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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 001-31673

Cingular Wireless LLC

Formed under the laws of the State of Delaware

5565 Glenridge Connector, Atlanta, Georgia 30342

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

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

The limited liability company ownership interests of the registrant are not publicly traded. Therefore, there is no aggregate market value for the registrant’s outstanding equity that is readily determinable.

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Overview

Throughout this document, Cingular Wireless LLC and its subsidiaries are referred to as “we” or “Cingular”.

We are the second largest provider of wireless voice and data communications services in the United States (U.S.) in terms of customers. For the last two years, we reported:

•	U.S. wireless cellular service and personal communication services, or “PCS”, customers totaling 21.9 million at December 31, 2002 and 24.0 million at December 31, 2003;
•	revenues of $14.9 billion in 2002 and $15.5 billion in 2003; and
•	net income of $1.2 billion in 2002 and $1.0 billion in 2003.

As one of the largest digital wireless network operators in the United States, we have access to licenses, either through owned licenses or licenses owned by joint ventures and affiliates, to provide cellular or PCS wireless communications services covering an aggregate of 236 million in population (POPs), or approximately 81% of the U.S. population, including in 45 of the 50 largest U.S. metropolitan areas. We directly provide cellular or PCS services in 43 of the 50 largest U.S. metropolitan areas. We served customers in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands as of December 31, 2003. All of our networks utilize digital technology; at December 31, 2003, 95% of our cellular and PCS customers were using digital service, and over 99% of our cellular and PCS minutes of use were digital in December 2003.

We provide a wide array of wireless services for individual, business and governmental users. Our data services are offered over our cellular/PCS networks and our separate Mobitex network, which on a combined basis had approximately 5.5 million and 6.6 million active users of our data services at December 31, 2002 and 2003, respectively.

On February 17, 2004, we entered into an Agreement and Plan of Merger to acquire AT&T Wireless Services, Inc. (AT&T Wireless) for an aggregate consideration of approximately $41 billion cash. The closing of the acquisition is expected to occur in late 2004 and is subject to the affirmative vote of AT&T Wireless’ shareholders, FCC, Hart Scott Rodino and other regulatory approvals and other customary closing conditions.

On a pro forma basis, the combined company would have had, at December 31, 2003, cellular and PCS spectrum coverage in 49 of the top 50 U.S. markets and operations in 97 of the top 100 U.S. markets (excluding only Richmond, Norfolk and Newport News, VA). Its licenses would encompass a population of 264 million people, and its network and operations would encompass a population of 225 million people. Both companies currently operate the same technologies. We plan that the combined company will provide service under the “Cingular” brand name.

Organizational Structure

Cingular Wireless LLC is a Delaware limited liability company and has its principal executive offices at Glenridge Highlands Two, 5565 Glenridge Connector, Atlanta, Georgia 30342 (telephone number 404-236-6000). We were formed in April 2000 by our members, SBC Communications Inc. (SBC) and BellSouth Corporation (BellSouth), as the operating company for their U.S. wireless communications joint venture. In October 2000, SBC and BellSouth contributed substantially all of their U.S. wireless businesses

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to us in exchange for economic ownership interests in us of approximately 60% and 40%, respectively. We began doing business under the “Cingular” brand name in January 2001.

Our Internet website is http://www.cingular.com. (This web site address is an inactive textual reference included for information only and is not intended to be an active link or to incorporate any web site information into this document.) We make available, free of charge, through our website our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with the SEC.

We have adopted a written code of conduct applicable to all directors, officers and employees. In addition, we have a separate Code of Ethics that is applicable to our principal executive, financial and accounting officers, or our “Senior Financial Officers”, responsive to Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the SEC. The Senior Financial Officer Code of Ethics is available on our website. In the event that we make any substantive changes in, or provide any material waivers from, the provisions of this Code of Ethics, we intend to disclose such events on our website.

SBC and BellSouth jointly control Cingular Wireless Corporation, a holding company with no material assets of its own other than a 0.0000001% economic interest in us. Its main purpose is to act as our manager and thereby control our management and operations. Our officers are appointed by its board of directors. We do not expect our management structure to change materially as a result of our planned acquisition of AT&T Wireless.

Our Business

We offer a comprehensive range of high-quality wireless voice and data communications services in a variety of pricing plans, including national and regional rate plans as well as prepaid service plans. Our voice and data offerings are tailored to meet the communications needs of targeted customer segments, including youth, family, active professionals, local and regional businesses and major national corporate accounts. The marketing and distribution plans for our services are further targeted to the specific geographic and demographic characteristics of each of our markets.

Postpaid Service. Consumer service is generally offered on a contract basis for one or two year periods. Under the terms of these contracts, service is provided and billed on a monthly basis according to the applicable pricing plan chosen. Our wireless services include basic local wireless communications service, long distance service and roaming services, which enable our customers to utilize other carriers’ networks when they are “roaming” outside our coverage area. We also bill other carriers for providing roaming services to their customers when they utilize our network outside the coverage area of their wireless service provider. We had approximately 19.8 million postpaid contract customers (excluding reseller customers) at December 31, 2002 and 21.3 million on December 31, 2003. In addition to basic wireless voice telephony services, we offer many enhanced features with many of our pricing plans. These features include caller ID, call waiting, call forwarding, three-way calling, no answer/busy transfer and voice mail. In some markets, we make available complementary services for a monthly fee, such as unlimited mobile-to-mobile calling, roadside assistance and handset insurance.

Our primary marketing emphasis is enrolling customers in postpaid service calling plans because such customers generate higher revenue usage and result in a lower customer churn rate than prepaid service customers. Accordingly, a significant component of our strategy consists of developing value-added plan

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features, ancillary services, unique devices and promotions to attract and retain postpaid customers. In 2003, we introduced an internally developed patent-pending FastForward^SM device that is unique to Cingular. When a Cingular handset is placed in the cradle, the FastForward^SM device automatically forwards all wireless calls to a designated wireline phone number and simultaneously charges the handset battery providing customers who are at a wireline location with the convenience of answering calls to their wireless phones on any wireline phone in that location. Our plans include options that allow off-peak hours to begin at 7:00 p.m. We began to target family members through our FamilyTalk^SM promotions, which contributed to a significant portion of our postpaid customer growth, and we continue to promote a “Rollover^SM” minutes feature, which allows our customers to carry over any unused “anytime” minutes from month to month for up to one year. We believe that these service offerings further enhance our brand message “Cingular Fits You Best^SM” by providing customers with value-added services and the flexibility to tailor those services to fit their specific calling needs.

Prepaid Service. We offer prepaid service to meet the demands of distinct consumer segments, such as the youth market, families and small business customers, who prefer to pay in advance. As of December 31, 2003, prepaid users represented approximately 6% of our total customers. We believe that our prepaid service offering benefits from being part of a national brand, particularly with regard to distribution. Our prepaid strategy focuses on increasing the profitability of this customer segment through offering a wider array of services and features to increase the usage, revenue and retention of these customers. Our KIC^SM (Keep In Contact) prepaid plan offers features such as long distance, caller ID, call waiting, voicemail and off-network roaming, as well as enhanced features like short messaging, downloadable graphics and ringtones, games and information alerts. At the same time, it retains the benefits of no contract, no credit check, no monthly billing and enhanced ability to control spending. In addition, we continue to focus on increasing the distribution of our prepaid offering to include the Internet, automated replenishment services and strategic retail partners that will allow our prepaid service to truly be a product of convenience.

Consistent with the industry, we experience higher customer churn rates and lower revenue per customer with prepaid customers than our postpaid customers; however, these impacts are somewhat offset by the lower cost of acquiring new prepaid customers, including lower handset subsidies, higher revenue per minute earned and the absence of payment defaults.

Reseller Service. We offer wholesale services to resellers, who purchase wireless services from us for resale to their customers. As of December 31, 2003 the number of customers served through resellers represented approximately 5% of our total customers.

Equipment Sales. We sell a wide variety of handsets, or phones, manufactured by various suppliers for use with our service. We also sell accessories, such as handset faceplates and carrying cases, hands-free devices, batteries, battery chargers and other items. Handsets and accessories are also sold to agents and other third-party distributors for resale.

General. Wireless data is the fastest growing area of our business, although its revenues are and for the foreseeable future are expected to be only a small portion of our overall revenue base. We are upgrading our network and coordinating with equipment manufacturers and applications developers to take advantage of continued growth in the demand for wireless data services.

We believe that we are the largest provider of wireless data in the industry in terms of annual revenue. We had approximately 6.6 million customers actively using our data services at December 31, 2003,

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approximately 789,000 of which we served with advanced applications over our separate Mobitex data network, with the rest using services we offer over our cellular and PCS networks.

Wireless Data Services Offered over our Mobitex Data Network. We believe that we are the largest provider of corporate messaging. We offer value-added wireless data applications to businesses and individuals who have a need for timely data communications to maintain a competitive advantage or increase personal productivity. We are a leader in providing wireless data services for complex businesses such as transportation, telecommunications, utilities and other businesses. Our Mobitex data network covers over 90% of the U.S. metropolitan population, and provides coverage in 99 of the 100 largest metropolitan areas.

We provide wireless access to corporate business applications for our customers who have mobile field personnel. Our wireless solutions allow sales managers to access corporate e-mail when away from the office and technicians to solve problems and access corporate databases from the field. These same businesses can also perform remote monitoring of devices as well as temporary or permanent wireless point-of-sale transaction processing.

We also provide individuals and mobile professionals with the ability to access information from web sites, conduct mobile commerce transactions (e.g., trade stocks, check bank statements and buy products) and send and receive Internet e-mail, all through a hand-held, wireless device.

We sell our customers terminal equipment, such as Blackberry™ hand-held pagers, and specialized devices for use in field/sales force automation, delivery truck and fixed location applications. In addition to collecting equipment fees, we enter into customer contracts with flat or usage-based fees.

Wireless Data Services Offered through our Cellular and PCS Networks. We currently offer wireless e-mail services, short messaging and other data services throughout our cellular and PCS networks. At December 31, 2003, we had over 19 million customers provisioned with wireless Internet and short messaging data services as part of their wireless service. An example of these services is XpressMail^SM service, which allows businesses to access their Microsoft Exchange Server™ or Lotus Notes™ corporate e-mail and other desktop applications in real time from Internet-enabled wireless phones or from Blackberry™ handheld devices. We also offer wireless Internet access for use on our digital cellular and PCS networks through a variety of different devices including wireless phones, personal computer (PC) cards, and personal digital assistants (PDA).

Our wireless Internet service gives customers access to timely, personalized information such as news, weather, sports, stocks, directions, restaurant reviews, movie show times, yellow and white pages directories, games and graphics through their wireless handsets. We also offer a range of messaging services to our customers including short messaging and instant messaging with AOL™, multi-media messaging and mobile polling. In 2003, we have enabled our customers to download many applications like games and ringtones directly from their handsets using minimal keystrokes. By making the download process convenient and user-friendly, we make data more accessible to our customer base and hope to increase the penetration of customers using data services as well as repeat customers. Our goal is to provide an array of high quality, productivity-enhancing wireless data services across our cellular and PCS networks through the use of GPRS and EDGE technologies (see definitions of GPRS and EDGE in the following “Our Network” section), similar to and even more robust than those we currently offer across our Mobitex data network.

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Our Network

We have access to licenses to provide cellular and PCS wireless services, both voice and data. We provide both analog and digital cellular services over the 850 megahertz (MHz) band and digital PCS services over the 1900 MHz band. We also have 900 MHz licenses to provide data services over the Mobitex data network. We obtained access to spectrum through application lotteries, mergers, acquisitions, exchanges, ventures, Federal Communications Commission (FCC) auctions and uncontested application grants of cellular licenses.

We have access to cellular/PCS licenses in 45 of the 50 largest U.S. metropolitan areas, covering an aggregate of 236 million POPs, or approximately 81% of the of U.S. population, and operate in 43 of the top 50 markets across the country. In addition, we have signed numerous roaming agreements to ensure our customers can receive wireless service in virtually all areas in the United States where cellular/PCS wireless service is available. Our cellular/PCS networks are substantially constructed. Our Mobitex data network covers over 90% of the U.S. metropolitan POPs, including the 50 largest U.S. metropolitan areas.

See “— Regulatory Environment — Factors Relating to Our Industry” for FCC network system build requirements.

Cellular/PCS Technology. In the U.S. wireless telecommunications industry, there are two principal frequency bands currently licensed by the FCC for transmitting two-way voice and data signals — the 850 MHz band and the 1900 MHz band. The services provided over these two frequency bands are commonly referred to as cellular and PCS, respectively. PCS infrastructure is characterized by shorter transmission distances and closer spacing of cells and towers than in a cellular network to accommodate the different characteristics of the PCS radio signals. However, PCS service does not differ functionally to the user from digital cellular service.

Cellular systems initially provided service solely by means of analog transmissions, and, because of differing digital standards, the FCC requires that cellular radio licensees offer analog service until 2008. PCS systems have been constructed using only digital technology and are not required by the FCC to offer analog service.

Digital systems convert voice or data signals into a stream of digits that is compressed before transmission, thereby enabling a single radio channel to carry multiple simultaneous transmissions. Our experience has shown that digital technology offers many advantages over analog technology, including substantially increased network capacity, lower operating costs per unit, reduced susceptibility to fraud and the opportunity to provide improved data transmissions. Digital service also provides clear benefits to our customers, including improved voice quality, extended battery life, greater call security and lower per-minute costs. Digital service enables enhanced features and services, such as interactive messaging, facsimile, e-mail and wireless connections to computer/data networks and the Internet. A majority of our analog customers have migrated from analog to digital service. During December 2003, digital usage accounted for over 99% of our total usage based on minutes.

Because of the advantages of digital technology, cellular operators have been adding digital communications equipment to their systems for some time and are expected to increase both the footprint and the

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spectrum dedicated to digital service. We offer analog and digital service in our cellular markets and digital service in our PCS markets.

