We have substantial cash needs, as described in more detail below. Historically, we have funded our operations and other cash needs utilizing internally generated funds, intercompany and external borrowings and capital contributions. We expect to rely on a combination of internally generated, intercompany and external funds to fund continued capital expenditures, acquisitions, distributions and debt service needs. Sources of future intercompany and external financing requirements may include a combination of debt financing provided through intercompany debt facilities with Verizon Communications, borrowings from banks or debt issued in private placements or in the public markets. We believe that internally generated funds will be

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sufficient to fund capital expenditures, distributions and interest payments on our debt in the next several years. Internally generated funds would not be sufficient to repay principal on our debt, including demand notes owed to Verizon Communications (if we were required to repay that debt in the next several years) and other short-term debt and would not be sufficient to honor any exercise of Vodafone’s put rights. We expect to refinance our outstanding debt when due with new debt financings, including debt financing provided either through intercompany borrowings, private placements, bank borrowings or public financing, and would seek other financing to honor any exercise of the put rights. While we believe we could obtain financing, Verizon Communications has no commitment to provide any financing to us, and we have no commitments from third parties. In addition to the potential cash needs described above, we may need to secure additional financing for acquisitions of additional spectrum licenses and wireless providers. The failure to obtain financing on commercially reasonable terms or at all could result in the delay or abandonment of our development and expansion plans or our inability to continue to provide service in all or portions of some of our markets, which could harm our ability to attract and retain subscribers.

      Debt payments in the table include principal and interest. A significant portion of our debt described above bears interest at a variable rate and we therefore have estimated, based on interest rates as of December 31, 2003, the amount of interest we are committed to pay in the future. Actual interest payments could differ materially due to changes in interest rates. In addition, we expect to make certain future payments related to pension and postretirement benefits. See Note 9 of our consolidated financial statements included in Item 15.

Capital Expenditures

      Our capital expenditures totaled approximately $4.6 billion in 2003, which includes capital expenditures for the build-out and upgrade of, and expansion of capacity on, our network, but does not include acquisitions of other wireless service providers. We expect 2004 capital expenditures to be approximately $5.0 to $5.5 billion with the increase in our spending over recent years due, in part, to our plans to deploy EV-DO technology nationally over the next two years. See “Business – Network.” We expect to incur substantial capital expenditures after 2004 as well. In March 2001 we committed to purchase $5 billion of equipment from Lucent Technologies Inc. (“Lucent”) over a three-year period and as of December 31, 2003 there was approximately $394 million remaining to be purchased. The $4.6 billion of capital spent for 2003 includes purchases under the Lucent contract. In addition to these amounts, we will also require substantial additional capital for, among other uses, acquisitions of spectrum licenses and wireless service providers, additional system development and network capacity expansion if wireless data services grow at a faster rate than we anticipate. Unforeseen delays, cost overruns, unanticipated expenses, regulatory changes, engineering design changes, weather-related delays, technological changes and other risks may also require additional funds.

Distributions

      We are obligated under our partnership agreement to make certain distributions to our owners related to taxes and additional distributions equal to 70% of our pre-tax net income from continuing operations plus amortization expense related to the amortization of intangible assets arising out of transactions contemplated by the alliance agreement, less the amount of tax distributions, assuming, in the case of non-tax distributions, we are in compliance with certain financial covenants including a 2.5 to 1 leverage ratio and 5 to 1 interest coverage ratio, unless our officers approve less restrictive ratios. This obligation will expire in April 2005, or earlier in certain circumstances. In addition, our owners can change our distribution policy at any time or cause us to pay additional distributions. See “Certain Relationships and Related Party Transactions—Partnership Agreement—Distributions.” Because we satisfied both ratios on June 30, 2002 and December 31, 2002, we made the scheduled distribution to our partners in August 2002 and February 2003 of approximately $862 million and $1,225 million, respectively. Approximately $112 million of the distribution in February 2003 represented a supplemental distribution. We satisfied both ratios on June 30,

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2003 and December 31, 2003 and made the scheduled distribution to our partners in August 2003 and February 2004 of approximately $1,148 million and $1,441 million, respectively.

