 million,~~ ~~an 8.2 percent~~ or ~~$308 million~~Cost ~~increase~~per ~~from~~Gross ~~the~~Add ~~third quarter of 2002~~(CPGA), ~~driven primarily by~~ ~~growth~~for in the ~~subscriber~~second ~~base;~~quarter ~~increased~~was ~~roaming~~$350, ~~toll,~~down ~~international, and data revenues; and the continued impact of revenue enhancement initiatives that began in the second half of 2002~~7. ~~Services revenue increased 3.4~~7 percent from ~~the~~ ~~second~~$379 ~~quarter~~in ~~of 2003 due primarily to~~ the ~~increase in total customers~~prior ~~during~~year ~~the third~~ quarter. ~~and~~CPGA ~~a sequential increase~~ in ~~our ARPU. ARPU for~~ the ~~third~~ second quarter ~~of $61.20~~ decreased ~~$0.40~~ from the prior year ~~quarter, but~~ ~~increased $0.60 compared with the second~~ quarter ofas ~~2003.~~a ~~The~~result ~~slight decline in ARPU over the third quarter~~ of ~~2002 was driven by continued pricing pressures, which resulted in a~~ lower ~~average revenue~~ per ~~minute. Partially offsetting the lower average revenue per minute were higher per~~-~~user~~gross ~~contributions~~add ~~from~~equipment ~~data and~~subsidies ~~international revenues,~~ and ~~higher regulatory fees passed on to our~~ ~~customers.~~advertising ~~The sequential increase in ARPU was primarily the result of seasonally higher roaming revenue~~expense. ~~We typically see higher roaming revenues in~~ ~~the second and third quarters as our customers travel more frequently in the~~ ~~spring and summer.~~

~~Minutes~~OIBDA, ofdefined ~~use~~as ~~(MOU) per~~operating ~~subscriber~~income ~~per~~before ~~month~~depreciation ~~increased~~and amortization, towas ~~553~~$1,134 million in the ~~third~~ second quarter of ~~2003~~2004, upa decrease ~~from~~of ~~484~~4.4 percent ~~and~~from ~~551 MOUs during~~ the ~~third~~year-ago quarter. ~~of 2002~~OIBDA ~~and~~margin for the second quarter of ~~2003,~~2004 ~~respectively~~of 29.3 percent ~~These~~decreased ~~increases~~from 30.1 percent in ~~MOUs were~~the ~~consistent~~year-ago ~~with~~quarter. ~~the~~Second ~~recent~~quarter ~~trend~~OIBDA inand ~~the~~OIBDA ~~growth~~margin ofdeclined ~~wireless~~from ~~minutes,~~the asprior year quarter ~~subscribers~~primarily ~~continue~~due to ~~shift~~higher ~~toward~~acquisition ~~calling~~costs ~~plans~~due ~~that~~to ~~include~~the ~~larger~~growth ~~buckets~~in gross ofsubscriber ~~minutes.~~additions ~~Going~~during ~~forward~~the quarter, welower ~~anticipate~~services ~~that~~revenue aand increases ~~continued~~in ~~competitive~~customer ~~pricing~~care and retention expenses. These increases were ~~environment~~partially ~~will~~offset ~~exert~~by ~~downward~~decreases ~~pressure~~in onincollect ~~ARPU,~~and ~~which~~general weand ~~expect~~administrative expenses ~~will~~during bethe atquarter. Additionally, second quarter OIBDA reflected ~~least~~the ~~partially~~benefit ~~offset~~of by$24 million ~~revenue~~of ~~enhancement~~net ~~programs,~~reversals ~~data~~of ~~revenues~~restructuring charges, ~~incremental~~versus ~~revenue~~$47 million ~~sources~~of charges recorded in the prior year quarter, and ~~increased~~a $24 million ~~MOUs~~benefit ~~per~~from ~~subscriber~~the settlement of previously written off receivables from WorldCom.

Ongoing competitive pressures during the third quarter of 2003 and our continued focus on improving the profitability of our customer base negatively impacted subscriber growth during the quarter. Net consolidated subscriber additions totaled 229 thousand during the quarter ended September 30, 2003, reflecting an increase in our churn rate relative to recent quarters. Subscriber growth in the quarter was attributable to post paid and Go Phone subscribers, as prepaid customers declined in absolute numbers and as a percentage of total subscribers. We ended the quarter with 21.9 million consolidated subscribers, an 8.4 percent increase over the prior year quarter. Subsequent to the end of the third quarter, we experienced a significant multi-day disruption in our ability to activate or service GSM/GPRS subscribers, in connection with our implementation of an upgrade to our GSM/GPRS customer care system. This disruption does not impact our ability to activate or service our TDMA customers, which represent over 85 percent of our customer base and over half of new subscriber growth through the third quarter. We have improved performance of this system, including new customer activations, and we are working continuously to achieve expected system performance. However, our ability to activate and service GSM/GPRS subscribers on a timely basis, and the efficiency of our customer care operations, will continue to be affected until we are able to successfully conclude this upgrade. We expect that this, along with our continued focus on profitability, competitive activity, and contract expirations, will put pressure on our future subscriber growth. In addition, increased competitive activity that may be associated with Local Number Portability (LNP) could further impact subscriber growth.

CPGA dropped to $335 in the quarter ended September 30, 2003, compared with $376 for the quarter ended September 30, 2002 and $379 from the second quarter of 2003. Our decreased CPGA reflects our ongoing efforts to move more sales to our lower cost distribution channels (retail stores, internet, and direct mail), which typically have a lower per-subscriber acquisition cost. Our lower CPGA also reflects the benefit of strong sales of our pay in advance product, Go Phone.

Our churn rate for the third quarter of 2003 was 2.7 percent, down from 2.9 percent in the third quarter of 2002, but up from 2.2 percent in the second quarter of 2003. The prior year quarter reflected the impact of increased deactivations associated with the loss of WorldCom subscribers. On a sequential-quarter basis, churn increased due to competitive activity based on coverage, service quality, and more aggressive offers and equipment incentives, as well as an increase in contract expirations during the third quarter of 2003, actions we took to remove unprofitable customers from our customer base, the departure of traditional prepaid customers, and higher customer deactivations due to lack of payment. We continued to hold our standards on credit quality during the third quarter.

~~However,~~ Free wecash ~~continue~~flow towas ~~see~~$105 million anfor ~~increase~~the insecond ~~new~~quarter ~~customers~~of ~~at the lower~~2004, ~~level~~compared ~~of our acceptable credit range as we seek~~ to ~~profitably~~$1,057 million ~~penetrate~~in the ~~third~~ ~~quartile~~prior ofyear ~~potential customers who currently do not own a wireless phone~~quarter. ~~These~~The ~~subscribers~~decrease ~~may impact our churn~~ in ~~future periods. Going forward~~ infree ~~the~~cash ~~fourth~~flow ~~quarter,~~versus ~~although we will remain aggressively focused on renewing~~ the ~~contracts~~prior ofyear ~~profitable~~quarter ~~customers,~~was ~~there~~due ~~will continue~~ to behigher ~~upward~~capital ~~pressure~~expenditures onduring ~~churn with~~ the ~~expiration~~second quarter of an2004 ~~even~~and ~~larger~~an ~~number~~income tax refund of ~~contracts,~~$511 million ~~as well~~received asduring the ~~impact~~second quarter of ~~LNP~~2003.

~~CCPU~~MERGER ~~decreased to $32.10 for the third quarter of 2003, or 1.2 percent~~ANNOUNCEMENT ~~lower than in the prior year quarter. This decrease in CCPU was driven by lower~~ ~~per-subscriber incollect and customer retention expenses (primarily equipment~~ ~~subsidies), partially offset by increases in per-subscriber customer care and~~ allowance for uncollectible receivable expenses. Our ability to maintain or reduce CCPU will be affected by our ability to control and reduce costs including those associated with implementing new infrastructure and back-office support systems for our GSM/GPRS network. There will be upward pressure to our CCPU during the fourth quarter as a result of increased customer retention efforts associated with anticipated fourth quarter contract expirations, the impact of LNP, and back-office system implementations, which may be partially offset by the impact of seasonally lower roaming expenses. Additional restructuring charges associated with our margin improvement efforts may negatively impact CCPU in the near-term, prior to the longer-term, larger savings being realized.

~~OIBDA~~On ~~was~~February 17, ~~income of $1~~2004,~~208 million~~ ~~for~~we ~~the~~entered ~~three~~into ~~months~~a ~~ended~~merger ~~September~~agreement with ~~30,~~Cingular ~~2003,~~Wireless ~~compared~~LLC ~~with~~(Cingular) aand ~~loss~~certain of ~~$259 million~~its ~~during~~affiliates. ~~the~~Under ~~prior year quarter.~~the ~~This~~terms ~~increase~~ of ~~$1,467 million was due primarily to~~ the ~~larger~~agreement, ~~SFAS~~which ~~No. 142 impairment~~were ~~charges~~approved ~~recorded~~by ~~during~~our ~~the~~board ~~third quarter~~ of ~~2002.~~directors ~~The third quarter~~and ~~OIBDA~~the ~~loss~~boards of ~~$259 million~~directors inof ~~2002~~BellSouth ~~included $1~~Corporation,~~329 million~~ inSBC ~~licensing cost~~Communications ~~impairment~~Inc., ~~charges~~and ~~versus~~Cingular, ~~$83 million~~our incommon ~~the~~shareholders ~~current~~will ~~year~~receive ~~quarter~~$15 ~~(see~~cash per ~~“Impairment~~common ofshare ~~Licensing~~and ~~Costs”~~our ~~below).~~preferred ~~Also~~shareholders ~~contributing~~will toreceive the ~~quarter’s~~then ~~OIBDA~~applicable ~~growth~~liquidation ~~was~~preference ~~increased services revenue and lower net costs~~ of ~~equipment sales,~~their ~~partially~~preferred ~~offset by increased network-related costs~~shares, ~~an increased provision~~ for ~~uncollectible receivables, higher customer care expenses, and~~ an ~~increase~~aggregate inof ~~marketing~~approximately ~~and advertising costs. Our ability to continue to grow OIBDA faster than our revenues~~$41 billion, ~~and therefore to continue to improve OIBDA margins, will be dependent~~ upon aconsummation ~~number~~ of ~~factors, including~~ the ~~success of~~ ~~our~~transaction. ~~revenue~~On ~~enhancement~~May 19, ~~programs~~2004, our ~~ability~~shareholders toapproved ~~further~~the ~~reduce costs and~~merger ~~establish~~agreement ~~more~~with ~~efficient~~Cingular. ~~distribution~~The ~~channels,~~transaction ~~and~~is ~~the~~subject ~~level~~to ~~and~~approval ~~cost of new~~by ~~subscriber~~regulatory ~~additions.~~authorities Weand ~~expect~~other ~~that~~closing ~~OIBDA~~conditions. ~~growth~~The ~~and~~companies currently ~~OIBDA~~anticipate ~~margins~~closing ~~will~~the ~~be negatively~~transaction ~~impacted~~ in the fourth quarter ~~by increased marketing expense~~of ~~associated with our brand campaign, and by increased customer retention efforts~~2004.

WeAlthough ~~are~~we inbelieve the ~~process~~transaction ~~of undertaking a series of actions to continue to reduce our cost structure, which we anticipate~~ will ~~improve~~be ~~our~~completed ~~OIBDA~~in ~~margins over time. During~~ the ~~second~~ fourth quarter ~~of 2003~~, wethe ~~launched~~underlying aaccounting ~~company-wide initiative~~within ~~known~~the asconsolidated ~~“Project Pinnacle” in an effort to improve operating~~financial ~~efficiency~~statements and ~~reach~~related ~~our~~disclosures ~~goal~~assumes ofAT&T ~~industry~~Wireless ~~leading margins in 2005 (see~~Services ~~“Restructuring~~continues ~~Charge”~~as ~~below).~~a ~~Additional~~stand-alone ~~decisions~~entity ~~may~~as ~~be made during~~ the ~~fourth~~ ~~quarter~~completion of ~~2003~~the asmerger ~~we continue to work to improve productivity and~~is ~~increase~~deemed ~~our OIBDA margins. We anticipate that these efforts will continue into 2004, and that some of the benefits will likely~~ not beprobable ~~realized~~ until ~~2004~~all ~~and thereafter.~~required ~~These~~regulatory ~~initiatives~~approvals ~~may~~have ~~require us to recognize incremental expenses~~been ~~prior to realizing anticipated savings~~received.

~~Our~~CRITICAL ~~Free~~ACCOUNTING ~~Cash~~POLICIES ~~Flow~~AND ~~for the third quarter of 2003 was $253 million. The~~ESTIMATES ~~Free Cash Flow generation in the third quarter was driven by our strong~~ ~~operating performance, partially offset by our capital expenditures and net~~ ~~interest payments made during the quarter. We expect Free Cash Flow to vary~~ from quarter to quarter and to be lower in the third and fourth quarters due primarily to higher capital expenditures during these quarters as compared to the first two quarters, and the seasonality of our OIBDA.

~~IMPAIRMENT~~ The OFpreparation ~~LICENSING~~of ~~COSTS~~financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and revenues and expenses during the periods reported. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

AsThere ofare ~~September 30,~~certain ~~2003,~~critical weestimates had goodwill and U.S. licensing costs totaling $7,311 million and $14,417 million, respectively. Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” requires that ~~goodwill~~we ~~and~~believe ~~other indefinite-lived intangible assets,~~require ~~consisting~~significant ofjudgment ~~U.S.~~in licensing costs, be tested for impairment annually based upon a fair value approach. Additionally, goodwill must be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the ~~fair~~preparation ~~value~~ of anour ~~entity~~Consolidated ~~below its~~Financial ~~carrying value~~Statements. ~~These~~We ~~events~~consider ~~or circumstances could include a significant change in the business climate, including a significant sustained decline in~~ an ~~entity’s~~ ~~market~~accounting ~~value,~~estimate ~~legal factors, operating performance indicators, competition, sale, or disposition of a significant portion of the business, or other factors. If our market value continues~~ to be ~~less~~critical than our book value for an extended period of time, it could trigger the need for impairment tests of acquired goodwill between annual tests. Other indefinite-lived intangible assets must be tested between annual tests if ~~events or changes in~~: ~~circumstances indicate that the asset might be impaired.~~

We• ~~completed~~It ~~our~~requires ~~second~~us ~~annual~~to ~~impairment~~make ~~tests~~assumptions ~~for~~because ~~both~~information ~~goodwill~~was ~~and~~not ~~U.S. licensing~~available ~~costs~~at ~~during~~ the ~~third~~time ~~quarter~~or ofit ~~2003,~~included ~~using~~matters ~~methodologies consistent~~that ~~with~~were ~~those~~highly ~~applied~~uncertain at the time ofwe ~~the~~were ~~initial~~making ~~adoption~~the ~~of SFAS No. 142 on January 1~~estimate, ~~2002 as well as~~ and

•

Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.

Our critical accounting policies and estimates include our unbilled services revenues; allowances for doubtful accounts; the estimates used in determining the useful lives and valuation allowances of our property, plant, and equipment; fair values and related impairments of property, plant, and equipment, goodwill, U.S. licensing costs, and investments in and advances to unconsolidated subsidiaries; and legal and tax contingencies. For a detailed discussion of our critical accounting policies and estimates please refer to our Annual Report on Form 10-K for the year ended December 31, 2003. There were no material changes in the application of our critical accounting policies and estimates subsequent to the report. We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors and the Audit Committee has reviewed our disclosures relating to them.

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated condensed financial statements and accompanying notes included elsewhere in the report and provides information that management believes is relevant to an assessment and understanding of our results of operations for the three and six months ended June 30, 2004 and 2003 and financial condition as of June 30, 2004 and December 31, 2003.

Restructuring ~~our first annual impairment test in the prior year quarter. Such testing~~Charges ~~resulted in no impairment charge to goodwill as the fair value calculated using~~ ~~a discounted cash flow model was sufficient to pass the first step of the~~ ~~impairment test as defined by SFAS No. 142. FCC licenses that support our U.S.~~ strategic plan, which represent a majority of the licensing costs’ carrying value, were aggregated and valued using a discounted cash flow model. The fair value of our aggregated U.S. strategic licenses, calculated using a discounted cash flow model, was greater than the carrying value, and therefore, no impairment was recorded. Our non-strategic U.S. licenses and licenses held by our variable interest entities (see “New Accounting Policies” below) were valued on a license-by-license basis using primarily comparative market transaction data to determine a fair value. These tests resulted in pretax impairment charges of $26 million for our non-strategic licenses and $57 million for licenses held by our variable interest entities, which were recorded as impairments of licensing costs during the third quarter of 2003. We believe that the declines in the fair value of certain licenses are reflective of recent comparable transactions that have occurred in the market. These impairment charges did not impact any of our debt covenants.

WeDuring ~~believe~~the ~~that~~second aquarter ~~discounted~~of ~~cash~~2003, ~~flow~~we ~~model~~launched isa ~~the~~company-wide initiative ~~best~~known ~~measure~~as of“Project ~~fair value~~Pinnacle” ~~for~~in ~~our~~an ~~reporting~~effort ~~unit~~to improve operating efficiency and margins. ~~However,~~During the ~~average~~first ~~closing~~and ~~price~~second quarters of ~~our~~2004, ~~common~~we ~~stock~~recorded ~~for~~$6 million ~~the~~and ~~ten~~$1 million, ~~trading~~respectively, ~~days~~of ~~before~~additional restructuring ~~and~~charges ~~after~~within ~~quarter-end~~selling, ~~was $4.22~~general, ~~$6.68,~~and administrative expenses ~~$6.64,~~associated ~~$8.13,~~with ~~and~~additional $8employee separations anticipated to occur during 2004.52 ~~for~~During the first and second quarters ~~ended~~of ~~September 30~~2004, ~~2002,~~we ~~December 31,~~reversed ~~2002, March~~$12 ~~31,~~million ~~2003,~~and ~~June~~$25 30million, ~~2003~~respectively, ~~and~~also ~~September 30~~within selling, ~~2003~~general, ~~respectively,~~ ~~reflecting~~and aadministrative ~~market~~expenses, ~~capitalization~~for ~~that~~charges istaken ~~lower~~during ~~than~~2003 ~~the~~that ~~fair~~are ~~value determined~~no ~~using~~longer ~~discounted~~required ~~cash~~based ~~flows.~~on Ifa ~~our~~reevaluation ~~market~~of ~~price~~certain ~~were~~restructuring activities, ~~used~~primarily related to ~~derive~~employee ~~the~~separations ~~fair value~~within of our ~~reporting~~customer care ~~unit,~~and weinformation ~~would~~technology ~~need~~functions. toWe ~~consider~~established ~~other~~a ~~items that may~~restructuring ~~affect~~plan during the ~~fair~~fourth ~~value~~quarter of ~~the~~2003 ~~reporting~~related ~~unit~~to asour acustomer ~~whole, such as a control~~care ~~premium~~function. IfDuring ~~this~~the ~~method~~second ~~were~~quarter ~~used~~of ~~and~~2004, wethe ~~failed~~restructuring plan needed to ~~pass~~be ~~the~~modified ~~first~~due ~~step~~to volumes of ~~the goodwill~~calls ~~impairment~~into ~~test,~~our itcustomer iscare centers ~~reasonably possible~~ that awere ~~goodwill~~higher ~~impairment would~~than ~~result.~~anticipated ~~While~~in wethe dooriginal ~~not~~plan. ~~use~~The adjustments to our ~~market~~plan ~~price~~for toemployee ~~determine~~separations ~~the~~related ~~fair~~to ~~value~~our ofinformation ~~our~~technology ~~reporting~~function ~~unit,~~resulted wefrom ~~expect~~a ~~convergence~~reassessment ~~between~~of ~~our market capitalization~~the economic and ~~discounted~~performance ~~cash~~risk ~~flow~~associated ~~valuation~~with toutilizing ~~occur~~third ~~over~~parties ~~time.~~for certain ~~If this does not occur~~functions, it ~~may~~as ~~signal~~well ~~the~~as ~~need~~higher ~~for~~levels ~~impairment~~of ~~charges~~voluntary employee attrition.

~~RESTRUCTURING~~ During ~~CHARGE~~2003 and the first half of 2004, we recorded net restructuring charges reflecting our plans to separate approximately 2,000 employees. Approximately 80 percent of these employees would be expected to be exempt employees and 20 percent would be expected to be non-exempt employees. Approximately 1,800 of the 2,000 employees had left their positions as of June 30, 2004. The majority of the remaining approximately 200 anticipated employee separations are currently on hold pending our merger with Cingular. Additional restructuring charges or adjustments to prior restructuring charges may occur as we continue to reevaluate our business plans, as well as assess the impacts of our pending acquisition by Cingular (see “Merger Announcement” above).

~~During~~The ~~the~~following ~~second~~table ~~quarter~~displays ofthe ~~2003,~~activity ~~we launched a company-wide initiative known as “Project Pinnacle” in an effort to improve operating efficiency~~ and ~~reach~~ ~~our~~balances ~~goal~~ of ~~industry leading margins in 2005. In~~ the ~~second quarter, in~~ ~~accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits — an Amendment of FASB Statements No. 5 and 43,” we recorded a business~~ restructuring ~~charge for workforce reductions~~reserve, ~~including~~which reductions resulting from our plans to consolidate national corporate functions primarily in Redmond, Washington and northern New Jersey. This charge included $47 million related to employee separation costs for actions taken during the second quarter of 2003. The business restructuring charge is reflected in ~~the Consolidated~~payroll ~~Condensed Statements of Operations as $42 million in selling, general,~~ and ~~administrative expenses and $5 million in costs of services. An additional business restructuring charge of $10 million was recorded during the third quarter of 2003, approximately one half of which~~ benefit-related ~~to new actions~~ ~~taken~~liabilities ~~during~~on the ~~period, and the other half resulting from a higher number of employee separations than originally planned for in the second quarter charge. The third quarter charge is reflected in the~~ Consolidated Condensed ~~Statements of~~Balance ~~Operations~~Sheets for the three ~~months ended September 30, 2003 as $9 million in~~ ~~selling, general,~~ and ~~administrative~~six ~~expenses~~months ~~and~~ended $1June million in costs of services. Approximately 1,900 employees are expected to be separated in conjunction with these plans, of which approximately 80 percent are exempt employees and 20 percent are non-exempt employees. The majority of the employee separations will be involuntary, although approximately one-third of the workforce reductions are anticipated to be the result of employees who decline the opportunity to relocate. Several hundred of those positions will be filled in our consolidated headquarters. The employee separation number is not adjusted for anticipated hiring to fill these positions. Approximately 800 employees had left their positions as of September 30, ~~2003; the remaining employees are anticipated to leave their positions by the end of~~ 2004.: ~~Additional decisions may occur during the fourth quarter of 2003 as we continue~~ ~~to work to improve productivity and increase our OIBDA margins.~~

The following table displays the activity and balances of the restructuring reserve, which is reflected in payroll and benefit-related liabilities on the Consolidated Condensed Balance Sheet:


	Employee Separation
	For the Three			For the Six
	Months Ended			Months Ended
(In Millions)	June 30, 2004			June 30, 2004
Beginning Balance	$	43		$	64
Additions		1			7
Payments		(12	)		(27	)
Adjustments		(25	)		(37	)

Balance at June 30, 2004	$	7		$	7

(In Millions)	Employee Separation
Balance at December 31, 2002	$	—
Additions		57
Payments		(12	)
Balance at September 30, 2003	$	45

Three and Six Months Ended June 30, 2004 Compared with the Three and Six Months Ended June 30, 2003

~~CRITICAL~~Operating ~~ACCOUNTING POLICIES AND ESTIMATES~~Metrics

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and


	For the Three Months									For the Six Months
	Ended June 30,									Ended June 30,
(Subscriber Numbers In Thousands)	2004			2003			Change			2004			2003			Change
Net subscriber additions (1)		15			446			(96.6	)%		(352	)		703			(150.1	)%
Consolidated ending subscribers (2)		21,737			21,493			1.1	%		21,737			21,493			1.1	%
Average monthly churn (3)		3.4	%		2.2	%		120	b.p		3.6	%		2.3	%		130	b.p
Average monthly postpaid churn (3)		3.0	%		1.9	%		110	b.p		3.2	%		2.0	%		120	b.p
Average Revenue per User (ARPU) (4)	$	58.80		$	60.60			(3.0)	%	$	57.70		$	59.70			(3.4	)%
Cost per Gross Subscriber Addition (CPGA) (5)	$	350		$	379			(7.7)	%	$	342		$	391			(12.5	)%

(1)		Net subscriber additions reflect gross subscriber additions (new customers who activate service) less subscriber deactivations.

(2)		Ending subscribers include customers in the U.S. and Caribbean on postpaid, prepaid, or pay-in-advance rate plans. Additionally, ending subscribers include subscribers that are sold through our resale agreements. A

subscriber ~~liabilities,~~is ~~and~~counted ~~the~~based ~~disclosure~~upon ofa ~~contingent~~Mobile ~~assets~~Identification ~~and~~Number ~~liabilities~~(MIN) asor ~~of the~~a ~~date~~Subscriber ofIdentity ~~the~~Module ~~financial~~(SIM) ~~statements~~if ~~and~~the ~~revenues~~subscriber ~~and~~has ~~expenses~~data-only ~~during~~services ~~the periods reported~~(e.g., Weno ~~base~~voice ~~our~~service). ~~estimates~~The onfollowing ~~historical~~table ~~experience,~~summarizes ~~where applicable,~~the ~~and~~activity ~~other~~in ~~assumptions~~our ~~that~~subscriber webase ~~believe~~for ~~are reasonable under~~ the ~~circumstances.~~ ~~Actual~~three ~~results~~and ~~may~~six ~~differ~~months ~~from~~ended ~~our~~June ~~estimates~~30, ~~under~~2004 ~~different assumptions~~and ~~or conditions.~~ 2003:

There are certain critical estimates that we believe require significant judgment in the preparation of our Consolidated Financial Statements. We consider an accounting estimate to be critical if:


	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
(In Thousands)	2004		2003			2004			2003
Ending subscribers as of the beginning of the period		21,692		21,116			21,980			20,859
Net subscriber additions		15		446			(352	)		703
Net subscriber impact from market acquisitions (dispositions) and adjustments		30		(69	)		109			(69	)

Ending subscribers as of June 30		21,737		21,493			21,737			21,493

• As Itof ~~requires~~June 30, us2004, towe ~~make~~had ~~assumptions~~21.7 million ~~because~~consolidated ~~information~~subscribers, an ~~was~~increase ~~not~~of ~~available~~1.1 percent atfrom June 30, 2003. Compared with the ~~time~~prior year orquarter, itnet ~~included~~subscriber ~~matters~~additions ~~that~~in the second quarter were impacted ~~highly~~by ~~uncertain~~strong atgross subscriber additions offset by a significant increase in subscriber deactivations. Gross subscriber additions grew 21.7 percent versus the ~~time~~prior weyear and were ~~making~~driven primarily by growth in postpaid subscriber sales. We continued to shift more sales to our direct channels, including our retail stores and website, during the ~~estimate~~quarter. Our churn rate rose to 3.4 percent, up from 2.2 percent in the prior year quarter; however an improvement from the 3.7 percent churn during the first quarter of 2004. We experienced higher churn rates in both our postpaid and prepaid products. Additionally, our churn rate versus the prior year was negatively impacted by higher deactivations within Go Phone, our pay-in-advance product, which was launched during the second quarter of 2003.

•(3) ~~Changes~~Churn inis ~~the~~calculated ~~estimate~~by ordividing ~~different~~the ~~estimates~~aggregate ~~that~~number weof ~~could~~subscribers ~~have~~who ~~selected~~cancel ~~would~~service ~~have~~during ~~had~~each month in a ~~material~~period ~~impact~~by onthe ~~our~~total ~~financial~~number ~~condition~~of orsubscribers ~~results~~as of ~~operations~~the beginning of the month.

~~Our~~(4) ~~critical~~ARPU ~~accounting~~is ~~policies~~used ~~and~~to ~~estimates~~measure ~~include our unbilled services revenues; allowances for doubtful accounts;~~ the ~~estimates~~average ~~used~~monthly ~~in determining~~services ~~the~~revenue ~~useful~~on ~~lives~~a ofper ~~our~~subscriber ~~property,~~basis. ~~plant,~~ARPU ~~and~~is ~~equipment;~~calculated ~~fair~~as ~~values and~~services ~~related~~revenue ~~impairments~~generated ofby ~~property~~subscribers, ~~plant,~~including ~~and~~both equipment, goodwill, U.S. licensing costs, and investments in and advances to unconsolidated subsidiaries; legal and tax contingencies; and deferred tax valuation allowances. For a detailed discussion of our ~~critical~~subscribers’ ~~accounting~~revenue ~~policies~~ and ~~estimates~~ ~~please~~the ~~refer~~roaming torevenues ~~our~~generated ~~Annual~~from ~~Report~~other onwireless ~~Form 10-K for the year ended December 31~~carriers, ~~2002.~~divided ~~There~~by ~~were no material changes in the application of~~ our ~~critical~~ ~~accounting~~average ~~policies~~subscribers ~~and~~for ~~estimates subsequent to~~ the ~~report~~period. WeSee ~~have discussed~~“Operating ~~the~~Metric ~~development~~Calculations” ~~and~~below ~~selection~~for ofcalculations ~~these critical accounting estimates with the Audit Committee~~ of our ~~board of directors and the Audit Committee has reviewed our disclosures relating to them~~ARPU.

~~NEW~~(5) ~~ACCOUNTING~~CPGA ~~POLICIES~~ is used to measure the average cost of adding a new subscriber. CPGA is calculated as our sales and marketing expenses (included within selling, general, and administrative expenses on our Consolidated Statements of Operations) and equipment subsidies (included within costs of equipment sales on our Consolidated Statements of Operations) related to new customer acquisitions, divided by the number of new gross subscribers added in the period. See “Operating Metric Calculations” below for calculations of our CPGA.

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Specifically, it requires that financial instruments within the scope of the statement be classified as liabilities because they embody an obligation of the issuer. Under previous guidance, many of these instruments could be classified as equity or be reflected as mezzanine equity between liabilities and equity on the balance sheet. As a result of the adoption of this statement on July 1, 2003, we reclassified our mandatorily redeemable preferred stock to long-term liabilities within our Consolidated Condensed Balance Sheet. Additionally, effective with the adoption and on a prospective basis, the accretion relating to our mandatorily redeemable preferred stock is classified as interest expense within our Consolidated Condensed Statements of Operations. We also have certain mandatorily redeemable noncontrolling interests subject to the disclosure provisions of SFAS No. 150 due to the issuance of FASB Staff Position No. FAS 150-3. These mandatorily redeemable noncontrolling interests include minority interests in entities with finite lives. The estimated settlement amount of these entities as of September 30, 2003 was $96 million of which $52 million is reflected within minority interest on our Consolidated Condensed Balance Sheet.


	For the Three Months										For the Six Months
	Ended June 30,										Ended June 30,
(In Millions)	2004		2003		$ Change			% Change			2004		2003		$ Change			% Change
REVENUE
Services	$	3,871	$	3,939	$	(68	)		(1.7	)%	$	7,617	$	7,682	$	(65	)		(0.8	)%
Equipment		348		219		129			59.0	%		677		424		253			59.8	%

Total revenue	$	4,219	$	4,158	$	61			1.5	%	$	8,294	$	8,106	$	188			2.3	%

InServices ~~April 2003~~revenue consists primarily of monthly recurring charges, airtime ~~the~~and ~~FASB~~toll ~~issued~~usage ~~SFAS~~charges ~~No. 149~~(domestic and international), ~~“Amendment~~roaming charges of(domestic ~~Statement~~and ~~133~~international) billed to both our customers and onother ~~Derivative~~wireless ~~Instruments~~service providers, and ~~Hedging~~regulatory ~~Activities.”~~fees ~~This~~we ~~statement~~pass ~~amends~~on ~~and~~to our ~~clarifies~~subscribers. ~~accounting~~Revenue ~~for~~from ~~derivative~~certain ~~instruments~~regulatory fees, ~~including~~primarily ~~certain~~USF ~~derivative~~fees, ~~instruments~~represents ~~embedded~~pass-through incharges ~~other~~that ~~contracts,~~have ~~and~~a ~~for~~corresponding ~~hedging~~expense recorded ~~activities~~within ~~under~~costs ~~SFAS~~of services. Services revenue is derived primarily Nofrom these voice services and also includes increasing revenue from data services. ~~133~~ Services revenue also includes revenues not generated from wireless users, ~~“Accounting~~which consists primarily of sublease rents, revenues we collect from local exchange carriers for ~~Derivative~~call ~~Instruments~~termination charges, and ~~Hedging~~revenues ~~Activities.”~~received ~~Our~~from Public ~~initial~~Safety ~~adoption~~Answering Points and the governmental oversight agency for Enhanced 911 Service. Services revenue is recognized based upon minutes of ~~this~~use ~~statement~~processed onand ~~July 1,~~contracted ~~2003~~fees, ~~did~~and ~~not~~is ~~have~~net aof ~~material~~credits and ~~impact~~adjustments onfor ~~our~~service ~~results~~discounts and incentives. Amounts collected in advance of ~~operations~~the service period, ~~financial~~primarily ~~position~~related to our prepaid and pay-in-advance customers, orare ~~cash~~recorded ~~flows~~as unearned revenue and are recognized when earned. In certain

In November 2002, the Emerging Issues Task Force (EITF) reached consensus on EITF No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” This consensus requires that revenue arrangements with multiple deliverables be divided into separate units of accounting if the deliverables in the arrangement meet specific criteria. In addition, arrangement consideration must be allocated among the separate units of accounting based on their relative fair values, with certain limitations. In certain cases, the sale of wireless service with an accompanying handset constitutes a revenue arrangement with multiple deliverables, which resulted in a reclassification of certain activation revenues (which were previously classified as services revenue) to equipment revenue. We adopted this statement on July 1, 2003, and are applying it on a prospective basis. Our initial adoption of this consensus did not have a material impact on our results of operations, financial position, or cash flows.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 also

cases, ~~requires~~customer ~~disclosure~~activation fees, along with the related costs up to but not exceeding these fees, are deferred and amortized over the estimated customer relationship period. During the second quarter of ~~significant~~2004, ~~variable~~we ~~interests~~reassessed inthe ~~variable~~estimated ~~interest~~customer relationship ~~entities~~period for ~~which~~our asubscribers ~~company~~and isreduced ~~not~~ the ~~primary~~amortization ~~beneficiary~~period of these fees from 36 months to 28 months. WeThe ~~are~~impact ~~required~~of this change was not material to our results of operations or financial position. In order to ~~apply~~grow ~~FIN~~services 46revenue and maintain current ARPU levels, growth in data and other revenue sources will need to ~~new~~offset ~~variable~~the ~~interest~~expected ~~entities~~continued decline ~~created~~in orour ~~acquired~~average ~~after~~revenue per minute related to our monthly ~~January 31,~~recurring ~~2003~~and airtime usage charges. ~~For~~Equipment ~~variable~~revenue ~~interest~~is ~~entities~~generated primarily ~~created~~from the sale of wireless handsets and accessories. We generally subsidize all or ~~acquired~~a onportion of handset sales in connection with longer-term contracts or other promotional offers. The revenue and ~~prior~~related toexpenses ~~January 31,~~associated ~~2003,~~with wethe ~~elected~~sale of wireless handsets and accessories are recognized when the products are delivered to ~~early~~and accepted ~~adopt~~by ~~FIN~~the 46customer ~~effective~~or ~~April 1~~distributor, as this is considered to be a ~~2003~~separate earnings process from the sale of wireless services.

WeTotal ~~have~~revenue ~~significant~~grew ~~variable interests in several of our unconsolidated subsidiaries for which we are deemed to be the primary beneficiary~~1.5 percent ~~These variable interests typically consist of a combination of any or all of voting equity interests, non-voting equity interests, loans, and put options that provide the other owners the right~~ to require us to purchase their ownership interest if and when certain events occur. These entities were formed to acquire licenses that were restricted by FCC rule to businesses with limited assets and revenues$4, ~~and to provide a means through which we can invest in these licenses. To date~~219 million, ~~the~~an ~~activity~~increase of ~~these entities has consisted primarily~~$61 ~~of acquiring licenses through acquisitions and FCC auctions~~million, ~~and network construction. We previously accounted~~ for ~~these ventures under~~ the ~~equity method~~three ofmonths ~~accounting~~ended ~~as we do not have voting control and we have recognized virtually 100~~June ~~percent~~30, of2004, ~~the~~compared ~~entities’~~with ~~operating losses due to our significant~~the ~~variable~~prior ~~interests~~year. ~~Our~~Total ~~maximum~~revenue ~~loss~~grew ~~exposure~~2.3 percent ~~related~~ to ~~these entities as of September~~$8,294 30million, ~~2003~~an ~~was~~increase of ~~approximately~~ $~~145~~188 million, ~~which~~for ~~represented~~ the ~~value of~~six ~~the~~months ~~put~~ended options that provide the other owners the right to require us to purchase their ownership interest under certain circumstances. As a result of the adoption of FIN 46, we consolidated these entities at their carrying values effective AprilJune 130, ~~2003. Additionally~~2004, wecompared ~~have determined we have a significant variable interest and are deemed to be the primary beneficiary in an entity that holds assets and liabilities associated~~ with ~~synthetic leases. As a~~ ~~result, upon adoption, we consolidated~~ the ~~assets~~prior ~~and liabilities associated with two synthetic leases that were previously disclosed as off-balance sheet arrangements~~year. ~~The impact of early-adopting FIN 46 to our Consolidated Condensed~~ ~~Balance Sheet as of April 1, 2003 was as follows:~~

	Cash		Property,				Investments in and						Other		Long-		Deferred		Other
	and cash		plant, and		Licensing		advances to unconsolidated			Other			current		term		income tax		long-term		Minority
(In Millions)	equivalents		equipment		costs		subsidiaries			assets			liabilities		debt		liabilities		liabilities		interest
Unconsolidated subsidiaries	$	16	$	—	$	636	$	(506	)	$	(18	)	$	8	$	30	$	47	$	5	$	38
Synthetic leases				63												63

Services revenue for the three months ended June 30, 2004 was $3,871 million, a decrease of $68 million, or 1.7 percent, compared with the same period in 2003. Services revenue for the six months ended June 30, 2004 was $7,617 million, a decrease of $65 million, or 0.8 percent, compared with the same period in 2003. For both the three and six months ended June 30, 2004, services revenue was positively impacted by higher data and roaming revenues, as well as an increase in regulatory program fees. Additionally, for the six months ended June 30, 2004, services revenue grew due to an increase in USF fees. More than offsetting these increases were lower monthly recurring charges received from our postpaid subscriber base, despite an increase in MOUs, and higher promotional incentives to support customer retention efforts.

AtARPU ~~adoption,~~for the ~~cumulative~~three ~~effect~~months ofended ~~change~~June 30, in2004 ~~accounting~~was ~~principle~~$58.80, ~~was~~compared ~~not~~to ~~material~~$60.60 tofor ~~our~~the ~~results~~second quarter of ~~operations~~2003. ~~Effective~~ARPU ~~with~~for the ~~adoption~~six ofmonths ~~FIN~~ended ~~46 on April~~June 130, ~~2003~~2004 was $57.70, wecompared ~~removed~~to $~~239 million~~59.70 for the first half of ~~outside~~2003. The ~~basis~~decline ~~deferred~~in ~~tax~~ARPU for both periods was driven by lower average monthly ~~assets~~recurring charges and higher promotional incentives, ~~which~~partially ~~had~~offset ~~full~~by higher ~~valuation~~average ~~allowances~~per-user contributions from data revenues, ~~associated~~USF ~~with~~fees, ~~the~~and regulatory ~~unconsolidated~~program fees. Average minutes of use per subscriber per month ~~subsidiaries~~were 600 and 582 for ~~which~~the wethree ~~are~~and ~~deemed~~six tomonths beended June 30, 2004, respectively, representing increases of 8.9 percent and 9.8 percent from the ~~primary~~respective ~~beneficiary~~year-ago periods. These increases are consistent with the recent trend in the growth of wireless minutes, as subscribers continue to shift toward calling plans that include larger buckets of minutes.

WeEquipment ~~have~~revenue nofor ~~material~~the ~~variable~~three ~~interests~~months ended June 30, 2004 was $348 million, an increase of $129 million, or 59.0 percent, compared with the same period in 2003. Equipment revenue for ~~which~~the wesix ~~are~~months ~~not~~ended ~~deemed~~June 30, 2004 towas be$677 million, an increase of $253 million, or 59.8 percent, compared with the ~~primary~~same ~~beneficiary~~period in 2003. The increases for both the three and six months ended June 30, 2004 were attributable to higher average revenue per unit sold and an increase in handsets sold versus the prior year periods.


	For the Three Months												For the Six Months
	Ended June 30,												Ended June 30,
(In Millions)	2004			2003			$ Change			% Change			2004			2003			$ Change			% Change
Costs of services	$	1,057		$	1,190		$	(133	)		(11.1	)%	$	2,223		$	2,304		$	(81	)		(3.5	)%
As a percentage of services revenue		27.3	%		30.2	%								29.2	%		30.0	%

WeCosts ~~are~~of ~~subject~~services toconsist ~~asset~~primarily ~~retirement~~of ~~obligations~~costs ~~associated~~to ~~with~~operate and maintain our ~~cell~~TDMA and GSM/GPRS/EDGE networks, incollect expenses (the roaming ~~site~~costs paid to other wireless providers), ~~switch~~and ~~site~~access, ~~retail~~interconnection, and toll ~~administrative~~charges ~~location~~paid ~~operating~~to ~~leases,~~connect ~~which~~our customers’ calls on other carriers’ ~~are~~networks. ~~subject~~Additionally, tocosts of services include the ~~provisions~~provision offor uncollectible ~~this~~receivables, ~~statement~~USF and regulatory fees, and non-income-related taxes. ~~These~~Costs ~~lease~~of ~~agreements~~services ~~may~~for the three months ended ~~contain~~June 30, ~~clauses~~2004 ~~requiring~~were ~~restoration~~$1,057 million, a decrease of ~~the~~$133 million, ~~leased~~or ~~site~~11.1 percent, atcompared with the ~~end~~three months ended June 30, 2003. Costs of services for the ~~lease~~ ~~term~~six months ended June 30, ~~creating~~2004 anwere ~~asset~~$2,223 million, ~~retirement~~a decrease ~~obligation~~of $81 million, or 3.5 percent, ~~Our~~compared ~~initial~~with ~~adoption~~the ofsix months ~~this~~ended ~~statement~~June 30, ~~did~~2003. ~~not~~The ~~have~~decrease afor ~~material~~the ~~impact~~three onmonths ~~our~~ended ~~results~~June 30, 2004 was the result of ~~operations~~lower incollect and toll expenses, as well as a ~~financial~~lower ~~position,~~provision orfor ~~cash~~uncollectible ~~flows~~receivables. Both incollect and toll expenses declined due to lower average costs

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This statement requires that a liability for a cost associated with an exit or disposal activity be recognized at fair value when the liability is incurred. Our initial adoption of this statement on January 1, 2003, did not have a material impact on our results of operations, financial position, or cash flows.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” This interpretation expands on the existing accounting guidance and disclosure requirements for most guarantees, including indemnifications. It requires that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligations it assumes under that guarantee if that amount is reasonably estimable, and must

per ~~disclose~~minute, ~~that~~and ~~information~~lower roaming inand ~~its~~long ~~interim~~distance ~~and~~minutes ~~annual~~of ~~financial statements~~use. The ~~provisions~~decline in the provision for ~~initial~~uncollectible ~~recognition~~receivables ~~and~~was ~~measurement~~due ofto ~~the~~an ~~liability~~improved ~~are~~aging toof the bereceivables ~~applied~~balances, onas well as a ~~prospective~~recovery ~~basis~~in the second quarter of 2004 related to ~~guarantees~~previously ~~issued~~written-off orreceivables ~~modified~~from onWorldCom. orDuring ~~after~~the ~~January 1~~second quarter, ~~2003.~~we ~~Our~~received ~~initial~~a ~~adoption~~settlement offrom ~~this~~WorldCom ~~statement~~totaling on$29 million, ~~January~~of which $18 1,million ~~2003,~~was ~~did not~~reflected ~~have~~as a ~~material~~reduction ~~impact~~to on our provision ~~results~~for ofuncollectible ~~operations,~~receivables. ~~financial~~These ~~position,~~improvements orwere ~~cash~~partially ~~flows.~~offset ~~Guarantees~~by ~~issued~~higher ornetwork ~~modified~~expenses, ~~after~~including ~~January 1~~leases, ~~2003,~~rents ~~will be~~and ~~recognized~~utilities atcosts, ~~their~~resulting ~~fair~~from ~~value~~an increase in ~~our~~cell ~~financial~~sites ~~statements.~~over ~~See~~the ~~“Off-Balance~~prior ~~Sheet~~year. ~~Arrangements”~~The decrease for ~~additional~~the ~~disclosures~~six ~~related~~months toended ~~indemnifications~~June 30, ~~made~~2004 was the result of lower incollect and toll expenses, partially offset by usincreases in network expenses and USF and regulatory fees.

RESULTS OF OPERATIONS


	For the Three Months									For the Six Months
	Ended June 30,									Ended June 30,
(In Millions)	2004		2003		$ Change		% Change			2004		2003		$ Change		% Change
Costs of equipment sales	$	620	$	473	$	147		31.0	%	$	1,206	$	942	$	264		28.0	%

~~The~~Costs ~~following~~of ~~discussion~~equipment ~~and~~sales ~~analysis~~include ~~should~~the becosts ~~read~~of inthe ~~conjunction~~handsets ~~with~~and ~~the~~accessories ~~Consolidated~~sold ~~Condensed~~to ~~Financial~~new, ~~Statements~~as ~~and~~well ~~accompanying~~as ~~notes~~existing ~~included elsewhere~~customers, inand the ~~report~~related distribution and ~~provides~~shipping ~~information~~costs. ~~that~~Costs ~~management~~of ~~believes~~equipment issales for the three ~~relevant~~months toended anJune 30, ~~assessment~~2004 ~~and~~were ~~understanding~~$620 million, an increase of ~~our~~$147 million, ~~results~~or of31.0 percent, ~~operations~~compared ~~for~~ with the three ~~and~~months ~~nine~~ended June 30, 2003. Costs of equipment sales for the six months ended ~~September~~June 30, ~~2003~~2004 were ~~and~~$1,206 million, ~~2002~~an increase of $264 million, ~~and~~or ~~financial~~28.0 percent, ~~condition~~compared aswith ofthe ~~September~~six months ended June 30, 2003. The increases in both periods resulted from an increase in both the number of handsets sold and the ~~December 31,~~average ~~2002~~cost per handset.

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002


	For the Three Months											For the Six Months
	Ended June 30,											Ended June 30,
(In Millions)	2004			2003			$ Change		% Change			2004			2003			$ Change		% Change
Selling, general, and administrative	$	1,408		$	1,309		$	99		7.6	%	$	2,765		$	2,564		$	201		7.9	%
As a percentage of services revenue		36.4	%		33.2	%							36.3	%		33.4	%

(In Millions)	For the Three Months									For the Nine Months
	Ended September 30,									Ended September 30,
	2003		2002		$ Change		% Change			2003		2002		$ Change			% Change
REVENUE
Services	$	4,073	$	3,765	$	308		8.2	%	$	11,755	$	10,745	$	1,010			9.4	%
Equipment		301		298		3		1.4	%		725		839		(114	)		(13.5	)%
Total revenue	$	4,374	$	4,063	$	311		7.7	%	$	12,480	$	11,584	$	896			7.7	%

Selling, general, and administrative (SG&A) expenses consist primarily of selling costs to acquire new customers, costs we incur to service our existing customer base, and our general and administrative expense for our information technology group and finance and administration functions. SG&A expenses for the three months ended June 30, 2004 were $1,408 million, an increase of $99 million, or 7.6 percent, compared with the three months ended June 30, 2003. SG&A expenses for the six months ended June 30, 2004 were $2,765 million, an increase of $201 million, or 7.9 percent, compared with the six months ended June 30, 2003. The increases for both periods resulted from increased customer care expenses, driven by high volumes of calls to our customer care centers relating to our GSM customer sales and migrations. Additionally, increases in gross subscriber additions and in sales personnel resulted in higher commissions expense and higher salary and benefit expenses versus the prior year periods. Partially offsetting these increases was a decline in advertising and general and administrative expenses versus the prior year periods. Both the three and six months ended June 30, 2004 reflected benefits associated with the net reversal of restructuring charges totaling $24 million and $30 million, respectively, versus restructuring charges totaling $42 million for the three and six months ended June 30, 2003.

Services revenue consists primarily of monthly recurring charges, airtime and toll usage charges (domestic and international), roaming charges (domestic and international) billed to both our customers and other wireless service providers, and regulatory fees we pass on to our subscribers. Services revenue is derived primarily from these voice services and also includes increasing revenue from data services. Services revenue also includes revenues not generated from wireless users, which consists primarily of sublease rents and revenues we collect from local exchange carriers for call termination charges. Services revenue is recognized based upon minutes of use processed and contracted fees, and is net of credits and adjustments for service discounts. Amounts collected in advance of the service period, primarily related to our prepaid and pay-in-advance customers, are recorded as unearned revenue and are recognized when earned. In certain cases, customer activation fees, along with the related costs up to but not exceeding these fees, are deferred and amortized over the estimated customer relationship period. In order to grow services revenue and maintain current ARPU levels, growth in data and other revenue sources will need to offset the expected continued decline in our average revenue per minute related to our monthly recurring and airtime usage charges. Equipment revenue is generated primarily from the sale of wireless handsets and accessories. We generally subsidize all or a portion of handset sales in connection with longer-term contracts or other promotional offers. The revenue and related expenses associated with the sale of wireless handsets and accessories are recognized when the products are delivered and accepted by the customer or distributor, as this is considered to be a separate earnings process from the sale of wireless services. Effective with the adoption of EITF No. 00-21, “Revenue Arrangements with Multiple Deliverables” in the third quarter of 2003, we changed the way we account for certain cases of wireless service sales with an accompanying handset (see “New Accounting Policies” above for further information regarding this consensus).


	For the Three Months									For the Six Months
	Ended June 30,									Ended June 30,
(In Millions)	2004		2003		$ Change		% Change			2004		2003		$ Change		% Change
Depreciation and amortization	$	896	$	735	$	161		21.7	%	$	1,783	$	1,470	$	313		21.3	%

~~Total~~Depreciation ~~revenue~~and ~~grew~~amortization ~~7.7~~expenses for the three months ended June ~~percent~~30, to2004 were $~~4,374~~896 million, an increase of $~~311~~ 161 million, ~~for~~or 21.7 percent, compared with the three months ended ~~September~~June 30, 2003,. ~~compared~~Depreciation and ~~with~~amortization expenses for the ~~three~~ six months ended ~~September~~June 30, ~~2002~~2004 were $1,783 million, ~~and~~an ~~7.7 percent~~increase toof $~~12,480~~313 million, ~~for~~or ~~the~~21.3 percent, compared ~~nine~~with the six months ended ~~September~~June 30, 2003,. ~~compared~~The increases for both periods resulted from an increase in depreciation expense associated with the growth ~~nine~~in AT&T Wireless Services’ depreciable asset base, and accelerated depreciation of certain TDMA radio equipment, which totaled $35 million and $92 million for the three and six months ended ~~September~~ June 30, ~~2002~~2004, respectively. Capital expenditures, including capital additions related to internal use software, were $918 million and $542 million for the three months ended June 30, 2004 and 2003,

Services revenue for the three months ended September 30, 2003 was $4,073 million, an increase of $308 million, or 8.2 percent, compared with the three months ended September 30, 2002. Services revenue for the nine months ended September 30, 2003 was $11,755 million, an increase of $1,010 million, or 9.4 percent, compared with the nine months ended September 30, 2002. The increase in services revenue for both current year periods was driven primarily by growth in the subscriber base; increased roaming, toll, international, and data revenues; and the continued impact of revenue enhancement initiatives that began in the second half of 2002.

Our wireless subscribers represent customers on post-paid, prepaid, or pay-in-advance rate plans. Additionally, our reported subscribers include subscribers that are sold through our resale agreements. As of September 30, 2003, we had 21.9 million consolidated subscribers, an increase of 8.4 percent from September 30, 2002. Total consolidated subscribers reflected a net increase of 133 thousand during the third quarter of 2003 associated with market acquisitions completed within the quarter and the release of the TeleCorp subscriber reserve taken at the time of the TeleCorp acquisition, partially offset by an adjustment to our total subscribers

respectively. ~~to reflect the removal of certain inactive reseller subscribers as part of~~Capital ~~our~~expenditures, ~~ongoing~~including ~~subscriber~~capital ~~reconciliation efforts. Net consolidated wireless subscriber~~ additions ~~during~~related ~~the~~to ~~three~~internal ~~and nine months ended September 30~~use software, ~~2003 totaled~~were ~~229 thousand and 932 thousand~~$1,657 million ~~respectively, representing a 13.9 percent increase over the third quarter of 2002~~ and ~~a 26.6~~$970 ~~percent~~million ~~decrease over~~for the ~~prior~~six ~~year-to-date~~months ~~period. Net subscriber additions during the third~~ended ~~quarter of 2003 were negatively affected by increased subscriber deactivations, or churn, in the quarter. Traditional prepaid subscribers as of September~~June 30, ~~2003~~ ~~remained~~2004 aand ~~mid-single-digit percentage of the total consolidated subscriber base~~2003, ~~and reseller subscribers remained a low-single-digit percentage of the total base~~respectively. ~~The following table summarizes the activity in~~ ~~our subscriber base during the third quarter of 2003:~~

(In Thousands)
	For the Three Months												For the Six Months
Ending subscribers as of December 31, 2002		20,859
	Ended June 30,												Ended June 30,
Net subscriber additions		703
(In Millions)	2004			2003			$ Change			% Change			2004		2003			$ Change		% Change
Net subscriber impact from market acquisitions (dispositions) and adjustments		(69	)
Interest income	$	12		$	12		$	—			(6.0	)%	$	26	$	22		$	4		16.6	%
Ending subscribers as of June 30, 2003		21,493
Net gains on sale/exchange of assets, businesses, and cost method unconsolidated subsidiaries		4			40			(36	)		n/m			30		5			25		n/m
Net subscriber additions		229
Minority interests in consolidated subsidiaries		—			(2	)		2			(107.6	)%		—		(6	)		6		(103.2	)%
Net subscriber impact from market acquisitions (dispositions) and adjustments		133
Miscellaneous, net		8			—			8			n/m			10		(1	)		11		n/m
Ending subscribers as of September 30, 2003		21,855
Total Other income	$	24		$	50		$	(26	)		(53.2	)%	$	66	$	20		$	46		227.1	%

~~Our~~Other ~~churn~~income ~~rates~~ for the three ~~and nine~~ months ended ~~September~~June 30, ~~2003, were~~2004 ~~2.7 percent~~totaled ~~and 2.4 percent, respectively, down from 2.9 percent and 2.6~~$24 ~~percent~~million ~~in the three~~ and ~~nine~~primarily ~~months~~included ~~ended~~interest ~~September 30, 2002, respectively~~income. ~~The~~ ~~churn~~Other ~~rate~~income ~~related to our postpaid customers~~ for the three ~~and nine~~ months ended ~~September~~June 30, 2003, oftotaled ~~2.4~~$50 ~~percent~~million and ~~2.1 percent, respectively, also~~primarily ~~improved~~included ~~from 2.6 percent and 2.4 percent, respectively,~~ a ~~year~~gain ~~ago. The prior year periods were negatively impacted by the impact of increased deactivations~~ associated with the ~~loss~~exchange of ~~WorldCom~~wireless ~~subscribers.~~properties, ~~Churn~~as well inas ~~the~~interest ~~third~~income. ~~quarter~~Other ~~of 2003~~income ~~was~~for ~~up from~~ the ~~second~~six ~~quarter~~months ~~rate~~ended ~~of 2.2~~June ~~percent due to competitive~~30, ~~activity~~2004 ~~based~~totaled on$66 million ~~coverage, service quality,~~ and ~~more~~primarily ~~aggressive~~included ~~offers~~interest income and the ~~equipment~~gain ~~incentives,~~of asthe ~~well~~sale asof ana ~~increase~~cost inmethod ~~contract~~investment ~~expirations~~ during the ~~third~~ ~~quarter~~first ~~of 2003, actions we took to remove unprofitable customers from~~quarter. ~~our~~Other ~~customer~~income ~~base,~~for the ~~departure~~six ofmonths ~~traditional~~ended ~~prepaid customers~~June 30, ~~and~~2003 ~~higher~~totaled $20 million ~~customer~~and ~~deactivations~~primarily ~~due~~included tointerest ~~lack of payment~~income.

Our ARPU for the three and nine months ended September 30, 2003, was $61.20 and $60.20, respectively, compared to $61.60 and $60.20 for the three and nine months ended September 30, 2002, respectively. The decline in ARPU in the current year quarter was driven by continued pricing pressures, which resulted in a lower average revenue per minute. Partially offsetting the lower average revenue per minute was an increase in data revenue resulting from more data users and higher per-user contributions, international revenues, and higher regulatory fees passed on to our customers. Average minutes of use per subscriber per month were 553 and 484 for the three months ended September 30, 2003 and 2002, respectively, and 538 and 466 for the nine months ended September 30, 2003 and 2002, respectively. The increases in both current year periods were consistent with the recent trend in the growth of wireless minutes, as subscribers continue to shift toward calling plans that include larger buckets of minutes.


	For the Three Months										For the Six Months
	Ended June 30,										Ended June 30,
(In Millions)	2004		2003		$ Change			% Change			2004		2003		$ Change			% Change
Interest expense	$	189	$	207	$	(18	)		(8.3	)%	$	385	$	391	$	(6	)		(1.4	)%

~~Equipment~~Interest ~~revenue~~expense ~~for~~was $189 million in the ~~three~~second ~~months~~quarter ~~ended~~of ~~September 30~~2004, compared ~~2003,~~with ~~was~~ $~~301~~ 207 million, anin ~~increase~~the ofprior year quarter. Interest expense was $3385 million, orin ~~1.4 percent,~~the ~~compared~~first ~~with~~six ~~the three~~ months ~~ended~~of ~~September 30~~2004, ~~2002.~~compared ~~The~~with ~~growth~~$391 million in the ~~current~~prior year. ~~quarter~~The ~~was~~decrease ~~due~~for both periods resulted toprimarily anfrom ~~increase~~lower ininterest ~~handsets~~expense ~~sold,~~on ~~offset~~the byTeleCorp aand ~~decline~~Tritel indebt due to the ~~average~~extinguishments ~~revenue~~which ~~per unit~~occurred ~~sold~~subsequent to June 30, 2003. Additionally, ~~Equipment~~the ~~revenue~~decrease for the ~~nine~~three months ended ~~September~~June 30, ~~2003, was~~2004 ~~$725 million,~~resulted afrom ~~decrease~~an ofincrease ~~$114 million,~~in orcapitalized ~~13.5 percent,~~interest ~~compared~~due ~~with~~to the higher ~~nine~~levels ~~months~~of ~~ended~~capital ~~September 30,~~expenditures ~~2002.~~versus ~~The~~the ~~decline~~prior inyear ~~equipment~~quarter. ~~revenue~~Partially offsetting ~~over~~these decreases was the accretion of interest associated with ~~prior~~our ~~year-to-date~~mandatorily ~~period~~redeemable preferred stock which was ~~attributable~~reclassified to interest aexpense ~~lower~~effective ~~average~~in ~~revenue~~the ~~per~~third ~~unit,~~quarter of 2003 with the adoption ~~partially~~of ~~offset~~SFAS byNo. 150, an“Accounting ~~increase~~for inCertain ~~handsets~~Financial ~~sold~~Instruments with Characteristics of both Liabilities and Equity.”

(In Millions)	For the Three Months												For the Nine Months
	For the Three Months												For the Six Months
	Ended September 30,												Ended September 30,
	Ended June 30,												Ended June 30,
	2003			2002			$ Change			% Change			2003			2002			$ Change			% Change
(In Millions)	2004			2003			$ Change			% Change			2004			2003			$ Change			% Change
Costs of services	$	1,267		$	1,173		$	94			8.1	%	$	3,571		$	3,387		$	184			5.5	%
Provision for income taxes	$	34		$	57		$	(23	)		(40.1	)%	$	—		$	103		$	(103	)		(100.2	)%
As a percentage of services revenue		31.1	%		31.2	%								30.4	%		31.5	%

~~Costs~~The ofprovision ~~services~~for ~~consist~~income ~~primarily~~taxes ofwas ~~costs~~$34 million tofor ~~operate~~the ~~and~~three ~~maintain our~~months ~~TDMA~~ended ~~and~~June 30, ~~GSM/GPRS networks~~2004, ~~incollect~~compared ~~expenses~~to ~~(the~~$57 million ~~roaming~~for ~~costs~~the ~~paid~~three tomonths ~~other~~ended ~~wireless providers)~~June 30, ~~and~~2003. ~~access,~~There ~~interconnection,~~was ~~and~~a ~~toll~~de ~~charges~~minimus ~~paid~~tax ~~to connect~~provision ~~our~~required ~~customers’~~for ~~calls~~the ~~on other carriers’ networks. Additionally, costs~~six ofmonths ~~services~~ended ~~include the provision for uncollectible receivables~~June 30, ~~regulatory fees~~2004, ~~and~~compared ~~non-income-related~~to ~~taxes.~~$103 million ~~Costs of services~~ for the ~~three~~six months ended ~~September~~June 30, 2003,. ~~were~~The ~~$1,267 million,~~estimated anannual ~~increase~~effective oftax ~~$94 million,~~rate ~~or 8~~of 9.1 0 percent as of June 30, ~~compared~~2004 ~~with~~was ~~the~~lower ~~three~~than ~~months~~our ~~ended~~statutory ~~September 30~~rate as non-deductible expenses, ~~2002.~~including ~~Costs~~interest ~~of services~~accretion ~~for~~on ~~the~~our ~~nine~~preferred stock ~~months~~and ~~ended~~merger-related ~~September 30~~expenses, ~~2003,~~offset ~~were~~the ~~$3,571 million,~~projected antax benefit. ~~increase~~During the second quarter of ~~$184 million~~2003, orour ~~5.5 percent,~~deferred ~~compared~~tax ~~with~~liabilities (excluding the ~~nine~~deferred ~~months~~tax ~~ended September 30,~~liabilities ~~2002.~~related ~~The~~to ~~majority~~licensing ofcosts ~~the~~and goodwill) ~~increase~~exceeded ~~for~~our ~~both~~deferred ~~periods~~tax ~~resulted~~assets. ~~from~~Therefore, we determined ~~increased~~that ~~network-related~~we ~~costs~~no ~~associated~~longer ~~with~~required a ~~larger~~valuation ~~number~~allowance ofagainst ~~cell~~our ~~sites~~deferred tax toassets, ~~support~~other ~~the~~than ~~increased~~those ~~minutes~~deferred oftax ~~use~~assets byassociated ~~the~~with ~~existing~~actual ~~base of customers, as~~and ~~well~~potential ascapital bylosses ~~new~~that ~~customers~~were ~~added~~deemed ~~since~~more ~~the~~likely ~~prior~~than ~~year~~not ~~periods;~~to ~~increased~~expire ~~interconnection~~unused. ~~and~~The ~~toll~~estimated ~~charges~~annual ~~with~~effective ~~the~~rate ~~growing~~for ~~subscriber~~2003 ~~base;~~of ~~and~~22.7 percent ~~higher~~was ~~regulatory~~lower ~~fees,~~than ~~primarily~~AT&T ~~Universal~~Wireless ~~Service~~Services’ ~~Fees.~~statutory ~~Additionally,~~rate ~~the~~due ~~three months~~to ~~ended~~the ~~September 30,~~reversal ~~2003~~of certain ~~was~~valuation ~~negatively~~allowances ~~impacted~~recorded byduring an2003.

increased provision for uncollectible receivables due to higher net write-offs and a deterioration of our accounts receivable aging. The nine months ended September 30, 2002 also included $21 million in charges associated with the wind-down of our air-to-ground operations.


	For the Three Months										For the Six Months
	Ended June 30,										Ended June 30,
(In Millions)	2004		2003			$ Change		% Change			2004		2003		$ Change			% Change
Net equity earnings (losses) from investments in unconsolidated subsidiaries, net of tax	$	22	$	(9	)	$	31		342.1	%	$	5	$	18	$	(13	)		(74.0	)%

(In Millions)	For the Three Months										For the Nine Months
	Ended September 30,										Ended September 30,
	2003		2002		$ Change			% Change			2003		2002		$ Change			% Change
Costs of equipment sales	$	495	$	620	$	(125	)		(20.1	)%	$	1,437	$	1,702	$	(265	)		(15.5	)%

Net equity earnings (losses) from investments in unconsolidated subsidiaries for the second quarter of 2004 were earnings of $22 million, net of a $6 million tax provision, compared with a loss of $9 million, net of a $46 million tax provision, in the second quarter of 2003. Net equity earnings (losses) from investments in unconsolidated subsidiaries for the first six months of 2004 were earnings of $5 million, net of a $1 million tax provision, compared with earnings of $18 million, net of a $46 million tax provision, in the first half of 2003. The increase in net earnings for the three months ended June 30, 2004 versus the prior year was primarily due to the lower tax provision, which included a benefit from the reversal of certain capital loss valuation allowances, partially offset by equity earnings for the three months ended June 30, 2003 related to investments that were subsequently sold during 2003. The decline in net equity earnings (losses) from investments in unconsolidated subsidiaries for the six months ended June 30, 2004 was due primarily to equity earnings from investments sold during 2003, partially offset by a lower tax provision.

Costs of equipment sales include the costs of the handsets and accessories sold to new, as well as existing customers and the related distribution and shipping costs. Costs of equipment sales for the three months ended September 30, 2003 were $495 million, a decrease of $125 million, or 20.1 percent, compared with the three months ended September 30, 2002. Costs of equipment sales for the nine months ended September 30, 2003 were $1,437 million, a decrease of $265 million, or 15.5 percent, compared with the nine months ended September 30, 2002. The decreases in costs of equipment sales in both current year periods resulted primarily from a decline in the average cost per unit sold, partially offset by an increase in handsets sold.


	For the Three Months							For the Six Months
	Ended June 30,							Ended June 30,
	2004		2003		$ Change			2004		2003		$ Change
Net income available to common shareholders
per basic and diluted share:	$	0.02	$	0.08	$	(0.06	)	$	0.00	$	0.13	$	(0.13	)

(In Millions)		For the Three Months											For the Nine Months
		Ended September 30,											Ended September 30,
		2003			2002			$ Change		% Change			2003			2002			$ Change		% Change
Selling, general, and administrative		$	1,321		$	1,200		$	121		10.1	%	$	3,885		$	3,586		$	299		8.3	%
	As a percentage of services revenue		32.4	%		31.9	%							33.0	%		33.4	%

Net income per share available to common shareholders for the second quarter of 2004 was $0.02 per share, compared with $0.08 per share in the prior year quarter. Net income per share available to common shareholders for the first half of 2004 was $0.00 per share, compared with income per share of $0.13 in the prior year first half. The decline in net income per share available to common shareholders for both periods was due primarily to lower operating income.

~~Selling,~~OIBDA ~~general, and administrative (SG&A) expenses consist primarily of~~Discussion ~~our selling costs to acquire new customers, costs we incur to service our~~ ~~existing customer base, and our general and administrative expense for our~~ ~~information technology group and finance and administration functions. SG&A~~ expenses for the three months ended September 30, 2003, were $1,321 million, an increase of $121 million, or 10.1 percent, compared with the three months ended September 30, 2002. SG&A expenses for the nine months ended September 30, 2003, were $3,885 million, an increase of $299 million, or 8.3 percent, compared with the nine months ended September 30, 2002. These increases resulted from higher customer care costs resulting from growth in the subscriber base and an increase in subscribers on our GSM/GPRS network, and from an increase in IT-related expenses associated with implementing new back-office support systems. Additionally, advertising expenses were higher in the third quarter as compared to the prior year period. SG&A expenses during the nine months ended September 30, 2003 also included the majority of the $57 million in severance-related charges recorded in the second and third quarters of 2003 related to restructuring initiatives that support our margin improvement efforts (see “Restructuring Charge” above). The year-to-date increase was partially offset by lower sales commissions expenses, due primarily to a decline in gross subscriber additions, gross additions related to our Go Phone product, which has a lower commission than our traditional postpaid sales, and an increase in the gross additions from our direct channels as compared to 2002. CPGA includes the cost of handset subsidies related to new subscriber acquisitions, which are recorded in costs of equipment sales. CPGA was $335 and $371 for the three and nine months ended September 30, 2003, respectively, representing decreases of 10.9 percent and 1.1 percent, respectively, over the prior year periods. CPGA decreased in the third quarter of 2003 as a result of lower per-gross-addition costs for equipment incentives and commission-related costs, partially offset by higher per-gross-addition advertising expenses, versus the prior year period.

(In Millions)	For the Three Months									For the Nine Months
	Ended September 30,									Ended September 30,
	2003		2002		$ Change		% Change			2003		2002		$ Change		% Change
Depreciation and amortization	$	841	$	703	$	138		19.5	%	$	2,311	$	2,029	$	282		13.9	%

OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA margin is calculated as OIBDA divided by services revenue. OIBDA and OIBDA margin are non-GAAP financial measures. They differ from operating income (loss), as calculated in accordance with GAAP in that they exclude depreciation and amortization, and differ from net income (loss) as calculated in accordance with GAAP in that they exclude (i) depreciation and amortization, (ii) other income (expense), (iii) interest expense, (iv) provision (benefit) for income taxes, and (v) net equity earnings (losses) from investments in unconsolidated subsidiaries. We believe OIBDA and OIBDA margin to be relevant and useful information to our investors as these measures are an integral part of our internal management reporting and planning process and are the primary measures used by our management to evaluate the operating performance of our consolidated operations. They are used by management as a measurement of our success in acquiring, retaining, and servicing customers because we believe these measures reflect our ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing our performance with that of many of our competitors. The components of OIBDA include the key revenue and expense items for which our operating managers are responsible and upon which we evaluate their performance. Additionally, our $1.25 billion credit facility (under which no amounts are currently outstanding) requires us to maintain certain financial ratios, including a specified ratio of net-debt-to-operating income before depreciation and amortization expenses and impairment charges. Lastly, we use OIBDA for planning purposes, and in presentations to our board of directors, and we use multiples of current or projected OIBDA in our discounted cash flow models to determine the value of our licensing costs and our overall enterprise valuation.

Depreciation and amortization expenses for the three months ended September 30, 2003, were $841 million, an increase of $138 million, or 19.5 percent, compared with the three months ended September 30, 2002. Depreciation and amortization expenses for the nine months ended September 30, 2003, were $2,311 million, an increase of $282 million, or 13.9 percent, compared with nine months ended September 30, 2002. These increases reflect higher depreciation expense associated with the growth in our depreciable asset base, the acceleration of depreciation of certain TDMA assets, and the acceleration of amortization of certain back-office support systems. Capital expenditures, including capital additions related to internal-use software, were $943 million and $1,267 million for the three months ended September 30, 2003 and 2002, respectively, and $1,913 million and $2,900 million for the nine months ended September 30, 2003 and 2002, respectively.

(In Millions)	For the Three Months										For the Nine Months
	Ended September 30,										Ended September 30,
	2003		2002		$ Change			% Change			2003		2002		$ Change			% Change
Impairment of licensing costs	$	83	$	1,329	$	(1,246	)		(93.7	)%	$	83	$	1,329	$	(1,246	)		(93.7	)%

OIBDA excludes other income (expense) and net equity earnings (losses) from investments in our unconsolidated subsidiaries, as these do not reflect the operating results of our subscriber base and our national footprint that we utilize to obtain and service our subscribers. Net equity earnings (losses) from investments in unconsolidated subsidiaries represent our proportionate share of the net income (loss) of equity investments in which we exercise significant influence, but do not control. As we do not control these entities, our management excludes these results when evaluating the performance of our primary operations. Although excluded, net equity earnings (losses) from investments in unconsolidated subsidiaries may include results that are material to our overall net income (loss). We may record impairment charges in the future if there are further declines in the fair values of our investments, which we deem to be other than temporary. OIBDA also excludes interest expense and the provision (benefit) for income taxes. Excluding these items eliminates the expenses associated with our capitalization and tax structures. Finally, OIBDA excludes depreciation and amortization expenses, in order to eliminate the impact of capital investments, which management believes is better evaluated through its effect on free cash flow (see “Free Cash Flow Discussion” within “Liquidity and Capital Resources” below).

~~Impairment~~We ofbelieve ~~licensing~~OIBDA ~~costs~~as ofa ~~$83 million~~percentage ~~and~~of ~~$1,329 million~~services ~~resulting from~~revenue ~~our~~to ~~annual~~be ~~assessments~~a ~~required~~more relevant bymeasure ~~SFAS~~of ~~No. 142,~~our ~~were~~operating ~~recorded~~margin inthan ~~the three~~OIBDA ~~months~~as ~~ended~~a ~~September 30,~~percentage ~~2003 and 2002, respectively. Specifically,~~of ~~SFAS~~total Norevenue. ~~142~~ ~~requires~~We ~~that~~generally ~~goodwill~~subsidize ~~and~~a ~~other~~portion ~~indefinite-lived~~of ~~intangible assets,~~our ~~consisting~~handset ~~of U~~sales.S. ~~licensing~~All of ~~costs,~~the beequipment ~~tested~~subsidy ~~for~~is ~~impairment~~recognized ~~annually or~~in ~~more~~the ~~frequently~~period ~~if events or changes~~ in ~~circumstances~~which ~~indicate~~we ~~that~~sell the ~~asset~~handset. ~~might~~This beresults ~~impaired.~~in ~~The~~a ~~impairment~~disproportionate ~~test~~impact ~~consists~~on ofour amargin ~~comparison~~in ~~of the~~that ~~fair~~period. ~~value~~Management ofviews ~~the~~this ~~goodwill~~equipment ~~and~~subsidy ~~licensing~~as ~~costs~~a ~~with~~cost ~~their~~to ~~carrying~~acquire ~~amounts. We~~or ~~completed~~retain ~~our~~a ~~assessment~~subscriber, ~~during~~which ~~the~~is ~~third~~recovered ~~quarter~~through ofthe ~~2003~~ongoing ~~and 2002 using~~services ~~methodologies~~revenue ~~consistent~~that ~~with~~is ~~those~~generated ~~applied~~by ~~during~~ the ~~initial adoption of SFAS No~~subscriber. ~~142~~ onWe ~~January 1,~~also ~~2002.~~use ~~There~~services ~~were no impairment charges required for~~revenue ~~goodwill~~to incalculate ~~either~~margin ~~year.~~to ~~See~~facilitate ~~“Impairment~~comparison, ofboth ~~Licensing~~internally ~~Costs” above for further~~and ~~information~~externally, ~~regarding~~with ~~the~~our ~~impairment~~competitors, ~~charges~~as ~~recorded~~they ~~during~~calculate ~~the~~their ~~third~~margins ~~quarter~~using ofservices ~~2003~~revenue as well.

(In Millions)	For the Three Months										For the Nine Months
	Ended September 30,										Ended September 30,
	2003		2002			$ Change		% Change			2003		2002			$ Change		% Change
Other income (expense)	$	16	$	(164	)	$	180		109.9	%	$	36	$	(188	)	$	224		119.3	%

There are material limitations to using measures such as OIBDA and OIBDA margin, including the difficulty associated with comparing these performance measures as we calculate them to similar performance measures presented by other companies, and the fact that these performance measures do not take into account certain significant items, including depreciation and amortization, interest, and tax expense and net equity earnings (losses) from investments in unconsolidated subsidiaries, that directly affect our net income or loss. Management compensates for these limitations by carefully analyzing how our competitors present performance measures that are similar in nature to OIBDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with their analysis of net income (loss) as calculated in accordance with GAAP. OIBDA and OIBDA margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America. OIBDA and OIBDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.

~~Other~~OIBDA ~~income~~was ~~(expense)~~$1,134 ~~primarily~~million ~~includes~~for ~~impairment~~the ~~charges~~second ~~associated with~~quarter ~~our~~of ~~equity~~2004, ~~investments~~a ~~accounted~~decrease of ~~for~~4.4 percent ~~under~~from the ~~cost~~year-ago ~~method,~~quarter. ~~gains~~OIBDA ~~and losses~~was on$2,100 million for the ~~sale~~first orsix ~~exchange~~months of ~~assets~~2004, ora ~~businesses,~~decrease ~~losses~~of on8.5 percent from the ~~early~~prior ~~extinguishment~~year ofperiod. ~~debt,~~OIBDA ~~and~~margin ~~interest~~for ~~income.~~the ~~Other~~second ~~income~~quarter ~~(expense) was income~~ of ~~$16~~29.3 ~~million~~percent decreased ~~and~~from ~~expense of $164~~30.1 ~~million~~percent ~~for~~in the ~~quarters~~year-ago ~~ended~~quarter. ~~September 30, 2003~~OIBDA ~~and~~margin ~~2002,~~for ~~respectively,~~the first ~~and~~six ~~was~~months ~~income~~of 2004 of ~~$36~~27.6 ~~million~~percent ~~and~~decreased ~~expense~~from of29.9 percent ~~$188~~in ~~million for~~ the ~~nine~~prior ~~months~~year ~~ended~~period. ~~September 30,~~OIBDA ~~2003~~ and ~~2002,~~OIBDA ~~respectively. Other~~margin ~~income~~declined ~~(expense) for~~from the ~~three~~prior year ~~and~~quarter ~~nine months ended September 30, 2003~~ primarily ~~consisted~~due ofto ahigher ~~$35 million~~acquisition ~~pretax~~costs ~~gain~~relating onto the growth ~~sale~~in ofgross ~~Dobson Communications~~subscriber ~~Corp.~~additions ~~(Dobson)~~during ~~common~~the ~~stock~~quarter, ~~(see~~lower ~~“Investments~~services revenue, In and ~~Advances~~increases ~~to Unconsolidated~~in ~~Subsidiaries”~~customer ~~below)~~care and ~~interest~~retention ~~income,~~expenses. These increases were partially offset by ~~a $40 million~~decreases ~~pretax~~in ~~loss~~incollect onand ~~early~~general ~~extinguishment~~and administrative ofexpenses ~~debt~~during ~~associated with~~ the ~~tender~~ ~~offer of our TeleCorp Wireless, Inc~~quarter. ~~and Tritel PCS~~Additionally, ~~Inc.~~second ~~notes during~~quarter ~~the~~OIBDA ~~third~~reflected ~~quarter~~the benefit of ~~2003~~$24 million ~~(see~~of ~~“Net~~net ~~Cash~~reversals ~~Provided by Financing Activities~~ of ~~Continuing~~restructuring ~~Operations”~~charges, ~~below~~versus ~~for~~$47 million ~~further~~of ~~information~~charges ~~regarding~~recorded ~~this~~in ~~debt~~the ~~repurchase).~~prior ~~Other~~year ~~income (expense) for the third~~ quarter, ofand ~~2002 primarily included~~ a $~~187~~24 million ~~pretax~~benefit ~~impairment~~from ~~loss~~the ~~recognized~~settlement ~~for investments in~~of ~~Dobson~~previously ~~common~~written ~~and~~off ~~preferred~~receivables ~~stock~~from ~~for~~WorldCom. ~~which~~OIBDA ~~the~~and ~~declines~~OIBDA ~~in fair value were~~margin ~~deemed~~for tothe besix ~~other~~months ~~than~~ended ~~temporary~~June 30, ~~partially~~2004 ~~offset~~decreased byfrom ~~interest~~the ~~income~~prior ~~earned~~year ~~during~~primarily ~~the~~due ~~quarter.~~to ~~Other~~higher ~~income~~customer ~~(expense) for~~care ~~the~~and ~~nine~~retention ~~months~~expenses, ~~ended September~~higher 30acquisition costs, ~~2002~~and ~~consisted~~increased ~~primarily~~network ofand ~~$244 million~~USF inexpenses. ~~total~~These increases ~~pretax~~were ~~impairment~~partially ~~charges related~~offset toby ~~our~~lower ~~investments~~incollect inand ~~Dobson,~~general ~~partially~~and administrative ~~offset~~expenses byand ~~interest~~the ~~income~~net reversal of restructuring charges.

(In Millions)	For the Three Months									For the Nine Months
	Ended September 30,									Ended September 30,
	2003		2002		$ Change		% Change			2003		2002		$ Change		% Change
Interest expense	$	202	$	180	$	22		12.6	%	$	593	$	490	$	103		20.9	%

Interest expense, net of amounts capitalized, consists primarily of interest on our Senior Notes and interest on the TeleCorp Wireless, Inc. and Tritel PCS, Inc. Senior Subordinated Notes that we assumed in conjunction with our acquisition of TeleCorp. Interest expense for the three months ended September 30, 2003, was $202 million, an increase of $22 million, or 12.6 percent, compared with the three months ended September 30, 2002. Interest expense for the nine months ended September 30, 2003, was $593 million, an increase of $103 million, or 20.9 percent, compared with the nine months ended September 30, 2002. The increases in 2003 reflected lower capitalized interest due to lower capital expenditures than in the prior year periods. Additionally, the adoption of SFAS No. 150 in the third quarter of 2003 required the reclassification of accretion expense associated with our mandatorily redeemable preferred stock to interest expense (see “New Accounting Policies” above). The year-to-date increase also reflects a full nine months of interest on the $3.0 billion Senior Notes offering that occurred in April 2002 and the debt acquired in conjunction with our acquisition of TeleCorp in February 2002. These increases were partially offset by lower interest expense on the TeleCorp Wireless, Inc. and Tritel PCS, Inc. notes due to our tender offer during the third quarter of 2003 (see “Net Cash Provided by Financing Activities of Continuing Operations” below for further information regarding this debt repurchase).

(In Millions)	For the Three Months										For the Nine Months
	Ended September 30,										Ended September 30,
	2003		2002			$ Change		% Change			2003		2002			$ Change		% Change
Provision (benefit) for income taxes	$	9	$	(139	)	$	148		106.4	%	$	112	$	(70	)	$	182		259.3	%

Provision (benefit) for income taxes was a provision of $9 million and $112 million for the three and nine months ended September 30, 2003, respectively, compared to a benefit of $139 million and $70 million in the three and nine months ended September 30, 2002, respectively. Our 2003 annual effective tax rate is estimated to be 17.7 percent, down from the 22.7 percent

Reconciliation ~~estimated at the end~~ of ~~the~~OIBDA ~~second quarter of 2003. The estimated annual effective rate for 2003 is lower than our statutory rate mainly due~~ to ~~the reversal~~Consolidated ofNet certain valuation allowances recorded during 2003. The benefits for income taxes during the three and nine months ended September 30, 2002 included a gross tax benefit, which was primarily associated with the pretax impairment charges recorded during the quarter, reduced by a full tax valuation allowance. During the third quarter of 2002, we recorded a full valuation allowance pursuant to SFAS No. 109, “Accounting for Income ~~Taxes,” due to the uncertainty~~ ~~of the realization of the deferred tax assets in future periods. We no longer~~ ~~required a full valuation allowance on our deferred tax assets effective during~~ ~~the second quarter of 2003.~~

(In Millions)	For the Three Months											For the Nine Months
	Ended September 30,											Ended September 30,
	2003			2002			$ Change		% Change			2003		2002			$ Change		% Change
Net equity (losses) earnings from investments in unconsolidated subsidiaries, net of tax	$	(16	)	$	(882	)	$	866		(98.1	)%	$	2	$	(1,017	)	$	1,019		100.2	%

The following table summarizes the reconciliation of OIBDA to consolidated net income:

We incurred net equity losses from investments in unconsolidated subsidiaries of $16 million, including a tax provision of $2 million, for the three months ended September 30, 2003, compared with net equity losses of $882 million, including a tax provision of $82 million, during the three months ended September 30, 2002. For the nine months ended September 30, 2003, we recorded net equity earnings of $2 million, net of a tax provision of $48 million, compared with net equity losses of $1,017 million, including a tax provision of $12 million, for the nine months ended September 30, 2002. Net equity (losses) earnings in the prior year quarter included $813 million in pretax impairment charges associated with the write-down of our equity-method unconsolidated subsidiaries and first annual SFAS No. 142 impairment tests related to their other indefinite-lived intangible assets. Also contributing to the improvement over the prior year quarter were higher equity earnings associated with certain international investments, partially offset by a $62 million pretax impairment of our investment in Far EasTone Telecommunications Co., Ltd (Far EasTone) recorded during the third quarter of 2003 (see “Investments In and Advances To Unconsolidated Subsidiaries” below for further information regarding this impairment). Net equity (losses) earnings from investments in unconsolidated subsidiaries for the nine months ended September 30, 2002 also included a $120 million pretax impairment charge related to our investment in ACC Acquisition LCC (the parent company of American Cellular Corporation (ACC)). The income tax provision in the current year-to-date period reflected increased valuation requirements for deferred tax assets associated with actual and potential capital losses that were deemed more likely than not to expire unused.


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
(In Millions)	2004			2003			2004			2003
OIBDA	$	1,134		$	1,186		$	2,100		$	2,296
Depreciation and amortization		(896	)		(735	)		(1,783	)		(1,470	)
Other income		24			50			66			20
Interest expense		(189	)		(207	)		(385	)		(391	)
Provision for income taxes		(34	)		(57	)		—			(103	)
Net equity earnings (losses) from investments in unconsolidated subsidiaries		22			(9	)		5			18

Net income	$	61		$	228		$	3		$	370

(In Millions)	For the Three Months										For the Nine Months
	Ended September 30,										Ended September 30,
	2003		2002		$ Change			% Change			2003		2002		$ Change			% Change
Income from discounted operations (net of tax provision of $5 and $29 for the three and nine months ended September 30, 2002)	$	—	$	8	$	(8	)		(100.0	)%	$	—	$	47	$	(47	)		(100.0	)%

Reconciliation of OIBDA Margin to Consolidated Net Income as a Percentage of Services Revenue

~~We recognized income from discontinued operations, net of tax, of $8 million and $47 million during the three and nine months ended September 30, 2002, respectively.~~ The ~~income~~following ~~recorded~~table ~~during~~summarizes ~~2002 consisted of adjustments to~~ the ~~recoverability~~reconciliation of ~~assets~~OIBDA ~~and~~margin ~~accruals related~~ to consolidated ~~costs~~net toincome ~~exit~~as ~~the~~a ~~fixed wireless~~percentage ~~business. The disposition~~ of ~~the~~services ~~fixed wireless business was completed~~revenue: ~~during 2002.~~

(In Millions)	For the Three Months												For the Nine Months
	For the Three Months						For the Six Months
	Ended September 30,												Ended September 30,
	Ended June 30,						Ended June 30,
	2003			2002			$ Change			% Change			2003		2002			$ Change		% Change
(All items shown as a percentage of services revenue)	2004			2003			2004			2003
Cumulative effect of change in accounting principle (net of tax benefit of $103)	$	—		$	—		$	—			0.0	%	$	—	$	(166	)	$	166		100.0	%
OIBDA margin		29.3	%		30.1	%		27.6	%		29.9	%
Depreciation and amortization		(23.1	)%		(18.7	)%		(23.4	)%		(19.1	)%
Other income		0.6	%		1.3	%		0.9	%		0.3	%
Interest expense		(4.9	)%		(5.2	)%		(5.1	)%		(5.1	)%
Provision for income taxes		(0.9	)%		(1.5	)%		0.0	%		(1.4	)%
Net equity earnings (losses) from investments in unconsolidated subsidiaries		0.6	%		(0.2	)%		0.0	%		0.2	%
Net income		1.6	%		5.8	%		0.0	%		4.8	%

~~Cumulative~~Operating ~~effect~~Metric ~~of change in accounting principle, net of tax, was a~~Calculations ~~loss of $166 million during the nine months ended September 30, 2002, and~~ ~~related to our proportionate share of impairment charges recorded by our equity~~ ~~method unconsolidated subsidiaries upon their adoption of SFAS No. 142~~ effective January 1, 2002. Of the total 2002 aftertax charge, $72 million and $7 million represented our proportionate share of impairments recognized by TeleCorp of its licensing costs and goodwill, respectively. The remaining $87 million represented our proportionate share of an impairment of licensing costs recognized by ACC.

The following tables summarize our calculation of CPGA and ARPU:


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
(In Millions, Except CPGA)	2004		2003		2004		2003
CPGA:
Equipment revenue	$	348	$	219	$	677	$	424
Less: Costs of equipment sales		620		473		1,206		942

Handset and accessory subsidy costs	$	272	$	254	$	529	$	518
Selling, general, and administrative costs	$	1,408	$	1,309	$	2,765	$	2,564
Less: General and administrative costs		412		497		854		948

Sales and marketing costs	$	996	$	812	$	1,911	$	1,616
Handset and accessory subsidy costs and Sales and marketing costs	$	1,268	$	1,066	$	2,440	$	2,134
Less: Costs unrelated to initial customer acquisitions		480		365		956		736

Customer acquisition costs	$	788	$	701	$	1,484	$	1,398
Cost per gross subscriber addition (CPGA)	$	350	$	379	$	342	$	391

(In Millions)	For the Three Months										For the Nine Months
	For the Three Months				For the Six Months
	Ended September 30,										Ended September 30,
	Ended June 30,				Ended June 30,
	2003		2002		$ Change			% Change			2003		2002		$ Change		% Change
(In Millions, Except ARPU)	2004		2003		2004			2003
Accretion of mandatorily redeemable preferred stock	$	—	$	6	$	(6	)		(100.0	)%	$	13	$	13	$	—		(3.6	)%
ARPU:
Services revenue	$	3,871	$	3,939	$	7,617		$	7,682
Less: Revenue not generated by wireless subscribers		45		34		97			64
Services revenue used to calculate ARPU	$	3,826	$	3,905	$	7,520		$	7,618
Average revenue per user per month (ARPU)	$	58.80	$	60.60	$	57.70		$	59.70

~~Accretion~~LIQUIDITY ofAND ~~mandatorily~~CAPITAL ~~redeemable preferred stock was zero and $6~~RESOURCES ~~million during the three months ended September 30, 2003 and 2002,~~ ~~respectively, and $13 million for both nine-month periods ended September 30,~~ ~~2003 and 2002, respectively. The accretion was associated with the mandatorily~~ redeemable preferred stock issued by us during February 2002 in conjunction with our acquisition of TeleCorp and reflects quarterly compounding. However, effective with our adoption of SFAS No. 150 in the third quarter of 2003, this accretion on a prospective basis is classified as interest expense within our Consolidated Condensed Statements of Operations (see “New Accounting Policies” above for further information regarding this statement).

Income (loss) per basic and diluted share:	For the Three Months							For the Nine Months
	Ended September 30,							Ended September 30,
	2003		2002			$ Change		2003		2002			$ Change
Income (loss) from continuing operations available to common shareholders	$	0.06	$	(0.76	)	$	0.82	$	0.19	$	(0.77	)	$	0.96
Income from discontinued operations		—		—			—		—		0.01			(0.01	)
Cumulative effect of change in accounting principle		—		—			—		—		(0.06	)		0.06
Net income (loss) available to common shareholders	$	0.06	$	(0.76	)	$	0.82	$	0.19	$	(0.82	)	$	1.01

As of June 30, 2004, we had cash and short-term investments totaling $4.3 billion. We expect to fund our capital requirements for at least the next 12 months by using existing cash balances and short-term investments; cash generated from operations; and if necessary, by accessing external sources of capital including the issuance of commercial paper, public equity or debt securities, or by drawing on our committed receivables securitization program and credit facility. As of June 30, 2004, we had access to $6.9 billion, including our cash balances, short-term investments, and committed, untapped sources of liquidity. We may also generate cash from the sale of nonstrategic investments or excess spectrum. Our need to obtain additional cash from external sources will be impacted by our ability to reduce costs and to continue to achieve subscriber and revenue growth.

~~Income~~Cash ~~(loss) from~~Flow ~~continuing operations available to common shareholders~~Analysis ~~per share was income of $0.06 and a loss of $0.76 for the three months ended~~ ~~September 30, 2003 and 2002, respectively, and was income of $0.19 for the nine~~ months ended September 30, 2003, compared with a loss of $0.77 for the nine months ended September 30, 2002. The increased income per share in both current year periods was attributable primarily to the larger SFAS No. 142 and investment-related impairment charges, as well as the deferred tax valuation allowance, recorded during the third quarter of 2002. Additionally, for the nine months ended September 30, 2003, higher operating income, excluding the licensing cost impairments, resulted in an increase in income (loss) from continuing operations available to common shareholders.

Income from discontinued operations per share was zero for the three months ended September 30, 2002 and $0.01 for nine months ended September 30, 2002.


	For the Six Months
	Ended June 30,
(In Millions)	2004			2003			$ Change			% Change
Net Cash Flows:
Provided by operating activities	$	1,556		$	2,705		$	(1,149	)		(42.5	)%
Used in investing activities		(1,802	)		(887	)		(915	)		(103.2	)%
Provided by (used in) financing activities		(5	)		441			(446	)		(101.1	)%
Net Increase in cash due to adoption of FIN 46		—			16			(16	)		(100.0	)%

~~Cumulative~~Net ~~effect~~Cash ofProvided ~~change~~by inOperating ~~accounting principle per share was zero for~~Activities ~~the three months ended September 30, 2002 and a loss of $0.06 for the nine~~ ~~months ended September 30, 2002.~~

Net ~~income~~cash ~~(loss) available~~provided toby ~~common~~operating ~~shareholders~~activities ~~was income of $156 million compared to a loss of $2,047 million~~ for the ~~three~~six months ended ~~September~~June 30, ~~2003~~2004 ~~and 2002, respectively, and~~ was ~~income of~~ $~~513~~1,556 million ~~versus~~, acompared ~~loss~~with of $2,~~206~~705 million for the six ~~nine~~ months ended ~~September~~June 30, 2003 ~~and 2002, respectively~~. ~~Net~~The ~~income~~decrease ~~(loss) available~~in tonet ~~common~~cash ~~shareholders~~provided ~~per~~by ~~share~~operating activities was ~~income~~due ofprimarily ~~$0.06~~to ~~and~~the ~~a loss of~~ $~~0.76~~511 million ~~for~~income ~~the three months ended~~tax ~~September 30,~~refund ~~2003~~ and ~~2002, respectively, and was income of~~ $~~0.19~~245 million ~~for~~from the ~~nine months~~termination ~~ended September 30, 2003, compared with a loss~~ of ~~$0.82~~interest ~~for~~rate ~~the nine~~swap ~~months~~agreements ~~ended~~received ~~September 30, 2002. The improvement~~ in ~~net income (loss) available to common shareholders per share in both current year periods was attributable primarily to the larger SFAS No~~2003. ~~142~~ ~~and investment-related impairment charges, as well as the deferred tax valuation allowance, recorded during the third quarter of 2002.~~ Also contributing to the ~~2003 year-to-date~~decline ~~improvement~~in operating ~~was~~cash ~~the increase~~flow inwas lower operating income, excluding ~~the~~depreciation and ~~licensing cost impairments~~amortization, and ~~the cumulative~~a ~~effect~~higher use of ~~change~~cash inrelated ~~accounting~~to ~~principle~~working ~~recorded~~capital ~~during the first~~in ~~quarter of 2002~~2004.

Net Cash Used in Investing Activities

Net cash used in investing activities for the six months ended June 30, 2004 was $1,802 million, compared with $887 million in the six months ended June 30, 2003. The increase in net cash used in investing activities compared to the prior year was due primarily to higher capital expenditures and the cash paid related to the purchase of markets from US Cellular during the first quarter of 2004. The majority of our capital spending during the first half of 2004 related to the GSM/GPRS/EDGE network, including the overlay of 850 MHz GSM radios in 850 MHz markets and other investments to enhance quality and expand capacity of the GSM/GPRS/EDGE network.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the six months ended June 30, 2004 was $5 million compared to net cash provided of $441 million for the six months ended June 30, 2003. Financing activities during the first half of 2004 primarily included common stock issuances associated with employee benefit plans which were more than offset by cash used to repurchase TeleCorp and Tritel debt. Financing activities during the first half of 2003 primarily included the cash received from a federal tax refund claim.

OIBDA DISCUSSION

We believe OIBDA and OIBDA margin to be relevant and useful information to our investors as these are used by our management to evaluate the operating performance of our consolidated operations. Additionally, our $2.5 billion credit facility (under which no amounts are currently outstanding) requires us to maintain certain financial ratios, including a specified ratio of net-debt-to-operating income before depreciation and amortization expenses and impairment charges. Lastly, we use OIBDA for planning purposes, and multiples of current or projected OIBDA in our discounted cash flow models to determine the value of our licensing costs and our overall enterprise valuation. We believe OIBDA and OIBDA margin are useful measures of our ability to grow our revenue faster than our operating expenses, excluding those expenses associated with our capital investments, and they are an integral part of the internal reporting system utilized by management to assess and evaluate the performance of our business. OIBDA excludes certain items, including net equity (losses) earnings from our unconsolidated subsidiaries and other income (expense) that we believe are not indicative of our core operating results. OIBDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capitalization and tax structures. Finally, OIBDA excludes depreciation and amortization expenses, in order to eliminate the impact of capital investments, which management believes is better evaluated through its effect on Free Cash Flow. OIBDA and OIBDA margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America. OIBDA and OIBDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies.

Reconciliation of OIBDA to Consolidated Net Income (Loss)

The following table summarizes the reconciliation of OIBDA to consolidated net income (loss):

(In Millions)	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2003			2002			2003			2002
OIBDA	$	1,208		$	(259	)	$	3,504		$	1,580
Depreciation and amortization		(841	)		(703	)		(2,311	)		(2,029	)
Other income (expense)		16			(164	)		36			(188	)
Interest expense		(202	)		(180	)		(593	)		(490	)
(Provision) benefit for income taxes		(9	)		139			(112	)		70
Net equity (losses) earnings from investments in unconsolidated subsidiaries		(16	)		(882	)		2			(1,017	)
Income from discontinued operations		—			8			—			47
Cumulative effect of change in accounting principle		—			—			—			(166	)
Net income (loss)	$	156		$	(2,041	)	$	526		$	(2,193	)

OIBDA for the Three and Nine Months Ended September 30, 2003, Compared with the Three and Nine Months Ended September 30, 2002

OIBDA for the three months ended September 30, 2003, was income of $1,208 million, compared with a loss of $259 million for the three months ended September 30, 2002, and was income of $3,504 million for the nine months ended September 30, 2003, compared with income of $1,580 million for the nine months ended September 30, 2002. The increase in OIBDA in both current year periods was due primarily to the larger SFAS No. 142 charges recorded during the third quarter of 2002. The third quarter and year-to-date OIBDA for 2002 included $1,329 million in licensing cost impairment charges versus $83 million in the current year quarter and year-to-date periods (see “Impairment of Licensing Costs” above). Also contributing to the OIBDA growth in 2003 was increased services revenue and lower net costs of equipment sales, partially offset by increased network-related costs and higher customer care expenses. OIBDA in the third quarter of 2003 was also negatively impacted by a higher provision for uncollectible receivable and increased marketing and advertising costs. Additionally, the severance-related charges (see “Restructuring Charge” above) partially offset the OIBDA increases for the nine months ended September 30, 2003.

Reconciliation of OIBDA Margin to Consolidated Net Income (Loss) as a Percentage of Services Revenue

The following table summarizes the reconciliation of OIBDA margin to consolidated net income (loss) as a percentage of services revenue:

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2003			2002			2003			2002
OIBDA margin		29.7	%		(6.9	)%		29.8	%		14.7	%
Depreciation and amortization as a percentage of services revenue		(20.7	)%		(18.7	)%		(19.6	)%		(18.9	)%
Other income (expense) as a percentage of services revenue		0.4	%		(4.3	)%		0.3	%		(1.7	)%
Interest expense as a percentage of services revenue		(5.0	)%		(4.8	)%		(5.0	)%		(4.6	)%
(Provision) benefit for income taxes as a percentage of services revenue		(0.2	)%		3.7	%		(1.0	)%		0.7	%
Net equity (losses) earnings from investments in unconsolidated subsidiaries as a percentage of services revenue		(0.4	)%		(23.4	)%		—			(9.5	)%
Income from discontinued operations as a percentage of services revenue		—			0.2	%		—			0.4	%
Cumulative effect of change in accounting principle as a percentage of services revenue		—			—			—			(1.5	)%
Net income (loss) as a percentage of services revenue		3.8	%		(54.2	)%		4.5	%		(20.4	)%

OIBDA Margin for the Three and Nine Months Ended September 30, 2003, Compared with the Three and Nine Months Ended September 30, 2002

OIBDA margin was a positive 29.7 percent for the three months ended September 30, 2003, compared with a negative 6.9 percent for the three months ended September 30, 2002, and was a positive 29.8 percent for the nine months ended September 30, 2003, compared with a positive 14.7 percent for the nine months ended September 30, 2002. The OIBDA margin improvement in both current year periods was due primarily to the larger SFAS No. 142 impairment charges recorded during the third quarter of 2002 (discussed above) as a percentage of services revenue.

LIQUIDITY AND CAPITAL RESOURCES

We expect to fund our capital requirements for at least the next 12 months by using existing cash balances and short-term investments, which totaled $4.3 billion as of September 30, 2003; cash generated from operations; and if necessary, by accessing external sources of capital including the issuance of commercial paper, public equity or debt securities, or by drawing on our committed receivables securitization program and credit facilities. As of September 30, 2003, we had access to $8.3 billion, including our cash balances, short-term investments, and committed, untapped sources of liquidity. We may also generate cash from the sale of non-strategic investments or excess spectrum. Our need to obtain additional cash from external sources will be impacted by our ability to reduce costs and to continue to achieve subscriber and revenue growth.

Statements of Cash Flows Discussion

(In Millions)	For the Nine Months
	Ended September 30,
Net Cash Flows:	2003			2002			$ Change			% Change
Provided by operating activities of continuing operations	$	3,733		$	2,262		$	1,471			65.0	%
Used in investing activities of continuing operations		(1,756	)		(3,613	)		1,857			51.4	%
(Used in) provided by financing activities of continuing operations		(141	)		1,758			(1,899	)		(108.0	)%
Used by discontinued operations		—			(8	)		8			100.0	%
Net increase in cash due to adoption of FIN 46		16			—			16			100.0	%

Net Cash Provided by Operating Activities of Continuing Operations

Net cash provided by operating activities of continuing operations for the nine months ended September 30, 2003, was $3,733 million, compared with $2,262 million for the nine months ended September 30, 2002. The increase in net cash provided by operating activities from continuing operations was due primarily to higher operating income (excluding depreciation and amortization expenses

and the impairment of licensing costs) during 2003, the $511 million in proceeds received from the 2002 NOL carryback, discussed below, and the $245 million in proceeds received from the termination of our interest rate swap agreements relating to the long-term portion of our hedged debt. These increases were partially offset by a higher use of cash from working capital. In the fourth quarter, we will continue our focus on working capital management, including maintaining tight credit standards and increased collection efforts related to our accounts receivables; maintaining appropriate inventory models and levels of inventory in our retails stores and warehouses; and improving days payable outstanding through working with our vendors on payment terms.

For the year ended December 31, 2002, we generated a NOL of $2.8 billion, of which $1.5 billion was carried back during the second quarter of 2003 for a refund of taxes paid by AT&T totaling $536 million. Prior to the filing of the refund claim, our deferred tax liabilities (excluding the deferred tax liabilities related to licensing costs and goodwill) exceeded our deferred tax assets. Therefore, we determined that we no longer required a valuation allowance against our deferred tax assets, other than those deferred tax assets associated with actual and potential capital losses and state NOLs that were deemed more likely than not to expire unused. As we no longer required a full valuation allowance on our deferred tax assets, the 2002 NOL carryback was reflected as a reduction of our long-term deferred tax assets. We received $511 million of this refund during the second quarter of 2003; the remaining $25 million will be held in escrow pursuant to the terms of an agreement between AT&T and us, and will be reflected as a receivable in other assets until distribution from the escrow. The balance of the 2002 NOL not carried back can be carried forward to offset our taxable income in future years.

Net Cash Used in Investing Activities of Continuing Operations

Net cash used in investing activities of continuing operations for the nine months ended September 30, 2003, was $1,756 million, compared with $3,613 million for the nine months ended September 30, 2002. The decrease in net cash used in investing activities during the first nine months of 2003 was primarily the result of reduced capital expenditures, as well as lower contributions made to unconsolidated subsidiaries.

In October 2003, we sold our ownership stake in Far EasTone to member companies of the carrier’s majority shareholder, Far Eastern Group, for 11.3 billion NT dollars, or approximately $330 million.

On June 18, 2003, we and Verizon Communications Inc. jointly signed an agreement to sell our combined 49 percent interest in Eurotel Praha, which is held by a 50/50 joint venture, to Cesky Telecom for $1.05 billion. Cesky Telecom currently owns 51 percent of Eurotel Praha. We expect to receive $525 million from the sale and a $100 million dividend upon distribution of the cash from the joint venture by early 2004. The sale transaction is subject to Cesky Telecom’s ability to finance the purchase.

Net Cash Provided by Financing Activities of Continuing Operations

Net cash (used in) provided by financing activities of continuing operations for the nine months ended September 30, 2003, was a use of cash totaling $141 million, compared with a source of cash totaling $1,758 million for the nine months ended September 30, 2002. Financing activities of continuing operations for the nine months ended September 30, 2003 primarily included the $588 million cash paid in the repayment of certain TeleCorp Wireless, Inc. and Tritel PCS, Inc. debt discussed below, partially offset by the receipt of the $436 million income tax refund from AT&T discussed below. Financing activities of continuing operations for the nine months ended September 30, 2002 primarily included net proceeds of $3.0 billion from our Senior Notes offering in April 2002 and cash proceeds of $382 million from the sale of our common shares to NTT DoCoMo, Inc. (DoCoMo) in connection with DoCoMo’s exercise of its preemptive right triggered by the TeleCorp acquisition. Partially offsetting these proceeds was the repayment of approximately $1.6 billion of TeleCorp debt subsequent to the acquisition, including the repayments of the TeleCorp public debt during the second quarter of 2002.

On July 24, 2003, we announced offers to repurchase for cash any and all outstanding 11.625 percent TeleCorp Wireless, Inc. Senior Subordinated Discount Notes due April 15, 2009, and 12.75 percent Tritel PCS, Inc. Senior Subordinated Discount Notes due May 15, 2009. The TeleCorp Wireless, Inc. notes had a face value of $374 million and a carrying value of $361 million as of June 30, 2003. The Tritel PCS, Inc. notes had a face value of $242 million and a carrying value of $237 million as of June 30, 2003. We are guarantors of these notes. During the third quarter of 2003, we retired $350 million face value of the TeleCorp Wireless, Inc. notes and $209 million face value of the Tritel PCS, Inc. notes for $588 million in cash. As a result of the debt repurchase, we recorded a loss of $40 million on the early extinguishment of debt within other income (expense) during the three months ended September 30, 2003.

For the tax return period July 10, 2001, through December 31, 2001, we incurred a NOL of $1.3 billion. Under the tax-sharing agreement with AT&T, the NOL was carried back for a refund of taxes paid by AT&T, as the common parent of an affiliated group that included AT&T Wireless Services. We established a receivable in shareholders’ equity in the amount of $461 million as of December 31, 2002, with a corresponding increase to additional paid-in capital. The 2001 NOL carryback was reflected as a capital contribution from AT&T as we required a full valuation allowance on our deferred tax assets as of December 31, 2002. Accordingly, it was determined that we would not have been able to realize this NOL carryback as a stand-alone entity. In January 2003, we received $436 million relating to the refund claim. The remaining $25 million will be held in escrow pursuant to the terms of an agreement between AT&T and us, and will be reflected as a receivable from former parent, AT&T, until distribution from the escrow.

Free Cash Flow Discussion

Free cash flow, as we have defined it, is calculated as the cash generated from our operating activities less cash payments for capital expenditures. We believe ~~Free~~free ~~Cash~~cash ~~Flow~~flow to be relevant and useful information to our investors as this measure is used by our management in evaluating our liquidity and the cash generated by our consolidated operating businesses. Our definition of ~~Free~~free ~~Cash~~cash ~~Flow~~flow does not take into consideration cash generated in the sale of or used to purchase license spectrum, cash used to acquire other businesses, or cash generated or used related to our unconsolidated subsidiaries. Additionally, our definition of ~~Free~~free ~~Cash~~cash ~~Flow~~flow does not reflect cash used to repurchase or fund debt principal obligations. Free ~~Cash~~cash ~~Flow~~flow reflects cash available ~~for~~ for financing activities, to strengthen our balance sheet, or cash available for strategic investments, including spectrum acquisitions, acquisitions of businesses, or investments in joint ventures and other ~~unconsolidated~~ unconsolidated subsidiaries. Free ~~Cash~~cash ~~Flow~~flow should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America. Free ~~Cash~~cash ~~Flow~~flow, as we have defined it, may not be comparable to similarly titled measures reported by other companies.

(In Millions)	For the Three Months Ended		For the Nine Months Ended
	For the Three Months										For the Six Months
	September 30, 2003		September 30, 2003
	Ended June 30,										Ended June 30,
Net cash provided by operating activities of continuing operations	$	1,028	$	3,733
(In Millions)	2004		2003		$ Change			% Change			2004			2003		$ Change			% Change
Less: Capital expenditures and other additions		775		1,649
Net cash provided by operating activities	$	1,002	$	1,430	$	(428	)		(29.9	)%	$	1,556		$	2,705	$	(1,149	)		(42.5	)%
Free Cash Flow	$	253	$	2,084
Less: Capital expenditures, including internal use software		897		373		524			140.5	%		1,745			874		871			99.7	%
Free cash flow	$	105	$	1,057	$	(952	)		(90.1	)%	$	(189	)	$	1,831	$	(2,020	)		(110.3	)%

Free ~~Cash~~cash ~~Flow~~flow ~~for the three months ended September 30, 2003~~ was $~~253~~ 105 million ~~and~~for ~~represented~~ the ~~net~~second ~~cash~~quarter ~~provided by operating activities~~ of 2004, ~~continuing~~compared ~~operations~~with of $1,~~028~~057 million, ~~less~~in ~~cash~~the ~~used~~three ~~for~~months ~~capital expenditures~~ended ~~and~~June 30, ~~other~~2003. Free ~~additions,~~cash ~~which~~flow ~~totaled~~was negative $~~775~~189 million. ~~Free Cash Flow~~ for the ~~nine~~first ~~months~~half ~~ended~~of ~~September 30~~2004, compared ~~2003~~to ~~was~~positive $21,~~084~~831 million ~~and~~in ~~represented~~ the ~~net~~prior ~~cash~~year ~~provided~~first byhalf. ~~operating~~The decrease ~~activities~~in offree ~~continuing~~cash ~~operations~~flow ~~of $3,733 million,~~versus ~~less~~the ~~cash~~prior ~~used~~year ~~for~~quarter ~~capital~~was ~~expenditures~~due ~~and other additions,~~to ~~which~~higher ~~totaled~~capital ~~$1,649 million.~~expenditures ~~The~~during ~~Free~~the ~~Cash~~second ~~Flow~~quarter ~~generation~~of in2004 ~~both~~and ~~the third~~an ~~quarter~~income ~~and~~tax ~~nine-month~~refund ~~periods~~ of ~~2003~~$511 million ~~was~~received ~~driven~~during ~~primarily~~the bysecond ~~our~~quarter ~~strong~~of ~~operating~~2003. ~~income,~~The ~~excluding~~decrease ~~non-cash~~in ~~expenses.~~free ~~Free~~cash ~~Cash~~ flow infor the ~~nine~~ six months ended ~~September~~June 30, 2004 ~~2003~~was ~~also~~due ~~included~~to the $511 million ~~received~~income ~~from the~~tax ~~2002~~refund ~~NOL carryback~~ and the $245 million from ~~cash received for~~ the termination of ~~our~~ interest rate swap agreements. ~~Partially~~received ~~offsetting the cash flow generation~~ in both periods were our capital expenditures and other capital additions and net interest payments made during the year. We expect Free Cash Flow to vary from quarter to quarter, and we do not expect to remain at this quarterly level in the fourth quarter of 2003~~, due primarily to anticipated~~; higher capital expenditures; asa ~~compared~~higher touse ~~the first three quarters, the seasonality~~ of ~~our~~working ~~operating~~capital ~~income, excluding non-~~cash; ~~expenses,~~ and ~~the~~ ~~one-time~~lower ~~items reflected in our year-to-date Free Cash Flow related to the income tax refund and interest rate swap payments~~OIBDA.

Sources of Liquidity

Accounts Receivable Securitization Program, Credit Facilities, and Commercial Paper Agreements

In ~~March~~February ~~2003~~2004, we renewed our ~~accounts receivable securitization program and increased the size of the program from~~ $1.26 billion toaccounts $1receivable securitization program.~~6 billion.~~ As of ~~September~~ June 30, ~~2003~~2004, availability under the program was approximately $1.5 4 billion based on our accounts receivable balance allowed for under the program. The program allows us to obtain financing collateralized by subscriber trade accounts receivable. Under the program, we can assign subscriber trade accounts receivable on a revolving basis to a special-purpose, wholly -owned subsidiary. ~~The~~ The wholly -owned subsidiary would then sell an undivided interest in such receivables to an unrelated third-party financing entity upon drawing on ~~the~~ the facility. The financing is subject to a program fee of 15 to 25 basis ~~points~~ points and a liquidity fee of 22.5 to 50 basis points, both of which are based on our Senior Notes rating. We intend to use any proceeds from this ~~financing~~ financing arrangement for general corporate purposes. This financing arrangement is subject to customary securitization covenants and will be recorded as an on-balance sheet transaction. Included in the covenants are provisions for the termination of the program in the event that our long-term unsecured Senior Notes rating is less than BB+ by Standard & Poor’s or Ba1 by Moody’s. See discussion of our credit ratings below. We are currently in compliance with the securitization covenants and have no amounts outstanding under this financing arrangement.

33 In March 2001, we entered into Competitive Advance and Revolving Credit Facilities in the aggregate amount of $2.5 billion consisting of a $1.25 billion 364-day Competitive Advance and Revolving Credit Facility and a $1.25 billion Five-Year Competitive Advance and Revolving Credit Facility (the Five-Year Facility). The 364-day Credit Facility expired in March 2004. The Five-Year Facility is subject to a facility fee of 10 to 25 basis points, which is based on AT&T Wireless Services’ Senior Notes rating, and is payable quarterly on the total commitment.

The ~~credit~~Five-Year ~~ratings~~Facility ~~below~~is also subject to a utilization fee of 25 basis points if borrowings exceed certain levels as defined in the agreement. The Facility bears interest at variable rates based upon, in various cases, (i) LIBOR plus 65 to 200 basis points depending on AT&T Wireless Services’ Senior Notes rating, or (ii) the greater of the prime rate or the federal funds effective rate plus 50 basis points. The Five-Year Facility is to be used for general corporate purposes and is subject to customary covenants, representations, warranties, and events of default. The Five-Year Facility contains financial covenants requiring AT&T Wireless Services to maintain certain financial ratios, including a net-debt-to-operating income before depreciation and amortization expenses and impairment charges ratio of 4X or less and an interest coverage ratio of 3.5X or higher. In addition, an obligation by AT&T Wireless Services to repurchase equity interests from DoCoMo may, under certain circumstances, constitute an event of default. Effective March 2003, the Facility was guaranteed by TeleCorp Wireless Inc., TeleCorp Communications, Inc., Tritel, Inc., Tritel PCS, Inc. and Tritel Communications, Inc. This guarantee expired in April 2004 with AT&T Wireless Services’ repurchases of certain debt of TeleCorp Wireless, Inc. and Tritel PCS, Inc. We are currently in compliance with the credit ~~securitization~~facility covenants and have no amounts outstanding under ~~this~~the ~~financing arrangement~~facility.

In both March of 2002 and 2003, we renewed our $1.25 billion 364-day Competitive Advance and Revolving Credit Facility. Both our 364-day Competitive Advance and Revolving Credit Facility, which expires in March 2004, and our $1.25 billion Five-year Competitive Advance and Revolving Credit Facility, which expires in March 2006, require us to maintain certain financial ratios, including a net-debt-to-operating income before depreciation and amortization expenses and impairment charges ratio of 4X or less and an interest coverage ratio of 3.5X or higher. We are currently in compliance with these financial ratios. The facilities are subject to a facility fee, which will fluctuate based on our Senior Notes rating. We currently have no amounts outstanding under the facilities.

During June 2001, we finalized agreements with a group of commercial paper dealers to issue up to $2.5 billion of private placement commercial paper notes. The notes will be unsecured, ranking pari passu with our other unsubordinated and unsecured indebtedness. Maturity of the notes can be up to 365 days from the date of issue. Our commercial paper notes are rated A2 by Standard & Poor’s and P2 by Moody’s. If we decide to issue commercial paper notes, the rates would be reflective of these commercial paper market rates at the time of issuance. The commercial paper program is subject to customary commercial paper program covenants. We currently have not issued any notes under the program.

Our accounts receivable securitization program and our credit facility are terminable upon a change of control. Our commercial paper program, Senior Notes, and Senior Subordinated Notes are not terminable upon a change of control.

Credit Rating Discussion

Our credit ratings impact our ability to obtain short- and long-term financing, and the cost of such financing. In determining our credit ratings, the rating agencies consider a number of factors, including our OIBDA, operating cash flow, total debt outstanding, off-balance sheet obligations, commitments, interest requirements, liquidity needs, and availability of liquidity. Other factors considered may include our business strategy, the condition of our industry, and our position within the industry. Although we understand that these and other factors are among those considered by the rating agencies, each agency might calculate and weigh each factor differently.

Our credit ratings as of the date of this report were as follows:

Rating Agency	Long-Term Debt Rating	Outlook/Watch	~~Outlook~~
Moody’s (a)	Baa2	On Review	~~Negative~~
Standard & Poor’s	BBB		Stable
Standard & Poor’s (b)	BBB	Positive
Fitch	BBB		Stable
Fitch (c)	BBB	Positive

(a) On ~~June~~February 2117, ~~2002~~2004, Moody’s ~~changed~~placed ~~the~~our ~~outlook~~Baa2 ~~for~~long-term ~~the~~debt ~~entire~~rating ~~wireless~~on ~~industry~~review, todirection ~~negative~~uncertain, ~~including~~as ~~changing~~a ~~our~~result ~~outlook~~of ~~from~~the ~~stable~~announced agreement by Cingular to ~~negative~~acquire AT&T Wireless Services. A(b) ~~negative~~On ~~outlook~~February ~~could~~17, ~~result~~2004, inStandard & Poor’s placed our ~~credit~~BBB long-term debt rating ~~being~~on ~~lowered~~credit inwatch positive as a result of the ~~future~~announced agreement by Cingular to acquire AT&T Wireless Services. ~~This~~(c) ~~change~~On ~~did~~February ~~not~~17, ~~impact~~2004, ~~the~~Fitch ~~availability~~Ratings orplaced ~~cost~~our BBB long-term debt rating on credit watch positive as a result of ~~our~~the ~~financing~~announced ~~arrangements~~agreement by Cingular to acquire AT&T Wireless Services.

Capital Requirements

Our ~~operating~~ capital requirements during ~~the~~2004 ~~remainder~~and ofbeyond ~~2003~~ will be ~~driven~~ driven primarily by expenditures associated with our network, interest payments, ~~and acquisition of new subscribers. Additional capital requirements~~ ~~may~~payments ~~include~~associated ~~spectrum~~with ~~purchases,~~the ~~acquisitions~~acquisition ~~of businesses,~~ and ~~cash contributions~~retention ~~and~~of ~~advances~~new ~~to our unconsolidated subsidiaries. We continually evaluate all options related to our outstanding debt~~ and ~~equity securities. We~~ ~~may~~existing ~~choose to retire a portion of our debt prior to its scheduled maturity~~subscribers, or ~~exercise the call opportunities related to our remaining TeleCorp Wireless,~~ ~~Inc. or Tritel PCS, Inc. Senior Subordinated Notes, which are available to us~~ ~~beginning in 2004. We currently do not pay any dividends on our common stock. We may utilize excess cash balances to pay dividends in the future; however, we do not have any current plans to do so.~~

~~Capital Requirements — Capital Expenditures and Handsets~~31

The operation, upgrade, and expansion of our networks will continue to require substantial amounts of capital. Our capital expenditures and other capital additions discussed below are calculated on an accrual basis, and therefore, may vary from the cash outflows reported during the period on our Consolidated Condensed Statements of Cash Flows (see reconciliation below). Capital expenditures, including capital additions related to internal-use software, totaled $943 million and $1,913 million for the three and nine months ended September 30, 2003, respectively. The majority of capital spending during the first nine months of 2003 related to the GSM/GPRS network, including capacity expansion and overlay of TeleCorp markets. Third quarter capital expenditures also included non-network spending related to system upgrades and consolidation. During 2003, we expect to spend approximately $3.1

and ~~billion~~principal on our long-term debt obligations which become due beginning in April 2005. Additional capital ~~expenditures~~requirements may result from spectrum purchases, ~~including~~acquisitions ~~capital~~of ~~additions~~businesses, ~~related~~payment of toprior year tax sharing obligations, and cash contributions and ~~internal-use~~advances ~~software~~to our unconsolidated subsidiaries. ~~Our~~We ~~purchase~~continually ~~commitments~~evaluate ~~for~~all options ~~network~~related ~~equipment~~to our outstanding debt and ~~handsets~~ ~~totaled~~equity $1securities.~~0 billion~~ asWe may choose to repurchase portions of ~~September 30,~~our ~~2003~~debt prior to its scheduled maturity, ~~with~~or exercise the call opportunities related to our remaining TeleCorp ~~payments~~Wireless, Inc. or Tritel PCS, Inc. Senior Subordinated Notes. Additionally, we may choose to beredeem ~~made~~our bymandatorily ~~the~~redeemable preferred ~~end~~stock ofprior to its redemption date. We do not anticipate significant cash requirements for income tax payments during 2004 due to existing, unutilized NOLs. We currently do not pay any dividends on our common stock, and we do not intend to pay any dividends on our common stock in the foreseeable future.

(In Millions)	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2003			2002			2003			2002
Reported accrual-basis capital expenditures, including internal use software	$	943		$	1,267		$	1,913		$	2,900
Add: Net impact of capital accruals and non-cash purchases of property, plant, and equipment		(168	)		(314	)		(264	)		131
Cash-basis capital expenditures, including internal use software	$	775		$	953		$	1,649		$	3,031

Capital Requirements — Capital Expenditures

The operation, upgrade, and expansion of our networks will continue to require substantial amounts of capital. Our capital expenditures discussed below are calculated on an accrual basis, and therefore, may vary from the cash outflows reported during the period on our Consolidated Condensed Statements of Cash Flows (see reconciliation below). Capital expenditures, including purchases of internal use software, were $918 million and $1,657 million, for the three and six months ended June 30, 2004, respectively, which represented increases of 69.4 percent and 70.8 percent, respectively, from the year-ago periods. The majority of our capital spending during 2004 related to the GSM/GPRS/EDGE network, including the overlay of 850 MHz GSM radios in 850 MHz markets and other investments to enhance quality and expand capacity of our GSM/GPRS/EDGE network.


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
(In Millions)	2004			2003			2004		2003
Reported accrual-basis capital expenditures, including internal use software	$	918		$	542		$	1,657	$	970
Add: Net impact of capital accruals and non-cash purchases of property, plant, and equipment		(21	)		(169	)		88		(96	)

Cash-basis capital expenditures, including internal use software	$	897		$	373		$	1,745	$	874

Capital Requirements — Spectrum

We may also require substantial capital to purchase additional spectrum licenses. Access to additional spectrum in critical markets will help us to meet demand for existing wireless products and facilitate deployment of next-generation services in critical markets.

Capital Requirements — Interest Payments

Our Senior Notes and Senior Subordinated Notes include the following interest payment requirements and maturity dates:

	Principal Amount as of September 30, 2003 (1)			Interest Rate			Interest Payments			Maturity
Principal Amount as of June 30, 2004 –
(In Millions)
(In Millions) (1)				Interest Rate			Interest Payments		Maturity
AT&T Wireless Services, Inc. Senior Notes:	$	250			6.875	%	Semiannually		April 18, 2005
	$	~~250~~1,000			67.~~875~~350	%~~(2)~~	Semiannually		March 1, 2006	~~April 18, 2005~~
	$	~~1,000~~750			7.~~350~~500	%~~(2)~~	Semiannually		May 1, 2007	~~March 1, 2006~~
	$	~~750~~3,000			7.~~500~~875	%~~(2)~~	Semiannually		March 1, 2011	~~May 1, 2007~~
	$	32,000			78.~~875~~125	%	Semiannually		May 1, 2012	~~March 1, 2011~~
	$	2,~~000~~500			8.~~125~~750	%~~(2)~~	Semiannually		March 1, 2031	~~May 1, 2012~~
	$	29,500			~~8.750~~	%	~~Semiannually~~			~~March 1, 2031~~
	$	9,500
TeleCorp Wireless, Inc. Senior Subordinated Notes:	$	—			11.625	%	(2)		April 15, 2009
TeleCorp Wireless, Inc. Senior Subordinated Notes:
	$	200			10.625	%	Semiannually (4)		July 15, 2010
	$	22200			~~11.625~~	%		(3	)	~~April 15, 2009~~
	$	292	(5)		10.625	%	Semiannually			July 15, 2010
Tritel PCS, Inc. Senior Subordinated Notes:	$	—			12.75	%	(3)		May 15, 2009
	$	~~314~~211			10.375	%	Semiannually (4)		January 15, 2011
Tritel PCS, Inc. Senior Subordinated Notes:
	$	211
	$	31	(5)		12.75	%		(4	)	May 15, 2009
	$	292	(5)		10.375	%	Semiannually			January 15, 2011
	$	323

(1) Principal amount represents the face value of the notes less any contractual discounts. Principal amounts do not include premiums recorded associated with purchase accounting adjustments for TeleCorp Wireless, Inc. and Tritel PCS, Inc. notes.32

(2) During the first quarter of 2003, we terminated all of our interest rate swap agreements, which had a total notional value of $2.8 billion. We received total cash proceeds of $289 million, of which $245 million represented the fair value of the portion of our long-term debt that was hedged. The remaining cash proceeds represented the fair value of the interest component of the hedged debt as of the termination dates of the interest rate swaps. The swaps were entered into as hedges of the fair value of $250 million of the 6.875 percent Senior Notes due April 2005, $1.0 billion of the 7.35 percent Senior Notes due March 2006, $750 million of the 7.5 percent Senior Notes due May 2007, and $800 million of the 8.125 percent Senior Notes due May 2012.

(3) Interest accrues to the principal balance of these Discount Notes until April 15, 2004. Interest will be paid in cash semiannually beginning October 15, 2004. During the third quarter of 2003, we retired a substantial amount of these notes (see “Net Cash Provided by Financing Activities of Continuing Operations” above for further information regarding this debt repurchase).

(4) Interest accrues to the principal balance of these Discount Notes until May 15, 2004. Interest will be paid in cash semiannually beginning November 15, 2004. During the third quarter of 2003, we retired a substantial amount of these notes (see “Net Cash Provided by Financing Activities of Continuing Operations” above for further information regarding this debt repurchase).

(1)		Principal amount represents the face value of the notes less any contractual discounts. Principal amounts do not include original issuance discounts associated with the AT&T Wireless Services, Inc. Senior Notes or premiums recorded associated with purchase accounting adjustments for TeleCorp Wireless, Inc. and Tritel PCS, Inc. notes.

(2)		In March 2004, TeleCorp Wireless, Inc. exercised its option to call the remaining outstanding principal amount of these notes. The notes, along with accrued but unpaid interest were redeemed in April 2004 for $25 million in cash.

(3)		In April 2004, Tritel PCS, Inc. exercised its option to call the remaining outstanding principal amount of these notes. The notes, along with accrued but unpaid interest were redeemed in May 2004 for $33 million in cash.

(4)		During the six months ended June 30, 2004, we repurchased notes with face values totaling $19 million and $33 million, respectively, of the TeleCorp Wireless, Inc. 10.625% and the Tritel PCS, Inc. 10.375% Senior Subordinated Notes for cash totaling $62 million.

(5) Subsequent to September 30, 2003, we retired $52 million total face value of these notes for $62 million in cash.

Capital Requirements — Contractual Obligations

(In Millions)	Payments Due by Period (1)
(In Millions)Contractual Obligations	Payments Due by Period (1)
Contractual Obligations									After 5
As of June 30, 2004 (unless otherwise noted)	Total		Less than 1 year		2-3 years		4-5 years		After 5 years
As of September 30, 2003 (unless otherwise noted)	Total		Less than 1 year		2–3 years		4–5 years		years
Operating leases (2)	$	3,375	$	766	$	1,212	$	634	$	763
Operating leases (2)	$	2,754	$	611	$	1,040	$	557	$	546
Dedicated leased lines (3)		640		222		317		101		—
Dedicated leased lines (3)		617		198		317		102		—
Purchase obligations (4)		1,112		512		400		200		—
Purchase obligations (4)		1,876		453		1,223		200		—
Long-term debt (5)		10,144		259		1,966		3		7,916
Long-term debt (5)		10,382		9		1,270		893		8,210
Obligation related to ANW venture agreement (6)		145		—		—		145		—
Mandatorily redeemable preferred stock (7)		~~846~~776		—		—		—		~~846~~776
Total contractual cash obligations	$	16,620	$	1,271	$	3,850	$	1,897	$	9,602
Other long-term liabilities reflected on the balance sheet under GAAP (8)		338		—		128		152		58
Total contractual cash obligations	$	16,530	$	1,759	$	4,023	$	1,235	$	9,513

(1) Payments are included in the period by which they are contractually required to be made. Actual payments may be made prior to the contractually required date.

(1)		Payments are included in the period by which they are contractually required to be made. Actual payments may be made prior to the contractually required date.

(2)		Represent our commitments associated with operating leases as of December 31, 2003 and are associated with contracts that expire in various years through 2035. Payments due reflects fixed rent expense.

(3)		Represent our commitments with our primary local exchange carriers for dedicated leased lines as of December 31, 2003. The original terms of these commitments vary from month-to-month up to five years.

(4)		Unconditional purchase obligations include commitments to purchase network equipment and commitments to purchase certain long-distance services under our Master Carrier Agreement with AT&T. In July 2004, we were released from $360 million of network equipment commitments. See Note (j) to our Consolidated Financial Statements. Purchase obligations do not include purchase orders, which we enter into in the ordinary course of business for network equipment, handsets, materials, supplies, and other items. During 2004, we expect our capital spending, including existing commitments, to be under $3 billion.

(5)		Amounts are equal to the annual maturities of our long-term debt outstanding as of June 30, 2004.

(6)		Represents our obligation associated with Alaska Native Wireless’ (ANW) other owners’ rights to require us to purchase their interests in ANW.

(7)		This commitment represents the total liquidation preference upon redemption (December 13, 2020) of our mandatorily redeemable preferred stock.

(8)		Other long-term liabilities requiring cash settlement including asset retirement obligations, deferred compensation, and tax contingencies.

(2) Represents our commitments associated with operating leases as of December 31, 2002 and is associated with contracts that expire in various years through 2035. Payments due reflects fixed rent expense.33

(3)Table Represents our commitments with our primary local exchange carriers for dedicated leased lines as of December 31, 2002. The original terms of these commitments vary from month-to-month up to five years.Contents

(4) Unconditional purchase obligations include commitments to purchase network equipment and handsets and commitments to purchase certain long-distance and network data services under our Master Carrier Agreement with AT&T. See Note (j) to our Consolidated Condensed Financial Statements.

(5) Amounts are equal to the annual maturities of our long-term debt outstanding.

(6) Represents our obligation associated with ANW’s other owners’ rights to require us to purchase their interests in ANW.

(7) This commitment represents the total liquidation preference upon redemption (December 13, 2020) of our mandatorily redeemable preferred stock.

In December 2002, the terms of our strategic relationship with DoCoMo were amended. The amendment increased DoCoMo’s rights to representation on our board of directors, and revised our technology commitment, among other things. Pursuant to our Investor Agreement, as amended, between AT&T Wireless Services, AT&T, and DoCoMo, DoCoMo may require us to repurchase its investment at DoCoMo’s original purchase price, plus interest, if under certain circumstances, and subject to the exceptions identified in the Investor Agreement:

•

We fail to launch service based on W-CDMA technology in certain areas of Dallas, San Diego, San Francisco, and Seattle, or permitted alternate cities by December 31, 2004; or

•

Our board of directors approves changes prior to December 31, 2004, in our use of W-CDMA technology as our primary standard for delivery of services based on third-generation technology.

WeOn ~~believe~~July 20, ~~that~~2004, we began offering customers in Detroit, Phoenix, San Francisco, and Seattle broadband mobile wireless services with our launch of the ~~likelihood~~first commercially-available true 3G UMTS (Universal Mobile Telecommunications System) network in the United States. The launch of service in these four cities satisfied the UMTS service launch obligations under the Investor Agreement. As a result of the market launches, and because the remaining contingency relating to the board of directors approval of changes in its use of W-CDMA technology is solely within AT&T Wireless Services’ control, during the third quarter of 2004, we will bereclassify ~~required~~the to406 million ~~repurchase~~common shares held by DoCoMo’s, ~~original~~which ~~investment~~are ~~plus~~currently ~~interest~~reflected ison ~~remote~~our consolidated condensed balance sheet as mandatorily redeemable common stock, to shareholder’s equity.

Occasionally, we make equity contributions and advances to our ~~investments~~ investments in unconsolidated subsidiaries and variable interest entities. We currently have no material commitments outstanding related to these ~~investments~~entities, with the exception of our commitment to ANW noted above.

WeAs ~~are~~discussed ~~currently~~in Merger Announcement above, on February 17, 2004, we entered into a ~~party~~merger toagreement ~~various~~with ~~claims~~Cingular and ~~legal~~certain ~~proceedings.~~of ~~We also~~its ~~make~~affiliates. ~~routine~~In ~~filings~~conjunction with the ~~FCC~~merger, ~~and~~we ~~state~~have ~~regulatory~~entered ~~authorities,~~into asfee arrangements ~~well~~with ~~as federal,~~investment ~~state,~~bankers and ~~local~~law ~~tax~~firms ~~authorities~~which are contingent upon the completion of the merger. IfAs of June 30, 2004, we ~~believe~~estimated that these acontingent ~~loss~~fees ~~arising from~~approximated ~~these~~$105 million ~~actions~~and will be paid if, and~~/or~~ when, ~~filings~~the merger is completed.

36 We are currently a party to various claims and legal proceedings. We also make routine filings with the FCC and state regulatory authorities, as well as federal, state, and local tax authorities. Also, we are currently under audit by the IRS and various state and local taxing jurisdictions. If we believe that a loss arising from these actions and/or filings or audits is probable and can reasonably be estimated, an amount is recorded for the estimated loss. As additional information becomes available, the potential liability related to the actions is assessed and the estimates are revised, if necessary. Based upon currently available information, we do not believe that the ultimate outcome of these actions beyond that provided for as of June 30, 2004, individually and in the aggregate, will have a material adverse effect on our Consolidated Financial Statements. However, litigation is subject to inherent uncertainties and unfavorable rulings could occur. If so, it could have a material adverse impact on our Consolidated Financial Statements in future periods. While it is not possible to predict the ultimate outcome of these matters, historically, we have been successful in defending ourselves against claims and suits that have been brought against us, and payments made in such claims and actions have not been material to our Consolidated Financial Statements.

probable and can reasonably be estimated, an amount is recorded for the estimated loss. As additional information becomes available, the potential liability related to the actions is assessed and the estimates are revised, if necessary. Based upon currently available information, we do not believe that the ultimate outcome of these actions beyond that provided for as of September 30, 2003, individually and in the aggregate, will have a material adverse effect on our Consolidated Financial Statements. However, litigation is subject to inherent uncertainties and unfavorable rulings could occur. If so, it could have a material adverse impact on our Consolidated Financial Statements in future periods. While it is not possible to predict the ultimate outcome of these matters, historically, we have been successful in defending ourselves against claims and suits that have been brought against us, and payments made in such claims and actions have not been material to our Consolidated Financial Statements.

We enter into purchase orders in the ordinary course of business for materials, supplies, and other items. Additionally, we have agreements with other wireless carriers that allow our customers to roam on other carriers’ wireless systems. These agreements establish general terms and charges for system usage, and in some cases also establish minimum usage requirements.

Off-Balance Sheet Arrangements

DoCoMo holds 41.7 million of our common stock warrants with a strike price of $35 per share. This off-balance sheet financing arrangement is not material to our overall results of operations or financial condition.

Additionally, we enter into agreements in the normal course of ~~business~~ business that provide for indemnification of counterparties. These include split-off, tax sharing, and tax refund agreements with AT&T, as well as certain asset sales, outsourcing arrangements, financing, intellectual property, services, and purchase agreements with other parties. The term of the indemnification varies by agreement. The events or circumstances that would require us to perform under these indemnities are transaction specific, however these agreements may require us to indemnify the counterparty for costs and losses incurred from changes in laws or regulations, and/or from litigation or claims arising from the underlying transaction. We are unable to estimate the maximum ~~potential~~ potential liability for these types of ~~indemnifications as the agreements~~ ~~generally do not specify a maximum amount, and the amounts are dependent on the~~ ~~outcome of future events, the nature and likelihood of which cannot be~~ determined at this time. Historically, we have not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying Consolidated Condensed Financial Statements.

~~QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK~~34

We are exposed to market risk from changes in interest and foreign exchange rates related to our consolidated operations, as well as with our international unconsolidated subsidiaries’ operations. Additionally, we are exposed to market risk associated with changes in the price of AT&T Wireless Services common stock relating to outstanding common stock warrants. We have minimal cash flow exposure related to interest rate changes associated with our long-term, fixed-rate debt. From time to time, we may use certain derivative financial instruments, primarily interest rate swaps, to manage our interest rate risks. We do not use derivative financial instruments for trading or speculative purposes.

As of September 30, 2003, we had outstanding $9.5 billion of Senior Notes of AT&T Wireless Services, Inc. with fixed interest rates ranging from 6.875 percent to 8.75 percent, and with maturity dates between 2005 and 2031. As of September 30, 2003, we had not entered into any derivative financial instruments to manage our market risks associated with these notes.

As of September 30, 2003, we had outstanding $641 million face value of Senior Notes of TeleCorp Wireless, Inc. and Tritel PCS, Inc., both of which are wholly owned subsidiaries of AT&T Wireless Services, Inc. These notes have fixed interest rates ranging from 10.375 percent to 12.75 percent with maturity dates between 2009 and 2011. As of September 30, 2003, we had not entered into any derivative financial instruments to manage our market risks associated with these notes.

We may have future interest rate risk associated with our Competitive Advance and Revolving Credit Facilities, as well as our commercial paper program. If drawn upon, the credit facilities bear interest at variable rates based upon, in various cases, (i) LIBOR plus 65 to 200 basis points depending upon our Senior Notes rating, or (ii) the greater of the prime rate or the federal funds effective rate plus 50 basis points. As of September 30, 2003, there were no amounts outstanding under the facilities, or any notes outstanding under commercial paper program.

indemnifications ~~plus~~as the agreements generally do not specify a ~~fixed~~maximum ~~spread~~amount, ~~depending~~and ~~upon~~the ~~our~~amounts ~~Senior~~are ~~Notes~~dependent ~~rating.~~on Asthe outcome of ~~September 30~~ future events, ~~2003~~the nature and likelihood of which cannot be determined at this time. Historically, ~~there~~we ~~were~~have nonot ~~amounts~~made ~~outstanding~~any significant indemnification payments under such agreements and no amount has been accrued in the ~~program~~accompanying Consolidated Condensed Financial Statements.

WeQUANTITATIVE ~~have~~AND ~~foreign~~QUALITATIVE ~~currency~~INFORMATION ~~risk~~ABOUT ~~associated~~MARKET ~~with investments in wireless~~RISK ~~companies outside of the United States of America. Results for our~~ ~~international investments in unconsolidated subsidiaries accounted for under~~ ~~the equity method are translated from the designated functional currency to the~~ U.S. dollar using average exchange rates during the period, while assets and liabilities are translated at the exchange rate in effect at the reporting date. We have not entered into any derivative financial instruments to hedge our foreign currency exposure. We believe that the potential exposure is not material to our overall financial position or results of operations.

We are exposed to market risk from changes in interest and foreign exchange rates related to our consolidated operations as well as with our international unconsolidated subsidiaries’ operations. Additionally, we are exposed to market risk associated with changes in the price of AT&T Wireless Services common stock relating to outstanding common stock warrants. We have minimal cash flow exposure related to interest rate changes associated with our long-term, fixed-rate debt. From time to time, we may use certain derivative financial instruments, primarily interest rate swaps, to manage our interest rate risks. We do not use derivative financial instruments for trading or speculative purposes.

As of June 30, 2004, we had outstanding $9.5 billion of Senior Notes of AT&T Wireless Services, Inc. with fixed interest rates ranging from 6.875 percent to 8.75 percent, and with maturity dates between 2005 and 2031. As of June 30, 2004, we had not entered into any derivative financial instruments to manage our market risks associated with these notes.

As of June 30, 2004, we had outstanding $411 million of Senior Notes of TeleCorp Wireless, Inc. and Tritel PCS, Inc., both of which are wholly-owned subsidiaries of AT&T Wireless Services, Inc. These notes have fixed interest rates of 10.375 percent and 10.625 percent with maturity dates of 2010 and 2011. As of June 30, 2004, we had not entered into any derivative financial instruments to manage our market risks associated with these notes.

We may have future interest rate risk associated with our Competitive Advance and Revolving Credit Facility, as well as our commercial paper program. If drawn upon, the credit facility bears interest at variable rates based upon, in various cases, (i) LIBOR plus 65 to 200 basis points depending upon our Senior Notes rating, or (ii) the greater of the prime rate or the federal funds effective rate plus 50 basis points. As of June 30, 2004, there were no amounts outstanding under the facility, or any notes outstanding under the commercial paper program.

We may have future interest rate risk associated with our accounts receivable securitization program. The program is subject to variable interest rates based upon, in various cases, (i) LIBOR plus or minus a variable spread depending upon demand or (ii) LIBOR plus a fixed spread depending upon our Senior Notes rating. As of June 30, 2004, there were no amounts outstanding under the program.

We have foreign currency risk associated with investments in wireless companies outside of the United States of America. Results for our international investments in unconsolidated subsidiaries accounted for under the equity method are translated from the designated functional currency to the U.S. dollar using average exchange rates during the period, while assets and liabilities are translated at the exchange rate in effect at the reporting date. We have not entered into material derivative financial instruments to hedge our foreign currency exposure. We believe that the potential exposure is not material to our overall financial position or results of operations.

We have equity price risk associated with common stock warrants in our common stock which are held by DoCoMo. In association with the split-off, DoCoMo’s warrants in AT&T Wireless Group tracking stock were converted into 41.7 million common stock warrants in AT&T Wireless Services with a strike price of $35 per share.

The risk management discussion above, related to our market risks, contains forward-looking statements. Future impacts of market risk would be based on actual developments in the financial markets.

~~FINANCIAL CONDITION AT SEPTEMBER 30, 2003, COMPARED WITH DECEMBER 31, 2002~~35

(In Millions)	At		At
	September 30, 2003		December 31, 2002
Total assets	$	47,756	$	45,806
Total liabilities		19,267		18,246
Minority interest		84		48
Mandatorily redeemable preferred stock		—		151
Mandatorily redeemable common stock		7,664		7,664
Total shareholders’ equity	$	20,741	$	19,697

Total assets increased to $47,756 million at September 30, 2003, an increase of $1,950 million, or 4.3 percent, compared with December 31, 2002. The increase in total assets as of September 30, 2003, was due primarily to an increase in cash and cash equivalents resulting from positive cash flow from operations, the receipt of $947 million in federal tax refund claims from AT&T related to our 2001 and 2002 tax net operating losses, and the $245 million in total cash proceeds received related to the termination of our interest rate swap agreements in the first quarter of 2003. These increases were partially offset by cash payments for capital expenditures and the $591 million spent during the third quarter of 2003 principally for the repurchase of certain TeleCorp Wireless, Inc. and Tritel PCS, Inc. notes (see “Net Cash Provided by Financing Activities of Continuing Operations” above for further information regarding this debt repurchase).

Total liabilities were $19,267 million at September 30, 2003, an increase of $1,021 million, or 5.6 percent, compared with December 31, 2002. The increase in total liabilities as of September 30, 2003, was due primarily to increases in net deferred tax liabilities reflecting the reduction in tax assets resulting from the receipt of refunds associated with our federal tax NOL carrybacks, the reversal of the valuation allowance against its net tax liability, and an increase in accounts payable due to higher capital expenditures-related accruals. Additionally, as a result of the adoption of SFAS No. 150 on July 1, 2003, our mandatorily redeemable preferred stock was reclassified to long-term liabilities (see “New Accounting Policies” above for further information regarding this statement). These increases were partially offset by a reduction in long-term debt resulting from the tender offer of certain TeleCorp Wireless, Inc. and Tritel PCS, Inc. notes during the quarter (see “Net Cash Provided by Financing Activities of Continuing Operations” above for further information regarding this debt repurchase).

Mandatorily redeemable preferred stock was zero and $151 million as of September 30, 2003 and December 31, 2002, respectively, representing the fair value of the mandatorily redeemable preferred stock issued by us in conjunction with the acquisition of TeleCorp and related dividend accretion subsequent to the acquisition date. Our adoption of SFAS No. 150 during the third quarter of 2003 required us to reclassify our mandatorily redeemable preferred stock to long-term liabilities within our Consolidated Condensed Balance Sheet and all remaining accretion will be reflected as interest expense in our Consolidated Condensed Statements of Operations (see “New Accounting Policies” above for further information regarding this statement).

Mandatorily redeemable common stock totaling $7,664 million as of September 30, 2003 and December 31, 2002, represented the fair value as of the split-off date of the AT&T Wireless Services common shares held by DoCoMo. These shares are presented as mandatorily redeemable common stock due to certain redemption rights held by DoCoMo. Under certain circumstances, DoCoMo

FINANCIAL ~~may~~CONDITION ~~require~~AT ~~the~~JUNE ~~repurchase~~30, of2004 ~~its~~COMPARED ~~investment~~WITH atDECEMBER ~~DoCoMo’s original purchase price~~31, ~~plus interest, if we fail to meet specified technological milestones.~~2003

Shareholders’ equity was $20,741 million at September 30, 2003, an increase of $1,044 million, or 5.3 percent, from December 31, 2002. The increase in shareholders’ equity resulted primarily from the net income earned during the first nine months of 2003 and from the collection of $436 million of the total $461 million receivable from former parent, AT&T, related to our federal tax refund claim filed in December 2002.


	At		At
(In Millions)	June 30, 2004		December 31, 2003
Total assets	$	46,984	$	47,802
Total liabilities		18,500		19,445
Minority interest		32		30
Mandatorily redeemable common stock		7,664		7,664
Total shareholders’ equity	$	20,788	$	20,663

Total assets were $46,984 million at June 30, 2004, a decrease of $818 million, or 1.7 percent, from December 31, 2003. The decrease in total assets as of June 30, 2004 was due primarily to decreases in current assets, including cash and cash equivalents, accounts receivable, and inventories. The decrease in cash reflected payments made for capital expenditures and for current liabilities, including compensation benefits, accrued at year-end 2003. The decline in accounts receivable resulted from a sequential decrease in our services revenue and an improved aging of the receivable balances. Inventories decreased as a result of better inventory management.

Total liabilities were $18,500 million at June 30, 2004, a decrease of $945 million, or 4.9 percent, compared with December 31, 2003. The decrease was primarily attributable to decreases in accounts payable and payroll and benefit-related liabilities. Accounts payable decreased as a result of high capital-related accruals as of year-end that were paid during the first six months of 2004. The decrease in payroll and benefit-related liabilities was driven by payment of prior year compensation-related benefits during the first quarter. Net deferred income tax liabilities decreased as a result of the deferred tax benefit recognized during the first half of 2004. Additionally, total debt decreased due to redemptions and repurchases of TeleCorp and Tritel debt during the first six months of 2004.

Mandatorily redeemable common stock totaling $7,664 million at June 30, 2004 and December 31, 2003 represented the fair value as of split-off date of the AT&T Wireless Services common shares held by DoCoMo. These shares were presented as mandatorily redeemable common stock as of June 30, 2004 and December 31, 2003 due to certain redemption rights held by DoCoMo. Under certain circumstances, DoCoMo may require the repurchase of its investment at DoCoMo’s original purchase price, plus interest, if AT&T Wireless Services fails to meet specified technological milestones. On July 20, 2004, we began offering customers in Detroit, Phoenix, San Francisco, and Seattle broadband mobile wireless services with our launch of the first commercially-available true 3G UMTS (Universal Mobile Telecommunications System) network in the United States. The launch of service in these four cities satisfied the UMTS service launch obligations under the Investor Agreement. As a result of the market launches, and because the remaining contingency relating to the board of directors approval of changes in its use of W-CDMA technology is solely within AT&T Wireless Services’ control, during the third quarter of 2004, we will reclassify the 406 million common shares held by DoCoMo, which are currently reflected on our consolidated condensed balance sheet as mandatorily redeemable common stock, to shareholders’ equity.

Shareholders’ equity was $20,788 million at June 30, 2004, an increase of $125 million, or 0.6 percent, from December 31, 2003. The increase was primarily attributable to the increase in common stock issuances related to employee benefit plans during the first half of 2004.

GOODWILL AND OTHER INTANGIBLES

As of June 30, 2004, we had goodwill and U.S. licensing costs totaling $7,444 million and $14,483 million, respectively. Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” requires that goodwill and other indefinite-lived intangible assets, consisting of U.S. licensing costs, be tested for impairment annually based upon a fair value approach. Additionally, goodwill must be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an entity below its carrying value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale, or disposition of a significant portion of the business, or other factors. If our market value is less than our book value for an extended period of time, it could trigger the need for impairment tests of acquired goodwill between annual tests. Other indefinite-lived intangible assets must be tested between annual tests if events or changes in circumstances indicate that the asset might be impaired.

In the absence of a current transaction for the sale of our business enterprise, we believe a discounted cash flow (DCF) model, rather than the market price of our common stock, is the best technique with which to estimate the fair value of our business enterprise. As such, we utilized a DCF model to estimate the fair value of our business enterprise for our transitional impairment test as of January 1, 2002 and our annual impairment tests performed during the third quarters of 2002 and 2003. The closing price of our common stock as of the last business day of the month was $8.21, $8.18, $7.99, $13.61, and $14.32, for the quarters ended June 30, 2003, September 30, 2003, December 31, 2003, March 31, 2004, and June 30, 2004, respectively, reflecting market capitalizations, in some cases, that were significantly lower than our fair values as determined using discounted cash flows. If market prices (adjusted for items that may affect the fair value of the reporting unit, such as a control premium) were used to derive the fair value of our business enterprise instead of a DCF model, it could result in a lower fair value of our business enterprise. This lower fair value might result in an impairment charge that might not otherwise result from using a DCF model. While we do not use our market price to determine the fair value of our reporting unit, we expect convergence between our market capitalization and DCF valuation to occur over time.

On January 22, 2004, we announced that our board of directors was exploring strategic alternatives. On February 17, 2004, Cingular and certain of its affiliates and AT&T Wireless Services signed an agreement such that, subject to certain conditions, Cingular would acquire AT&T Wireless Services for approximately $41 billion, which we deem to reflect fair value. The announcement in January, along with the agreement signed in February, constituted triggering events under SFAS No. 142 requiring us to perform impairment tests for both our goodwill and strategic licensing costs during the first quarter of 2004. We determined the fair value of our business enterprise based upon the purchase price of $41 billion reflected by the agreement. As the business enterprise fair value of $41 billion exceeded our net book value, the first step of the goodwill impairment test was passed and no impairment was recorded. We determined the fair value of our strategic licensing costs, using a DCF model that took into consideration our business enterprise fair value. This test resulted in no impairment charges for our strategic licensing costs.

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES

We hold equity interests in various U.S. and international ventures, corporations, and partnerships. These ~~ventures~~entities ~~and partnerships~~ operate primarily in the ~~wireless~~ wireless telecommunications industry. Equity investments in which we have the ability to exercise significant influence, but do not have voting ~~control other than where~~ ~~we are deemed to be the primary beneficiary~~control, are accounted for under the equity method of accounting. Investments in which we do not have the ability to exercise significant influence are accounted for under the cost method. We review our significant cost and equity method investments ~~annually~~at ~~during~~least ~~the third quarter~~annually, or whenever events or changes in circumstances indicate that the ~~carrying~~ carrying amount may not be recoverable, to determine whether a decline in the ~~fair~~ fair value of our investment below its carrying value is deemed to be other than temporary. We employ a systematic methodology that considers ~~available~~ available evidence in evaluating potential impairment of our investments. In the event that the carrying value of an investment exceeds its fair value, we evaluate, among other factors, the duration and extent to which the fair value is less than the carrying value; the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors; and our intent and ability to hold the investment. We may record additional impairment charges in the future if there are ~~further~~ further declines in the fair values of our investments, which we deem to be ~~other~~ other than temporary.

OnIn ~~November~~March 32004, ~~2003,~~we ~~Pinnacle~~completed ~~Cellular Limited Partnership (Pinnacle) was dissolved and~~ the ~~assets~~sale ~~were~~of ~~distributed~~our ~~to the partners. We had a 50 percent~~ ownership interest in ~~Pinnacle, which held primarily~~ a ~~non-controlling interest~~ incost ~~the~~method ~~Pittsburgh,~~investment ~~Pennsylvania market and a controlling interest in several markets in Arkansas. Prior to the dissolution, we accounted~~ for ~~this~~$26 million ~~investment under the equity method. In the distribution, we received the non-controlling Pittsburgh interest, which increased our direct interest~~ in ~~the~~cash ~~Pittsburgh market~~and ~~to 100 percent. The distribution will be~~ recorded ~~at fair value for which we expect to record~~ a pretax gain of ~~approximately~~ $5526 million inwithin ~~the fourth~~other ~~quarter~~income ~~of 2003~~(expense).

In ~~October~~July ~~2003~~2004, we ~~sold~~signed ~~our~~a ~~ownership~~non-binding ~~stake~~letter inof ~~Far~~intent ~~EasTone~~with ~~to member~~Cingular ~~companies~~and Triton PCS for the exchange of wireless properties. Under the ~~carrier’s~~terms of ~~majority~~the ~~shareholder~~letter of intent, ~~Far~~Cingular ~~Eastern~~would ~~Group,~~receive ~~for~~Triton 11PCS’s network assets and customers in Virginia.3 Triton PCS would receive certain ~~billion~~of NTour ~~dollars,~~network orassets ~~approximately~~and customers in North Carolina and Puerto Rico, plus $~~330~~175 million in cash from Cingular. Additionally, Triton PCS and we have entered into definitive agreements to terminate the stockholder agreement, which includes termination of an exclusivity arrangement in return for the surrender of our equity in Triton PCS. Both transactions are contingent upon the closing of the merger agreement between us and Cingular.

~~On September 22, 2003, we sold all of our ownership interest in Dobson’s~~37 ~~common stock and recorded a pretax gain of $35 million within other income (expense) during the three months ended September 30, 2003.~~

In August 2003, in connection with the restructuring of ACC’s debt, we abandoned our interest in, and thereby withdrew from, ACC Acquisition LLC, the parent company of ACC.

In the third quarter of 2003, we recognized a pretax impairment charge of $62 million within net equity (losses) earnings from investments in unconsolidated subsidiaries associated with our non-strategic investment in Far EasTone. This impairment charge was recognized due to a decline in the fair value of the investment that management deemed to be other than temporary.

On June 17, 2003, we completed an exchange transaction with a subsidiary of Dobson. We transferred to Dobson our wireless properties in two Alaska markets and our shares of Dobson Series AA preferred stock. In exchange, we received Dobson’s wireless properties in two California markets. As a result of the transaction, we recorded a pretax gain of $39 million within other income (expense) during the second quarter of 2003.

In April 2004, AT&T Wireless Services, on behalf of JVII General Partnership (JVII) which is owned by AT&T Wireless Services, notified Rogers Communications Inc. of its decision to explore options to monetize its entire interest in Rogers Wireless Communications Inc. (Rogers Wireless). This notification commenced an exclusive 21-day negotiation period during which Rogers Communications offered to purchase JVII’s interest for CAN$31 per share. This offer was rejected and the 21-day period lapsed in May 2004. Pursuant to the terms of the existing Shareholders’ Agreement between JVII and Rogers Communications, JVII had 60 days following the termination of the 21-day period within which it could sell its interest in Rogers Wireless to third parties, provided that it did so at a price greater than the price at which Rogers Communications offered to acquire JVII’s shares. The 60-day period lapsed in July 2004 with no transaction having occurred.

ADDITIONAL FACTORS THAT MAY AFFECT OUR BUSINESS, FUTURE OPERATING RESULTS, AND FINANCIAL CONDITION

You should carefully consider the following factors that may affect ~~our~~ our business, future operating results, and financial condition, as well as other information included in this report. The risks and uncertainties ~~described~~ described below are not the only ones we face. Additional risks and uncertainties not presently known to us, that we have not identified as risks, or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition, and operating results could be materially adversely affected.

Our stock price would likely be adversely affected if we do not consummate our transaction with Cingular.

The merger agreement we entered into with Cingular and certain of its affiliates contains numerous conditions to Cingular’s obligation to close. These conditions include:

•

obtaining approval of the FCC, antitrust clearance, and certain other governmental approvals;

•

operating our business in compliance with the covenants set forth in the merger agreement; and

•

continued accuracy of our representations and warranties, including the absence of any material adverse effect on our business.

We cannot be certain we will obtain the necessary regulatory approvals, or that we will satisfy other closing conditions. If the transaction were terminated, or if it appeared reasonably likely to be terminated, this would likely have a significant adverse effect on our stock price.

Our business could be adversely impacted by our pending transaction with Cingular.

Uncertainty about the impact of our pending transaction with Cingular could adversely affect our business. This uncertainty could adversely impact customer churn, employee retention, subscriber growth, revenue growth, and our operational results. These adverse effects are likely to be exacerbated if the merger is pending for an extended period of time.

We operate in a highly competitive industry.

There is substantial competition in the wireless telecommunications industry. We expect competition to intensify as a result of the development of new technologies, products and services, including the integration of mobile and other wireless ~~number~~technologies, wireless number portability, and as market penetration increases. Other wireless providers, including resellers, serve each of the markets in which we compete. Some of the indirect retailers who sell our services also sell our competitors’ services. There are six national facilities-based mobile wireless service providers, many start-up providers of Wi-Fi and other fixed wireless solutions and wireless data networks, and numerous regional competitors. This competition puts downward pressure on our subscriber and revenue growth and profit margins, and we expect this trend to continue. Carriers compete principally on service ~~area~~quality, ~~price,~~ service ~~quality~~area, ~~and~~price, and features. Our ability to compete successfully will depend on our ability to anticipate and respond to various competitive factors, including service quality, ~~service~~ coverage area, new services, service features and enhancements, changes in consumer preferences, demographic trends, economic conditions and competitors’ pricing strategies.

~~Implementation of wireless local number portability could negatively impact our~~38 ~~business.~~

The FCC has mandated that wireless carriers provide for local number portability by November 24, 2003. This would allow subscribers to keep their wireless phone number when switching to a different wireless service provider. We anticipate number portability will increase competition for existing customers, which may put downward pressure on subscriber growth and increase churn, which is likely to increase our costs. A high rate of churn would adversely affect our results of operations because of loss of revenue and because the cost of adding a new subscriber, which generally includes a commission expense and/or significant handset discounts, is a significant factor in income and profitability for participants in the wireless industry. We may be required to subsidize product upgrades and/or reduce pricing to match competitors’ initiatives and retain customers, which could adversely impact our revenue and profitability. It is unclear whether the wireless industry is fully prepared to implement wireless number portability. If consumer dissatisfaction results, it could adversely impact industry growth.

If our wireless service offerings do not meet customer expectations, it could limit our ability to attract and retain customers.

Customer acceptance of the services we offer is and will continue to be affected by technology-based differences and by the operational performance, quality, reliability, and coverage of our wireless networks. We may have difficulty attracting and retaining customers if we are unable to meet customer expectations for, or otherwise unable to resolve quality issues relating to, our wireless networks, billing systems, or customer care or if those issues limit our ability to expand our network capacity or subscriber base, or otherwise were to place us at a competitive disadvantage to other wireless service providers in our markets. The level of consumer demand for our next-generation products is uncertain. Consumer demand could be impacted by differences in technology, footprint and service areas, network quality, customer care levels and rate plans.

Market prices for wireless services may decline in the future.

We anticipate that market prices for mobile wireless voice and data services generally will continue to decline. We expect significant competition among wireless providers to continue to drive service and equipment prices lower. We also expect that there will be increases in advertising and promotional spending, along with increased demands on access to distribution channels. All of this may lead to greater choices for customers, possible consumer confusion, and increasing movement of customers between competitors, which we refer to as “churn.” If market prices continue to decline, it could adversely affect our ability to grow revenue, which would have a material adverse effect on our financial condition and results of operations.

We need to complete significant GSM/GPRS network build-out and system implementation as part of our plans to improve the quality and capacity of our GSM/GPRS network.

We need to complete significant build-out activities and enhancements to our GSM/GPRS network, including:

• In ~~completion~~recent ofyears, ~~build~~the wireless industry has experienced significant consolidation. This has created large, well-~~out~~capitalized ~~activities~~competitors inwith ~~some~~substantial offinancial, technical, marketing, and other resources that enable them to rapidly respond to offers we introduce to the market. As a result, these competitors may be able to offer nationwide services and plans more quickly and more economically, may be able to obtain more favorable roaming rates, and may be better able to respond to our ~~existing~~offers. ~~wireless~~Our ability ~~markets;~~to effectively compete may be limited if we do not consummate our pending transaction with Cingular, and obtain access to comparable financial, technical, and marketing resources.

•If ~~enhancement~~our ofwireless service offerings or customer care service do not meet customer expectations, it could limit our ~~GSM/GPRS~~ability ~~network;~~to retain or attract customers.

• Customer acceptance ~~deployment~~ of ~~next~~the services we offer is, and will continue to be, affected by technology-~~generation~~based differences and by the operational performance, quality, reliability, and coverage of our wireless networks. Consumer demand could be impacted by differences in technology, ~~including~~footprint and ~~EDGE~~service areas, network quality, consumer perception, customer care levels, and rate plans. We may continue to ~~support~~have ~~enhanced~~difficulty ~~data~~retaining customers ~~services~~if we are unable to meet our customers’ expectations for network quality and ~~increase~~coverage, billing systems, or customer care. An inability to address those issues could limit our ability to expand our network capacity ~~efficiency~~or subscriber base, and place us at a competitive disadvantage to other wireless service providers in our markets. These issues could affect our ability to attract new subscribers as well. We have experienced difficulty transferring wireless phone numbers on a timely basis. Late last year, when wireless LNP was first introduced, we also experienced disruptions to our GSM/GPRS order entry, customer care, and collections processes in connection with implementation of our upgrade to our customer care support system. If we experience similar disruptions, they would be likely to adversely affect our ability to attract and retain customers.

~~Failure~~We have toexperienced ~~successfully~~elevated ~~build~~churn ~~out~~rates ~~and~~over ~~enhance~~the ~~our~~recent ~~GSM/GPRS~~several ~~network and~~quarters. ~~necessary~~A ~~support~~high ~~facilities~~rate ~~and~~of ~~systems~~churn inadversely aaffects ~~cost~~our ~~effective~~results ~~manner,~~of ~~and~~operations ~~in a~~because ~~manner~~of ~~that~~loss ~~satisfies~~of ~~customer~~revenue ~~expectations~~and ~~for~~because ~~quality~~the ~~and~~cost ~~coverage,~~of ~~could have~~adding a ~~material~~new ~~adverse effect on our operations~~subscriber, ~~financial condition,~~which ~~performance,~~generally ~~and~~includes ~~growth.~~a Ascommission weexpense ~~deploy, expand,~~ and ~~enhance our GSM~~/~~GPRS network, we may need to acquire additional spectrum~~ or ~~reallocate~~significant ~~spectrum~~handset ~~previously~~discount, ~~utilized~~is bya ~~our~~significant ~~TDMA~~factor ~~network~~ in ~~certain~~income ~~markets.~~and ~~Reallocation~~profitability ~~could~~for ~~result~~participants in ~~disruptions~~the ~~to,~~wireless orindustry. ~~decreased~~Continued ~~quality~~failure ~~of service~~ to ~~TDMA~~meet ~~customers in those markets, or may result in~~ our ~~TDMA customers roaming on another wireless~~ ~~service provider~~customers’s ~~system~~expectations ~~in that market, which~~ could increase our ~~roaming costs.~~operating ~~Although we plan to build out our GSM/GPRS network over virtually all of our TDMA footprint~~expenses, ~~the actual coverage area may vary in certain markets, which could~~ adversely affect ~~consumer demand for and satisfaction with~~ our ~~GSM/GPRS service.~~margins, ~~As we continue to build out~~ and ~~enhance~~reduce ~~our~~cash ~~GSM/GPRS network, we must,~~flow. ~~among other things, continue to:~~

•Our ~~lease,~~TDMA ~~acquire~~offerings orcould ~~otherwise~~become ~~obtain~~less ~~rights~~attractive, toresulting in a ~~large~~loss ~~number~~ of customers ~~cell~~ and ~~switch~~reduced ~~sites;~~profitability.

• We ~~obtain~~expect ~~zoning~~to ~~variances~~continue oroperating our TDMA network for the foreseeable future as customers migrate to GSM/GPRS technology, as we continue to have a large base of TDMA subscribers. Due to the overlay of our TDMA network with GSM technology and to encourage our customers to migrate to GSM service, we do not plan to upgrade our TDMA network with the same robust features that we will provide on our GSM networks. Furthermore, as we expand our GSM/GPRS/EDGE network and develop more compelling services, offers, and features for our GSM/GPRS/EDGE subscribers and other ~~local~~carriers offer ~~governmental~~advanced orservices ~~third~~and features on their network, our remaining TDMA customers may experience dissatisfaction with their service and available devices. In addition, as we introduce and market GSM service, we anticipate we will price GSM products and services at more attractive levels than TDMA products and services to encourage our customers to migrate to GSM/GPRS service. Even with such offers, we may experience higher levels of churn among our TDMA customers. We may have difficulty maintaining our TDMA network and our TDMA handsets as our suppliers shift resources to next-~~party~~generation technology ~~approvals~~development, decreasing their incentives to develop enhancements or ~~permits~~upgrades ~~for~~to ~~network~~their ~~construction;~~TDMA product lines because of decreased economies of scale.

• As ~~complete~~a result, the ~~radio~~cost ~~frequency~~structure ~~design,~~for ~~including~~our ~~cell~~TDMA ~~site~~offerings ~~design~~might increase, ~~frequency~~and ~~planning~~the ~~and~~attractiveness ~~network~~of ~~optimization~~our TDMA service or handset offerings is likely to be affected. This will continue to put upward pressure on churn among our large base of TDMA customers. Failure to retain our TDMA customers will affect our ability to achieve the proper balance between our two networks, which would reduce our profitability. If we lower prices for ~~each~~our TDMA products and services in an effort to optimize use of our two ~~markets;~~networks, ~~and~~we could adversely affect demand for our GSM services, which could adversely affect our profitability.

~~• improve, expand and maintain customer care, network management, billing and other financial and management systems.~~39

In addition, problems in vendor equipment availability, technical resources, system performance or system adequacy could delay the launch of new or expanded operations in new or existing markets or result in increased costs in all markets. We intend to rely on the services of various companies in order to build-out our GSM/GPRS network. However, we may not be able to obtain satisfactory contractors on economically attractive terms or ensure that our contractors or the systems they install will perform as we expect.

If we fail to successfully develop, implement, integrate, and install upgraded information technology systems to support our network expansion and technology migration strategy it could adversely impact our subscriber base, revenue growth, and cost control efforts.

Many of the customer care and infrastructure support systems for our GSM/GPRS subscribers are not fully implemented. We have encountered delays implementing and upgrading some of these systems. In connection with our implementation of an upgrade to our customer care support system, we experienced a significant multi-day disruption in our ability to activate, or access customer care databases for, our GSM/GPRS subscribers. Although we have improved performance of this system, our ability to activate and service GSM/GPRS subscribers on a timely basis, and the efficiency of our customer care operations, will continue to be affected until we are able to successfully conclude this upgrade. This will put pressure on our subscriber growth, particularly through our indirect channels. If we are unable to enhance these new systems in order to handle additional volume as our customer base grows, or we experience further implementation delays or disruptions, our service levels, operating efficiency, and our profitability could be adversely impacted. We are relying on the services of various companies in order to develop, install, and upgrade necessary support systems. However, the systems they install may not perform as we expect. We intend to migrate our TDMA customers from our existing support systems to these new systems once they are established. If we are unable to migrate our TDMA subscribers from our legacy systems, or if this migration is delayed, it could impair our ability to reduce our customer care and IT-related costs, which would adversely affect our profitability and cash flows. A delay in the full implementation of support systems for our GSM/GPRS subscribers could also have an adverse effect on our ability to add or service GSM/GPRS subscribers.

We may encounter difficulties implementing our GSM/GPRS deployment strategy, which could have a negative impact on subscriber growth and retention, and our financial results.

Our technology strategy involves operating our recently deployed GSM/GPRS network separately from our TDMA network. We may not be able to achieve or maintain the balanced loading on each network necessary to optimize capital spending, operational expenses, or service quality. Failure to achieve the proper balance could require us to invest additional capital in our TDMA network to avoid service degradation in certain markets. It could also lead to customer dissatisfaction with network quality on one or both

~~networks.~~ We ~~initially~~may ~~deployed~~encounter ~~our~~difficulties ~~GSM/GPRS~~implementing ~~equipment at~~ our ~~existing TDMA sites, to the extent possible. Due to the different operating characteristics of TDMA and~~ GSM/GPRS ~~equipment although we have deployed additional GSM~~/~~GPRS~~EDGE ~~sites within our TDMA footprint, the actual coverage area~~deployment ~~of our GSM/GPRS network will vary from our TDMA network~~strategy, ~~particularly~~which ~~where~~could we have ~~deployed~~ a ~~GSM/GPRS~~negative ~~system~~impact ~~utilizing~~on ~~1900~~subscriber ~~MHz~~growth ~~spectrum over a TDMA system~~and ~~using~~retention, ~~850~~and ~~MHz~~our ~~spectrum.~~financial ~~This may result in customer dissatisfaction~~results.

WeOur ~~may~~technology ~~have~~strategy ~~difficulty~~involves ~~upgrading~~operating our ~~TDMA~~GSM/GPRS/EDGE network separately ~~and~~from our TDMA ~~handsets~~network. ~~as our~~We ~~suppliers~~may ~~shift~~not ~~resources~~be able to ~~next-generation~~achieve ~~technology development,~~or ~~decreasing~~maintain ~~their~~the ~~incentives~~balanced toloading ~~develop~~on ~~enhancements~~each ornetwork ~~upgrades~~necessary to ~~their TDMA~~optimize ~~product~~capital ~~lines~~spending, ~~because~~operational ofexpenses, ~~decreased~~customer ~~economies~~care, ofor ~~scale~~service quality. AsFailure ato ~~result,~~achieve the ~~cost structure~~proper ~~for~~balance ~~our~~could ~~TDMA~~result ~~offerings~~in ~~might~~service degradation ~~increase,~~in orcertain ~~the~~markets. ~~attractiveness~~It ~~of our TDMA service offerings~~ could bealso ~~impaired,~~lead ~~resulting~~to incustomer dissatisfaction ~~increased~~with ~~churn~~network ofquality ~~TDMA customers,~~and ~~failure~~customer tocare ~~achieve~~levels ~~the~~for ~~proper~~TDMA ~~balance~~or GSM/GRPS ~~between~~subscribers ~~our~~which ~~two~~could ~~networks~~increase ~~and reduced profitability~~churn.

~~Handsets~~If ~~that~~we ~~will~~fail ~~operate~~to onsuccessfully ~~both~~develop, ~~our~~implement, ~~TDMA~~integrate, and ~~GSM/GPRS networks are more~~install ~~expensive~~upgraded ~~than~~information ~~TDMA~~technology ~~handsets~~systems ~~and~~necessary ~~may have operational limitations, which could impede our efforts~~ to ~~sell~~support ~~GSM/GPRS services and lead to increased churn. Our strategy assumes a portion of~~ our ~~customers will prefer the flexibility and~~ ~~broader~~technology ~~service~~migration ~~area~~strategy ~~offered by new dual mode TDMA/GSM/GPRS handsets, referred to as “GAIT” phones. Because GAIT phones are required by only a limited number of carriers that operate both TDMA~~ and ~~GSM/GPRS~~network ~~networks~~expansion, ~~they~~it ~~may~~could ~~not be~~adversely ~~produced~~impact inour ~~sufficient~~subscriber ~~quantities when needed~~base, ~~and~~revenue their limited use may be insufficient to achieve high economies of scale. These handsets are new products that may have operational limitations or sub-optimal features that may discourage customer use. If these handsets are not economical or attractive to customersgrowth, ~~we may experience increased churn, our costs could increase,~~ and ~~our profitability~~cost ~~could~~control ~~be reduced~~efforts.

We have encountered delays implementing and upgrading some customer care and infrastructure support systems for our GSM/GPRS and EDGE subscribers. In connection with our implementation of an upgrade to our customer care support system, we experienced a significant multi-day disruption in our ability to activate, or access customer care databases for, our GSM/GPRS and EDGE subscribers. If we experience additional disruptions in our ability to activate and service subscribers on our GSM/GPRS/EDGE network, or if we are unable to increase the capacity of our systems to respond to a rapid increase in the number of GSM/GPRS subscribers, our service levels, operating efficiency, and our profitability could be adversely impacted. We are relying on the services of various companies in order to develop, install, and upgrade necessary support systems. However, the systems they install may not perform as we expect. Additional disruptions in support systems for our GSM/GPRS/EDGE subscribers could have an adverse effect on our ability to add or service GSM/GPRS/EDGE subscribers.

We depend on a brand agreement with AT&T that can be terminated under certain circumstances.

To maintain our rights under the brand license agreement, we must comply with specified quality, privacy, customer care, graphics, and marketing standards in connection with our use of the AT&T brands. While we are using the AT&T brands, we must also pay AT&T a brand maintenance fee. Under certain circumstances, AT&T may terminate the brand license agreement in the event we materially breach the agreement or we experience a change of control. AT&T may also choose not to extend the agreement beyond the end of its term.

AT&T has notified us that it believes we are in violation of certain standards specified in the brand license agreement. We are taking steps to address AT&T’s concerns, and are in discussions with them concerning the validity of their claims. If we were to materially breach the agreement, and were unable to cure the breach, or are unable to reach agreement with AT&T, and as a result, AT&T terminated the brand license agreement, it could have a material adverse effect on our business and results of operations.

Our business and operations would be adversely affected if we fail to acquire adequate radio spectrum.

Our domestic business depends on the ability to use portions of the ~~radio~~ radio spectrum licensed by the FCC. WeIf ~~could~~we ~~fail~~were unable to obtain sufficient spectrum capacity in new and existing markets, whether through FCC auctions or other transactions, init ~~order~~could toseverely ~~meet~~limit ~~the~~our ~~expanded~~ability to ~~demands~~provide ~~for~~next-generation ~~our~~data ~~existing~~ services in critical markets, asand ~~well~~limit our asability to ~~enable~~meet ~~deployment~~the ofexpanded ~~next-generation~~ demands for our existing services. Such a failure could have a material adverse impact on the quality of ~~our~~ our services or our ability to roll out such future services in some markets, or could require that we curtail existing services in order to make ~~spectrum~~ spectrum available for our next-generation services. ~~We may acquire more spectrum~~ ~~through a combination of alternatives, including participation in spectrum~~ ~~auctions. As required by law, the FCC periodically conducts auctions for~~ licenses to use some parts of the radio spectrum. The decision to conduct auctions, and the determination of what spectrum frequencies will be made available for auction, are provided for by laws administered by the FCC. The FCC may not allocate spectrum sufficient to meet the demands of all those wishing to obtain licenses. Even if the FCC determines to conduct further auctions in the future, we may not be successful in those future auctions in obtaining the spectrum that we believe is necessary to implement our business and technology strategies. We may also seek to acquire radio spectrum through purchases and swaps with other spectrum licensees or otherwise, including by purchases of other licensees outright. However, we may not be able to acquire sufficient spectrum through these types of transactions, and we may not be able to complete any of these transactions on favorable terms.

The FCC may not allocate spectrum sufficient to meet the demands of all those wishing to obtain licenses. Even if the FCC determines to conduct further auctions in the future, we may not be successful in those future auctions in obtaining the spectrum that we believe is necessary to implement our business and technology strategies. We may also seek to acquire radio spectrum through purchases and swaps with other spectrum licensees or otherwise, including by purchases of other licensees outright. However, we may not be able to acquire sufficient spectrum through these types of transactions, and we may not be able to complete any of these transactions on favorable terms.

If the demand for wireless data services does not continue to grow, or if we fail to capitalize on such demand, it could have an adverse effect on our growth potential.

We have committed significant resources to develop and market wireless data services in anticipation of a growth in demand for those services. The continued growth of wireless data services is substantially dependent on the ability of others to develop new applications for wireless data devices and to develop and manufacture devices that support those wireless applications. These applications or devices may not be developed or developed in sufficient quantities to support the growth of wireless data services. These services may not be widely introduced and fully implemented at all or in a timely fashion. These services may not be successful when they are in place and customers may not purchase the services offered. Even if demand for wireless data continues to grow, consumer needs for wireless data services may be met by alternate technologies such as Wi-Fi, or other next-generation wireless technology that do not rely on FCC licensed spectrum. Data services may rely on new or unproven technology. We may not be able to successfully develop or obtain new technology to effectively and economically deliver these services. The lack of standardization across wireless data handsets may contribute to customer confusion which could slow acceptance of wireless data services or increase customer care costs. Any of these factors could adversely affect our ability to provide these services profitably. If these services are not successful or costs associated with implementation and completion of the rollout of these services materially exceed our current estimates, our financial condition and prospects could be materially adversely affected.

Our technology may not be competitive with other technologies or be compatible with next-generation technology.

There are three principal digital transmission technologies, none of ~~which~~ which is compatible with the others. We and other carriers selected TDMA ~~technology~~ technology for our second-generation network. We believe that this technology offers several advantages over other second-generation technologies. However, a number of other wireless service providers chose code division multiple access (CDMA) or GSM as their digital wireless technology. We have chosen a GSM platform to lower costs and to make available, among other things, enhanced data services using GPRS technology, and next-generation capabilities using enhanced data rates for global evolution (EDGE) and ultimately universal mobile telecommunications systems (UMTS) technologies. These technologies may not provide the advantages we expect and may increase the cost and complexity of complying with regulatory mandates, such as emergency 911 services. ~~Download~~ Data transmission speeds and coverage provided by our EDGE network may be impacted by signal strength, ~~end~~ end user location, and network loading.

Some other wireless providers have chosen a competing wideband technology as their next-generation technology. As we implement our plans for deployment of technology for next-generation capabilities, we will continue to incur substantial costs associated with maintaining our expanding networks. Also, these networks are not compatible, and only customers with phones that operate on more than one network will be able to use those phones on more than one network. There are risks inherent in the development of new next-generation equipment and we may face unforeseen costs, delays or problems that may have a material adverse effect on us.

42In many areas, we rely on roaming agreements with affiliates or other carriers to provide service to our customers outside our service area. Our business and operations could be adversely affected if we are unable to establish new relationships to expand our GSM/GPRS/EDGE service area or if our affiliates do not or cannot develop or expand their network in a manner consistent with ours.

To accelerate the build-out of wide scale coverage of the U.S. by a digital mobile wireless network operating on the technical standards we have adopted, we have entered into affiliation agreements with other entities that provide wireless services or hold spectrum licenses. Through roaming arrangements between these affiliates and us, our customers are able to obtain service in the affiliates’ territories, and the affiliates’ customers are able to obtain service in our territory. In all markets where these affiliates operate, we are at risk because we do not control the affiliates. As a result, we may not be able to compel these affiliates to participate in our technology migration strategy or to expand their coverage areas. Our ability to provide service on a nationwide level and to implement our next-generation strategy could be adversely affected if these affiliates are unable or unwilling to participate in the further development of our digital network, or if they cease to provide services comparable to those we offer on our networks.

In order to effectively compete with other carriers with a nationwide service area, we need to offer our customers nationwide GSM/GPRS/EDGE coverage. In many areas, we are dependent on roaming relationships with other

Incarriers ~~many~~to ~~areas,~~provide weour ~~rely~~customers onthat ~~roaming~~coverage. We ~~agreements~~intend ~~with~~to ~~affiliates~~establish ornew ~~other~~relationships ~~carriers~~ to ~~provide~~accelerate ~~service~~build-out toof GSM/GPRS/EDGE ~~our~~networks ~~customers~~ outside our ~~coverage~~service area., ~~Our~~and ~~business~~enter ~~and~~into new or ~~operations~~expanded ~~could~~roaming beagreements ~~adversely~~with ~~affected~~other ifcarriers. If we are unable to establish ~~new~~ such relationships, toor ~~expand~~if any of our affiliates, or other carriers with whom we have GSM/GPRS/EDGE ~~service~~roaming ~~area~~relationships orare ifunable to ~~our~~or ~~affiliates~~ do not or ~~cannot~~successfully develop or expand their ~~network~~systems in a manner consistent with ~~ours~~our network, our ability to service our customers and increase the quality and coverage area of our GSM/GPRS/EDGE network could be adversely affected. In addition, to the extent our affiliates or roaming partners that have developed GSM/GPRS do not deploy EDGE technology, our ability to expand our EDGE service area beyond our own network will be limited, which could adversely affect demand for the service.

To accelerate the build out of wide scale coverage of the U.S. by a digital mobile wireless network operating on the technical standards we have adopted, we have entered into affiliation agreements with other entities that provide wireless services or hold spectrum licenses. Through roaming arrangements between these affiliates and us, our customers are able to obtain service in the affiliates’ territories, and the affiliates’ customers are able to obtain service in our territory. In all markets where these affiliates operate, we are at risk because we do not control the affiliates. As a result, we may not be able to compel these affiliates to participate in our technology migration strategy or to expand their coverage areas. Our ability to provide service on a nationwide level and to implement our next-generation strategy could be adversely affected if these affiliates are unable or unwilling to participate in the further development of our digital network, or if they cease to provide services comparable to those we offer on our networks.

Our customers are not able to obtain GSM/GPRS service in many parts of the country, either because there is no GSM/GPRS network in that area, or because we do not have a GSM/GPRS roaming agreement with a service provider in that area. In order to effectively compete with carriers offering a larger service area, we need to expand our GSM/GPRS service area. We intend to establish new relationships to accelerate build-out of GSM/GPRS networks outside our coverage area, and enter into new or expanded roaming agreements with other carriers. If we are unable to establish such relationships, or if any of our affiliates, or other carriers with whom we have GSM/GPRS roaming relationships are unable to or do not successfully develop or expand their systems in a manner consistent with our network, our ability to service our customers and increase the quality and coverage area of our GSM/GPRS network could be adversely affected. In addition, to the extent our affiliates or roaming partners do not deploy EDGE, our ability to expand our EDGE service area beyond our own network will be limited, which could adversely affect demand for the service.

We rely on roaming arrangements with other carriers, which we may be unable to obtain or maintain in the future.

We may not continue to be able to obtain or maintain roaming ~~agreements~~ agreements with other wireless providers on terms that are acceptable to us. Our customers automatically can access another provider’s analog cellular or digital system only if the other provider allows our customers to roam on its network. We rely on agreements to provide roaming capability to our customers in many areas of the U.S. outside our service ~~coverage~~ area and to improve coverage within our network footprint. Some competitors may be able to obtain lower roaming rates than we do because they have larger call volumes or because of their affiliations with, or or ownership of, wireless providers, or may be able to reduce roaming ~~charges~~ charges by providing service principally over their own network. In addition, the quality of service that a wireless provider delivers during a roaming call may be inferior to the quality of service we or our affiliates provide, the price of a roaming call may not be competitive with prices of other wireless providers for such call, and our customers may not be able to use ~~any~~some of the advanced features, such as voicemail notification, that the ~~customer~~customers ~~enjoys~~ enjoy when making calls within our network. Finally, we may not be able to continue to obtain ~~roaming~~ roaming agreements for our GSM/GPRS, EDGE, and other next-generation products ~~and~~ and services with pricing or coverage we desire.

IfTermination ~~the~~or ~~demand~~impairment ~~for~~of ~~wireless~~our ~~data~~relationship ~~services~~with ~~does~~a ~~not~~small ~~grow,~~number orof ~~if we fail to~~key ~~capitalize~~suppliers onor ~~such~~vendors ~~demand, it~~ could ~~have~~adversely anaffect ~~adverse~~our ~~effect~~revenues onand ~~our~~results ~~growth~~of ~~potential~~operations.

We have ~~committed~~developed ~~significant~~relationships ~~resources~~with toa ~~develop~~small ~~and~~number ~~market~~of ~~wireless data~~key ~~services~~vendors, including inNokia ~~anticipation~~Mobile ofPhones, aInc., ~~growth~~Sony inEricsson ~~demand~~Mobile ~~for~~Communications, Siemens ~~those~~AG, ~~services.~~LG ~~That demand~~InfoComm ~~may~~U.S.A., ~~not materialize~~Inc., ~~Even~~Motorola, ~~if such demand does develop~~Inc., ~~our~~NEC ~~ability to~~Corporation, ~~deploy~~ and ~~deliver~~Samsung ~~wireless~~Electronics ~~data~~Co., ~~services~~Ltd. ~~relies,~~for inour ~~many~~supply ~~instances,~~of onwireless ~~new~~handsets and ~~unproven~~devices; ~~technology.~~Nortel ~~Existing~~Networks, ~~technology~~Inc., ~~including~~Telefonaktiebolaget ~~GPRS~~LM ~~and EDGE~~Ericsson, ~~may not~~Nokia ~~perform~~Networks, asInc., ~~expected~~ and ~~may~~Hewlett bePackard ~~more~~Company ~~capital~~for ~~intensive~~our ~~than~~supply ~~planned. We may not~~of betelecommunications ~~able~~infrastructure toequipment; ~~successfully~~Convergys ~~develop or obtain new technology to effectively~~ and ~~economically~~ ~~deliver~~StarTek, ~~these services~~Inc. ~~The~~for ~~success~~billing ofor ~~wireless~~customer ~~data~~care services is; ~~substantially~~Bechtel ~~dependent~~Corporation onfor ~~the~~build-out ~~ability~~ of ~~others~~our tonetworks; ~~develop~~and ~~applications~~Siebel ~~for~~Systems, ~~wireless~~Inc., ~~data~~Sun ~~devices~~Microsystems, ~~and~~Inc., ~~to develop~~ and ~~manufacture~~Cisco ~~devices~~Systems, ~~that~~Inc. ~~support wireless~~for ~~applications~~information systems. ~~These~~We ~~applications~~do ~~or devices may~~ not behave ~~developed~~operational or ~~developed~~ infinancial ~~sufficient~~control ~~quantities~~over toour ~~support the deployment of wireless data~~key ~~services.~~suppliers ~~These~~and ~~services~~have ~~may~~limited ~~not~~influence bewith ~~widely~~respect ~~introduced~~to ~~and~~the ~~fully~~manner ~~implemented~~in atwhich ~~all~~these orkey insuppliers aconduct ~~timely~~their ~~fashion~~businesses. ~~These~~We ~~services~~rely ~~may~~on ~~not be successful when they are~~Cingular inWireless ~~place,~~LLC ~~and customers may not purchase the services offered. Consumer needs~~ for ~~wireless~~a ~~data~~significant ~~services~~percentage ~~may~~of beour ~~met~~roaming ~~by technologies such as 802~~coverage.~~11,~~ ~~known as~~If ~~Wi-Fi,~~these ~~which~~companies ~~does not rely on FCC licensed spectrum. The lack of~~were ~~standardization~~unable ~~across wireless data handsets may contribute~~ to ~~customer confusion~~honor, ~~which could slow acceptance of wireless data services,~~ or ~~increase customer~~otherwise ~~care~~failed ~~costs.~~to ~~Either~~honor ~~could~~their ~~adversely~~obligations ~~affect our ability~~ to ~~provide these~~ ~~services~~us, ~~profitably.~~or Ifterminated ~~these~~their ~~services~~relationship ~~are~~with ~~not~~us, ~~successful or costs associated~~we ~~with~~could ~~implementation~~experience ~~and~~disruptions ~~completion~~ of ~~the~~our ~~rollout~~business ofand ~~these~~adverse ~~services~~effects ~~materially exceed~~on our revenues ~~current estimates, our financial condition~~ and ~~prospects~~results ~~could~~of ~~be materially adversely affected~~operations.

43Market prices for wireless services may decline in the future.

~~Table~~ We anticipate that market prices for mobile wireless voice and data services generally will continue to decline. We expect significant competition among wireless providers to continue to drive service and equipment prices lower. We also expect that there will be increases in advertising and promotional spending, along with increased demands on access to distribution channels. All of ~~Contents~~this may lead to greater choices for customers, possible consumer confusion, and increasing movement of customers between competitors, which we refer to as “churn.” If market prices continue to decline, it could adversely affect our ability to grow revenue, which would have a material adverse effect on our financial condition and results of operations.

Significant changes in wireless industry technology or demand for wireless service could materially adversely affect us.

The wireless communications industry is experiencing significant technological change. This change includes:

•

evolving industry standards;

~~• ongoing improvements in the capacity and quality of digital technology;~~42

•Table shorterof development cycles for new products, enhancements and changes in end-user needs and preferences;Contents

• ongoing improvements in the capacity and quality of digital technology; • shorter development cycles for new products, enhancements and changes in end-user needs and preferences; • development of data and ~~broadband~~high bandwidth network capabilities; • migration to next-generation services; and • expanded availability and functionality of Wi-Fi services and other new wireless technologies.

• migration to next-generation services; and

• expanded availability and functionality of Wi-Fi services and other new wireless technologies.

The pace and extent of customer demand may not continue to increase, and airtime and monthly recurring charges may continue to decline. As a result, the future prospects of the industry and of our company and the success of our competitive services remain uncertain. Also, alternative technologies may develop that may provide wireless communications service or alternative service superior to that available from us, or that enable voice communication over unregulated frequencies. Such developments could have a material adverse affect on us.

We may not be able to fund future capital requirements.

Our strategy and business plan will continue to require capital investment, which we may not be able to obtain on favorable terms or at all. If we ~~failed~~fail to obtain capital necessary to fund our business plan, we would have to delay, change or abandon those plans. We ~~currently estimate that our capital expenditures will total approximately $3.1 billion in 2003. We also~~ expect to incur significant ~~additional~~ capital expenditures in 2004 and future years. The actual amount of the funds required to finance our network build -out and other capital expenditures in future periods may vary materially from management’s estimate. Our ~~contractual~~ purchase commitments for network equipment totaled ~~and~~$501 million ~~handsets~~ as of ~~September~~June 30, 2004. In July 2004, we were ~~2003~~released ~~totaled~~from $~~1.0~~360 ~~billion~~million of these commitments. In addition, we anticipate that we will enter into material purchase commitments in the future. We also may require substantial additional capital for, among other uses, acquisitions of providers of wireless services, spectrum license or system acquisitions, system development, and network capacity expansion. Our ability to obtain such financing could be affected if we did not consummate our pending transaction with Cingular. If we were unable to finance our capital commitments either through cash from operations or external financing, it would have a material adverse effect on our financial condition and results of operations.

The actual amount of funds necessary to implement our strategy and business plan may materially exceed current estimates, which could have a material adverse effect on our financial condition and results of operations.

The actual amount of funds necessary to implement our strategy and business plan may materially exceed our current estimates in the event of various factors including: departures from our current business plan, unforeseen delays, cost overruns, unanticipated expenses, failure to consummate our pending transaction with Cingular, regulatory developments, engineering design changes, and technological and other risks. If actual costs do materially exceed our current estimates for these or other reasons or we are unable to control or reduce costs, this could have a material adverse effect on our financial condition and results of operations.

Our relationship with NTT DoCoMo, Inc. contains features that could adversely affect our financial condition or the way in which our business is conducted.

DoCoMo, a leading Japanese wireless communications company, is our largest shareholder, and the agreements relating to DoCoMo’s investment contain requirements and contingencies that could materially adversely affect our financial condition and technology strategies. Pursuant to the Investor Agreement, as amended, between AT&T Wireless Services, AT&T Corp. and DoCoMo, DoCoMo may require us to repurchase its investment at DoCoMo’s original purchase price, plus interest, if under certain circumstances, and subject to the exceptions identified in the Investor Agreement:

• We fail to launch service prior to December 31, 2004 based on W-CDMA technology in certain areas of Dallas, San Diego, San Francisco and Seattle, or permitted alternate cities; or

• Our Board of Directors approves changes in its use of W-CDMA technology as our primary standard for delivery of services based on third-generation technology prior to December 31, 2004.

Two other provisions of the Investor Agreement limit our ability to take certain actions without DoCoMo’s consent. We need to obtain DoCoMo’s consent to change the scope of our business such that our current businesses, including businesses that are part of our business plan and natural evolutions of those businesses, taken as a whole no longer constitute our primary business, or to allow another wireless operator to acquire more than 15% but less than 50% of our equity in connection with the formation of a strategic alliance, with certain exceptions specified in the Investor Agreement. These limitations could prevent us from taking advantage of some business opportunities or relationships that we might otherwise pursue.

Potential acquisitions may require us to incur substantial additional debt and integrate new technologies, operations and services, which may be costly and time-consuming.

An element of our strategy is to expand our network coverage to approximately 75% of the U.S. population, which we intended to accomplish in part through the acquisition of TeleCorp PCS and which we may continue to pursue through other acquisitions of licenses, systems and wireless providers. The acquisition of TeleCorp PCS resulted in our assumption of substantial additional indebtedness. Further, other acquisitions may cause us to incur substantial additional indebtedness to finance such acquisitions or to assume indebtedness of the entities that are acquired. In addition, we may encounter difficulties in integrating those acquired operations into our own operations, including different technologies, systems, services or service offerings. These actions could prove costly or time-consuming or divert our management’s attention from other business matters.

Consolidation in the wireless communications industry may adversely affect us.

The wireless communications industry has experienced significant consolidation and this consolidation may continue. The mergers or joint ventures of Bell Atlantic Corporation/GTE Corporation/Vodafone AirTouch, now called Verizon, SBC/BellSouth, now called Cingular, and Deutsche Telekom/ VoiceStream Wireless, now called T-Mobile, have created large, well-capitalized competitors with substantial financial, technical, marketing and other resources to respond to our offerings. As a result of these combinations, these competitors have enhanced their ability to offer larger service areas, provide enhanced quality, quickly and economically introduce new rate plans, obtain more favorable roaming rates, and respond to consumer needs.

We have had in the past, and we may have in the future, discussions with other companies in the wireless communications industry relating to various possible transactions or business combinations. While there is no assurance that any such discussions will result in any transaction, if we were to engage in such a transaction, it could have a significant impact on our business, financial condition and results of operations. In addition, if the wireless communications industry continues to consolidate and we do not participate in that consolidation, the consolidation may create even stronger competitors and adversely affect us and our competitive position.

Termination or impairment of our relationship with a small number of key suppliers or vendors could adversely affect our revenues and results of operations.

We have developed relationships with a small number of key vendors, including Nokia Mobile Phones, Inc., Sony Ericsson Mobile Communications, Siemens AG, Motorola, Inc., Sierra Wireless, Research in Motion (RIM) and Matsushita Electric Industrial Co., Ltd. (Panasonic) for our supply of wireless handsets and devices; Nortel Networks, Inc., Telefonaktiebolaget LM Ericsson, Nokia Networks, Inc. and Hewlett Packard Company for our supply of telecommunications infrastructure equipment; Convergys Information Management Group for our billing services; Bechtel Corporation for build out of our networks; and Siebel Systems, Inc. for information systems. We do not have operational or financial control over our key suppliers and have limited influence with respect to the manner in which these key suppliers conduct their businesses. If these key suppliers were unable to honor, or otherwise fail to honor their obligations to us, we could experience disruptions of our business and adverse effects on our revenues and results of operations.

Political or economic changes, or other factors, in a specific country or region could harm our operations and financial condition.

We ~~anticipate~~conduct ~~conducting~~some ~~significant~~ customer care operations outside of the United States. International roaming is becoming a larger part of our ~~services~~ services revenue. Additionally, we hold equity interests in several foreign entities. Accordingly, our future results could be materially~~, adversely~~ adversely affected by a variety of uncontrollable and changing factors including, among others, foreign currency exchange rates; political or social ~~unrest~~ unrest or economic instability in a specific country or region; difficulties in staffing and managing international operations; and increased difficulty in identifying and preventing consumer fraud. Any or all of these factors could have a material adverse impact on our costs, expenses, and financial condition.

4543

identifying and preventing consumer fraud. Any or all of these factors could have a material adverse impact on our costs, expenses, and financial condition.

We may substantially increase our debt in the future, which could subject us to various restrictions and higher interest costs and decrease our cash flow and earnings.

We may substantially increase our debt in the future, which could ~~subject~~ subject us to various restrictions and higher interest costs and decrease our cash flow and earnings. We may also encounter difficulties in obtaining all the financing we need to fund our business and growth strategy on desirable terms. We may require substantial additional financing to fund capital expenditures, license purchases and costs and expenses in connection with ~~funding~~ our operations, domestic and international investments, and growth strategy. We currently rely on our committed credit ~~facilities~~facility and receivables securitization program to meet any additional financing needs. ~~We are exploring and evaluating the~~ ~~relative advantages and disadvantages of various funding mechanisms. Other~~ ~~funding mechanisms that still may be considered include other forms of public~~ and private debt facilities. The decision on debt composition is dependent on, among other things, our business and financial plans and the market conditions at the time of financing. The agreements governing this indebtedness may contain financial and other covenants that could impair our flexibility and restrict our ability to pursue growth opportunities. We may also need to utilize other funding sources, including issuance of public equity or debt securities, or issuance of commercial paper.

Our operating results, including our profit or loss, margins, and cash flow generation, may fluctuate on a quarterly basis, and may not be representative of our results for the full year.

The wireless industry, including our company, has experienced a trend of generating a significantly higher number of customer additions in the fourth quarter of each year as compared to the other three fiscal quarters. A number of factors contribute to this trend, including the increasing use of retail distribution, which is 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. Strong fourth quarter results for customer additions may not continue for the wireless industry or for us. The number of our customer additions in the fourth quarter could decline for a variety of reasons, including our inability to match or beat pricing plans offered by competitors, failure to adequately promote our products, services and pricing plans, failure to have an adequate supply or selection of handsets, or lower demand for wireless services. If in any year fourth quarter results fail to significantly improve upon customer additions from the year’s previous quarters, this could adversely impact the growth of our subscriber base, which could limit revenue growth in subsequent periods.

The revenues we generate from subscribers roaming on our network, as ~~well~~ well as the expenses we incur related to our subscribers roaming on other carriers’ networks, fluctuate on a quarterly basis, with increases typically occurring during the summer months due to an increase in travel during these periods. These fluctuations may result in higher or lower roaming revenues and expenses in any given quarter, thereby increasing or decreasing our profit or loss for that quarter. Our capital expenditures vary due to the timing of network expansion, network upgrades and market launches. The timing of our capital expenditures will impact the cash flow we generate in any given quarter, and may not be representative of our cash flow for the full year. Our churn levels may fluctuate from quarter to quarter depending on the number of expiring contracts, or other factors. Our OIBDA and OIBDA margins could fluctuate from ~~quarter~~ quarter to quarter, depending on marketing expenses, significant fluctuations in in the number of new subscribers, and our customer retention efforts.

Equipment failure, power outages, natural disasters, terrorist acts, or other breaches of network or IT security may adversely affect our business.

A major equipment failure, power outage, natural disaster, terrorist act, or other breach of network or IT security that affects our mobile telephone switching offices, information systems, microwave links, third-party owned local and long distance networks on which we rely, our cell sites or other equipment or the networks of other providers on which our subscribers roam could have a material adverse effect on our operations. While we have insurance coverage for some of these events, our inability to operate our wireless system or access our ~~information~~ information systems even for a limited time period, or the loss of subscriber data, may result in a loss of subscribers or impair our ability to serve our subscribers or attract new subscribers, which would have a material ~~adverse~~ adverse effect on our business, results of operations and financial condition.

Our future financial results could be adversely impacted by asset impairments or other charges.

Effective January 1, 2002, we adopted Statement of Financial ~~Accounting~~ Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” As a result, we are required to test both acquired goodwill and other indefinite-lived intangible assets, consisting of our U.S. licensing costs, for impairment on an annual basis based upon a fair value approach, rather than amortizing them over time. We have chosen to perform our annual impairment reviews of both goodwill and U.S. licensing costs during the third quarter of each fiscal year. We are also ~~required~~ required to test goodwill for impairment between annual tests if an event ~~occurs~~ occurs or circumstances change that would more likely than not ~~reduce our~~ ~~enterprise fair value below its book value. These events or circumstances could~~ ~~include a significant change in the business climate, including a significant~~ sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If our market value continues to be less than our book value for an extended period of time, we could be required to record an impairment charge. Additionally, our U.S. licensing costs must be tested between annual tests if events or changes in circumstances indicate that the asset might be impaired. We may also be required to record an earnings charge, or incur unanticipated expenses, if due to a change in strategy or other reason we determine that the value of other assets has been impaired or we terminate a contractual commitment. The amount of any such annual or interim impairment or other charge could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken.

reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors. If our market value is less than our book value for an extended period of time, we could be required to record an impairment charge. Additionally, our U.S. licensing costs must be tested between annual tests if events or changes in circumstances indicate that the asset might be impaired. We may also be required to record an earnings charge or incur unanticipated expenses if, due to a change in strategy or other reason, we determine that the value of other assets has been impaired or we terminate a contractual commitment. The amount of any such annual or interim impairment or other charge could be significant and could have a material adverse effect on our reported financial results for the period in which the charge is taken.

Media and other reports have suggested radio frequency emissions may be linked to various health concerns and interfere with various medical devices, and we may be subject to potential litigation relating to these health concerns.

Media and other reports have linked radio frequency emissions from wireless handsets to various health concerns, including cancer, and to interference with various electronic medical devices, including hearing aids and pacemakers. Research and studies are ongoing. Whether or not such research or studies conclude there is a link between radio frequency emissions and health, these concerns over radio frequency emissions may discourage the use of wireless handsets or service or expose us to potential litigation, which could have a material adverse effect on our results of operations. Several class-action lawsuits have been filed against us, several other wireless service providers and several wireless phone manufacturers asserting products liability, breach of warranty and other claims relating to radio frequency transmissions to and from wireless phones. The complaints seek damages for personal injuries and the costs of headsets for wireless phone users as well as injunctive relief.

Our operations are subject to government regulation that could have adverse effects on our business.

The licensing, construction, operation, sale, resale, and ~~interconnection~~ interconnection arrangements of wireless communications systems are regulated to varying degrees by the FCC, and, depending on the jurisdiction, by state and local regulatory agencies. These regulations include, among other things, required service features and capabilities, such as ~~number~~wireless ~~portability~~LNP or emergency 911 service. We have entered into consent decrees with the FCC relating to our implementation of emergency 911 services for our TDMA and GSM~~/GPRS~~ networks. In addition, the FCC, together with the U.S. Federal Aviation Administration, regulates tower marking and lighting. If we are unable to comply with any of ~~these~~ these agencies’ rules or consent decrees, we could be subject to forfeitures or other enforcement action that could have an adverse effect on our business. Further, any of these agencies having jurisdiction over our business could adopt regulations or take other actions that could require us to make unanticipated capital expenditures, increase our costs or could otherwise adversely affect our business. Our ability to comply with these regulations may depend on third parties if the regulations require new features to be built into our infrastructure.

FCC licenses to provide wireless services or personal communications services are subject to renewal and revocation. There may be competition for our licenses upon their expiration and it is possible that the FCC will not renew them. FCC rules require all wireless and personal communications services licensees to meet specified build-out requirements. We may not be able to meet these requirements in each market. Failure to comply with these requirements in a given license area could result in revocation or forfeiture of our license for that license area or the imposition of fines on us by the FCC.

We are required to comply with the internal control attestation requirements mandated by the Sarbanes-Oxley Act of 2002. We have committed substantial resources to support development of the processes necessary to support attestation, and expect we will continue to devote substantial resources to the task. These efforts may not achieve the desired result and may interfere with our ability to achieve other business objectives.

We may be subject to potential litigation relating to the use of wireless phones while driving.

Some studies have indicated that some aspects of using wireless phones while driving may impair drivers’ attention in some circumstances, making accidents more likely. These concerns could lead to potential litigation alleging accidents, deaths or serious bodily injuries, or to new restrictions or regulations on wireless phone use, any of which also could have material adverse effects on our results of operations.

4745

State and local legislation restricting or prohibiting wireless phone use while driving could cause subscriber usage to decline.

~~Some~~Numerous state and local legislative bodies have proposed ~~legislation~~ legislation restricting or prohibiting the use of wireless phones while driving motor vehicles. Similar laws have been enacted in other countries. On June 28, 2001, New York State enacted a law prohibiting the use of handheld wireless phones while driving motor vehicles other than through the use of hands-free equipment. Since then, New Jersey and the District of Columbia have enacted similar laws. To date, a small number of communities in the U.S. have also passed restrictive local ordinances. These laws, or, if passed, other laws prohibiting or restricting the use of wireless phones while driving, could have the effect of reducing subscriber usage, which could cause a material adverse effect on ~~our~~ our results of operations.

The historical financial information of AT&T Wireless Group may not be representative of our results as an independent entity and, therefore, may not be reliable as an indicator of our historical or future results.

The historical financial information of AT&T Wireless Group may not reflect what our results of operations, financial position and cash flows would have been had we been an independent entity during the periods prior to the split-off. This is because the financial information reflects allocations for services provided to AT&T Wireless Group by AT&T, and these allocations may not reflect the costs we incur for similar or incremental services as an independent entity.

We will generally be responsible for tax liability if the split-off is taxable.

Under the separation and distribution agreement between us and AT&T, subject to limited exceptions, we will be responsible for any tax liability and any related liability that results from the split-off failing to qualify as a tax-free transaction. If the split-off failed to qualify as a tax-free transaction, this liability would have a material adverse effect on us.

We no longer receive tax sharing payments from AT&T since we ceased to be a member of the AT&T consolidated tax return group, and we may incur other tax liabilities as a result of the split-off and pre-split-off transactions.

As a result of the split-off, we ceased to be a member of the ~~consolidated~~ consolidated federal income tax return group of which AT&T is the common parent. Consequently, taxable income and losses, and our other tax attributes in post-split-off taxable periods can generally no longer offset taxable income or losses and other tax attributes of the AT&T consolidated tax return group. To the extent we have tax losses in post-split-off taxable periods, we generally are not entitled to receive current tax sharing payments with respect to those losses (other than payments attributable to our 2001 and 2002 net operating loss carrybacks to pre -split-off periods pursuant to certain agreements with AT&T). Instead, except where those losses can be carried back, we would benefit from those losses only if and when we generated sufficient taxable income in in future years to utilize those tax losses on a stand-alone basis. In addition, there may be tax costs associated with the split-off that result from our ceasing to be a member of the AT&T consolidated tax return group, as well as from pre-split-off transactions. If incurred, these costs could be material to our results.

~~Various~~Our ~~factors~~relationship ~~may~~with ~~interfere~~DoCoMo ~~with~~contains ~~our~~features ~~ability~~that tocould ~~engage~~adversely affect the way in ~~desirable~~which ~~strategic transactions~~our ~~and~~business ~~equity~~is ~~issuances~~conducted.

WeDoCoMo, ~~may~~a beleading ~~prevented~~Japanese ~~from~~wireless ~~engaging~~communications incompany, ~~some~~is ~~desirable strategic~~our ~~transactions.~~largest ~~In addition~~shareholder, and the ~~separation~~agreements relating to DoCoMo’s investment contain requirements and ~~distribution~~contingencies ~~agreement~~that ~~between~~could materially adversely ~~AT&T~~affect our financial condition and ustechnology ~~prohibits~~strategies. usThe Investor Agreement, ~~for~~as aamended, ~~period~~between ofAT&T ~~30 months~~Wireless ~~following~~Services, ~~the~~AT&T ~~split-off~~and DoCoMo, ~~from~~DoCoMo ~~entering~~limits ~~into~~our ~~particular~~ability ~~transactions~~to ~~that~~take ~~could~~certain ~~render~~actions ~~the~~without ~~split-off~~DoCoMo’s ~~taxable~~consent. ~~This~~We ~~may~~need ~~discourage,~~to ~~delay~~obtain orDoCoMo’s ~~prevent~~consent ato ~~merger,~~ change ofthe ~~control,~~scope orof our ~~other~~business ~~strategic~~such orthat ~~capital~~our ~~raising~~current ~~transactions~~businesses, ~~involving~~including ~~our~~businesses ~~issuance~~that ofare ~~equity.~~part ~~Provisions~~ of our ~~amended~~business plan and ~~restated~~natural ~~certificate~~evolutions of ~~incorporation~~those ~~and by-laws~~businesses, taken ~~rights~~as ~~plan~~a whole no longer constitute our primary business, ~~applicable~~or ~~law~~to ~~and~~allow another ~~the~~wireless ~~DoCoMo~~operator ~~agreements~~to ~~may~~acquire ~~also~~more ~~have~~than 15 percent but less than 50 percent of our equity in connection with the ~~effect~~formation of ~~discouraging~~a strategic alliance, ~~delaying~~with orcertain exceptions ~~preventing~~specified ~~change~~in the Investor Agreement. These limitations could prevent us from taking advantage of ~~control~~some business opportunities or ~~transactions~~relationships that ~~our~~we ~~shareholders~~might ~~find~~otherwise ~~desirable~~pursue.

WeThe ~~may~~value ~~lose~~to ~~rights~~us ~~under~~of ~~agreements~~our ~~with~~right to use the AT&T ~~under~~brand ~~certain~~could ~~circumstances~~be adversely impacted by AT&T or others.

~~Some~~Our oflicense ~~the~~from ~~agreements that we have entered into with~~ AT&T inof ~~connection with~~ the ~~split-off,~~AT&T ~~including the~~ brand ~~license~~grants ~~agreement,~~us ~~master carrier~~limited ~~agreement~~exclusivity. ~~and~~Our ~~other~~ability ~~commercial~~to ~~agreements,~~control ~~contain~~who ~~provisions~~is ~~that~~licensed ~~give~~to ~~one party~~use ~~rights in~~ the ~~event~~AT&T ofbrand is ~~a change of control of the other party~~limited. ~~These provisions~~We may ~~deter~~not abe ~~change~~able ofto ~~control.~~prevent InAT&T ~~the~~from ~~event~~licensing ofthe ~~a change of control,~~brand ~~the~~for ~~exercise~~uses ofthat ~~these~~we ~~rights~~feel could ~~have~~adversely aimpact ~~material~~the ~~adverse~~value ~~effect~~of onthe brand to us. ~~To maintain~~The ~~our~~value ~~rights~~of ~~under~~ the brand ~~license~~could ~~agreement,~~be weadversely ~~must~~impacted ~~comply~~by ~~with specified~~actions ~~quality, privacy, customer care, graphics and marketing standards in connection with our use~~ of ~~these~~ AT&T ~~brands. While we are using the AT&T brands~~, weor ~~must~~any ~~also pay AT&T a brand maintenance fee. Under certain circumstances~~licensee, ~~AT&T~~or ~~may terminate~~ the ~~brand~~public ~~license~~perception ~~agreement~~of incompanies ~~the~~using ~~event we~~the ~~materially~~brand ~~breach the agreement~~ or weif ~~experience~~it ais ~~change~~no oflonger ~~control.~~used ~~AT&T may~~by ~~also choose not to extend the agreement beyond the end of its term.~~

4846

~~The~~companies ~~value~~other tothan us ~~of our right to use the AT&T brand could be adversely impacted by AT&T Corp~~. ~~or others.~~

Our license from AT&T Corp. of the AT&T brand grants us limited exclusivity. Our ability to control who is licensed to use the AT&T brand is limited. We may not be able to prevent AT&T Corp. from licensing the brand for uses that we feel could adversely impact the value of the brand to us. The value of the brand could be adversely impacted by actions of AT&T Corp, or any licensee, or the public perception of companies using the brand or if it is no longer used by companies other than us.

FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our relationship with our former parent, AT&T, following our separation from AT&T in July 2001, financial condition, results of operations, cash flows, financing plans, business strategies, operating efficiencies or synergies, capital and other expenditures, network build-out and upgrade, competitive positions, availability of capital, growth opportunities for existing and new products and services, our acquisition and growth strategy, benefits from new technologies, availability and deployment of new technologies, plans and objectives of management, and other matters.

Statements in this document that are not historical facts are hereby identified as forward-looking statements. These forward-looking statements, including, without limitation, those relating to the future business prospects, revenues, working capital, liquidity, capital needs, network build-out, interest costs and income, in each case, relating to us, wherever they occur in this document, are necessarily estimates reflecting the best judgment of senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

• Uncertainty concerning the effects of our pending transaction with Cingular; • The effects of vigorous competition in the markets in which we operate and competition for more valuable customers, which may decrease prices charged, increase churn, and change the customer mix, profitability, and average revenue per user; • Uncertainty concerning the growth rate for the wireless industry in general; • The risks associated with the implementation of our GSM/GPRS/EDGE network and our technology migration strategy, including risks relating to the implementation and operations of new systems and technologies, customer satisfaction with quality and coverage, substantial required expenditures and potential unanticipated costs, our reliance on roaming agreements with third parties, uncertainties regarding the adequacy of suppliers on whom we must rely to provide both network and consumer equipment, and consumer acceptance of the products and services to be offered; • Uncertainty about the level of consumer demand for our GSM/GPRS or EDGE products and services, including the possibility of consumer dissatisfaction which could result from unfamiliarity with new technology, quality and coverage, and different service footprint, coverage areas, and levels of customer care; • The ability to enter into and maintain agreements with other carriers to provide services throughout the United States and the cost of entering new markets necessary to provide these services; • Our ability to effectively develop and implement new services, offers, and business models to profitably serve that segment of the population not currently using wireless services and the possible impact of those services and offers on our business; • The risk of increased churn and adverse impacts on our ability to grow our subscriber base resulting from introduction or popularity of new products and services by our competitors, inability to match competitor quality, coverage, features, and service packages, the impact of FCC regulations mandating number portability for wireless phones, or customer dissatisfaction with our products and services; • The ongoing global and U.S. trend towards consolidation in the telecommunications industry, which may have the effect of making our competitors larger and better financed and give these competitors more extensive resources, improved buying power, and greater geographic reach, allowing them to compete more effectively;

~~• Uncertainty concerning the growth rate for the wireless industry in general;~~47

• Uncertainty concerning the impact of wireless number portability;

• The risks associated with the implementation of our GSM/GPRS network and our technology migration strategy, including risks relating to the implementation and operations of new systems and technologies, customer satisfaction with quality and coverage, substantial required expenditures and potential unanticipated costs, the need to enter into roaming agreements with third parties, uncertainties regarding the adequacy of suppliers on whom we must rely to provide both network and consumer equipment, and consumer acceptance of the products and services to be offered;

• Uncertainty about the level of consumer demand for our GSM/GPRS products and services, including the possibility of consumer dissatisfaction which could result from unfamiliarity with new technology, quality and coverage, and different footprint, service areas, and levels of customer care;

• The ability to enter into agreements to provide services throughout the United States and the cost of entering new markets necessary to provide these services;

• Our ability to effectively develop and implement new services, offers, and business models to profitably serve that segment of the population not currently using wireless services and the possible impact of those services and offers on our business;

• The risk of increased churn and adverse impacts on our ability to grow our subscriber base resulting from introduction or popularity of new products and services by our competitors, inability to match competitor quality, coverage, features, and service packages, the impact of FCC regulations mandating number portability for wireless phones, or customer dissatisfaction with our products and services;

• The ongoing global and U.S. trend towards consolidation in the telecommunications industry, which may have the effect of making our competitors larger and better financed and give these competitors more extensive resources, improved buying power, and greater geographic reach, allowing them to compete more effectively;

• The impact of oversupply of capacity resulting from excessive deployment of network capacity in the markets we serve;

• The risks and costs associated with the need to acquire additional spectrum to expand or enhance current and future services;

• The requirements imposed on us or latitude allowed to competitors by the FCC or state regulatory commissions under the Telecommunications Act of 1996 or other applicable laws and regulations;

• The impact of oversupply of capacity resulting from excessive deployment of network capacity in the markets we serve; • The risks and costs associated with the need to acquire additional spectrum to expand or enhance current and future services; • The requirements imposed on us or latitude allowed to competitors by the FCC or state regulatory commissions under the Telecommunications Act of 1996 or other applicable laws and regulations; • The ability to establish a significant market presence in new geographic and service markets; • Our ability to monetize our nonstrategic assets, including our nonconsolidated investments in foreign entities and excess spectrum; • The availability and cost of capital and the consequences of increased leverage; • The impact of any unusual items resulting from ongoing evaluations of our business strategies; • The potential impact of DoCoMo’s investment in us, including provisions of the agreements that restrict our future operations; • The risks and uncertainties associated with the acquisition and integration of businesses and operations; • The results of litigation filed or to be filed against us, or of some types of litigation filed or to be filed against AT&T for which we have agreed to assume liability under the split-off agreements with AT&T; • Our ability to develop cost-effective distribution channels; • Risks and uncertainties concerning our ability to successfully implement Project Pinnacle; • The risk of insolvency of vendors, customers, and others with whom we do business; • The risk of equipment failure, natural disasters, terrorist acts, or other breaches of network or IT security; • The additional risks and uncertainties not presently known to us or that we currently deem immaterial; and • Those factors discussed under the heading “Additional Factors That May Affect Our Business, Future Operating Results, and Financial Condition.”

• Our ability to monetize our non-strategic assets, including our non-consolidated investments in foreign entities and excess spectrum;

• The availability and cost of capital and the consequences of increased leverage;

• The impact of any unusual items resulting from ongoing evaluations of our business strategies;

• The potential impact of NTT DoCoMo’s investment in us, including provisions of the agreements that restrict our future operations, and provisions that may require the repurchase of NTT DoCoMo’s investment if we fail to meet specified conditions, under certain circumstances, and the cost of complying with our technology commitment;

• The risks and uncertainties associated with the acquisition and integration of businesses and operations;

• The results of litigation filed or to be filed against us, or of some types of litigation filed or to be filed against AT&T for which we have agreed to assume liability under the split-off agreements with AT&T;

• Our ability to develop cost-effective alternate distribution channels to replace our reseller distribution channel;

• Risks and uncertainties concerning our ability to successfully implement Project Pinnacle;

• The risk of insolvency of vendors, customers, and others with whom we do business;

• The risk of equipment failure, natural disasters, terrorist acts, or other breaches of network or IT security;

• The additional risks and uncertainties not presently known to us or that we currently deem immaterial; and

• Those factors discussed under “Additional Factors That May Affect Our Business, Future Operating Results, and Financial Condition.”

The words “estimate,” “project,” “intend,” “expect,” “believe,” “plan,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are found at various places throughout this document. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Moreover, in the future, we may make forward-looking statements about the matters described in this document or other matters concerning us. We are under no obligation to update these forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information relating to market risk is included in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Quantitative and Qualitative Information About Market Risk.”

ITEM 4. CONTROLS AND PROCEDURES

Our principal executive and financial officers have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of ~~September~~June 30, ~~2003~~2004. They have determined that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 with respect to the Company and its consolidated subsidiaries is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our principal ~~executive~~ executive officer and principal financial officer, as appropriate, to allow ~~timely~~ timely decisions regarding required disclosures.

We regularly evaluate our internal controls over financial reporting ~~and~~ and discuss these matters with our independent accountants and our audit committee. Based on these evaluations and discussions, we consider what revisions, improvements, or corrections are necessary in order to ensure that our internal controls are and remain effective. As a result, we ~~continue to improve and~~are ~~change~~currently ~~our~~enhancing internal ~~controls~~processes ~~over~~related ~~financial reporting relating~~ to ~~the~~certain ~~tracking~~general ofcomputer ~~our~~controls, ~~network~~fixed ~~equipment~~asset tracking, and ~~our~~handset ~~tax~~vendor ~~reporting~~allowances. We ~~functions~~anticipate ~~and~~that ~~have~~implementation ~~brought~~of these ~~items~~ toenhancements may continue through the ~~attention~~end of ~~our audit committee~~2004. ~~The~~Pending ~~principal~~full ~~focus~~implementation of these ~~improvements~~enhancements, ~~and~~we ~~changes~~have isinstituted ~~developing~~additional procedures and ~~implementing new~~ policies, to ~~procedures~~preserve ~~and~~our ~~systems~~ability ~~designed~~ to ~~more~~accurately ~~efficiently~~ record, ~~movements~~process, ~~disposals~~and summarize financial data and ~~in-service~~prepare ~~dates~~financial statements for ~~our~~external ~~network~~purposes that ~~equipment~~fairly ~~and~~present ~~improving~~ our ~~efficiency~~financial condition, results of operations, and ~~reducing~~cash ~~the~~flows. ~~preparation~~The ~~time~~principal ~~for~~focus of the ~~appropriate~~enhancements ~~tax~~related ~~accounting~~to ~~entries~~general ~~necessary~~computer controls include documenting and adhering to ~~comply~~comprehensive system ~~with~~development ~~financial~~methodologies ~~reporting~~when performing system application implementations and ~~regulatory~~upgrades, ~~requirements.~~establishing ~~Full implementation~~a ofsingle ~~these~~repository ~~changes~~for enterprise ~~may~~reference ~~continue~~data, ~~into~~identifying ~~next~~business ~~year.~~owners ~~Pending~~for applications ~~implementation~~with offinancially ~~these~~significant ~~changes~~data, weand ~~have~~enhancing ~~other~~controls ~~procedures~~to appropriately ~~and~~limit ~~policies~~ability to access network infrastructure. The ~~maintain~~enhancements to our ~~ability~~internal controls relating to ~~accurately~~fixed ~~record~~asset tracking include developing and implementing new policies, ~~process~~procedures, and ~~summarize financial~~systems ~~data~~designed ~~and~~to ~~prepare~~more ~~financial~~efficiently ~~statements~~record ~~that~~in-service ~~fairly~~dates, ~~present~~movements, and disposals for our ~~financial~~network equipment. The internal control enhancements ~~condition~~relating to handset vendor allowances include improved review, communication, ~~results~~and documentation of ~~operations~~vendor contracts, ~~and~~which ~~cash~~include handset ~~flows~~allowances.

We have made nosignificant ~~other~~progress ~~significant~~implementing ~~changes~~enhancements inand corrective actions to our internal controls related to tax reporting over ~~financial~~the ~~reporting~~past ~~during~~year. ~~the~~There ~~last~~have ~~fiscal~~been ~~quarter~~no ~~that~~other ~~materially~~significant ~~affected~~changes orin internal ~~are~~controls, ~~reasonably~~or ~~likely~~other tofactors ~~materially~~that ~~affect~~could ~~our~~significantly ~~internal~~affect internal controls, ~~over~~including ~~financial~~any corrective actions with regard to significant ~~reporting~~deficiencies or material weaknesses. We intend to continue to refine our internal controls on an ongoing basis as we deem appropriate with a view towards continuous improvements.

5249

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~None.~~We held our third annual shareholder meeting as an independent company on May 19, 2004. The following proposals were voted upon at the meeting and were adopted or rejected by the margins indicated:

(a) Proposal to approve and adopt the Agreement and Plan of Merger, dated as of February 17, 2004, by and among AT&T Wireless Services, Inc., Cingular Wireless Corporation, Cingular Wireless LLC, and solely with respect to Section 5.3, 6.1(b) and Article IX of the Agreement and Plan of Merger, SBC Communications Inc. and BellSouth Corporation received the following votes:


			Number of Votes
	For		1,832,417,331
	Against		12,126,665
	Abstain		21,472,230
	Broker non-votes		446,799,247

(b) In an uncontested election, three nominees of the Board of Directors were elected directors for three-year terms expiring on the date of the annual meeting in 2007. The votes were as follows:


	For	Withheld
Nobuharu Ono	2,258,271,862	54,543,611
Carolyn M. Ticknor	2,266,628,258	46,187,215
John D. Zeglis	2,259,642,649	53,172,824

(c) Proposal regarding the ratification of the appointment of PricewaterhouseCoopers LLP as the company’s independent accountants received the following votes:


			Number of Votes
	For		2,246,400,842
	Against		49,898,090
	Abstain		16,516,535
	Broker non-votes		6

(d) A shareholder proposal relating to the executive compensation program received the following votes:


			Number of Votes
	For		189,944,893
	Against		1,615,719,357
	Abstain		60,351,976
	Broker non-votes		446,799,247

(e) A shareholder proposal relating to discontinuing certain executive compensation received the following votes:


			Number of Votes
	For		176,911,559
	Against		1,631,004,819
	Abstain		58,099,847
	Broker non-votes		446,799,248

(f) A shareholder proposal relating to vote requirements for director elections received the following votes:


			Number of Votes
	For		192,247,958
	Against		1,599,915,199
	Abstain		73,853,067
	Broker non-votes		446,799,249

ITEM 5. OTHER INFORMATION

~~None~~In June, AT&T Wireless Services received an informal request for information from the SEC as part of the SEC’s industry-wide investigation of subscriber reporting. The SEC has not alleged that we engaged in any improper behavior. AT&T Wireless Services is currently cooperating with the SEC to provide the requested information.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Number		Title
10.1		~~Amendment~~Equity ~~No.~~Program 4for toNon-Employee Directors under the AT&T Wireless Services, Inc. ~~Deferred~~2001 ~~Compensation~~Long Term Incentive Plan (as amended and restated as of May 19, 2004)
10.2		~~Amendment~~Non-Employee ~~No.~~Director 4Compensation toSummary ~~AT&T~~of ~~Wireless~~Non-Employee ~~Services,~~Director ~~Inc.~~Compensation ~~Deferred~~(adopted ~~Compensation~~and ~~Plan~~effective ~~for~~May ~~Non-Employee~~19, ~~Directors~~2004)
10.3		Amendment ~~No. 2~~ to ~~Employment Agreement between~~ AT&T Wireless Services, Inc. ~~and~~Deferred ~~Andre~~Compensation ~~Dahan~~Plan
10.4		Amendment to the Brand License Agreement by and between AT&T Corp. and AT&T Wireless Services, Inc.
31.1		Certification of CEO
31.2		Certification of CFO
32.1		Certification of CEO furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32.2		Certification of CFO furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

(b) Reports on Form 8-K

No Current Reports on Form 8-K were filed with the Securities and Exchange Commission in the fiscal quarter ended September 30, 2003. The following Current Reports on Form 8-K were furnished to the Commission:


(1)		Furnished Form 8-K under Items 9 and 12 dated April 20, 2004, pre-announcing selected financial results for the quarter ended March 31, 2004.
(2)		Furnished Form 8-K under Items 7, 9 and 12 dated April 23, 2004, announcing financial results for the quarter ended March 31, 2004.
(3)		Furnished Form 8-K under Item 5 dated April 28, 2004, disclosing the appointment of Dr. Koichi Nishimura to the Governance Committee of the Board of Directors of AT&T Wireless Services, Inc. effective April 27, 2004.

~~On July 23, 2003, we furnished a Form 8-K under Items 7 and 9 announcing~~51 ~~financial results for the second quarter of 2003.~~

On July 25, 2003, we furnished a Form 8-K under Items 7 and 9 announcing our intention to repurchase, through a tender offer, any and all outstanding 11.625 percent TeleCorp Wireless, Inc. Senior Subordinated Discount Notes due April 15, 2009 and 12.75 percent Tritel PCS, Inc. Senior Subordinated Discount Notes due May 15, 2009.

SIGNATURES

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

	AT&T WIRELESS SERVICES, INC
	By:	/s/ Joseph McCabe, Jr.
		Joseph McCabe, Jr. Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Dated: November 13, 2003


		AT&T WIRELESS SERVICES, INC.

		By:		/s/ Joseph McCabe, Jr.

				Joseph McCabe, Jr.
				Executive Vice President and Chief Financial Officer
				(Principal Financial and Accounting Officer)

54Dated: August 5, 2004

Table of Contents

AT&TTable Wireless Services received a series of payments from MCI WorldCom Network Services, Inc., within the 90 days preceding WorldCom’s July 21, 2002 bankruptcy filing under Chapter 11 of the Bankruptcy Code, and WorldCom asserted that it is Contents

Table of Contents

Table of Contents

Table of Contents

(3)Table Represents our commitments with our primary local exchange carriers for dedicated leased lines as of December 31, 2002. The original terms of these commitments vary from month-to-month up to five years.Contents

Table of Contents

•Table shorterof development cycles for new products, enhancements and changes in end-user needs and preferences;Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · NEW CINGULAR WIRELESS SERVICES, INC.