Third generation wireless communications standards are being developed in response to the expected consumer demand for high-speed data services. These technologies will allow high-speed wireless packet-switched data services and ultimately voice services using Internet protocol, thereby providing customers with greater connectivity and communications capabilities. Packet-switched technology allows for data to be sent and received in bursts, instead of requiring continuous transmission over the network for a duration of the communication, thereby providing the user “always on” connectivity. The introduction of packet-switched technology allows for devices that support simultaneous voice and data communications, e.g., receive voice calls while browsing the Internet. In addition, billing can be based on the quantity of data transmitted, not on the duration of the transmission. These technologies will also allow more robust features for voice communications and increased network capacity.

Currently the largest United States wireless communications providers use the following principal technologies:

•	Global System for Mobile Communications, or “GSM” — used by us, AT&T Wireless and T-Mobile USA, Inc. (T-Mobile). GSM is a digital wireless technology originally developed by the European operator community and later adopted by operators around the world to become by far the world’s most dominant wireless technology. Hardware and software enhancements, referred to as General Packet Radio Service, or “GPRS”, and Enhanced Data Rates for GSM Evolution, or “EDGE”, allow high-speed data communications.
•	Time Division Multiple Access, or “TDMA” — used by us and AT&T Wireless in some markets pending full deployment of, and customer migration to, GSM/GPRS/EDGE.
•	Code Division Multiple Access, or “CDMA” — used by Verizon Wireless and Sprint PCS. CDMA is a technology originally developed by the military, but adapted for commercial usage and licensed by Qualcomm Incorporated.
•	integrated Digital Enhanced Network, or “iDEN”® — used by Nextel.

TDMA, iDEN and GSM technologies work by dividing a single radio frequency into multiple time slots so it can support multiple calls. TDMA allows for up to three calls per frequency, GSM allows for up to eight and iDEN allows up to six. CDMA technology works by encoding individual conversations into a series of digits and then spreading the transmission of the sequence over available spectrum.

These technologies are not currently compatible or interchangeable with each other and require separate types of wireless phones and network infrastructure.

However, the GSM/ANSI-136 Interoperability Team, or “GAIT”, has developed standards promoting the ability to use one phone for both GSM and TDMA voice and data service. We are selling GAIT phones in some markets to facilitate the migration of customers from TDMA to GSM service.

Prior to 2002, our network consisted of both TDMA (approximately 70%) and GSM (approximately 30%) technologies. In October 2001 we announced a plan to overlay GSM/GPRS throughout our TDMA network and upgrade our data network to EDGE, our choice for third generation, or “3G”, wireless technology. EDGE, a faster version of GPRS technology, is expected to provide our customers with greater connectivity and communications capabilities, including faster speeds for accessing the wireless

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Internet. The following reasons underlie our decision to overlay GSM/GPRS/EDGE technology on our TDMA systems:

•	GSM has up to three times the voice capacity of the TDMA network.
•	We did not believe we could continue to offer competitive voice and data communications services over the long term unless we migrated from TDMA technology. TDMA was not a predominant global technology, and vendor support for this technology was less robust than for CDMA and GSM. With the decision of AT&T Wireless to overlay its TDMA network with, and gradually migrate its customer base to, GSM systems, the prospects for innovative research and development of TDMA systems seemed less likely than for CDMA and GSM systems.
•	Since TDMA systems comprised a relatively small percentage of wireless systems, more substantial economies of scale can be realized by using hardware and software that are more prevalent than TDMA.
•	TDMA technology, standing alone, would not support high-speed/capacity 3G, data systems.
•	GSM technology is compatible with all global GSM systems, and if a wireless handset is capable of operating on international frequencies as well as domestic frequencies, international roaming is possible with the same handset.

While we continue to utilize TDMA in the markets traditionally using this technology, we have substantially completed adding GSM/GPRS/EDGE in those markets and expect to complete this project in 2004.

We decided to overlay GSM/GPRS/EDGE instead of CDMA or iDEN for the following reasons;

•	Since approximately 30% of our network already utilized GSM technology, it would have been substantially more expensive to construct CDMA or iDEN over our entire network than GSM/GPRS/EDGE over about two-thirds.
•	We believe we will be able to offer our customers a greater variety of handset models and communications services by migrating our business offerings to the predominant GSM standard.
•	Technically simpler handsets compared to CDMA (less processing is required), combined with royalties payable to Qualcomm for the use of CDMA technology equate to a slight inherent cost advantage of GSM over CDMA technology.
•	Large commonality of handsets with the rest of the GSM community should result in enhanced development efforts and larger production runs, lowering costs further.
•	While the primary advantage of the iDEN technology is its support of a “push-to-talk” service, we believe that such services can also be supported on GSM technology, and we expect such services to be available from GSM vendors in the near future.

The disadvantages of GSM/GPRS/EDGE versus CDMA are:

•	Current CDMA systems offer greater voice capacities than GSM.
•	GSM/GPSR/EDGE offer higher data speeds than the currently available CDMA 1XRTT technology. Both GSM and CDMA will have technology evolution paths that will offer comparable higher speed throughputs and capacities in the future.

The predominant digital technologies, GSM and CDMA, are dynamic and evolutionary technologies in that a variety of technical enhancements are constantly being developed and implemented to extend the

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capacity and performance capabilities of each. Because the operation and performance of wireless communications networks and handsets is functionally identical on all digital technologies, we believe that wireless customers are generally unaware of or unconcerned with the particular technology of their chosen wireless carrier. Therefore, we believe that our chosen technology path is fully capable of supporting our business growth strategies in this competitive market.

Mobitex Technology. Our Mobitex data network operates over a 900 MHz network and uses packet-switched technology. We are currently the only U.S. operator of a Mobitex data network.

We currently own licenses for spectrum in the 850 MHz and 1900 MHz bands. We expect that the demand for our wireless services will grow over the next several years as the demand for both traditional wireless voice services and wireless data and Internet services increases significantly. We anticipate needing access to additional spectrum in selected densely populated markets to meet expected demand for existing services and throughout our network to provide full 3G services beyond EDGE. Some of this additional spectrum requirement would be met by the pending acquisition of 1900 MHz spectrum from NextWave Telecom, Inc. (NextWave) and the pending acquisition of AT&T Wireless. See also Item 7, Management Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Cash Requirements — Licenses Acquisition.

In order to acquire access to additional spectrum, we may participate in future FCC auctions and exchange spectrum with, and lease or purchase spectrum licenses from other wireless carriers. We may also obtain additional spectrum capacity through mergers and acquisitions, joint ventures and alliances. See “Regulatory Environment” and “Factors Relating to Our Business — If we fail to obtain access to additional spectrum, we may not be able to expand the geographic reach of Cingular-branded services, increase our customer base in areas we currently serve or meet the anticipated demand for new services”.

From time to time, we exchange or purchase licenses for spectrum and enter into joint ventures to share networks. Joint ventures such as those described below allow us to enter new markets more quickly and for substantially less capital costs. See also Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Cash Requirements for further information regarding such joint ventures.

Joint Ventures and Spectrum Exchanges / Acquisitions

In 2000, we and Crowley Digital Wireless, LLC (Crowley Digital) formed a joint venture, Salmon PCS LLC, (Salmon) to acquire PCS licenses being auctioned by the FCC. We do not control Salmon. Through the auction, Salmon obtained 45 licenses covering over 11 million POPs. Under the terms of this venture, we act as manager of the PCS systems, subject to Crowley Digital’s oversight and control. The management agreement has a term of eight years. In addition, pursuant to a trademark license agreement, Salmon has elected to use our trademarks in its business to offer Cingular-branded services.

Crowley Digital has the right to put its interest in Salmon to us at a price in cash equal to its initial investment plus a specified rate of return. The put right can only be exercised at certain times, and we estimate that the earliest exercise period will begin in February 2006 and the latest exercise period will end in April 2008. We estimate that the fair value of this put obligation was approximately $126 million and $139 million as of December 31, 2002 and 2003, respectively. This obligation is included in “Other noncurrent liabilities” in our consolidated balance sheets.

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We entered into a credit agreement with Salmon under which, until November 2006, we will provide through secured loans, upon Salmon’s request, substantially all of the capital Salmon will require to pay for the licenses, construct its system and fund working capital requirements. Loans are repayable no later than May 2008, with interest at a rate of 9% per annum, or 14% per annum if Salmon terminates the management agreement or trademark agreement.

In May 2001, we and T-Mobile exchanged FCC licenses covering approximately 36 million POPs each. We received licenses covering 10 MHz of spectrum for the five boroughs of New York City, all of Long Island as well as parts of upstate New York, northeast Pennsylvania, St. Louis, Detroit, Vermont, New Jersey and Connecticut. In exchange, we transferred to T-Mobile licenses covering 10 MHz of spectrum out of the 30 MHz of spectrum that we had in the California and Nevada markets. As a result of the exchange, we gained access to spectrum covering over 20 million additional POPs in the northeastern United States.

Subsequently, in November 2001, we and T-Mobile formed a jointly-controlled venture, GSM Facilities, LLC (GSMF), to allow the companies to share network infrastructure in the California, Nevada and New York City markets. Each of our respective existing networks in these markets, which use GSM technology and cover approximately 56 million POPs, has been contributed to the venture. Both companies have access to the venture’s network infrastructure, and pursuant to the terms of the venture’s commercial arrangements, are able to provide our respective customers access to a weighted average spectrum depth of 39 MHz in these markets. We and T-Mobile buy network services from the venture but each of us retained ownership and control of our own licenses. Funding for capital investments and cash operating expenses of the venture is generally made by us and T-Mobile on a pro rata basis based on network traffic. We also independently market our unique services to customers using our own brand name and utilize our own sales, marketing, billing and customer care operations. In July 2002, we began marketing and providing service in the New York City market and T-Mobile began providing service in California and Nevada through the venture. Our participation in this venture gives our customers access to more spectrum and is expected to result in more robust networks and lower operating expenses and capital expenditures than if we had constructed our own network.

In January 2002, we entered into an agreement with AT&T Wireless to form a jointly-controlled and equally-owned venture to construct a GSM voice network with GPRS/EDGE data technologies along a number of major highways in order to ensure availability of GSM/GPRS/EDGE service to our customers, and reduce roaming expenses we pay to other carriers when our customers travel on those highways. We and AT&T Wireless will each buy services from the venture and provide services under our own brand names. In March 2003, we and AT&T Wireless contributed licenses and assets of equal value. As of December 31, 2003, we had an investment in the venture of $21 million.

In December 2002, we announced an agreement to transfer to AT&T Wireless our wireless license and operations in Kauai, Hawaii and wireless licenses in Alabama, Idaho, Oklahoma, Mississippi and Washington. In return, we would receive wireless licenses in Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Tennessee and Texas. This swap was completed in June 2003. As a result, our licensed coverage area increased by approximately one million POPs.

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Item 1.	Business

In December 2003, we acquired three PCS licenses in Florida from Sunshine PCS, for approximately $14 million.

In February 2004, we completed an exchange transaction with Dobson Cellular Systems, Inc. We transferred $22 million cash and wireless property in Michigan to Dobson in exchange for wireless property in Maryland.

In February 2004, we acquired an operational cellular system in Louisiana and other FCC licenses in Louisiana, Arkansas and Texas from Unwired Telecom Corporation. We expect the aggregate consideration for this transaction to be approximately $28 million cash.

Acquisition of NextWave licenses. In August 2003, we executed an agreement with NextWave and certain of its affiliates pursuant to which we would purchase FCC licenses for wireless spectrum for $1.4 billion cash. This pending acquisition is for 1900 MHz spectrum licenses in 34 markets covering 83.4 million POPs with all but 3.4 million POPs in existing Cingular licensed areas. The transaction is subject to various closing conditions, some of which are outside of the parties’ control. The transaction is expected to close in the first half of 2004.

Acquisition of AT&T Wireless. In February 2004, we executed an agreement to acquire AT&T Wireless by means of a merger for an aggregate consideration of approximately $41 billion cash. SBC and BellSouth have agreed to provide us all of the funds necessary to pay the merger consideration. The closing of the acquisition is expected to occur in late 2004 and is subject to the affirmative vote of AT&T Wireless’ shareholders, FCC, Hart Scott Rodino and other regulatory approvals and other customary closing conditions. The merger agreement provides that if the conditions to closing are not satisfied by December 31, 2004, it will be terminated, subject to extension to June 30, 2005 by either party if, as of December 22, certain regulatory approvals have not been obtained (in very limited circumstances it may be extended another 60 days). If AT&T Wireless enters into or consummates certain types of business combination transactions within 15 months after a designated termination of the merger agreement, AT&T Wireless would be obligated to pay to BellSouth and SBC an aggregate fee of $1.4 billion.

The agreement provides that Cingular and AT&T Wireless are required to use their best efforts to consummate the merger as promptly as reasonably practicable, and BellSouth and SBC are required to use reasonable best efforts to assist Cingular in obtaining regulatory approval. However, none of us, SBC nor Cingular will be required to take actions required by regulators as a condition to approval of the merger, and we will not be required to close the merger, if the aggregate adverse impacts of required sales of customers or spectrum or any conditions imposed on either BellSouth, SBC and/or Cingular would exceed $8.25 billion. For purposes of calculating the impacts regarding sales of customers or spectrum, the parties have agreed that the adverse impact of (a) any required divestitures of a market would be equal to the number of customers in the market required to be divested multiplied by $825 and (b) any required divestitures of spectrum only would be equal to the amount of spectrum required to be divested multiplied by $0.50 per MHz/POP. Any other adverse impacts on BellSouth, SBC and/or Cingular would be calculated at the time the conditions are imposed. Each of SBC and BellSouth has agreed not to take any action reasonably likely to prevent the closing of the merger.