Vodafone Put Rights

      Vodafone may require us to purchase up to an aggregate of $20 billion of Vodafone’s interest in the partnership, at its then fair market value, with up to $10 billion redeemable during a 61-day period opening on June 10 ^th and closing on August 9 ^th in 2004 and the remainder, not to exceed $10 billion in any one year, during a 61-day period opening on June 10 ^th and closing on August 9 ^th in 2005, 2006 and/or 2007. Verizon Communications has the right, exercisable at its sole discretion, to purchase all or a portion of this interest instead of us. However, even if Verizon Communications exercises this right, Vodafone has the option to require us to purchase up to $7.5 billion of this interest redeemable during a 61-day period opening on June 10 ^th and closing on August 9 ^th in 2005, 2006 and/or 2007 with cash or contributed debt. Accordingly, $20 billion of partners’ capital has been classified as redeemable on the accompanying consolidated balance sheets. We will need to obtain financing if we are required to repurchase these interests. See “Certain Relationships and Related Party Transactions—Investment Agreement.” We have no commitment for such financing. Vodafone also had certain put rights in 2003 that it did not exercise.

Debt Service

      As of December 31, 2003, we had approximately $13.8 billion of indebtedness and capitalized leases, including $7.1 billion of short-term debt, excluding net intercompany receivables. Future interest payments may vary from our historical results due to changes in outstanding debt levels, the partnership’s or Verizon Communications’ credit ratings and changes in market conditions. See “—Qualitative and Quantitative Disclosures about Market Risks.”

      Our principal debt obligations consist of $1.5 billion floating rate notes issued in November 2003 and $2.5 billion fixed rate notes and approximately $9.8 billion of debt borrowed from Verizon Communications and its affiliates. During 2003, we repaid $1.5 billion of floating rate notes due December 2003 and repaid $24 million owed under our bank credit facility.

      The floating rate notes bear interest at a rate equal to the three-month London Interbank Offered Rate, or LIBOR, plus 0.07%, reset quarterly, and mature on May 23, 2005. The fixed rate notes bear interest at 5.375% and mature on December 15, 2006.

      Borrowings from Verizon Communications include demand loans and term notes. The maximum amount of demand loans outstanding during the last 12 months was approximately $8.2 billion. Demand loan balances fluctuate based upon our working capital and other funding requirements. At December 31, 2003, such demand loan borrowings totaled $7.1 billion. Interest on the demand loans is generally based on a blended interest rate calculated by Verizon Communications using fixed rates and variable rates applicable to borrowings by Verizon Communications to fund the partnership and other entities affiliated with Verizon Communications. Interest rates on such borrowings, with comparable maturity dates, may be lower than rates on borrowings the partnership may enter into with unrelated third parties primarily due to Verizon Communications’ stronger credit rating. As of December 31, 2003, the interest rate on demand loans was approximately 5.0%.

      Term borrowings from Verizon Communications amounted to $2.8 billion at December 31, 2003, which includes a $2.4 billion term note due in 2009 that requires quarterly prepayments to the extent that the markets that GTE purchased from Ameritech generate excess cash flow, as defined in the term note. To date, no quarterly prepayment requirement has been triggered. This term note contains limited, customary covenants and events of default. The interest on the note is generally based on the same blended rate as for the demand loans. Term borrowings also include a $350 million term note obtained from Verizon Communications that bears a fixed interest rate of approximately 8.9% per year. This term note was established in connection with the acquisition of Price’s wireless assets on August 15, 2002 in order to effect a covenant defeasance of Price’s 11 ¾% Senior Subordinated Notes due 2007 and 9 1/8% Senior Secured Notes due 2006. The term note is guaranteed by Price. It matures the earlier of February 15, 2007 or six months following the occurrence of certain specified events.

      We may incur significant additional indebtedness in the next several years to help fund our cash needs.

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Cash Flows Provided By Operating Activities

      Our primary source of funds continues to be cash generated from operations. The $1.1 billion increase in net cash provided by operating activities for the year ended December 31, 2003, compared to the similar period of 2002 was primarily due to an increase in operating income excluding depreciation and amortization resulting from revenue growth.

Cash Flows Used In Investing Activities

      Capital expenditures continue to be our primary use of cash. Our capital expenditures were $4.6 billion for the year ended December 31, 2003, compared to $4.4 billion for the year ended December 31, 2002 and were used primarily to increase the capacity of our wireless network to meet usage demand, expand our network footprint, facilitate the introduction of new products and services, enhance responsiveness to competitive challenges, and increase the operating efficiency of our wireless network. We expect total capital expenditures in 2004 to be approximately $5.0 to $5.5 billion and to have substantial capital requirements thereafter.

      We invested $925 million in acquisitions for the year ended December 31, 2003, including $762 million to purchase the Northcoast Communications LLC’s (“Northcoast”) licenses, $39 million to purchase a general partnership interest in Virginia 10 RSA Limited Partnership and $98 million to reimburse Verizon Communications for the purchase of a minority interest in one of its subsidiaries that was a partner in the partnership. For the year ended December 31, 2002, we invested $774 million in cash acquisitions, including $552 million to acquire some of the wireless properties of Dobson Communications Corporation and $222 million for other wireless properties.

      Net investing activities for the year ended December 31, 2002 includes a $1,740 million refund ($1,479 million in April 2002 and $261 million in December 2002) from the FCC in connection with our wireless auction deposit.

Cash Flows Provided By (Used In) Financing Activities

      We issued $1,525 million of floating rate notes on November 17, 2003 and used the net proceeds to repay our existing $1,500 million of floating rate notes, which matured on December 17, 2003, and to repay $24 million owed under our bank credit facility. Net proceeds from borrowings from affiliates amounted to $418 million.

      Our debt to equity ratio (including partner’s capital subject to redemption) was 34% at December 31, 2003, unchanged compared to December 31, 2002.

      We made distributions to our partners of $2.4 billion in the year ended December 31, 2003, compared to $862 million in the year ended December 31, 2002. Approximately $112 million of the $2.4 billion represented a supplemental distribution and the remainder were payments corresponding to 70.0% of our adjusted pre-tax income to our owners for the six months ended December 31, 2002 and the six months ended June 30, 2003, which we were required to distribute subject to our meeting certain financial targets.

      In addition, under the terms of an investment agreement entered into among Verizon Communications, Vodafone and us on April 3, 2000, Vodafone may require us to purchase up to an aggregate of $20 billion of Vodafone’s interest in the partnership, at its then fair market value, with up to $10 billion redeemable during a 61-day period opening on June 10 ^th and closing on August 9 ^th in 2004 and the remainder, not to exceed $10 billion in any one year, during a 61-day period opening on June 10 ^th and closing on August 9 ^th in 2005, 2006 and/or 2007. Verizon Communications has the right, exercisable at its sole discretion, to purchase all or a portion of this interest instead of us. However, even if Verizon Communications exercises this right, Vodafone has the option to require us to purchase up to $7.5 billion of this interest redeemable during a 61-day period opening on June 10 ^th and closing on August 9 ^th in 2005, 2006 and/or 2007 with cash or contributed debt. Accordingly, $20 billion of partners’ capital has been classified as redeemable on the accompanying consolidated balance sheets. Vodafone also had certain put rights in 2003 that it did not exercise.

      Total assets at December 31, 2003 were $64.8 billion, an increase of $1.6 billion, or 2.6%, compared to December 31, 2002. The increase was due to $925 million of acquisitions of businesses and wireless licenses, primarily as a result of the Northcoast acquisition, and $4.6 billion of capital expenditures as a result of our network build-out program, offset by $3.9 billion in depreciation and amortization expense.

      Total liabilities at December 31, 2003 were $22.3 billion, an increase of $1.0 billion, or 4.7%, compared to December 31, 2002. The increase was primarily due to an increase in net borrowings from Verizon Communications.

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      Total partners’ capital (including partner’s capital subject to redemption) was $41.0 billion at December 31, 2003, an increase of $674 million, or 1.7%, compared to December 31, 2002. The increase was primarily due to net income for the year ended December 31, 2003, offset by distributions to our partners of $2.4 billion.

      On May 23, 2003, we completed the purchase of 50 PCS licenses and related network assets from Northcoast Communications, L.L.C., for approximately $762 million in cash. We funded the purchase utilizing our existing intercompany loan facility with Verizon Communications. The licenses cover large portions of the East Coast and Midwest, including such major markets as New York; Boston; Minneapolis, MN; Columbus, OH; Providence, RI; Rochester, NY; and Hartford, CT. Total population served by the licenses is approximately 47.2 million and includes 10 MHz in each of the 50 license areas, in the D, E, and F blocks of the 1800-1900 MHz frequency band.