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Competition

There is substantial and increasing competition in all aspects of the wireless communications industry. We expect this to continue even after our planned acquisition of AT&T Wireless. We compete for customers based principally on our call quality, service offerings, price, coverage area and customer service.

Our competitors are principally the other national providers of cellular, PCS and other wireless communications services — Verizon Wireless, AT&T Wireless (until the acquisition is consummated), Sprint PCS, Nextel and T-Mobile, which together with us serve almost 80% of the U.S. wireless customers. We also compete with smaller companies, resellers and wireline telephone service providers. Verizon Wireless ranks first among the six national carriers in terms of number of customers served as of December 31, 2003 and first in 2003 revenues and profitability. We ranked second among these carriers according to number of customers served. Although AT&T Wireless had fewer customers, their 2003 revenues slightly exceeded ours.

Some of our competitors have greater financial, technical, marketing, distribution and other resources than we do. In addition, some of the other large providers have more spectrum depth and extensive coverage areas than we do. Some of the indirect retailers who sell our services also sell our competitors’ services. Moreover, we may experience significant competition from companies that provide similar services using other communications technologies and services. Some of these technologies and services are now operational and others are being developed or may be developed in the future.

Consolidation, alliances and business ventures may increase competition. Consolidation and the formation of alliances and business ventures within the wireless communications industry have occurred and we expect that this trend will continue. We have numerous other competing wireless providers in our markets. Consolidation may create larger, better-capitalized competitors with substantial financial, technical, marketing, distribution and other resources to compete with our product and service offerings. Competitors with more complete nationwide footprints may be able to offer nationwide services and plans more economically due to economies of scale and less dependence on roaming arrangements. In addition, global combinations of wireless carriers — such as the alliance between AT&T Wireless and NTT DoCoMo Inc. of Japan, the joint venture between Sprint and Virgin Group, Verizon Wireless, which is a joint venture between Verizon and Vodafone plc, and mergers and acquisitions, such as the acquisition of T-Mobile by Deutsche Telekom — may give some domestic competitors better access to international technologies, marketing expertise and strategies and diversified sources of capital. Other large, national wireless carriers have affiliations with a number of smaller, regional wireless carriers that offer wireless services under the same national brand, thereby expanding the national carrier’s perceived national scope. In addition, infrastructure sharing ventures, while facilitating our entry into new markets, also allow our partners to compete with us in those markets.

Governmental policy at all levels favors robust competition. For example, under current FCC rules, six or more PCS licensees, two cellular licensees and one or more enhanced specialized mobile radio, or “ESMR”, licensees may operate in each geographic area. This structure has resulted in the presence of multiple competitors in our markets and makes it challenging for us to attract new customers and retain existing ones. In addition, specialized mobile radio, or “SMR”, dispatch system operators have constructed two-way ESMR digital mobile communications systems on existing SMR frequencies in many cities throughout the United States, including most of the markets in which we operate. Wireless number portability rules recently implemented by the FCC that enable customers to retain their wireless local numbers when switching carriers further increase competition.

Our ability to compete successfully will depend, in part, on the quality of our network and marketing efforts and on our ability to anticipate and respond to various competitive factors affecting the industry.

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These factors include the introduction of new services and technologies, changes in consumer preferences, demographic trends, economic conditions, pricing strategies of competitors and our ability to take advantage of our wireless/wireline service area overlap with SBC and BellSouth. As a result of competition, we have in the past and may in the future be required to:

•	reduce prices for our services and products;
•	restructure our service packages to provide more services without increasing prices;
•	further upgrade our network infrastructure and the handsets we offer;
•	increase our advertising, promotional spending, commissions and other customer acquisition costs; and
•	increase our spending to retain customers.

The primary advantages other carriers have over us are spectrum depth and population coverage. We address this by seeking additional licenses in areas where we are at a spectrum disadvantage, via the following options:

•	by participating in FCC auctions, such as the auction that ended in January 2001 that resulted in our acquiring access, through Salmon, to an additional 45 licenses;
•	by acquiring licenses from other carriers, either by direct purchases, as in Salt Lake City and the pending acquisition of licenses from NextWave, or by swaps for licenses, as in the New York metropolitan markets, in exchange for licenses for spectrum where we have excess capacity;
•	by joint venturing with other carriers to pool spectrum or share network infrastructure, as in our AT&T Wireless and T-Mobile ventures;
•	by leasing spectrum under the FCC’s new spectrum leasing rules; and
•	by acquiring companies that possess strategic assets, such as the planned acquisition of AT&T Wireless.

In addition, because we are in the process of overlaying our TDMA network with GSM/GPRS/EDGE technology and in the process of transitioning our TDMA customers to that new technology, we will operate at somewhat of a disadvantage to other carriers (e.g., Verizon Wireless, Sprint PCS, Nextel and T-Mobile) that utilize an established common technology throughout their networks. We are meeting these challenges by offering cellular and PCS phones that will operate on both TDMA and GSM networks as well as the standard GSM-only and TDMA-only handsets and negotiating roaming agreements to allow our customers to use TDMA or GSM networks of other carriers until our GSM network overlay is completed. At the end of 2003, we had 93% of our POPs currently with cellular or PCS service covered by GSM/GPRS and 20% covered by EDGE.

See “Factors Relating to Our Business — Substantial competition in all aspects of our business could continue to cause reduced pricing and have adverse effects on our profit margins”.

Business Strategies

Our business strategies are to:

•

Expand our Customer Base Profitably. Recent surveys indicate that we have firmly established our brand, showing total brand awareness of approximately 95% as of December 31, 2003, similar to the brand recognition of competitors who have been in the marketplace with their brand substantially longer than we have. We believe that we can capitalize on this brand recognition and our extensive distribution capabilities to attract new customers, including those customers switching service from other wireless

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	carriers. We can offer new innovative product plans that provide both favorable economics and customer value such as our current “rollover” plans. We also benefit from having the largest wireless/wireline service area overlap in the United States as a result of our affiliation with SBC and BellSouth. We intend to further capitalize upon this strength and expand our distribution and bundled product offerings with SBC and BellSouth as well as explore future opportunities to integrate wireless/wireline services such as FastForwardTM. In October 2003, we introduced FastForwardTM, a patented cradle device that plugs into an electrical outlet and acts as charger but when “cradled”, calls to the wireless phone are forwarded to a designated wireline phone.
•	Reduce Costs and Enhance Service by Leveraging Our Large Scale and National Scope. Since our formation, we have made progress in realizing cost savings, including lowering of equipment costs resulting from our combined purchasing power, integration of support and billing systems, reduction of roaming rates and consolidation of customer care facilities, headquarter offices and distribution centers. With major integration projects completed, we are positioned to realize the savings from these efforts while deploying better tools to serve our customers.
•	Increase the Capacity, Speed and Functionality of our Cellular and PCS Networks by Deploying a Common Voice and Data Technology Throughout our Networks. We are currently completing a project of overlaying GSM/GPRS technology throughout our TDMA network to provide a uniform technology platform throughout our coverage area. At December 31, 2003, 93% of our POPs currently with cellular or PCS service had access to GSM voice and GPRS data technology, with the remaining coverage areas to be completed in 2004. In addition, we intend to upgrade our GPRS data capabilities to EDGE to significantly improve data speeds and spectral efficiency. As of the end of 2003, 20% of our POPs currently with cellular or PCS service had EDGE capabilities, with the remainder to be completed in 2004. This transition from GPRS to EDGE is primarily completed through software upgrades.
•	Develop and Promote Advanced Wireless Data Applications Over Multiple Communications Devices. We currently provide advanced data services over our Mobitex and cellular/PCS networks, including interactive messaging and wireless Internet access. Our Mobitex data network services also include specialized business applications for transportation, telecommunications, banking, utilities and other businesses, including mobile field personnel management, remote monitoring, point of sale and other mobile commerce applications. The deployment of GPRS and EDGE throughout the cellular/PCS networks enables us to further expand data applications to our broad base of voice customers using handsets, personal computers and personal digital assistants.
•	Expand our Existing Network Footprint and Capacity Where Economical. We will opportunistically expand our network and services. Where economical, we will pursue acquisition of spectrum from private ownership, as such our planned acquisition of spectrum licenses from NextWave and our planned acquisition of AT&T Wireless, or through FCC auctions. We can also gain access through innovative means such as leasing or spectrum swaps. We also have the ability to expand our service through network sharing ventures, such as our GSMF venture with T-Mobile. See “Our Network”. We are also actively working with other carriers to facilitate a strong GSM/GPRS/EDGE footprint across the continental United States through economical roaming agreements.

Marketing

We are focusing our marketing strategy on promoting the Cingular brand, providing compelling products and services, delivering high-quality service and customer care, leveraging our extensive distribution

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network and cross-marketing with SBC and BellSouth. With 24 million cellular and PCS customers at December 31, 2003, we also have the opportunity to provide value-added services to a large customer base.

Our advertising utilizes integrated, multi-media tools, including television, radio, newspaper, outdoor, Internet and point of sale. Our advertising objectives include:

•	increasing new customer growth by attracting prospective customers to a Cingular sales channel, and
•	aiding customer retention by reinforcing the value of an existing relationship with Cingular.

In February 2003, we repositioned the brand with “Cingular Fits You Best^SM”, a campaign that gives potential customers tangible reasons to choose Cingular. In addition, we began co-branding with SBC and BellSouth in their respective markets. These changes have led to dramatic improvements in brand awareness and brand attributes. An example is our “rollover” advertising that has had great success in building awareness for our unique “rollover” feature where unused anytime minutes rollover from month to month for up to one year. It has also resulted in building important brand attributes that consumers consider when choosing a wireless carrier, such as trust and fairness. We will continue to leverage our brand identity by presenting more compelling and market specific reasons to choose Cingular.

Our marketing strategy is to aggressively sell our voice services based on three basic calling plan structures offered throughout our service areas: Cingular Region^SM and Cingular Nation^SM rate plans. The plans differ in terms of the geographic areas that are included as the local calling areas. The costs and terms of each plan depend on the customer’s location and the plan selected. We have targeted plans to specific customer segments: Family Talk®, a shared minutes plan; KIC^SM (Keep In Contact), our prepaid product for those preferring to pay as they use, and a host of plans targeted to various segments of the business-to-business market. In addition, our GSM/GPRS/EDGE migration is nearly complete, making advanced features, products and services available to customers around the country.

Our marketing plans also address the growing communications needs of our existing customers, thereby increasing customer retention. We target specific customer segments with tailored services and offer them a range of high-quality handsets and enhanced features, including wireless data services, additional wireless phones, accessories and new products.

Our strategy for data offerings is to leverage the marketing and operational experience that we have gained as a leader in wireless data services and match our customers’ needs with our existing data products or with customized solutions. We offer an entire suite of consumer data products aimed at enhancing the customer experience, including internet access, picture messaging through multimedia messaging services, short messaging services, games, graphics, polyphonic ringtones and supertones and instant messaging with AOL^TM. We also offer a robust line-up of business data services from corporate messaging to customized wireless application access. We market our business data offerings to larger organizations, as well as small and medium-sized businesses.

Sales and Distribution

Our sales and distribution strategy seeks to tailor the mix of direct, indirect and resale distribution channels to match customer shopping preferences to increase customer growth and satisfaction while reducing customer acquisition and retention costs. As of December 31, 2003, we had over 88,000 distribution “points of presence”. These included approximately 1,700 company-owned stores and kiosks, 8,000 authorized agent locations, more than 77,000 national retail points of distribution, including those distributing prepaid services, and more than 1,500 direct business-to-business salespeople. In addition, we have access to the distribution channels of SBC and BellSouth as both sales channels and bundlers of our wireless services with their wireline product offerings. SBC’s Total Connections^SM and BellSouth Answers^SM

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product offerings offer a combination of local phone service and features, long distance, Internet access and Cingular Wireless services, with the customer receiving one consolidated bill. In addition to these traditional channels, we will continue to utilize and expand other channels, such as the Internet and telemarketing.

Customer Care and Satisfaction

The cost of adding new customers is one of the most significant cost elements in the wireless industry. Therefore, satisfying and retaining existing customers are critical to the financial performance of wireless operators. The goal of our customer care, retention and satisfaction programs is to ensure customer convenience and ease of use and to cultivate long-term relationships with our customers. We offer our customers a full range of options for making requests and inquiries to maximize convenience. We also offer complete customer care during extended business hours and emergency service after business hours, as well as a number of other services designed to enhance our relationship with our customers.

In 2004, we will continue to pursue opportunities to enhance customer satisfaction. Our key initiatives include continued expansion of our knowledge base tools, improved call routing initiatives and deployment of a contact management tool.

Environmental Matters

We are subject to various federal, state and local environmental protection and health and safety laws and regulations, and we incur costs to comply with those laws. Environmental laws hold current or previous owners or operators of businesses and real property potentially liable for contamination on that property, even if they did not know of and were not responsible for the contamination. Environmental laws may also impose liability on any person who disposes or arranges for the disposal of hazardous substances for contamination at the disposal site, regardless of whether the disposal site is owned or operated by such person. Although we do not currently anticipate that the costs of complying with environmental laws, including costs for remediating contaminated properties, if any, will materially adversely affect us, we cannot ensure that we will not incur material costs or liabilities in the future due to the discovery of new facts or conditions, the occurrence of new releases of hazardous materials or a change in environmental laws.

Employees

As of December 31, 2003, we had approximately 39,400 employees. Approximately 22,000 of our employees are represented by the Communications Workers of America, with contracts expiring on various dates between February 2004 and February 2007. Most of the contracts contain no-strike clauses. In most areas of the country and with most job titles, we are contractually required to maintain a position of neutrality and to allow card-check procedures with respect to unionization and will support the determination of our employees. In those areas where our employees are unionized, we have in place contracts that we believe provide us with the flexibility to run our business in an increasingly competitive environment. We consider our relationship with our employees and the Communications Workers of America to be very good.

Intellectual Property

We own the rights to the “Cingular” brand name. We rely on a combination of copyright, patent, trademark, trade secret and other intellectual property rights, together with confidentiality and/or license agreements with our employees, customers and others to protect our proprietary rights. Our trademarks

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cover our brand name and icon and names of our service and product offerings and have a duration of 10 years with renewal provisions. We also license trademarks for various products and services from either SBC or BellSouth for varying terms. For more information on licenses granted by our member companies to us and licenses we grant to them, see “Item 13. Certain Relationships and Related Transactions”. Our FCC licenses are discussed under “Regulatory Environment”.

Regulatory Environment

The FCC regulates the licensing, construction, operation, acquisition and transfer of wireless systems in the United States pursuant to the Communications Act of 1934 (Communications Act) and its associated rules, regulations and policies.

To obtain the authority to have the exclusive use of radio frequency spectrum in an area within the United States, wireless communications systems must be licensed by the FCC to operate the wireless network and wireless devices in assigned spectrum segments and must comply with the rules and policies governing the use of the spectrum as adopted by the FCC. These rules and policies, among other things, (1) regulate our ability to acquire and hold radio spectrum licenses or to lease spectrum, (2) impose technical obligations on the operation of our network, (3) impose requirements on the ways we provide service to and communicate with our customers, (4) regulate the interconnection of our network with the networks of other carriers, (5) obligate us to permit resale of our services by resellers, if we offer resale opportunities, and to serve roaming customers of other wireless carriers and (6) impose a variety of fees and charges on our business that are used to finance numerous regulatory programs and a substantial part of the FCC’s budget.

Licenses are issued for only a fixed period of time, typically 10 years. Consequently, we must periodically seek renewal of those licenses. The FCC will award a renewal expectancy to a wireless licensee that has provided substantial service during its past license term and has substantially complied with applicable FCC rules and policies and the Communications Act. The FCC has routinely renewed wireless licenses in the past. However, the Communications Act provides that licenses may be revoked for cause and license renewal applications denied if the FCC determines that a renewal would not serve the public interest. Violations of FCC rules may also result in monetary penalties or other sanctions. FCC rules provide that applications competing with a license renewal application may be considered in comparative hearings and establish the qualifications for competing applications and the standards to be applied in hearings.

Wireless systems are subject to Federal Aviation Administration and FCC regulations governing the location, lighting and construction of transmitter towers and antennas and are subject to regulation under federal environmental laws and the FCC’s environmental regulations, including limits on radio frequency radiation from wireless handsets and towers. Zoning and land use regulations, including compliance with historic preservation requirements, also apply to tower siting and construction activities.

Two-way Voice and Data Services. We hold geographic service area licenses granted by the FCC to provide cellular and PCS services. A cellular system operates on one of two 25 MHz frequency blocks in the 850 MHz band that the FCC allocates for cellular radio service. Cellular systems principally are used for two-way mobile voice applications, although they may be used for data applications and fixed wireless services as well. Cellular licenses are issued for either metropolitan statistical areas, or “MSAs”, or rural service areas, two in each area. At present, no entity may hold overlapping cellular licenses in the same rural service area without a waiver from the FCC.

A broadband PCS system operates under licenses issued in the 1900 MHz band. PCS systems generally are used for two-way voice applications, although they may carry two-way data communications and fixed wireless services as well. For the purpose of awarding PCS licenses, the FCC has divided the United

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States into 51 large regions called major trading areas, or “MTAs”, which are comprised of 493 smaller regions called basic trading areas, or “BTAs”. The FCC awarded two PCS licenses for each major trading area, known as the “A” and “B” blocks, and four licenses for each BTA known as the “C”, “D”, “E” and “F” blocks. Thus, generally, six PCS licenses are authorized in each area, together with two cellular licenses. The two MTA licenses authorize the use of 30 MHz of PCS spectrum. One of the basic trading area licenses is for 30 MHz of spectrum (the “C” block), and the other three are for 10 MHz each. The FCC permits a licensee to split its license and assign a portion, on either a geographic or frequency basis or both, to another party or parties.

We must satisfy a range of FCC-specified coverage requirements. For example, a cellular licensee was permitted five years following the grant of its license to provide service to its desired coverage area. The area it served with specified minimum signal strength became its licensed service area. Failure to provide that coverage to the boundaries of its initially licensed service area resulted in reduction of the relevant license area by the FCC. All 30 MHz PCS licensees must construct facilities that offer coverage to one-third of the population of the service area within five years of the original license grants and to two-thirds of the population within 10 years. All 15 MHz and 10 MHz PCS licensees must construct facilities that offer coverage to one-fourth of the population of the licensed area or “make a showing of substantial service in their license area” within five years of the original license grants. A licensee that fails to meet the coverage requirements may be subject to forfeiture of its license.

We use common carrier point-to-point microwave facilities and dedicated facilities leased from communications companies or other common carriers to connect our wireless cell sites and to link them to the main switching office. The FCC licenses point-to-point microwave facilities separately and they are subject to regulation as to technical parameters and service. Microwave licenses must also be renewed every 10 years.

Mobitex Wireless Data Services. We have separate licenses for each of the 900 MHz spectrum blocks that we use to provide most of our business data services. In 2003, the FCC approved our “substantial service” demonstration that we have met the network system build requirements of these licenses. Like other licenses, however, these are renewable every 10 years and require showings of continued “substantial service” and compliance with other license conditions, as described above.

Transfers and Assignments of Wireless Licenses. The Communications Act and the FCC rules require the FCC’s prior approval of the assignment or transfer of control of a license for a wireless system. Before we can complete any such purchase or sale, we must file appropriate applications with the FCC, and the public is by law granted a period of time, typically 30 days, to oppose or comment on them. In addition, the FCC has established transfer disclosure requirements that require licensees who assign or transfer control of a license acquired through an auction within the first three years of their license terms to file associated sale contracts, option agreements, management agreements or other documents disclosing the total consideration that the licensee would receive in return for the transfer or assignment of its license. Non-controlling minority interests in an entity that holds an FCC license generally may be bought or sold without FCC approval. However, notification and expiration or earlier termination of the applicable waiting period under Section 7A of the Clayton Act by either the U.S. Federal Trade Commission or the U.S. Department of Justice may be required, as well as notification of state or local regulatory authorities having competent jurisdiction, if we sell or acquire wireless systems.

Foreign Ownership. Under existing law, no more than 20% of an FCC licensee’s capital stock may be owned, directly or indirectly, or voted by non-U.S. citizens or their representatives, by a foreign government or its representatives or by a foreign corporation. If an FCC licensee is controlled by another entity, as is the case with our ownership structure, up to 25% of that entity’s capital stock may be owned

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or voted by non-U.S. citizens or their representatives, by a foreign government or its representatives or by a foreign corporation.

Foreign ownership above the 25% level may be allowed should the FCC find such higher levels not inconsistent with the public interest. The FCC has ruled that higher levels of foreign ownership, even up to 100%, are presumptively consistent with the public interest with respect to investors from certain nations, which are countries that are signatories to the World Trade Organization Agreement on Basic Telecommunications Services. However, the FCC, in adopting that strong presumption, did note the possibility exists that entry by a foreign carrier could be so detrimental as to require the imposition of conditions on entry by such a carrier or even a denial of entry. In addition, the FCC stated it would accord deference to legitimate national security, law enforcement, foreign policy and trade concerns raised by other federal agencies as part of the FCC’s analysis of whether to grant a particular authorization. The FCC has done that in certain cases where the U.S. Department of Justice and the U.S. Federal Bureau of Investigation have raised concerns, requiring the carrier to configure its network(s) to be capable of complying with lawful U.S. process and to make available in the United States certain call and customer data. Foreign ownership by entities from countries other than World Trade Organization member countries must meet a more stringent standard, and there is no assurance that the FCC would find a grant of such an application to be in the public interest. If our foreign ownership were to exceed the permitted level (through foreign ownership of our owners, their transfers of ownership in us or issuances of Class A common stock by our manager), the FCC could revoke our FCC licenses, although we could seek a declaratory ruling from the FCC allowing the foreign ownership or take other actions to reduce our foreign ownership percentage in order to avoid the loss of our licenses. We have no knowledge of any present foreign ownership that exceeds these limitations.

Spectrum Acquisitions and Leasing. Two of the ways by which we can attempt to meet our needs for additional spectrum are by acquiring spectrum licenses held by others or by accessing new spectrum being auctioned and licensed by the FCC. The Communications Act requires the FCC to award new licenses for commercial wireless services to applicants through a competitive bidding process. Therefore, if we need additional spectrum, we plan to acquire the spectrum, indirectly through joint arrangements, or directly in an auction for any new licenses that may become available or by purchasing existing licensed facilities and incorporating them into our system, provided that we are permitted to do so under FCC rules.

The FCC has announced that it will auction spectrum in the 700 MHz band. There are numerous television operators that currently occupy UHF television channels 52-69 in this band. Although these stations have been awarded a second channel to establish digital service, they also have the right to continue operation on the current channel through at least 2006, and potentially longer if various conditions are not met. Absent adoption of new federal legislation or rules that lead to “clearing” of the 700 MHz band earlier than current law requires, or the development of band-clearing mechanisms by these operators for relocation, this spectrum would be of limited use in the short-term for wireless services.

There are additional spectrum bands that may be suitable for our business, but this spectrum has not been allocated and auctions of this spectrum are not imminent.

In early 2004, the FCC’s new spectrum leasing rules become effective. These rules permit license holders to lease the use of their spectrum to others and provide that such holders can meet their network system build requirements through the facilities construction and operating activities of their lessees. The FCC has structured its rules such that it has minimal involvement in leasing activities. For these reasons, we view spectrum leasing as an attractive alternative to license acquisition in areas where we are spectrum constrained.

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Rates and Services. The FCC does not specify the rates we may charge for our services nor does it require us to file tariffs for our U.S. wireless operations. However, the Communications Act states that an entity, such as us, that provides commercial mobile radio services is a common carrier and is thus subject to the requirements of the Communications Act that it not charge unjust or unreasonable rates nor engage in unreasonable discrimination. The FCC may invoke these provisions to regulate the rates and related terms and conditions under which we provide service. In addition, the Communications Act defines a commercial mobile radio service provider as a common carrier, which makes it subject to a number of other regulatory requirements in its dealings with other carriers and customers. The following requirements impose restrictions on our business and increase our costs as well as the costs of other wireless carriers.

Recent Regulatory Developments. The FCC eliminated the rules limiting the amount of spectrum a wireless carrier can own in a market effective January 1, 2003. As yet, it has not replaced these spectrum limits with published rules or guidelines setting forth how the FCC will review carriers’ spectrum aggregations. The FCC also eliminated the prohibition on ownership of both cellular licenses by a single entity in metropolitan markets. Certain acquisitions of spectrum would remain subject to approval of the U.S. Department of Justice.

The FCC has imposed rules requiring carriers to provide emergency 911 services, including enhanced 911 services that provide to local public safety dispatch agencies the caller’s communications number and approximate location. Providers are required to transmit the geographic coordinates of the customer’s location within accuracy parameters set forth by the FCC, either by means of network-based or handset-based technologies. Providers may not demand cost recovery as a condition of doing so, although they are permitted to negotiate cost recovery if it is not mandated by the state or local governments. Because of the delayed availability of vendor equipment that could reasonably be relied upon to comply with the FCC’s location accuracy rules, we and other wireless carriers negotiated settlement arrangements with the FCC requiring payments to the U.S. Treasury and modified compliance standards and deadlines.

The FCC has established federal universal service requirements that affect commercial mobile radio service operators. Under the FCC’s rules, commercial mobile radio service providers are potentially eligible to receive universal service subsidies for the first time; however, they are also required to contribute to the federal universal service fund and may be required to contribute to state universal service funds. Contributions into the federal fund are based on the interstate and international revenues generated by the properties owned by a commercial mobile radio service provider. For 2003, we had payment obligations into the federal universal service fund of approximately $274 million. Because the amount that we are required to pay into the fund is based on revenues generated by our properties, we anticipate that this amount should continue to increase over time. We recover most of this expense from our customers. Many states also are moving forward to develop state universal service fund programs. A number of these state funds require contributions, varying greatly from state to state, from commercial mobile radio service providers. If these programs expand they will impose a correspondingly growing expense on our business.

The FCC has adopted rules regulating the use of telephone numbers by wireless and other providers as part of an effort to achieve more efficient number utilization. Wireless carriers were required to participate in this “number pooling”, beginning in November 2002.

On November 24, 2003, the FCC’s rules on wireless local number portability became operative, enabling wireless customers to keep their wireless number when switching to another carrier. These rules require wireless carriers to offer number portability to their customers in the top 100 MSAs now and to all other customers no later than May 24, 2004. These rules will likely increase competition, costs and customer churn.

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The FCC has adopted rules requiring wireless providers to provide functions to facilitate electronic surveillance by law enforcement officials pursuant to the Communications Assistance for Law Enforcement Act of 1995. These obligations are likely to result in significant costs to us for the purchase, installation and maintenance of network software and other equipment needed.

The Communications Act and the FCC’s rules grant various rights and impose various obligations on commercial mobile radio service providers when they interconnect with the facilities of local exchange carriers. Generally, commercial mobile radio service providers are entitled to “reciprocal compensation” in connection with the termination of wireline-originated local traffic, in which they are entitled to collect the same charges for terminating wireline-to-wireless local traffic on their system similar to the charges that the local exchange carriers levy for terminating wireless-to-wireline local calls. Interconnection agreements are typically negotiated by carriers, but in the event of a dispute, state public utility commissions, courts and the FCC all have a role in enforcing the interconnection provisions of the Communications Act. Although we have interconnection agreements in place with the major local exchange carriers in virtually all of our service areas, those agreements are subject to modification, expiration or termination in accordance with their terms. Moreover, we are negotiating and must continue to negotiate interconnection agreements with a number of independent telephone companies in our service areas. Until these agreements are concluded, we must accrue for contractual liabilities associated with the resulting unpaid invoices from those companies. Additionally, as we expand our coverage footprint, we will be required to negotiate interconnection arrangements with other wireline carriers.

The FCC has reallocated 30 MHz of spectrum from the 2 gigahertz (GHz) Mobile Satellite Service or MSS for fixed and mobile services. The FCC now proposes to combine part of the 1990-2000 MHz portion of that spectrum, which is adjacent to the upper limit of the base-to-mobile portion of the PCS C Block, with part of the currently unlicensed PCS spectrum at 1910-1920 MHz, which is adjacent to the upper limit of the mobile-to-base portion of the PCS C Block, to create a new PCS “G” Block. If adopted by the FCC, the new PCS “G” Block could be licensed to other wireless competitors. One plan would grant the PCS “G” block to Nextel in return for it relinquishing certain of its spectrum in the 700/800/900 MHz bands to alleviate public safety interference concerns. Another plan would grant the spectrum in specific locations to Multipoint Distribution Service licensees who are being displaced by the FCC to make room for new Advanced Wireless Service spectrum allocations in the 2 GHz band. Other possible allocations, including the auctioning of that paired spectrum, may be considered by the FCC in its decision making process.

The FCC has also decided to allow MSS licensees in three separate MSS bands to add an ancillary terrestrial component to their existing or proposed mobile satellite offering. The FCC has conditioned the deployment of the terrestrial offering such that it has to be integrated with the satellite offering of a licensee. In addition, satellites must be launched and operational before the terrestrial service can be initiated. It is likely that the satellite proponents will ask the FCC to minimize or eliminate these conditions which could permit them to forego their satellite service in favor of deploying a terrestrial network and offering service in direct competition with our cellular and PCS services.

State Regulation and Local Approvals. With the rapid growth and penetration of wireless services has come a commensurate surge of interest on the part of state legislatures and state public utility commissions and local governmental authorities in regulating our industry. This interest has taken the form of efforts to regulate customer billing, termination of service arrangements, advertising, filing of “informational” tariffs, certification of operation, use of handsets when driving, service quality, sales practices, and many other areas. We anticipate that this trend will continue. It will require us to devote legal and other resources to working with the states to respond to their concerns while minimizing any new regulation that could increase our costs of doing business.

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While the Communications Act generally preempts state and local governments from regulating entry of, or the rates charged by, wireless carriers, it also permits a state to petition the FCC to allow it to impose commercial mobile radio service rate regulation when market conditions fail adequately to protect customers and such service is a replacement for a substantial portion of the telephone wireline exchange service within a state. No state currently has such a petition on file. In addition, the Communications Act does not expressly preempt the states from regulating the “terms and conditions” of wireless service.

Several states have invoked this “terms and conditions” authority to impose or propose various consumer protection regulations on the wireless industry. California’s proposed rules are potentially quite costly. States also may impose their own universal service support requirements on wireless and other communications carriers, similar to the requirements that have been established by the FCC. At the local level, wireless facilities typically are subject to zoning and land use regulation. Neither local nor state governments may categorically prohibit the construction of wireless facilities in any community or take actions, such as indefinite moratoria, which have the effect of prohibiting construction. Nonetheless, securing state and local government approvals for new tower sites has been and is likely to continue to be difficult, lengthy and costly.

In addition, state commissions have become increasingly aggressive in their efforts to conserve telephone numbering resources. These efforts may impact wireless service providers disproportionately by imposing additional costs or limiting access to numbering resources. Examples of state conservation methods include number pooling, number rationing and code sharing. In many markets, the supply of new numbers is inadequate to meet growing customer demands, but states have been and continue to be reluctant to deploy new area codes.

Further, states have become more active in imposing new taxes on wireless carriers, such as gross receipts taxes, and fees for items such as the use of public rights of way. These taxes and fees are generally passed through to our customers and result in higher costs to our customers.

Factors Relating to Our Business

Substantial competition in all aspects of our business could continue to cause reduced pricing and have adverse effects on our profit margins. There is substantial and increasing competition in all aspects of the wireless communications industry. We expect this to continue even after our planned acquisition of AT&T Wireless. Competition continues to intensify as wireless carriers include more equipment discounts and bundled services in their offerings, including more minutes and free long distance and roaming services. This contributes to downward pressure on revenue growth and profit margins, and we expect this trend to continue.

Our competitors are principally five other national carriers doing business as Verizon Wireless, AT&T Wireless (until the acquisition is consummated), Sprint PCS, Nextel Communications and T-Mobile, respectively, and a large number of regional providers of cellular, PCS and other wireless communications services, resellers and wireline telephone service providers. NextWave holds a substantial number of radio spectrum licenses to provide PCS service, and it may sell the licenses to our competitors, form ventures and/or construct wireless data networks, which would increase competition for wireless data customers.

FCC regulations and government policy in general promote robust competition, and new rules or changes to existing rules, such as rules providing for spectrum leasing and requiring wireless local number portability for customers changing wireless local carriers, could increase this trend and result in higher churn and lower margins.

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Many of our competitors have substantial financial, technical, marketing, distribution and other resources. As a response to the intensifying competition, the need for cost reduction and the requirements for additional radio spectrum, we believe that the industry may consolidate to some extent in the next several years. This may produce larger and more formidable competitors with greater financial ability to continue to reduce prices to increase their customer base. As a result, our market share and profit margins may decrease.

New wireless data technologies, such as “Wi-Fi”, are being developed and deployed by competitors, which may make our wireless data offerings less attractive.

If we do not successfully complete the acquisition of AT&T Wireless, we will miss an opportunity to achieve significant growth in the near term. We agreed to acquire AT&T Wireless for a number of reasons, including the following:

•	AT&T Wireless fills in our spectrum and network footprints by covering areas where we do not have licenses or network infrastructure;
•	AT&T Wireless adds depth to our spectrum position, enhancing our ability to offer future high-speed data services and reduce capital expenditures;
•	AT&T Wireless’ customer base, which has a stronger business customer component than ours, adds a complementary customer mix to our customer base;
•	AT&T Wireless’ average revenue per user, or “ARPU”, is higher than our customers’ ARPU;
•	AT&T Wireless gives us added size and scale to compete more effectively in the industry and to procure more significant cost economies from vendors; and
•	the merger will reduce our incollect roaming costs that we incur because of our broader post-acquisition footprint.

While we believe we have the ability to compete vigorously in the marketplace now, we believe that we must grow, either internally or through acquisition, to achieve our goal of becoming the pre-eminent wireless carrier. Failure to consummate the AT&T Wireless acquisition would place additional challenges on us to reach this position through internal growth or other acquisitions. This result would be exacerbated by the combination of other of the major wireless competitors.

While there are risks in not closing the acquisition of AT&T Wireless, the consummation of the transaction poses significant challenges and risks. As a result of our acquisition agreement and efforts to close the transaction, our business could suffer over the near term as a result of factors, including:

•	customer churn could increase if customers experience or anticipate service deterioration arising from delayed or ineffective merger integration;
•	competition could increase as other carriers focus more on emphasizing and exaggerating potential service degradation;
•	required changes in the business to achieve regulatory approval for the acquisition could hinder our growth; and
•	although we expect to achieve significant capital and operating cost synergies after the next several years, the implementation of integration efforts, transaction-related costs and possible continued deterioration of AT&T Wireless’ operating results will initially reduce our operating performance and margins.

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Item 1.	Business

We will not control the operations of AT&T Wireless prior to closing. Therefore, we cannot implement policies to improve its operating performance. If its management fails to execute its strategies and policies to optimize the value of its business, we could acquire a company with unsatisfactory performance and growth prospects.

Delays in closing the acquisition of AT&T Wireless would prevent us from owning it and implementing our policies and integration initiatives. Such delays could make the integration efforts more challenging, prolong the period before we begin realizing cost synergies from the combination of the two companies, increase our operating costs, increase customer churn, lower the value of the combined companies and, depending on the severity of the delays, could jeopardize the acquisition.

Factors that could delay the closing of the acquisition include:

•	prolonged proceedings before the FCC pertaining to license transfers or before the U.S. Department of Justice pertaining to anti-trust clearance; and
•	litigation challenging the acquisition agreement.

Because we cannot control the policies, strategies and operations of AT&T Wireless until the closing of the transaction, we are unable to take action to address previously disclosed problems at AT&T Wireless or otherwise maximize the value of the business that we will acquire. If the management of AT&T Wireless is not successful in meeting its own operational challenges, its customer growth and financial results could suffer and our ability to achieve cost reductions, efficiently integrate the two businesses and restore customer and financial growth after the closing could be significantly jeopardized. Actual or perceived operational problems at AT&T Wireless and adverse publicity about the timing of and issues pertaining to the acquisition could result in increased customer churn and decreased customer additions to both businesses.

Two other national wireless competitors could enter into an agreement to combine their operations, and if our regulatory approval process is significantly extended, circumstances could arise that could result in the FCC and the U.S. Department of Justice approving that transaction before reaching a decision with respect to ours. If that occurs, there would be a heightened risk that those regulatory authorities might disapprove our acquisition of AT&T Wireless.

In order to obtain regulatory consents to consummate the acquisition of AT&T Wireless, we and/or AT&T Wireless may be required to make divestures of assets or take other actions that would diminish the value of the acquisition to us. In general, we can terminate the merger agreement only for misrepresentations, breaches and developments prior to the closing that are material and adverse. We are excused from taking actions to satisfy regulatory conditions only if the aggregate adverse effects on us, SBC and BellSouth would be substantial.

There is no assurance we would be able to obtain what we consider fair value for any required divestitures. Consequently, we could be required to close the transaction and acquire a substantially less valuable AT&T Wireless than currently exits.

Furthermore, adverse effects on SBC and BellSouth are included in the calculation of net adverse effects. As a result, SBC and BellSouth could require us to terminate the acquisition even if there is no devaluation of the acquisition to us if they were required to take certain actions adverse to their own interests as a condition of regulatory approval.

Acquisitions, including AT&T Wireless, could be costly and time consuming to integrate. One element of our strategy is to expand the geographic coverage of our network, which we could achieve by obtaining

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access to additional spectrum through acquiring wireless carriers or forming joint ventures or alliances with the existing businesses of other wireless providers. Integrating existing operations that we could acquire into our own operations may be difficult, time consuming and costly.

The challenges to integrate AT&T Wireless into us include:

•	demonstrating to customers that the transaction will not result in adverse changes in client service standards or business focus;
•	integration and rationalization of separate analog, TDMA and GSM network systems;
•	consolidating and rationalizing corporate information technology (IT) and administrative infrastructures;
•	combining product offerings;
•	coordinating sales and marketing efforts to communicate our capabilities effectively;
•	preserving distribution, marketing or other important relationships and resolving potential conflicts that may arise;
•	coordinating and rationalizing research and development activities to enhance introduction of new products and technologies with reduced cost;
•	minimizing the diversion of management attention from ongoing business concerns;
•	persuading employees that business cultures are compatible, maintaining employee morale and retaining key employees; and

If we do not successfully address these integration challenges in a timely manner, we may not realize the anticipated benefits or synergies of the transaction to the extent, or in the timeframe, anticipated. The size and scale of the proposed merger with AT&T Wireless increase both the scope and consequences of ongoing integration risks.

Our initiatives to migrate customers to a new technology could result in heightened customer churn and lower profits. Our networks currently utilize two distinct digital voice technologies — GSM and TDMA. In order to adopt a single standard across our networks, we are concluding the process of adding GSM technology to all of our networks. GSM is the predominant global standard and offers substantial cost efficiencies to us and our customers. As we encourage customers to migrate from TDMA to GSM service, they may perceive shortcomings in the coverage and quality of GSM service, compared to TDMA service, which could cause them to switch from our service to the offerings of a competitor.

As we dedicate more resources to new GSM voice technology, our TDMA offerings could become less attractive, resulting in a loss of customers and reduced profitability. We expect to continue operating our TDMA network for the foreseeable future as customers migrate to GSM technology. Due to our decision to overlay our TDMA network with GSM technology and to encourage our customers to migrate to GSM service, we expect not to upgrade our TDMA network with the same robust features that we will provide on our GSM networks. Furthermore, as we dedicate more spectrum to GSM, our remaining TDMA customers may experience difficulties in using our services. In addition, as we introduce and market GSM service, we may price GSM products and services at more attractive levels than TDMA products and services to encourage our customers to migrate to GSM service. Manufacturers are not expected to produce innovative TDMA handsets with the same multiplicity of features and attractiveness of design as handsets using other technologies. All of these potential developments could drive our TDMA customers to our competitors instead of to our GSM offerings and thereby reduce our market share and profitability.

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If we fail to obtain access to additional spectrum, we may not be able to expand the geographic reach of Cingular-branded services, increase our customer base in areas we currently serve or meet the anticipated demand for new services. We expect to acquire substantial spectrum from the pending NextWave license and AT&T Wireless acquisitions in 2004. Over the long term, however, we may need more licensed spectrum to support high speed data and other advanced services, expand our geographic reach, to meet an expected increasing volume of customer usage and to increase our customer base. If we cannot obtain access to new markets through auctions, spectrum exchanges or leasing, acquisitions, joint ventures or other means, it could impede our growth. In addition, an inability to add spectrum in some of our existing markets could adversely affect the quality of service if the demand for wireless communications continues to increase at a rapid rate. There are no spectrum auctions scheduled in the near future at which we could obtain needed spectrum, and there can be no assurance that we will be able to obtain access to additional spectrum from secondary market sources on acceptable terms. Therefore, we cannot give assurance that we will be successful in obtaining access to the additional spectrum needed to expand our geographic coverage and meet the growing needs of our business.

If our roaming partners do not complete their GSM networks and remain viable operators, our ability to provide national GSM coverage could be jeopardized. As a result, our customers might conclude that our service is less satisfactory than that of a competitor with a more substantial national footprint, and our growth, churn rate and profit margin might suffer.

Even upon the completion of our GSM/GPRS overlay project, we will have to rely on roaming agreements with other GSM/GPRS service providers to provide national GSM/GPRS coverage. We have negotiated agreements with these carriers to provide roaming services in certain geographic areas at rates substantially more favorable than TDMA network roaming rates. Some of these carriers are still building their GSM/GPRS networks. If those carriers are delayed or prevented from completing their GSM/GPRS networks, or if they cease doing business, our GSM/GPRS customers might be unable to roam on those networks when out of their home service areas, or they may have to roam on carriers’ networks with which we have less favorable roaming agreements.

We are committing a substantial amount of capital to upgrade our wireless voice networks to offer advanced data services, but there can be no assurance that widespread demand for these services will develop. While demand for our advanced data services is growing, it is currently a small portion of our revenues. Continued growth in wireless data services is dependent on increased development and availability of popular applications and improved availability of handsets and other wireless devices with features, functionality and pricing desired by customers. EDGE is a new technology and a limited number of applications and devices designed to operate on this technology are currently available. If applications and devices are not developed and become commercially accepted, our revenues and competitive position would be materially and adversely affected. We cannot give assurance that in the near future there will be widespread demand for advanced wireless data services or that data revenues will constitute a significant portion of our total revenues, nor can we provide assurance that this demand will develop at a level that will allow us to earn a reasonable return on our investment.

Our choice for the next generation of technology, EDGE, is a new technology and could quickly become obsolete and/or not commercially accepted, which could result in a delay in offering new services. New high-speed 3G wireless services are now being offered by wireless carriers in the United States. We expect that 3G services will combine the attributes of faster speed, greater data capability, better portability and greater functionality than services provided over existing second-generation networks. We have chosen EDGE as our 3G technology, but we believe that there will be multiple, competing technological standards, several options within each standard, vendor-proprietary variations and rapid technological innovation. Other technologies could emerge as preferred data networks for some services and, if those

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technologies are widely accepted, we may miss the opportunity to offer those services because of our technology choice. There is a risk that EDGE could be inadequate or become obsolete. In addition, EDGE could receive less active support from equipment vendors and/or be less commercially accepted by users, which could be detrimental to our competitive position, financial condition and results of operations.

Because some of our operations are conducted through joint ventures with other companies, we cannot control all aspects of our business, and disputes with our partners may damage our reputation as a nationwide brand. Despite our commitments to provide substantial funds to joint venture affiliates, we do not have control of their managements. In addition, we have ventures to share infrastructure and save us a large portion of the cost of building and maintaining our own network in certain areas where we own wireless licenses, such as in California, Nevada and the New York metropolitan area. If we experience disagreements with our partners, it could adversely affect our ability to serve our customers in those areas and profitably grow our business.

Our network sharing ventures may impede our ability to compete effectively in the covered territories. We share network infrastructure in some areas, e.g., California, Nevada and New York City, with joint venture partners. As a result, both our customers and our partners’ customers use the same network infrastructure in these areas. If the combined demand for service through the joint ventures far exceeds the network capacity, temporary degradation of service and loss of customers may result until capacity is increased.

Our business expansion and network upgrade will require substantial additional capital, and we cannot assure you that we will be able to obtain funding at a satisfactory cost. We will require substantial capital for acquisitions of systems, construction of network infrastructure, concluding our technology migration and upgrade plan, expanding our network capacity, investing in joint venture affiliates and making other capital investments. In addition, we will be required to make distributions to SBC and BellSouth under our limited liability company agreement to cover their tax liabilities that may arise from their interests in us to the extent that we generate taxable income, which will deplete cash available for these projects.

The actual amount of capital required may vary materially from our current estimates. Unforeseen delays, cost overruns, regulatory changes, engineering and technological changes, legal costs and judgments and other factors may also require additional funds.

As a result of the cash needs described above, we may need to incur significant amounts of additional debt or to raise equity. Incurring substantial amounts of additional debt, failing to improve our operating performance and perceived uncertainties surrounding the acquisition, SBC and BellSouth financing and our integration of AT&T Wireless and the NextWave licenses could result in negative actions by the major credit rating agencies, which could increase our cost of borrowing. In addition, we may not be able to obtain debt or equity funds on satisfactory terms from the capital markets, from other sources or from SBC or BellSouth, neither of which has any obligation to provide us additional funding, besides the agreement to provide funding for the AT&T Wireless acquisition. The failure to obtain financing could result in, among other things:

•	delay or abandonment of our business development and expansion or network upgrade plans; or
•	failure to meet regulatory network system build requirements or to continue to provide service in all or portions of some of our markets, any of which could result in slower business growth and loss of competitive position.

Failure of certain of our key suppliers to deliver equipment and services could adversely affect our ability to operate our business. We depend upon various key suppliers to provide us with equipment and services that we need to continue our network upgrade and operate our business. Some of these suppliers have

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experienced financial and business difficulties, and if these or any of our other suppliers fail to provide equipment or service to us on a timely basis, we may be unable to provide services to our customers in a competitive manner. If we are unable to obtain the hardware and software we need to construct licensed territories, our licenses may be at risk of termination for failure to satisfy the requirements contained in our FCC licenses regarding the construction of our networks.

We have an agreement with Research in Motion Limited, or “RIM”, to purchase Blackberry™ hand-held devices for use in our data communications business. A trial court has held that, in litigation against RIM by various patent holders, these devices infringe several patents. If we cannot obtain these or comparable devices from RIM on a reasonable financial basis, it could impair our profit margins and disrupt our wireless data business.

The potential impact of unionization and organizing activities, which we expect to increase, could adversely affect our costs and results of operations. All of our businesses, excluding ventures, are subject to various agreements with the Communications Workers of America (CWA). These agreements contain provisions requiring us to maintain neutrality if the union conducts an organizing campaign and requiring us to allow employees to vote to unionize by presenting authorization cards rather than participating in a more difficult secret ballot process conducted by the National Labor Relations Board. In an effort to gain recognition in the areas not already covered by a contract, union activity may increase. We believe that no other national wireless provider currently employs a unionized workforce to any significant extent. We have major labor agreements with the CWA covering approximately 8,000 employees that expire in early 2004. At the expiration of the agreements, a work stoppage could prevent us from providing service to our customers in the areas covered by the expired contracts and possibly result in customer loss and a reduction in revenue.

Factors Relating to Our Industry

We may be adversely affected by the significant changes that we expect the wireless communications industry to undergo. The wireless communications industry is experiencing significant changes. These include evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new services, evolution to 3G standards, changes in end-user needs and preferences and high costs and customer churn due to implementation of wireless local number portability. Also, alternative technologies are developing for the provision of services to customers that may provide wireless communications services or alternative services superior to those available from us. Accordingly, there can be no assurance that technological changes will not materially adversely affect us.

Our industry will continue to be adversely affected if the economic slowdown persists. While the economies of the United States and many other nations are improving, they continue suffering from sluggish employment growth. There can be no assurance that this will not continue to adversely affect the industry.

Our operations are subject to substantial government regulation, which could significantly increase our costs and increase customer churn. Many aspects of our business are regulated to varying degrees by the FCC and some state and local regulatory agencies. The adoption or change of regulations could significantly increase our costs and increase customer churn. For example, the FCC, together with the Federal Aviation Administration, regulates tower marking and lighting. In addition, the FCC and the states are increasingly looking to the wireless industry to fund various initiatives, including universal service programs, local telephone number portability, services for the hearing-impaired and emergency 911 networks. Furthermore, many states have imposed significant taxes on the wireless industry and are regulating customer billing matters. We are also subject to environmental protection and health and safety regulation, including limits on radio frequency energy from wireless handsets and towers. The failure to

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comply with any of these regulations, even if hardware and software solutions are not readily available from manufacturers and suppliers, can result in significant penalties.

The FCCs local number portability regulations did not include specific rules governing the process, and the wireless carriers have had to negotiate inter-carrier agreements with each other addressing procedures for transferring numbers when customers change carriers. Because the software and automated processes are new and the procedures are non-standardized throughout the industry there have been and may continue to be delays or malfunctions in the process of transferring numbers when customers change carriers. This may continue to exacerbate churn and expenses and slow customer growth. It has and could continue to reduce revenues, since carriers are not allowed to condition number portability on bringing delinquent accounts current.

A high rate of customer churn would negatively impact our business. Wireless communications services providers, including us, experience varying rates of customer churn. We believe that customers change wireless providers for the following reasons: call quality, service offerings, price, coverage area and customer service. 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 customer, which generally includes a commission expense and/or a handset subsidy, is a significant factor in income and profitability for participants in the wireless industry. We believe industry-wide churn has increased slightly with the implementation of wireless local number portability. Churn from this new regulatory initiative could increase substantially over time as service contracts expire and customers become more familiar and comfortable with the processes involved in changing carriers. Carriers are not allowed to condition number portability on bringing delinquent accounts current. We expect to incur significant expenses to improve customer retention and reduce churn by subsidizing product upgrades and/or reducing pricing to match competitors’ initiatives, upgrading our network and providing improved customer service.

Concern about alleged health risks relating to radio frequency energy may harm our prospects. A number of studies have been conducted to examine the health effects of wireless phone use, and some persons have construed some of the studies as indicating that wireless phone use causes adverse health effects or that wireless phones’ safety has not been established. Some media reports have also suggested that radio frequency energy from wireless handsets, accessories and cell sites may be associated with various health problems, including cancer. In addition, lawsuits have been filed against us and other participants in the wireless industry alleging actual and potential adverse health consequences as a result of wireless phone usage. Some of these lawsuits allege other related claims, including negligence, strict liability, conspiracy and the misrepresentation of or failure to disclose these alleged health risks. If consumers’ health concerns over radio frequency energy increase, they may be discouraged from using wireless handsets, and regulators may impose restrictions on the location and operation of cell sites. These concerns could have an adverse effect on the wireless communications industry and expose wireless providers to further litigation, which, even if not successful, can be costly to defend. Additional studies of radio frequency energy are ongoing and new studies are anticipated. Any negative findings in these studies could increase the risks described above. In addition, an adverse outcome or settlement in the existing and/or any further litigation against us or any other provider of wireless services could have a material adverse effect on our results of operations, financial condition and/or prospects.

State and local legislation regarding wireless phone use while driving may adversely affect us. Many states and municipalities have proposed, and several, including New York State, New Jersey and the District of Columbia have enacted, legislation that requires the use of a hands-free accessory while driving an automobile, which may discourage use and could decrease our revenues from customers who now use their phones when driving. Such legislation, if adopted and enforced throughout the areas we serve, may reduce, in the short term, sales, usage and revenues. In addition, allegations that using wireless phones

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while driving may impair drivers’ attention may lead to potential litigation relating to traffic accidents and further governmental regulation, which could adversely affect our results of operations.

A number of our FCC licenses to provide wireless services are subject to renewal and potential revocation in the event that we violate applicable laws. A number of our licenses are subject to renewal, generally some each year, upon the expiration of the 10-year period for which they are granted, and we cannot assure you that the FCC will renew them. In addition, FCC rules require all wireless licensees to meet specified network system build requirements, and failure to comply with these and other requirements in a given license area could result in termination or cancellation of our license for that license area or the imposition of fines by the FCC. If any of our licenses are forfeited or revoked, we would not be able to provide service in that area unless we contract to resell wireless services of another provider, utilize roaming agreements or lease spectrum from other carriers.

Equipment failure and disasters may adversely affect our operations. A major equipment failure or a disaster that affects our wireless telephone switching offices, 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 customers 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, even for a limited time period, may result in a loss of customers or impair our ability to attract new customers, which would have a material adverse effect on our business, results of operations and financial condition.

The restricted supply of new telephone numbers could limit or delay our growth. The supply of new telephone numbers in some areas of the United States is near exhaustion due, in large part, to competitive wireline carriers having obtained large blocks of numbers and rapidly growing customer demand for additional numbers for wireless handsets and pagers as well as for second voice lines, Internet access and private branch exchange systems, or private telephone networks used within enterprises. Many states have imposed restrictions on carriers’ access to additional numbers, creating shortages and delay in obtaining needed number resources. If we are unable to obtain a sufficient supply of new telephone numbers, our ability to increase our customer base would be adversely affected.

Factors Relating to Our Arrangements with SBC and BellSouth

SBC and BellSouth may transfer their controlling interests in us and cease to be subject to certain obligations that benefit us, including exclusivity provisions. Under our limited liability company agreement and the stockholders’ agreement among our manager, SBC and BellSouth, each of SBC and BellSouth will cease to be subject to many of the restrictions imposed on it in the limited liability company agreement that benefit and protect us, such as restrictions on competition and acquisitions of other wireless businesses, once its ownership interest falls below 10%. Although both SBC and BellSouth are subject to a number of transfer restrictions, each of them may, under the circumstances described in our limited liability company agreement, sell its interests in us and its common stock in our manager to third parties, subject to a right of first refusal of the respective other party, or spin-off or split-off its interests in us or its stock in our manager to its shareholders. In addition, we may lose any competitive advantage we currently gain from our agency relationships and service bundling offerings with SBC and BellSouth.

SBC and BellSouth may compete with us in the areas of fixed wireless voice and data services and may resell our services under their own brand names inside their service territories after specified future dates. SBC and BellSouth have agreed in our limited liability company agreement to engage in the provision of U.S. mobile wireless voice and data services only through us and our subsidiaries, but the agreement is subject to significant exceptions, including an exception that permits them to market and sell fixed wireless

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Item 1.	Business

voice and fixed wireless data services and to market and sell wireless services in areas in which we, our subsidiaries or Salmon are not providing services pursuant to FCC licenses. SBC and BellSouth may also amend the agreement to provide that they can engage in other competitive activities, such as “Wi-Fi” wireless data service. SBC and BellSouth are permitted to resell our services under their own brand names outside their service territories. In addition, if BellSouth or SBC terminates its wireless agency agreement, it may resell our wireless services in its respective service territories.

The arrangements that we have with SBC and BellSouth were established by SBC and BellSouth, and may not be as advantageous as similar agreements negotiated with unaffiliated third parties. We have entered into various agreements with SBC and BellSouth and their respective affiliates that are material to the conduct of our business, and we may enter into additional agreements with them in the future. For example, we have entered into agency agreements with SBC and BellSouth that include pricing and other terms. Although we believe that these agreements, as a whole, are as advantageous to us as those that could otherwise be obtained, we have no independent verification that these agreements are as advantageous as similar agreements negotiated with unaffiliated third parties.

Under the terms of agreements with SBC and BellSouth, the scope of our potential business is limited, which could hurt the growth of our business. We have agreed with SBC and BellSouth that, without their consent, we may not enter into any business other than the U.S. mobile wireless voice and data business. These restrictions could limit our ability to grow our business through initiatives such as expansion into international markets and acquisitions of wireless providers that are also engaged in other businesses outside of our permitted activities. These restrictions may also preclude us from pursuing other attractive related or unrelated business opportunities.

SBC and BellSouth control all important decisions affecting our governance and our operations and may fail to agree on important matters. Under the terms of our limited liability company agreement, our management is exclusively vested in our manager. Both the board of directors and the strategic review committee of our manager are comprised of four directors: two elected by SBC and two elected by BellSouth. Substantially all important decisions of our manager must be approved by its strategic review committee. It is possible that the committee may be deadlocked regarding matters that are very important to us. Although deadlocks are to be resolved by the chief executive officers of SBC and BellSouth, if they cannot agree, inaction or disputes may result, which could, among other things, result in us losing important opportunities.

SBC and BellSouth may have conflicts of interest with us. Conflicts of interest may arise between us and SBC and BellSouth when we are faced with decisions that could have different implications for us and SBC or BellSouth, including technology decisions, financial budgets, repayment of member loans from SBC and BellSouth, the payment of distributions by us and other matters. They may also take action that favors their businesses and the interests of their shareholders over our wireless business and the interests of our debt holders. Because SBC and BellSouth control us, conflicts of interest could be resolved in a manner adverse to us or our debt holders. Therefore, we may not always be able to use our resources in the best interest of advancing our business.

We lease our corporate headquarters buildings in Atlanta, Georgia. We also maintain administrative and sales offices, customer care call centers, retail sales locations, switching centers, cell tower sites and data centers throughout the United States. Most locations are generally leased to provide maximum flexibility.

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Switching centers and data centers are frequently owned due to their critical role in our operations and high set-up and relocation costs.

As of December 31, 2003, we operated a direct distribution channel comprised of approximately 1,700 company-operated stores and kiosks. We have one central handset and accessory distribution center located in Memphis, Tennessee. Network properties included 200 switches and 21,700 cell sites.

We believe that our facilities are in good operating condition and are currently suitable and adequate for our business operations.

In September 2003, an Administrative Law Judge of the California Public Utilities Commission issued a Presiding Officer’s Decision that recommended a fine of approximately $12 million, plus potentially significant restitution to customers, against Cingular for alleged violations of California’s consumer protection laws. Cingular has appealed that Decision to the full Commission.

We are a party to various legal actions and regulatory proceedings relating to matters that are incidental to the conduct of our business. These involve disputes with and inquiries by private parties and governmental entities over patent infringement, agency and reseller relationships, unfair competition, marketing, advertising, promotions, sales, billing and collection practices and potential health effects of wireless phones.

We are also subject to claims incidental to the normal conduct of our business, including actions by customers, vendors and employees and former employees. We believe that these matters will not be material to our financial position, results of operations or cash flows.

None

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There is no established trading market for our ownership interests. SBC owns approximately 60% of our ownership interests and BellSouth owns approximately 40% of our ownership interests. Cingular Wireless Corporation, our manager, owns the remaining 0.0000001% ownership interest in us.

We are required to make periodic distributions to our members on a pro rata basis in accordance with each member’s ownership interest in amounts sufficient to permit members to pay the tax liabilities resulting from allocations of income tax items from us. During 2001, we made distributions to members of $47 related to 2000 tax liabilities and $592 related to 2001 tax liabilities. Since we did not generate taxable income to the members in 2002 and 2003, we made no distributions in either year.

Additionally, we are required to distribute to our members 50% of our “excess cash”, as defined in our operating agreement, at the end of each fiscal year. Excess cash consists of funds generated from our operations, less forecasted cash needs for the upcoming fiscal year and distributions made to the members for their tax payments. In all years presented, we were not required to make any distributions of excess cash to the members and do not anticipate being required to make any such distributions in 2004.

The following selected financial data should be read in conjunction with the Cingular Wireless LLC consolidated financial statements and the notes thereto contained herein in “Item 8. Financial Statements and Supplemental Data”, the information contained herein in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the information contained herein in “Item 1. Business — Factors Relating to our Business, — Factors Relating to our Industry and — Factors Relating to Our Arrangements with SBC and BellSouth”. Historical results are not necessarily indicative of future results.

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Item 6.	Selected Financial Data

Selected Historical Financial Information — Cingular Wireless LLC

The following table presents selected historical consolidated financial and operating data of Cingular Wireless LLC from the date of its formation, April 24, 2000. The financial data presented in this table is derived from the historical financial statements and related notes, which are included in this document. The results for the period April 24, 2000 to December 31, 2000 presented below include the contributed SBC and BellSouth Domestic Wireless Groups’ wireless operations from October 2, 2000; there were no meaningful results of operations of Cingular Wireless LLC prior to that date.

To be consistent with emerging industry practices, the historical Cingular Wireless LLC consolidated statements of income for all periods presented have been reclassified to reflect billings to our customers for the Universal Service Fund (USF) and other regulatory fees as operating revenues and the costs related to payments into the associated regulatory funds as operating expenses. See also “Operating Expenses — Cost of Services” below. Operating income and net income for all periods have been unaffected.

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Item 6.	Selected Financial Data

(1)	Subsequent to November 2001, depreciation expense related to the assets transferred to GSMF is classified as a component of equity in net loss of affiliates and is no longer included in operating expenses.
(2)	For the year ended December 31, 2002, net income includes a cumulative effect of accounting change, net of tax, of $32 upon the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. See Note 4 to the Cingular Wireless LLC audited financial statements included in Item 8.
(3)	Capital expenditures do not include capital expenditures and cash contributions related to our infrastructure venture, GSMF. See Note 5 to the Cingular Wireless LLC audited financial statements included in Item 8.
(4)	Licensed POPs refers to the number of people residing in areas where we have licenses to provide cellular or PCS service.
(5)	Cellular/PCS customers include customers served through reseller agreements. In 2001, cellular/PCS customers include customers associated with additional wireless businesses subsequently contributed by our members.
(6)	Cellular/PCS customer churn is calculated by dividing the aggregate number of cellular/PCS customers who cancel service during each month in a period by the total number of cellular/PCS customers at the beginning of each month in that period.
(7)	ARPU is defined as cellular/PCS service revenues during the period divided by average cellular/PCS customers during the period. This metric is used to compare the recurring revenue amounts generated on our network to prior periods and internal targets. We believe that this metric provides useful information concerning the performance of our initiatives to attract and retain high value customers and the use of our network.
(8)	Earnings consist of income before income taxes, extraordinary gain (loss), cumulative effect of accounting changes and fixed charges. Fixed charges include interest expense, capitalized interest and the portion of rent expense representing interest.

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Selected Historical Financial Information — SBC Domestic Wireless Group

The following table presents selected historical consolidated financial and operating data of the SBC Domestic Wireless Group. The statements of operations and cash flow data for the year ended December 31, 1999 and the period ended October 2, 2000 are derived from the audited financial statements of the SBC Domestic Wireless Group. We derived the operating data from unaudited financial reports of the SBC Domestic Wireless Group.

The historical financial information includes the results of operations and cash flows for the SBC Domestic Wireless Group for all periods, retroactively restated to reflect the mergers of SBC with the wireless businesses of Pacific Telesis Group, Southern New England Telecommunications Corporation and Ameritech Corporation (Ameritech) as poolings of interests. Historical financial information also includes the results of operations and cash flows for acquisitions from their dates of acquisition and includes the results of operations and cash flows from various disposed assets until their dates of disposition. The revenues and expenses presented below have not been adjusted for the USF and other regulatory fees as previously noted in the historical financial information for Cingular Wireless LLC as such amounts are immaterial.

(1)	In October 1999, SBC completed the required disposition, as a condition of the Ameritech merger, of 20 Midwestern cellular properties, including the competing cellular licenses in Chicago, Illinois, and St. Louis, Missouri and other markets. The SBC Domestic Wireless Group recorded an extraordinary gain of $1,379 on this sale, net of taxes of $960.
(2)	In September 2000, adjustments related to calculations of the 1999 gain on the required disposition of the 20 Midwestern cellular properties following the Ameritech merger referred to in note (1) above resulted in an additional extraordinary gain of $36, net of taxes of $24.

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(3)	The SBC Domestic Wireless Group’s results in 1999 include the effect of conforming the adoption date for postretirement accounting between SBC and Ameritech. This change was recorded in the third quarter of 1999, retroactive to January 1, 1999, as a cumulative effect of accounting change of $14, net of taxes.
(4)	Net cash provided by operating activities for the period ended October 2, 2000 reflects a tax payment of $1,102 associated with the sale of the 20 Midwestern cellular properties referenced in note (1).
(5)	Cellular/PCS customers include customers served through reseller agreements.
(6)	Cellular/PCS customer churn is calculated by dividing the aggregate number of cellular/PCS customers who cancel service during each month in a period by the total number of cellular/PCS customers at the beginning of each month in that period.
(7)	Average revenue per user (ARPU) is defined as cellular/PCS service revenues during the period divided by average cellular/PCS customers during the period. This metric is used to compare the recurring revenue amounts generated on our network to prior periods and internal targets. We believe that this metric provides useful information concerning the performance of our initiatives to attract and retain high value customers and the use of our network.

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Selected Historical Financial Information — BellSouth Domestic Wireless Group

The following table presents summary historical consolidated financial and operating data of the BellSouth Domestic Wireless Group. The statements of operations and cash flow data for the year ended December 31, 1999 and the period ended October 2, 2000 are derived from the audited financial statements of the BellSouth Domestic Wireless Group. We derived the operating data from unaudited financial reports of the BellSouth Domestic Wireless Group.

The historical financial information for the BellSouth Domestic Wireless Group includes the results of operations and cash flows for various significant acquisitions from their dates of acquisition and includes the results of operations and cash flows from various disposed assets until their dates of disposition. The revenues and expenses presented below have not been adjusted for the USF and other regulatory fees as previously noted in the historical financial information for Cingular Wireless LLC as such amounts are immaterial.

(1)	Total operating expenses include a provision for asset impairment in 1999. This provision represents non-cash charges associated with disposals of infrastructure equipment in 14 wireless markets in the southeastern United States. This charge of $320 was recorded to adjust these assets to their fair market value, as required under SFAS 121, and was estimated by discounting the expected future cash flows of these assets through the date of disposal. This equipment was replaced with new equipment.
(2)	Cellular/PCS customers include customers served through reseller agreements.
(3)	Cellular/PCS customer churn is calculated by dividing the aggregate number of cellular/PCS customers who cancel service during each month in a period by the total number of cellular/PCS customers at the beginning of each month in that period.

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(4)

Average revenue per user (ARPU) is defined as cellular/PCS service revenues during the period divided by average cellular/PCS customers during the period. This metric is used to compare the recurring revenue amounts generated on our network to prior periods and internal targets. We believe that this metric provides useful information concerning the performance of our initiatives to attract and retain high value customers and the use of our network.

Overview

We earn revenues and generate our primary source of cash through offering a comprehensive variety of high-quality wireless voice and data communications services. Our services are available in a variety of postpaid pricing plans and prepaid service arrangements. Our voice and data offerings are tailored to meet the communications needs of targeted customer segments, including youth, family, active professionals, local and regional businesses and major national corporate accounts. The marketing and distribution plans for our services are further targeted to the specific geographic and demographic characteristics of each of our markets.

We serve approximately 24.8 million voice and data customers, including customers served over our Mobitex network, and are the second-largest provider of wireless voice and data communications services in the United States, based on the number of wireless customers. We have access to licenses to provide cellular or PCS wireless communications services covering an aggregate population of 236 million, or approximately 81% of the U.S. population, including in 45 of the 50 largest U.S. metropolitan areas. We provide cellular or PCS services in 43 of the 50 largest U.S. metropolitan areas.

On February 17, 2004, we entered into an Agreement and Plan of Merger providing for the acquisition by our manager, Cingular Wireless Corporation, of AT&T Wireless Services, Inc. (AT&T Wireless) for an aggregate consideration of approximately $41,000 cash. The closing of the acquisition is expected to occur in late 2004 and is subject to the affirmative vote of AT&T Wireless’ shareholders, FCC, Hart Scott Rodino and other regulatory approvals and other customary closing conditions. On a pro forma basis, the combined company would have had, at December 31, 2003, cellular and PCS spectrum coverage in 49 of the top 50 U.S. markets and operations in 97 of the top 100 U.S. markets (excluding only Richmond, Norfolk and Newport News, VA). Its licenses would encompass a population of 264 million people and its network and operations would encompass a population of 225 million people. Both companies currently operate the same technologies. We plan that the combined company will provide service under the “Cingular” brand name.

We compete for customers based principally on price, service offerings, call quality, coverage area and customer service. We face substantial and increasing competition in all aspects of our business. Our competitors are principally five national (Verizon Wireless, AT&T Wireless, Sprint PCS, Nextel Communications and T-Mobile) and a large number of regional providers of cellular, PCS and other wireless communications services, resellers and wireline service providers. In addition, we may experience significant competition from companies that provide similar services using other current or future communications technologies and services. Our management focuses on the key wireless industry drivers of customer penetration, ARPU, operating income and reputation within the wireless industry to evaluate our performance.

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Overall, intense industry competition and market saturation will likely cause the wireless industry’s customer growth rate to moderate in comparison with historical growth rates. While the wireless telecommunications industry does continue to grow, a high degree of competition exists among the six national carriers, their affiliates and smaller regional carriers. This competition and other factors, such as the implementation of wireless local number portability, will continue to put pressure upon pricing, margins and customer churn (See Note 6 to “Selected Historical Financial Information — Cingular Wireless LLC” for a definition of customer churn) as the carriers compete for potential customers. Future carrier revenue growth is highly dependent upon the number of net customer additions a carrier can achieve and the average revenue per user (ARPU) derived from its customers. The effective management of customer churn is also paramount in minimizing customer acquisition costs and maintaining and improving margins.

At the beginning of 2003, we reorganized our marketing and sales operations to more effectively address local market needs. We also increased the emphasis on our affiliation with our members, SBC Communications Inc. (SBC) and BellSouth Corporation (BellSouth), and increased co-branding our services with their offerings in areas where our wireless markets overlap with their wireline markets, thereby increasing our sales channels. As a result of these strategies, in combination with the introduction of a more meaningful brand message, “Cingular Fits You Best^SM”, improved execution at the market level and promotion of service offerings such as “Family Talk” plans, we saw the number of our customer additions increase. During 2003, our cellular/PCS net customer additions were the highest since our formation and represent a significant improvement over our 2002 performance.

Our margins in 2003 were lower than the prior year as a result of a number of factors. We had increased operating expenses that were driven by acquisition costs related to higher cellular/PCS gross customer additions and extensive customer retention and customer service initiatives in anticipation of wireless local number portability. Also negatively impacting our margins were increased network system operating costs as a result of ongoing growth in customer usage and incremental costs related to our current network system upgrade. Additionally, as we continued to expand our network and further complete our network system upgrade to add Global System for Mobile Communication (GSM) technology in our Time Division Multiple Access (TDMA) networks, depreciation expense increased as a result of our ongoing capital spending and a reduction in our TDMA asset lives. Partially offsetting these expense increases were modest revenue growth, focused cost control efforts and the positive impacts of prior and ongoing system and process consolidations.

The impacts of competition and wireless service penetration will continue to pressure revenue growth and margins. We expect cost increases to continue due to higher network system usage and redundant expenses related to operating dual networks while migrating our customer base from TDMA to GSM. We also expect higher depreciation expense due to our ongoing capital spending. If we are successful in continuing to grow our customer base, our acquisition costs will increase. We also expect increased costs to maintain and support our existing customer base, including customer care initiatives to improve our level of service and support wireless local number portability. We expect these and other cost increases to be partially offset by ongoing efforts to reduce general and administrative expenses as well as decreased roaming costs as a result of lower negotiated roaming rates with other carriers.

We expect that our costs for 2004 will increase as a result of the preparation to complete the acquisition of AT&T Wireless and that the integration of and accounting for the transaction will result in higher costs for the next several years. Thereafter, we expect cost savings from the elimination of redundant facilities, staff, functions, capital expenditures and other resources.

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Wireless local number portability was implemented on November 24, 2003 and, although we are seeing number porting transactions that are significantly less than many predicted, it is still early in the process of implementation. We have already incurred costs related to the preparation for and implementation of wireless local number portability, and we expect customer retention costs, consisting primarily of handset subsidies, selling costs and greater staffing of customer care centers, to be higher during the year following the inception of the new portability mandate. To the extent industry churn remains higher than in the past, we would expect those costs to continue at a significant level.

We face many challenges and opportunities in the future and are focused on the following key initiatives:

•	successfully completing the merger with AT&T Wireless and integrating its business operations;
•	growing our customer base profitably by offering wireless voice and data products and rate plans that provide both customer value and favorable economics;
•	increasing the capacity, speed and functionality of our network through the completion of our GSM/General Packet Radio Service (GPRS)/Enhanced Data Rates for GSM Evolution (EDGE) network overlay and improving overall network coverage and performance;
•	increasing wireless data penetration and usage through the development and promotion of advanced wireless data applications and interfaces;
•	improving the Cingular customer experience and our reputation in the industry by focusing on all customer-impacting aspects of our business including network performance, sales, billing and customer service;
•	maintaining effective cost controls by continually evaluating the cost structure of our business and driving efficiencies through our large size and national scope; and
•	continuing the expansion of our existing footprint and network capacity by obtaining access to additional spectrum, primarily through spectrum exchanges, purchases, spectrum leasing, mergers, acquisitions and joint ventures.

Service Revenues. Service revenues consist of revenues from the provision of wireless voice and data services. For all the periods presented, revenues from voice services accounted for more than 90% of our consolidated voice and data service revenue.

Service revenues, which we record when services are provided, include revenues from:

•	recurring monthly access charges;
•	airtime usage, including prepaid service;
•	long distance charges;
•	charges for optional features and services such as voice mail, unlimited mobile-to-mobile calling, roadside assistance, caller ID and data services;
•	roaming charges we bill to our customers for their use of our and other carriers’ networks, which we refer to as “incollect roaming” revenues; and
•	roaming charges we bill to other wireless service providers whose customers use our network, which we refer to as “outcollect roaming” revenues.

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Revenues from data services, as a percent of total service revenues, have not been material in any of the periods presented. We expect that trend to continue, although revenues from our wireless data services did increase nearly 60% in 2003. We expect to see growth in wireless data services in the upcoming year as a result of the increased availability and usage of GPRS and EDGE across our network and the introduction of new data applications for business and consumer use, including access to e-mail, Internet content, mobile commerce and location-based services.

To be consistent with emerging industry practices, our consolidated statements of income for all periods presented have been reclassified to reflect billings to our customers for the Universal Service Fund (USF) and other regulatory fees as service revenues and the costs related to payments into the associated regulatory funds as cost of services expenses. See also “Operating Expenses — Cost of Services” below. Operating income and net income for all periods have been unaffected.

Equipment Sales. Equipment sales include revenues from the sale of handsets and accessories to new and existing customers and to agents and other third-party distributors. The trend in equipment sales is generally comparable to the trend in gross customer additions.

Our operating expenses include:

•	cost of services;
•	cost of equipment sales;
•	selling, general and administrative expenses; and
•	depreciation and amortization.

We must increasingly reduce expense growth in order to protect profit margins. We believe that our industry position enables us to negotiate roaming, long distance and local network connection fees and handset and network infrastructure purchase arrangements on favorable terms.

Cost of Services. Cost of services includes network costs related to voice and data transmissions and includes the costs to monitor, maintain and service our network and wireline facilities expense. In addition, cost of services includes the costs related to payments into the USF and other regulatory funds. Cost of services also includes roaming charges and long distance expense for services provided by other telecommunications carriers. Overall, we expect these third-party costs to continue to decrease as increased usage, stimulated by national rate plans’ inclusion of free roaming and long distance services, is more than offset by lower negotiated roaming and long distance rates.

Cost of Equipment Sales. Cost of equipment sales includes the cost of handsets and accessories. Some of our third party distributors purchase handsets and accessories from us, nominally above cost. However, we generally sell handsets below cost to customers who purchase through direct sales channels, such as our company stores, as an inducement to customers who agree to one-year and two-year subscription contracts or in connection with other promotions. As a result, revenues from equipment sales are more than offset by the related cost of equipment sales, resulting in a net subsidy to customers. In addition, we have actively focused on selling services to new customers and upgrading existing customers to digital handsets and service, which increase network capacity and lower our operating cost per minute. The trend in the cost of equipment sales generally follows the trend in gross customer additions but is also impacted by changes in the cost of handsets. Overall, we have seen the cost of handsets decline; however, as we complete our GSM/GPRS/EDGE network upgrade and introduce new data offerings, we expect to see an increase in higher cost, feature-rich handsets for both new and existing customers. As one of the largest

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

purchasers of handsets in the United States, we believe we will be able to purchase handsets at attractive volume-discounted rates.

Selling, General and Administrative. Selling, general and administrative expenses include all operating costs and expenses not included in the other operating cost and expense categories, such as:

•	sales and marketing costs, including the costs of advertising and promotions;
•	distribution expenses, including the costs to maintain retail locations and the commissions paid to our own sales force as well as agents and other third party distributors; and
•	other administrative costs such as accounting and billing operations, customer service and other overhead costs.

Depreciation and Amortization. Depreciation and amortization expense includes non-cash expenses relating to the depreciation of property, plant and equipment and the amortization of intangibles, such as customer lists and, prior to 2002, FCC licenses and goodwill. Depreciation and amortization expense excludes depreciation related to assets used in our joint ventures. See “— Equity in Net Income (Loss) of Affiliates, Net” below. Depreciation expense pertaining to assets used in our business has been generally increasing as a result of our capital expenditures and recognition of shorter TDMA asset lives. We expect this expense to continue to increase in the foreseeable future as we make substantial capital expenditures to expand and upgrade our network and make other investments. See “— Liquidity and Capital Resources” below for a discussion of our capital expenditures and other investments.

Interest Expense. Interest expense includes interest costs related primarily to our indebtedness and capital leases.

Minority Interest in Earnings of Consolidated Entities. Minority interest reflects the share of operating income (loss) allocated to members or partners in our consolidated entities.

Equity in Net Income (Loss) of Affiliates, Net. We have non-controlling equity investments in various entities. The largest of these are as follows:

•	In November 2000, we made an equity investment, and as of December 31, 2003 had a non-controlling equity interest, in Salmon PCS LLC, (Salmon). Because we do not control Salmon, through December 31, 2002, we accounted for this investment using the equity method and recorded profits or losses in our income statement as equity in net income (loss) of affiliates. However, in January 2003, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) and consolidated the financial position, results of operations and cash flows of Salmon, effective January 1, 2003. We did not restate any previously issued financial statements. The FASB revised FIN 46 in December 2003, which did not impact us. For additional information regarding Salmon, see also Note 5, “Investments in and Advances to Equity Affiliates,” in Item 8, Financial Statements and Supplemental Data — Historical Financial Statements — Cingular Wireless LLC.
•	In November 2001, we formed a jointly-controlled infrastructure venture with T-Mobile, GSM Facilities, LLC (GSMF). In July 2002, we commenced commercial operations in New York City and T-Mobile commenced operations in California and Nevada. Because we do not independently control this venture, we account for this investment using the equity method. This venture is structured to generate operating losses approximating the amount of the depreciation on the assets that have been contributed to it and non-reimbursed interest expense.

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We expect to record a significant equity in net loss of affiliates over the next several years relating to our GSMF infrastructure venture.

We are a limited liability company treated as a partnership for income tax purposes and therefore generally do not pay taxes on our income. Instead, income taxes are generally the responsibility of our members. However, we have corporate and LLC subsidiaries that are taxpayers in some jurisdictions and will record income tax expense. We do not expect that our income tax expense will be material in the near future.

Consolidated Results of Operations

*	The percentage change is based on the actual whole numbers

We had over 24 million cellular/PCS customers at the end of 2003, representing a growth of 2.1 million cellular/PCS customers from the prior year end. The 2.1 million increase in our cellular/PCS customer

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base represents the highest annual increase since our formation. In addition, the number of cellular/PCS postpaid gross and net customer additions for the year, 7.2 million and 1.5 million, respectively, also represents our highest annual growth in these customer segments. We believe the significant improvement in customer growth, when compared with the prior year, resulted from the following business initiatives implemented in late 2002 and early 2003:

•	reorganization of our marketing and sales operations to more effectively address local market needs;
•	introduction of a more meaningful brand message — “Cingular Fits You BestSM”;
•	increased emphasis on our affiliation with our parent companies and co-branding and more effectively utilizing their sales channels in those areas where our wireless markets overlap with their wireline markets; and
•	more effective marketing execution such as the “Family Talk” rate plan offer introduced in the third quarter of 2003.

Prepaid and reseller customer growth also improved significantly over the prior year. Prepaid customer growth in 2003 was positively impacted by our KIC (Keep in Contact) prepaid plan launched in the fourth quarter of 2002. We also had a 68% growth in our reseller customer base during the year. The increase in reseller customers compared with the prior year can be attributed both to aggressive growth by our primary reseller during 2003 and to a loss of approximately 371,000 WorldCom Inc. (WorldCom) reseller customers in 2002, most of which occurred when WorldCom made the decision to exit the wireless reseller business in the second half of 2002.

Approximately 95% of our customers are now using our digital services, up from 92% at the end of the prior year. Our networks have 100% digital coverage and over 99% of our network traffic was digital at the end of 2003.

For the year ended December 31, 2003, the cellular/PCS churn rate was 2.7%, a slight improvement from the 2.8% churn rate for the prior year. Churn rates in 2003 were positively impacted by lower churn rates in our prepaid and reseller customer bases while our postpaid customer base churn rate remained essentially unchanged.

In addition to our cellular and PCS licenses, we own Federal Communications Commission (FCC) licenses to provide data services over a separate frequency band. Our network at this band utilizes a different technology called “Mobitex”. Although our Mobitex customer churn rate only increased modestly compared with 2002, gross customer additions were negatively impacted due to the availability of new competitive data products over our and other cellular/PCS networks. Additionally, our Mobitex customer churn rate was unfavorably impacted in 2003 as a result of the deactivation of over 40,000 customers by one of our resellers.

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