      In addition to the information set forth above, the following factors, as well as the factors listed under “Cautionary Statement Concerning Forward-Looking Statements” may adversely affect our future results.

       Legislation and Regulation

      The licensing, construction, operation, sale, and interconnection arrangements of wireless communications systems are regulated to varying degrees by the FCC and, depending on the jurisdiction, state and local regulatory agencies. In addition, the FCC, together with the Federal Aviation Administration, regulates tower marking and lighting, and other government agencies periodically consider various mandates on the wireless industry. We are also subject to various environmental protection and health and safety laws and regulations, including limits on radio frequency radiation from mobile handsets and towers. Additionally, our business is increasingly subject to efforts by state legislatures and state public utilities commissions to adopt legislation and regulations that could regulate the marketing, billing and provision of wireless service. Any of these agencies having jurisdiction over our business could adopt regulations or take other actions that could increase our costs, place restrictions on our operations and growth potential or otherwise adversely affect our business.

      The FCC and an increasing number of state authorities are requiring the wireless industry to comply with, and in some cases to fund, various initiatives, including federal and state universal service programs, telephone number administration, local number portability, services to the hearing-impaired and emergency 911 networks. In addition, many states have imposed significant taxes on providers in the wireless industry. These initiatives are imposing increasing costs on us and other wireless carriers and may otherwise adversely affect our business. For example, the FCC has mandated wireless providers to be capable of supplying the geographic coordinates of a subscriber’s location when a subscriber makes an emergency call to public safety dispatch agencies, and to be capable of allowing subscribers to take their telephone number when they decide to change to a new wireless service provider. These initiatives and programs increase our costs either directly in the form of fees and taxes to federal and state agencies, or in the form of expenses to comply with the regulatory mandates. See “Business—Regulatory Environment” for a more detailed description of the regulatory environment affecting us.

      We operate our system on spectrum pursuant to licenses issued to us by the FCC. The FCC is considering changes to its spectrum policies and rules that could impact our spectrum holdings. The outcome of the FCC’s proceedings could increase the radio interference to our operations from other spectrum users, allow other users to share our spectrum, or condition future renewals of our licenses on compliance with new spectrum use rules. These changes potentially impact the ways in which we use our licensed spectrum, the capacity of that spectrum to carry traffic, and the value of that spectrum.

      Legislation has been proposed in the U.S. Congress and many state and local legislative bodies to restrict or prohibit the use of wireless phones while driving motor vehicles. Similar laws have been enacted in other countries and, to date, the States of New Jersey and New York, and a small number of localities in the U.S., have passed restrictive laws. Congress also considers on a regular basis legislation that would amend the Communications Act, pursuant to which our licenses are issued. Future federal legislation could lead to increased costs to us of complying with new or modified regulations or could affect our access to and use of spectrum.

       Litigation

      In recent years, there has been a substantial amount of litigation in the wireless industry, including patent lawsuits, personal injury lawsuits relating to alleged health effects of wireless phones, antitrust class actions, and class action lawsuits that challenge marketing practices and disclosures, including practices and disclosures relating to alleged adverse health effects of handheld wireless phones. These lawsuits seek substantial damages. The risk of litigation may be higher for companies like us that offer services nationally due to our increased prominence in the industry. We may incur significant expenses in defending these

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lawsuits. In addition, we may be required to pay significant awards or settlements. For a discussion of significant litigation matters involving our company, see “Business—Legal Proceedings.”

       Health Concerns

      Some studies have suggested that radio frequency emissions from wireless handsets and cell sites may be associated with various health problems, including cancer, and may interfere with electronic medical devices, including hearing aids and pacemakers. In addition, lawsuits have been filed against us and other participants in the wireless industry alleging various adverse health consequences as a result of wireless phone usage. The U.S. Food & Drug Administration (“FDA”) and the FCC have stated that the available scientific evidence does not show that any health problems are associated with using wireless phones, but it has not been proven that wireless phones are absolutely safe. In May 2001, the U.S. General Accounting Office issued a report, entitled Research and Regulatory Efforts on Mobile Phone Issues , observing that the consensus of various major health agencies is that the research to date does not show radio frequency energy emitted from mobile phones to have adverse health effects but there is not yet enough information to conclude that they pose no risk. The report offers recommendations to improve the FCC’s review of mobile phone testing, as well as the FCC’s and FDA’s consumer information on health issues relating to mobile phones. Additional studies of radio frequency emissions are ongoing. If consumers’ health concerns 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 that, even if not successful, can be costly to defend. Government authorities may increase regulation of wireless handsets and cell sites as a result of these health concerns and wireless companies may be held liable for costs or damages associated with these concerns. The actual or perceived risk of radio frequency emissions could also adversely affect us through a reduced subscriber growth rate, a reduction in subscribers, reduced network usage per subscriber or reduced financing available to the wireless communications industry.

       Competition in a Rapidly Changing Industry

      The wireless industry is highly competitive and rapidly changing and characterized by substantial competition, which has led to reduced pricing and the need to develop and introduce new services in order to retain and attract subscribers. Competition is expected to continue, which may lead to further pressure on pricing and increases in subscriber churn and retention costs. See “Business-Competition.”

       Our Relationship with our Owners

      Cellco Partnership is a joint venture controlled by Verizon Communications, although many important decisions, including decisions relating to equity issuances and significant acquisitions, require the approval of representatives of Verizon Communications and Vodafone. Conflicts of interest may arise between us and our owners when we are faced with decisions that could have different implications for us and our owners, including potential acquisitions of businesses, potential competition, the issuance or disposition of securities, the payment of distributions by the partnership, labor relations policies, tax, regulatory and legal matters. In certain circumstances, our owners are permitted to compete with us, which would increase the conflicts of interest. Because of these conflicts, our owners may make decisions that are adverse to us. Moreover, it is possible that the representatives will not reach agreement regarding matters that are very important to us and could be deadlocked. If deadlocks cannot be resolved, we will not be permitted to take the specified action, which could, among other things, result in us losing business opportunities and harm to our competitive position.

      We have agreed with our owners that we may not, without their consent, enter into any business other than the U.S. mobile wireless business. These restrictions 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 our permitted activities. Many wireless providers that could otherwise be potential acquisition targets are affiliated with companies that also engage in other domestic businesses, such as wireline or long-distance services, or in international wireless businesses. These restrictions may also preclude us from pursuing other attractive related or unrelated business opportunities.

In this Management’s Discussion and Analysis, and elsewhere in this Annual Report and in our other public filings and statements (including oral communications), we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, capital expenditures, anticipated cost savings and financing plans. Forward-looking statements also include those preceded or followed by the words “may”, “will”, “expect”, “intend”, “plan”, “anticipates”, “believes”, “estimates”, “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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Our actual future performance could differ materially from these forward-looking statements, as these statements involve a number of risks and uncertainties. You should therefore not place undue reliance on these statements. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements:

• materially adverse changes in economic conditions in the markets served by us;
  
  
• an adverse change in the ratings afforded our debt securities or those of Verizon Communications by nationally accredited ratings organizations;
  
  
• our ability to obtain sufficient financing to satisfy our substantial capital requirements, including to fund capital expenditures, debt repayment and distributions to our owners;
  
  
• our ability to generate additional subscribers, with acceptable levels of churn, from resellers and distributors of our service;
  
  
• our continued provision of satisfactory service to our subscribers at an acceptable cost, in order to reduce churn;
  
  
• the effects of the substantial competition that exists in our markets, which has been intensifying, and which may intensify further as a result of local number portability regulations that allow wireless customers to retain their phone numbers when switching wireless service providers;
  
  
• our ability to obtain sufficient spectrum licenses, particularly in our most densely populated areas;
  
  
• our ability to develop future business opportunities, including wireless data services, and to continue to adapt to the changing conditions in the wireless industry;
  
  
• our ability to receive satisfactory service from our key vendors and suppliers;
  
  
• material changes in available technology, and technology substitution that could impact the popularity and usage of our technology;
  
  
• the impact of continued unionization efforts with respect to our employees;
  
  
• regulatory developments, including new regulations that could increase our cost of doing business or reduce demand for our services;
  
  
• developments in connection with existing or future litigation; and
  
  
• changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings.