UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                   (Mark One)

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                 EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED:
                                December 31, 2001

                                       OR
     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO _____

                         Commission File Number: 0-32167

                              Horizon Telcom, Inc.
             (Exact name of registrant as specified in its charter)

                    Ohio                                         31-1449037
(State or other jurisdiction of incorporation                 (I.R.S. Employer
              or organization)                               Identification No.)

    68 East Main Street, Chillicothe, OH                         45601-0480
  (Address of principal executive offices)                       (Zip Code)

(Registrant's telephone number, including area code):  (740) 772-8200

Securities registered pursuant to Section 12(b) of the Act:
None.

Securities registered pursuant to Section 12(g) of the Act:
Class B common stock, without par value.

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

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. [ ]

As of  March  1,  2002,  there  were  99,726  shares  of  class A  common  stock
outstanding and 299,301 shares of class B common stock outstanding.





                              HORIZON TELCOM, INC.

                                    FORM 10-K

                                TABLE OF CONTENTS


                                                                        Page No.

PART I
     ITEM 1.     Business......................................................2
     ITEM 2.     Properties...................................................37
     ITEM 3.     Legal Proceedings............................................38
     ITEM 4.     Submission of Matters to a Vote of Security Holders..........38


PART II
     ITEM 5.     Market for Registrant's Common Equity and Related
                     Stockholder Matters......................................38
     ITEM 6.     Selected Financial Data......................................41
     ITEM 7.     Management's Discussion and Analysis of Financial
                     Condition and Results of Operation.......................41
     ITEM 7A.    Quantitative and Qualitative Disclosures About
                     Market Risk..............................................70
     ITEM 8.     Financial Statements and Supplementary Data..................71
     ITEM 9.     Changes In and Disagreements With Accountants on
                     Accounting and Financial Disclosure......................71

PART III
     ITEM 10.   Directors and Executive Officers of the Registrant............72
     ITEM 11.   Executive Compensation........................................74
     ITEM 12.   Security Ownership of Certain Beneficial Owners
                     and Management...........................................81
     ITEM 13.   Certain Relationships and Related Transactions................83

PART IV
     ITEM 14.   Exhibits, Financial Statement Schedules and Reports
                     on Form 8-K..............................................84








                                     PART I

     As used  herein and  except as the  context  may  otherwise  require,  "the
Company,"  "we," "us," "our" or "Horizon  Telcom" means,  collectively,  Horizon
Telcom, Inc., and its subsidiaries: Horizon PCS, Inc., The Chillicothe Telephone
Company,  Horizon  Technology,  Inc. and Horizon  Services,  Inc.  References to
"Horizon PCS" refer to Horizon PCS, Inc., and its subsidiaries  Horizon Personal
Communications,  Inc. ("HPC") and Bright Personal  Communications  Services, LLC
("Bright PCS").

                           FORWARD-LOOKING STATEMENTS

     This annual report on Form 10-K includes forward-looking  statements within
the  meaning of  Section  27A of the  Securities  Act of 1933,  as amended  (the
Securities  Act),  and Section 21E of the  Securities  Exchange Act of 1934,  as
amended  (the   Exchange   Act),   which  can  be   identified  by  the  use  of
forward-looking   terminology  such  as:  "may,"  "might,"   "could,"   "would,"
"believe,"  "expect,"  "intend,"  "plan,"  "seek,"   "anticipate,"   "estimate,"
"project" or "continue" or the negative thereof or other  variations  thereon or
comparable terminology.  All statements other than statements of historical fact
included in this annual report on Form 10-K,  including without limitation,  the
statements  under "ITEM 1.  Business" and "ITEM 7.  Management's  Discussion and
Analysis of Financial  Condition and Results of Operation" and located elsewhere
herein  regarding  our  financial  position and  liquidity  are  forward-looking
statements.  These forward-looking  statements also include, but are not limited
to:

     o    changes   in    industry    conditions    created   by   the   Federal
          Telecommunications   Act  of  1996  and  related   state  and  federal
          legislation and regulations;

     o    recovery  of  the  substantial   costs  which  will  result  from  the
          implementation and expansion of our new businesses;

     o    retention of our existing customer base and our ability to attract new
          customers;

     o    rapid changes in technology;

     o    actions of our competitors;

     o    estimates of current and future population for our markets;

     o    forecasts of growth in the number of consumers  and  businesses  using
          personal communication services ("PCS");

     o    statements  regarding  our plans for and costs of the build-out of our
          PCS network; and

     o    statements  regarding  our  anticipated   revenues,   expense  levels,
          liquidity and capital resources and projections of when we will launch
          commercial PCS and achieve break-even or positive operating cash flow.

     Although  we believe the  expectations  reflected  in such  forward-looking
statements are reasonable, we can give no assurance such expectations will prove
to have been correct. Important factors with respect to any such forward-looking
statements,  including certain risks and  uncertainties  that could cause actual
results to differ materially from our expectations (Cautionary Statements),  are
disclosed in this annual report on Form 10-K, including,  without limitation, in
conjunction with the  forward-looking  statements included in this annual report
on Form 10-K.  Important  factors  that  could  cause  actual  results to differ
materially from those in the forward-looking statements included herein include,
but are not limited to:

     o    our potential need for additional  capital or the need for refinancing
          existing indebtedness;

     o    our dependence on our  affiliation  with Sprint PCS and our dependence
          on Sprint PCS' back office services;




     o    the need to successfully  complete the build-out of our portion of the
          Sprint PCS network on our anticipated schedule;

     o    changes or advances in technology;

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

     o    changes in government regulation; and

     o    general economic and business conditions.

     These   forward-looking   statements   involve  known  and  unknown  risks,
uncertainties and other factors which may cause our actual results,  performance
or achievements to be materially different from any future results,  performance
or achievements  expressed or implied by such  forward-looking  statements.  All
subsequent  written and oral  forward-looking  statements  attributable to us or
persons  acting on our behalf are expressly  qualified in their  entirety by the
Cautionary Statements. See "Risk Factors" under "ITEM 7. Management's Discussion
and Analysis of Financial  Condition and Results of Operation"  included  herein
for  further  information  regarding  risks  and  uncertainties  related  to our
businesses.

ITEM 1.  Business

Overview

     Horizon  Telcom,  Inc.,  is  a  holding  company.   Through  its  operating
subsidiaries,  Horizon Telcom is a facilities-based  telecommunications  carrier
that  provides  (i) local and long  distance  telephone,  Internet  and  network
services to residential and business  customers  located  primarily in Ohio, and
(ii) wireless personal  communications  services to customers in Ohio,  Indiana,
Kentucky,   Maryland,   Michigan,   New  Jersey,   New  York,   North  Carolina,
Pennsylvania, Tennessee, Virginia and West Virginia.

     We began  operations in 1895 as The Home  Telephone  Company.  In 1929 this
company  changed its name to The  Chillicothe  Telephone  Company  ("Chillicothe
Telephone").  After a  reorganization  in 1996, we became a holding  company and
Chillicothe  Telephone became a wholly-owned  subsidiary.  Chillicothe Telephone
supplies local area telephone  service through its equipment and facilities to a
territory  covering  approximately  800 square  miles in Ross,  Pickaway,  Pike,
Jackson,  Hocking and Vinton  Counties,  Ohio,  as an incumbent  local  exchange
carrier,  commonly  referred to as an "ILEC".  In  addition  to local  telephone
service,  Chillicothe  Telephone  sells  telephone  equipment to businesses  and
offers  Internet  access  through  high-speed  digital  subscriber  line ("DSL")
technology over telephone lines.  Chillicothe  Telephone also offers  high-speed
very-high  digital  subscriber  line ("VDSL")  services over telephone  lines to
residences as an alternative to coaxial cable television services.

     Our  majority-owned  subsidiary,  Horizon  PCS,  Inc.,  is in  the  digital
wireless  personal  communications  industry.  Horizon PCS is one of the largest
Sprint PCS affiliates based on its exclusive right to market Sprint PCS products
and services to a total  population  of over 10.2 million  people in portions of
twelve contiguous states. A Sprint PCS affiliate is an entity that has agreed to
act as Sprint  PCS'  exclusive  agent to market  its  services  and  manage  its
customers  in a particular  area.  Our markets are located  between  Sprint PCS'
Chicago,  New York and Raleigh/Durham  markets and connect or are adjacent to 15
major Sprint PCS markets that have a total population of over 59 million people.
As a Sprint PCS affiliate, we market digital personal  communications  services,
or PCS, under the Sprint and Sprint PCS brand names.  We offer the same national
pricing  plans and use the same  sales and  marketing  strategies  and  national
distribution   channels  as  Sprint  PCS.  At  December  31,  2001,  we  managed
approximately 194,100 Sprint PCS subscribers in our territory.

     Through our wholly-owned  subsidiary,  Horizon  Technology,  Inc., formerly
known as United  Communications,  Inc., ("Horizon  Technology") we offer dial-up
Internet and network  services and resell long distance  services.  The Internet
and network services are provided under the  "bright.net"  brand through Horizon
Technology's  contractual  arrangement  with Comnet,  a consortium of small Ohio
telephone companies.  Horizon Technology provides long distance services through
a reselling arrangement with a primary long distance carrier.  Prior to December
1, 2000,  Horizon  Technology  also  operated a paging  business in the state of


                                       2


Ohio.  On December  1, 2000,  Horizon  Technology  sold the assets of its paging
business to an unrelated third party.

     We also own 100% of Horizon  Services,  Inc.  ("Horizon  Services"),  which
provides  administrative  services  to our  other  subsidiaries.  Administrative
services  provided by Horizon  Services  generally  include  such  functions  as
insurance,  billing  services,  accounting  services,  computer access and other
information technology services and human resources services.


     The following chart illustrates our corporate structure:




                                [GRAPHIC OMITTED]



- ---------------------
(1)  The ownership percentage for Horizon PCS excludes options granted under its
     2000 Stock  Option  Plan,  warrants  issued to the  initial  purchasers  of
     Horizon PCS' discount notes and shares subject to Sprint PCS warrants.

(2)  This  percentage  includes  the 48% of Bright  PCS which  Horizon  PCS owns
     indirectly through Horizon Personal Communications.



                                       3



     The operations of Chillicothe  Telephone,  our landline telephone services,
and Horizon PCS, our wireless personal communications  services, are our primary
business segments.  Landline telephone services accounted for approximately 23%,
51% and 76% of our operating  revenues,  respectively,  in 2001,  2000 and 1999.
Landline  telephone  services  accounted  for  $16.1,  $15.1 and  $10.3  million
operating  profit for 2001, 2000 and 1999,  respectively.  Horizon PCS accounted
for  approximately  72%,  39%,  and 10% of our  operating  revenues,  and  $82.2
million, $40.3 million and $12.7 million of operating losses, respectively,  for
2001, 2000 and 1999.

     Horizon Telcom is incorporated  under the laws of Ohio and was organized in
1996 pursuant to the corporate  reorganization  of Chillicothe  Telephone into a
holding company  structure.  Our principal  executive  offices are located at 68
East  Main  Street,  Chillicothe,   Ohio  45601-0480  (telephone  number:  (740)
772-8200).

     Certain   business,   financial  and  competitive   information  about  our
operations is discussed below. For additional information regarding our business
segments,  see  "Note 3 -  Segment  Information"  in the  Notes to  Consolidated
Financial  Statements at "ITEM 8. Financial  Statements and Supplementary  Data"
and "ITEM 7.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operation" below.

Employees

     At December 31, 2001,  Horizon Telcom had approximately  928 employees,  of
which 140 were represented by a union. We consider  relations with our employees
to be good.


                            LOCAL TELEPHONE SERVICES

General

     Chillicothe Telephone offers integrated  telecommunications  services as an
ILEC to customers served by more than 36,500  telephone  lines,  known as access
lines,  which  have  access to  telephone  service  through  our local  exchange
equipment, in Ross, Pickaway,  Pike, Jackson, Hocking and Vinton Counties, Ohio.
Chillicothe Telephone network facilities include nearly 258 fiber miles, serving
ten  exchanges,  including  a  central  office  acting  as host  to nine  remote
switches.

     The number of access lines  increased  from 37,824 on December 31, 2000, to
38,892 on December 31, 2001.  The following  table details the changes in access
lines over the past three years:

                                            At December 31,
                     ----------------------------------------------------------
                            2001                2000                1999
                     ------------------  ------------------  ------------------
ACCESS LINES

Residential........     28,480     73%      28,820     76%      28,580      78%
Business...........     10,412     27%       9,004     24%       8,252      22%
                     ---------  ------    --------  ------    --------  -------
TOTAL ILEC.........     38,892    100%      37,824    100%      36,832     100%


     Customer  satisfaction  remains a top priority and our efforts are directed
accordingly.  Since we serve our home  town,  it is  important  to our  business
strategy that our employees  concentrate on customer  service,  and our training
and orientation programs emphasize that concern.

     The  Chillicothe  Telephone  sales team is  structured  to provide  maximum
flexibility for our customers.  Residential customers may personally meet with a
sales and service  representative  in our business  office or can  alternatively
take advantage of the convenience of calling into our centralized  customer care
center. Our sales team provides "one-stop"  shopping;  each residential customer
service  representative  is trained in all residential  applications,  including
Internet and data services,  digital wireless  services and telephone  equipment
and will additionally address any follow-up sales and billing concerns.

     Business  customers are served by a specialized group trained to manage the
specialized  products and services unique to business customers.  Customers with
less complex needs are supported by a specialized telephone customer care group,


                                       4


which develops  solutions and schedules  service  installations.  Major business
customers are assigned dedicated account executives that are familiar with their
complex applications and service requirements.

     A centralized  operations  service center  provides  telephone  service and
maintenance  for all  ILEC  customers.  In  addition  to  receiving  maintenance
requests,  this center dispatches field personnel and monitors the status of all
service  orders  and  maintenance   requests.   To  ensure  continued   customer
satisfaction,  the center is measured  against  targeted time  intervals and the
ability to meet customer commitment dates.

     Chillicothe  Telephone  operates a class 4/5 Siemens EWSD digital host as a
main  switch,  in  a  network  with  nine  additional  remote  switches  serving
population clusters throughout Ross County, Ohio. Chillicothe Telephone also has
an extensive fiber optic network,  which now serves  approximately  one-third of
the access line base, and covers approximately 258 miles.  Chillicothe Telephone
has deployed  Integrated  Services Digital Network ("ISDN"),  Asymmetric Digital
Subscriber  Line ("ADSL") and VDSL  high-speed  telephone  line access  service,
which brings broadband  service  capability to  approximately  85% of the access
line base. We continue to upgrade our  distribution  network by moving fiber and
electronics  closer to the customer  through the use of remote  switching units.
The customer care service  center  operations  are supported by a service order,
trouble-ticketing,   billing   and   collection   system  and   automated   call
distribution.  At the heart of our network is a network  operations  center that
identifies  problems  as they occur and  diagnoses  potential  network  problems
before customers are impacted.

     Chillicothe  Telephone  recently began offering  high-speed  video services
through  its VDSL  telephone  lines  under the name  "Horizon  View."  The first
customer was  connected on August 15, 2000.  This quality  digital video service
competes  with  cable  and  satellite  television  providers.  It also  provides
high-speed  always-on  Internet  access and a voice path for  regular  telephone
service. As of December 31, 2001, we had 2,473 Horizon View customers.

Regulation of Chillicothe Telephone's Local Exchange Carrier Business

     Chillicothe  Telephone  is  subject  to  extensive  regulation  by  various
federal, state and local governmental bodies. Federal laws and regulations, and,
specifically,  the  Telecommunications  Act of  1996,  which  we refer to as the
Telecom Act, have sought to open the local service market to competition.

     The Telecom Act has imposed burdensome  obligations upon ILECs that are not
exempted as "rural telephone companies." These obligations include the duty:

     o    to negotiate  agreements  with competing  local service  providers for
          interconnection of telephone equipment between providers;

     o    to obtain state commission approval of such agreements;

     o    to  interconnect  with  competing  local  carriers at any  technically
          feasible point;

     o    to  provide  nondiscriminatory  access  to  separate  portions  of the
          telephone network at regulated prices;

     o    to furnish local  competitors  with local services at wholesale  rates
          for resale purposes; and

     o    to allow  local  competitors  to  collocate  their  equipment  in ILEC
          central offices.

     Chillicothe  Telephone  takes the  position  that it is a "rural  telephone
company"  within the meaning  established  by the Telecom  Act, and is therefore
presently  exempt from these ILEC  obligations.  It will  retain this  exemption
unless and until the Public Utilities  Commission of Ohio ("PUCO") terminates it
at the request of a competing local carrier.

     The Telecom Act also imposes  obligations upon all local exchange  carriers
(ILECs and  competitive  local exchange  carriers,  also referred to as "CLECs,"
which also offer local  telephone  services  utilizing in part the facilities of
the ILEC). These obligations include:

     o    the  payment  of  reciprocal   compensation   for  the  transport  and
          termination of local calls;



                                       5


     o    the ability of customers to change local  telephone  service  carriers
          while  maintaining the same telephone  number,  known as "local number
          portability" as well as dialing parity;

     o    affording  access by competing  local  telephone  service  carriers to
          poles, ducts, conduits and rights-of-way.

     Small  carriers  may  request  suspension  or  modification  by their state
commission  of  some or all of  these  requirements,  but  such  suspensions  or
modifications are extremely difficult to obtain.  Chillicothe  Telephone has not
sought or obtained  suspension or  modification  of any of these local  exchange
carrier obligations.

     As a general matter,  federal regulation increases Chillicothe  Telephone's
business  risks and may have a  substantial  impact on  Chillicothe  Telephone's
future  operating  results.  The  Federal   Communications   Commission  ("FCC")
regulates two significant sources of Chillicothe  Telephone's revenues - namely,
interstate  access  charges  and  Federal  Universal  Service  Support.  Federal
Universal Service Support is a program that provides funding to qualifying ILECs
such as Chillicothe Telephone.

     The FCC currently  has several  proceedings  pending that could  materially
change the mechanisms for determining  interstate  access charges and the dollar
revenues received by Chillicothe  Telephone from this source.  For example,  the
FCC recently  adopted  portions of an interstate  access charge reform  proposal
submitted by the  Multi-Association  Group comprised of four national  telephone
trade associations.  As adopted, the Multi-Association  Group Plan increased the
monthly federal subscriber line charges paid by Chillicothe Telephone's business
and  residential  customers and reduced the  per-minute  access  charges paid by
Chillicothe  Telephone's  interexchange  carrier  customers.  There are  several
portions  of the  proposed  plan which the FCC did not adopt but are still under
consideration.   The  Multi-Association  Group  Plan  has  received  substantial
opposition from interexchange carriers, state commissions,  and consumer groups,
and  the  remaining  portions  of  the  plan  may  be  rejected  or  adopted  in
significantly modified form by the FCC.

     The FCC also has  initiated  a  proceeding  to examine the  feasibility  of
replacing the current  mechanisms of inter-carrier  compensation,  including the
access charge mechanism,  with a "bill-and-keep" approach. Under a bill-and-keep
approach,  each  carrier is  required to recover  the costs of  termination  and
origination  from its own end-user  customers.  Such an approach could result in
increased rates to Chillicothe's business and residential end-user customers.

     The FCC recently adopted, in large part, a recommendation by the Rural Task
Force for reform of the Federal Universal  Service Support  mechanism  presently
applicable to Chillicothe  Telephone.  The FCC's order retains the embedded cost
mechanism,  a methodology  presently  used to determine and  distribute  Federal
support to rural  telephone  companies  to enable them to cover the high cost of
specific new telephone network technology. It also recalculates and modifies the
indexed cap that limits Federal high-cost telephone service support, establishes
a new  mechanism to enable rural  telephone  companies to obtain some  universal
service  support for exchanges that they acquire and upgrade,  and permits rural
telephone  companies  facing potential  competition to disaggregate  their study
areas to discourage  competitors from entering rural population centers in order
to seize  disproportionate  amounts of the universal service support received by
rural ILECs.

     Chillicothe  Telephone is required to contribute  to the Federal  Universal
Service Support program. States also have similar assessment mechanisms.  At the
present time it is not possible to predict the extent of Chillicothe Telephone's
total Federal and state universal  service  assessments or the amount of dollars
it will receive from Federal and state universal service funds.

     The FCC and the Federal Bureau of  Investigation  are  responsible  for the
implementation  of the  Communications  Assistance for Law Enforcement Act. This
legislation  obligates Chillicothe Telephone to upgrade its switching facilities
to give it the  capabilities and capacity to install and operate  wiretaps,  pen
registers and similar surveillance activities in response to properly authorized
requests  from  Federal,  state and local law  enforcement.  The  Communications
Assistance for Law Enforcement Act statute and regulations  also impose security
and  administrative  obligations  and risks upon  carriers  such as  Chillicothe
Telephone.  Some  of the  more  expensive  and  risky  potential  Communications
Assistance for Law Enforcement  Act obligations - for example,  those related to
the  interception  of  packet-switched  communications  - are still  subject  to
litigation before the FCC and the courts.



                                       6


     Federal  statutes and FCC rules and  proceedings  regarding the slamming of
local and long  distance  customers,  the use of  Customer  Proprietary  Network
Information and the  conservation of telephone  number  resources can affect the
costs and risks of doing  business  of  Chillicothe  Telephone  and other  local
exchange carriers.

     State  laws  and  regulations  require  us  to  comply  with  Ohio  pricing
regulations,  file  periodic  reports,  pay  various  fees and comply with rules
governing  quality of service,  consumer  protection and similar matters.  Local
regulations require us to obtain municipal franchises and to comply with various
building codes and business license requirements.

     Chillicothe  Telephone  continues to provide local exchange service through
traditional  rate  base,  rate of  return  regulation.  The  PUCO  has  proposed
alternative  rate regulation and, when the regulation is finalized,  Chillicothe
Telephone will have the right to elect this form of regulation. Generally, under
the proposed regulations,  we would have greater flexibility to decrease prices,
but would have to  petition  the PUCO to  increase  rates.  We have not  decided
whether to elect the alternative rate regulation.

Competition

     Several factors have resulted in rapid change and increased  competition in
the local telephone market over the past 16 years, including:

     o    growing customer demand for alternative products and services,

     o    technological advances in transmitting voice, data and video,

     o    development of fiber optics and digital electronic technology,

     o    a  decline  in the  level  of  access  charges  paid by  interexchange
          carriers to local telephone  companies to access their local networks,
          and

     o    legislation and regulations designed to promote competition.

     To date, we have not faced  competition for local telephone  service in the
Chillicothe  Telephone  service  territory from any  competitive  local exchange
carriers.  It is possible,  however,  that we will face such  competition in the
future.  We believe  that  Adelphia  Cable is  preparing  to  upgrade  its cable
television  plant  to be in a  position  to  provide  local  telephone  service.
Adelphia  Cable is  already  offering  long  distance  telephone  services  as a
reseller,  as well as high-speed Internet access. No potential competitive local
exchange  carrier has asked us to enter into  agreements  to connect its network
with our network.  If  competition  develops,  we may face pressure to match the
pricing and service offerings of these competitors.




                                       7



                  LONG DISTANCE, INTERNET AND NETWORK SERVICES

     Our wholly-owned subsidiary, Horizon Technology, Inc., offers long distance
service,   Internet  and  data  services  and  network  consulting  services  to
customers.

Long Distance Service

     The long distance market has become  significantly  more competitive  since
1984,  when AT&T was required to divest its local telephone  system.  Since that
time,  new  competitors  have  entered  the  market and  prices  have  declined,
resulting in increased consumer demand and significant market growth.  Increased
competition has also led to increased  consolidation among long distance service
providers.  Major  long  distance  competitors  include  AT&T,  Sprint  and  MCI
WorldCom,  Inc. Furthermore,  Verizon obtained approval to provide long distance
services  in New  York  and  Massachusetts,  and SBC  Communications,  Inc.  has
obtained approval in Texas, Kansas and Oklahoma.  These competitors benefit from
established  market share and from  established  trade names through  nationwide
advertising.  Internet-protocol  telephony,  a potential competitor for low cost
telephone service, is also developing.

     Horizon  Technology began offering long distance  services as a reseller in
1996 and now provides  that service to  approximately  6,500  access  lines.  We
expect to continue to offer a  competitively  priced service to those  customers
who are looking for a local supplier of long distance services.

Internet Access Service

     Horizon  Technology   provides  Internet  and  data  services  through  our
affiliation with Comnet. Comnet is a consortium of 20 independent local exchange
carriers in Ohio, and one Ohio electric cooperative. We have the right to market
and sell Internet and data services using the "bright.net"  brand in 27 counties
in southern Ohio, including  Chillicothe  Telephone's service territory.  Comnet
provides  wholesale gateway access,  service,  support and bandwidth services to
the Internet for retail internet  service  providers  primarily in Ohio.  Comnet
also provides advanced intelligent networking services to Ohio's rural areas via
special  signaling  networks.  Horizon  Technology owns a less than five percent
interest in Comnet.  As of December 31, 2001, we had 14,929  subscribers to this
service.

     We offer a variety of means to access the  Internet  through our  telephone
network.  We also offer a full range of customer premise  equipment  required to
connect to the Internet. Our access services include:

     o    Dial-up Access.  Our dial-up  services  provide access to the Internet
          through  ordinary  telephone  lines  at  speeds  of up to 56 Kbps  and
          through digital ISDN lines at speeds of up to 128 Kbps.

     o    Dedicated Access. We offer a broad line of high-speed dedicated access
          utilizing frame relay and dedicated  circuits,  which provide business
          customers with direct access to a full range of Internet applications.

     o    DSL  Access.  We began  to offer  several  ILEC  customers  high-speed
          Internet  access service using ADSL technology in the first quarter of
          2000. ADSL technology permits high-speed digital transmission over the
          existing copper wiring of regular telephone lines. Our ADSL service is
          available at speeds up to 768 Kbps. Our ADSL services are designed for
          residential  users and  small-to-medium  sized  businesses  to provide
          high-quality  Internet  access  at  speeds  faster  than  ISDN  and at
          flat-rate  prices  that are lower than  traditional  dedicated  access
          charges.  As the local  exchange  carriers  in other areas of southern
          Ohio begin offering DSL  technology,  we will offer DSL in the rest of
          our bright.net service territory.

     We offer a variety of  value-added  services,  including  Web hosting,  Web
design,  co-location,  virtual private networks or intranets,  remote access and
security solutions and video conferencing.

     We provide software  solutions that enable companies to conduct  electronic
commerce.  We offer electronic data interchange and non-Internet based solutions
consisting of software and services that are designed to help businesses connect
to their suppliers and customers.  We also provide Internet commerce software to
allow  businesses  to build Web  applications  for  commerce-enabled  Web sites,


                                       8


intranets and extranets. Common features of this software include the ability to
build electronic catalogs to conduct transactions and to integrate with business
systems, including purchasing, accounting and inventory systems.

     Account  executives  sell Internet and data  services  directly to business
customers in our service  areas.  Our  technical  support  staff is available 24
hours a day,  seven  days a week.  Our  technicians  design,  order,  configure,
install and maintain all of our equipment to suit the customer's  needs. We have
a customer care group dedicated to Internet and data services.

     In general,  Internet and data  services  are not  regulated at the Federal
level. An important  regulatory issue currently  pending before both the FCC and
Federal  courts is how  Internet  traffic  will be  classified  and  treated for
purposes of interstate  access  charges and reciprocal  compensation  related to
local traffic.  Internet service providers currently obtain access services from
local  exchange   carriers  without  having  to  pay  the  access  charges  that
interexchange carriers pay for equivalent service. This special exemption may be
withdrawn  at any time,  in which  case  Internet  services  could be subject to
access charges. As we provide Internet services directly to the ILECs' networks,
a change in the  treatment  of  Internet  traffic  for  purposes  of  reciprocal
compensation would likely have little effect on our operations.

     The Internet and data  services  market is  extremely  competitive,  highly
fragmented  and  has  grown   dramatically  in  recent  years.   The  market  is
characterized  by the  absence of  significant  barriers  to entry and the rapid
growth in Internet usage among customers. Sources of competition are:

     o    access and content  providers,  such as AOL, the Microsoft Network and
          Prodigy;

     o    local,  regional  and national  Internet  service  providers,  such as
          EarthLink;

     o    the  Internet   services  of  regional,   national  and  international
          telecommunications  companies,  such as Verizon, AT&T, BellSouth,  and
          MCI WorldCom;

     o    online  services  offered by incumbent cable  providers,  such as Time
          Warner; and

     o    DSL providers, such as COVAD.

     The  recent  merger  of  AOL/Time   Warner  creates   further,   formidable
competitive  threats in the  Internet  and data  services  markets.  The merging
companies  announced  plans to  leverage  their  combined  assets and  resources
post-merger to offer a wide variety of Internet and data-related services.

Network Consulting

     Our  Computer  Solutions  division  offers  network  consulting   services,
computer training and computer repair services.

                    WIRELESS PERSONAL COMMUNICATIONS SERVICES

     The information set forth under this heading  describes the business of our
subsidiary Horizon PCS, Inc., a Delaware corporation.  Horizon Telcom owns 92.0%
of the outstanding  class B common stock of Horizon PCS,  representing  58.1% of
all classes of capital  stock on a fully diluted  basis,  and 84.5% of the total
voting power of all classes of capital  stock of Horizon PCS on a fully  diluted
basis. References under this heading to "we," "us" and "our" are to Horizon PCS.

Overview

     We are one of the  largest  Sprint PCS  affiliates  based on our  exclusive
right to market  Sprint PCS products and services to a total  population of over
10.2 million in portions of twelve  contiguous  states.  Our markets are located
between Sprint PCS' Chicago, New York and Raleigh/Durham  markets and connect or
are adjacent to 15 major Sprint PCS markets that have a total population of over


                                       9


59 million. As a Sprint PCS affiliate, we market digital personal communications
services, or PCS, under the Sprint and Sprint PCS brand names.


     Our  territory  includes  significant  market  coverage in  Indiana,  Ohio,
Pennsylvania,  Tennessee,  Virginia and West  Virginia  and selected  markets in
Kentucky,  Maryland,  Michigan,  New Jersey,  New York and North  Carolina.  Our
markets are adjacent to or connect a number of major  markets owned and operated
by Sprint PCS,  including Buffalo,  Chicago,  Cincinnati,  Cleveland,  Columbus,
Detroit, Indianapolis, Knoxville, Lexington, New York, Philadelphia, Pittsburgh,
Raleigh/Durham, Richmond and Washington, DC. In addition, our territory contains
more than 2,600 heavily traveled  interstate miles,  including over 460 miles of
Interstate 80, a major  east-west  artery  connecting  New York to Chicago,  and
numerous other Federal and major state  highways.  Our territory is also home to
more than 60 four-year  colleges and universities  with a student  population of
over 240,000, as well as a number of smaller colleges and universities.

History and Background

     The following are key milestones in Horizon PCS' business:

     o    In  November  1996,  we  acquired  PCS  licenses  in the FCC's C Block
          auction  giving us the right to  provide  service  to five  markets in
          Ohio,   West  Virginia  and  Kentucky  with  a  total   population  of
          approximately 1.0 million.

     o    In June 1998, we returned all of our FCC licenses except for a portion
          of the license  covering our Chillicothe,  Ohio,  market and agreed to
          become one of five charter Sprint PCS affiliates. Our initial grant of
          markets  from  Sprint PCS  consisted  of seven  markets in Ohio,  West
          Virginia and Kentucky  with a total  population of  approximately  1.6
          million.  This grant included the five markets for which we originally
          held licenses. We continued to use Horizon Personal  Communications as
          the primary brand for marketing our PCS service.

     o    In August  1999,  Sprint  PCS  granted  us 17  additional  markets  in
          Virginia, West Virginia, Tennessee, Maryland, Kentucky and Ohio with a
          total  population of  approximately  3.3 million.  In conjunction with
          this second grant, we also entered into a network  services  agreement
          with the West Virginia PCS Alliance and Virginia PCS  Alliance,  which
          we  refer  to  as  the  Alliances.  The  Alliances  are  two  related,
          independent  PCS providers  offering  services under the NTELOS brand,
          and  whose  network  is  managed  by CFW  Communications.  Under  this
          agreement,  we  obtained  the right to use their  wireless  network to
          provide  Sprint PCS  services  to our  customers  in most of these new
          markets.

     o    In September 1999, Horizon Telcom,  sold its interest in the towers it
          owned to SBA for  $15.7  million  and  invested  the net  proceeds  in
          Horizon  PCS.  Prior to the sale,  Horizon  PCS had been  leasing  the
          towers from Horizon  Telcom.  Horizon PCS now leases those towers from
          SBA.  Horizon PCS also has a build-to-suit  agreement with SBA for the
          construction of new towers as part of the network  build-out.  Horizon
          PCS  receives  site  development  fees and  reduced  lease  rates  for
          specified  towers  constructed  by SBA and leased by Horizon PCS as an
          anchor tenant of SBA.

     o    In September 1999, a Horizon PCS subsidiary became one of the founders
          of  Bright  PCS,   receiving  a  26%  equity  stake  in  exchange  for
          approximately $3.1 million. Bright PCS became the exclusive Sprint PCS
          affiliate for 13 markets in Indiana,  Ohio and Michigan,  with a total
          population  of  approximately  2.4  million.  We  launched  service in
          substantially all of the Bright PCS markets in October 2000.

     o    In  December  1999,  we  completed  a  two-month   transition  from  a
          co-branded  marketing  strategy  to  marketing  and selling all of our
          products and services  exclusively  under the "Sprint PCS" brand name,
          which gave us full  access to Sprint  PCS' major  national  retailers.
          Since that transition,  we have  experienced an accelerated  growth in
          our customer base.

                                       10


     o    In May 2000,  Sprint  PCS  granted  us an  additional  17  markets  in
          Pennsylvania, New York, Ohio and New Jersey with a total population of
          approximately  2.9  million.   In  September  2000,  we  substantially
          completed  the purchase  from Sprint PCS of the assets  related to our
          new markets.

     o    In June 2000,  we acquired the remaining 74% of Bright PCS equity that
          we did not already own. As  consideration,  we  exchanged  4.7 million
          shares  of  Horizon  PCS'  class B  common  stock  equal  to 8% of its
          outstanding  shares of all  classes of its common  stock  prior to the
          acquisition  and 31,912 shares of Horizon Telcom common stock equal to
          8% of the  outstanding  shares of Horizon  Telcom,  which  Horizon PCS
          acquired in February 2000.

     o    On September  26,  2000,  an investor  group led by Apollo  Management
          purchased $126.5 million of Horizon PCS convertible preferred stock in
          a private  placement.  Concurrently,  holders  of  Horizon  PCS' $14.1
          million  short-term  convertible  note (including  accrued interest of
          $1.1 million)  converted it into the same convertible  preferred stock
          purchased by the investor  group.  Concurrently,  Horizon PCS received
          $149.7 million from the issuance of $295.0 million of senior  discount
          notes due 2010 and $50.0 million of term loans from its $225.0 million
          secured  credit  facility   (later   increased  to  a  $250.0  million
          facility).

     o    On December 7, 2001,  the Company  received  $175.0  million  from the
          issuance of senior  notes due on June 15,  2011.  Approximately  $48.7
          million of the offering's proceeds were placed in an escrow account to
          fund the first four semi-annual interest payments.

Sprint PCS

     Sprint PCS, a  wholly-owned  subsidiary  of Sprint,  operates the only 100%
digital,  100% PCS wireless network in the United States. The digital technology
that Sprint PCS uses is code division multiple access technology, referred to as
CDMA.  Sprint PCS has  licenses to provide PCS  service  nationwide.  Sprint PCS
operates its PCS network in major  metropolitan  markets  throughout  the United
States and has entered into agreements with affiliates,  such as Horizon PCS, to
build and  manage  networks  in  smaller  metropolitan  areas  and  along  major
highways.

     Sprint first  launched its  commercial  PCS network in the United States in
November 1995. By combining its brand name,  national  footprint,  competitively
priced plans and extensive product  offerings,  Sprint PCS has experienced rapid
customer  growth.  In the fourth  quarter of 2001,  Sprint PCS reported its 14th
consecutive industry-leading quarter of customer growth, adding over 1.1 million
direct  customers  and 381,000  affiliate  customers.  As of December  31, 2001,
Sprint PCS had more than 13.6 million direct  customers  and,  together with its
affiliates, provided service to 15.8 million customers on an all-digital network
covering  almost 247  million  people with  licenses to provide  coverage to 285
million people in all 50 states, Puerto Rico and the U.S. Virgin Islands.

     Statements in this document  regarding Sprint Corporation or Sprint PCS are
derived from  information  contained in the periodic reports and other documents
filed with the Securities  and Exchange  Commission by Sprint and Sprint PCS, or
press releases issued by Sprint and Sprint PCS.

Competitive Strengths

     Our long-term  strategic  affiliation with Sprint PCS provides us with many
business, operational and marketing advantages including the following:

     Sprint  PCS'  national  brand name  recognition  and  national  advertising
support.  We have the  exclusive  right to use the  Sprint  and Sprint PCS brand
names for the sale of Sprint PCS  products  and  services in our  territory.  We
benefit  from the  strength  and the  reputation  of the  Sprint  and Sprint PCS
brands.  Sprint PCS' national  advertising  campaigns  and  developed  marketing
programs are provided to us at little or no additional cost under our Sprint PCS
agreements. We offer the same strategic pricing plans, promotional campaigns and
handset and  accessory  promotions  as Sprint  PCS,  and have the ability to add
pricing plans and marketing promotions that target local market needs.



                                       11


     Established and available  distribution channels. We benefit from immediate
access  to major  national  retailers  under  Sprint  PCS'  existing  sales  and
distribution  agreements  and other national  sales and  distribution  channels,
including:

     o    a sales and distribution agreement with RadioShack,  which provides us
          with access to approximately 178 stores in our territory;

     o    the  sales and  distribution  agreements  with  other  major  national
          third-party retailers such as Best Buy, Circuit City, Office Depot and
          Wal-Mart which  collectively  provide us with access to  approximately
          277 additional retail outlets in our territory;

     o    Sprint PCS' national inbound telemarketing sales force;

     o    Sprint PCS' national accounts sales team; and

     o    Sprint PCS' electronic commerce sales platform.

     Sprint PCS' nationwide digital PCS network. As of December 31, 2001, Sprint
PCS,  together with its affiliates,  operated PCS systems  providing  service to
nearly 247 million people nationwide or 87% of Sprint PCS licensed population of
285 million people,  including all of the 50 largest  metropolitan  markets. Our
network  operates  with Sprint  PCS'  national  network and extends  Sprint PCS'
coverage into our markets, which we believe is important to Sprint PCS' national
strategy.  We believe our ability to provide our customers with access to Sprint
PCS' national network  represents a competitive  advantage over other nationwide
and regional providers of wireless services.

     Sprint PCS Wireless Web. Our network  supports and we market the Sprint PCS
Wireless Web. The Sprint PCS Wireless Web allows customers with  data-capable or
web browser  enabled  handsets to connect to the Internet  and browse  specially
designed text-based Web sites, including AOL, Yahoo!, Amazon.com, Bloomberg.com,
CNN  Interactive,   MapQuest.com,  Fox  Sports,  Ameritrade,  InfoSpace.com  and
Weather.com.  For more information on the Sprint PCS Wireless Web, see "Products
and  Services:  Access to the Sprint  PCS  Wireless  Web."  below.  Sprint  PCS'
investment to upgrade its network to third generation  wireless network services
("3G") is expected to result in up to a doubling  of voice  capacity  nationwide
and dramatically increased data transmission speeds. The migration to 3G is also
expected to provide better  economies for Sprint PCS and its affiliates  through
improved spectrum efficiency.

     Sprint PCS' extensive research and development. We benefit from Sprint PCS'
extensive research and development effort,  which provides ongoing access to new
technological   products  and  enhanced  service  features  without  significant
research and  development  expenditures of our own. We have prompt access to any
developments produced by Sprint PCS for use in our network.

     Better  equipment  availability  and  pricing.  We are able to acquire  our
network equipment,  handsets and accessories more quickly and at a significantly
lower cost than we would without our strategic  relationship with Sprint PCS. We
purchase  our network  equipment,  handsets  and  accessories  under Sprint PCS'
vendor arrangements that provide volume discounts. These discounts significantly
reduce the overall  capital  required  to build our  network  and  significantly
reduce our costs of handsets and accessories.

     Sprint PCS licenses and long-term commitments.  We have the exclusive right
to use Sprint PCS' licensed spectrum to provide Sprint PCS products and services
in our  territory.  Sprint PCS has funded the purchase of the licenses  covering
our  territory  at a cost  of  approximately  $57.0  million  and  has  incurred
additional  expenses for microwave clearing.  As a Sprint PCS affiliate,  we did
not have to fund  the  acquisition  of  these  licenses,  thereby  reducing  our
start-up costs. The Sprint PCS agreements are for a total of 50 years, including
an initial  term of 20 years,  which will  expire June 2018,  and three  10-year
renewal terms. These agreements will automatically renew for each renewal period
unless at least two  years  prior to the  commencement  of any  renewal  period,
either  party  notifies  the  other  party  that it does not  wish to renew  the
agreement.



                                       12


     Sprint  PCS'  back  office  services.   When  we  initially   launched  our
independent PCS operations,  we provided our own back office  services,  such as
customer services and billing  services.  In May 2000, we amended the Sprint PCS
agreements so that Sprint PCS will provide these back office  services to us. We
completed  conversion of our existing  customers to these services in June 2001.
We expect the cost of these  services  will be at or below the cost of providing
the services  ourselves,  due to  anticipated  rate  reductions  and Sprint PCS'
ability to economically manage the support of new services. We also believe this
arrangement  will allow us to more  quickly roll out new Sprint PCS products and
services in our markets.

Other Competitive Strengths of Our Business

     In addition to the advantages  provided by our strategic  affiliation  with
Sprint PCS, we have the following additional competitive strengths:

     Attractive markets.  Our markets,  with a total population of approximately
10.2 million people, are in areas with attractive  demographic  characteristics,
including the following:

     o    Fewer competitors in our markets compared to major metropolitan areas.
          We face  fewer  competitors  in our  markets  than is the  case in the
          surrounding  urban markets.  In addition,  we were the first or second
          PCS provider in a majority of our markets.

     o    High volume of commuter  and  long-distance  travel.  Our  territories
          include more than 2,600  interstate  miles and numerous  other federal
          and major state  highways.  We believe  coverage  along these highways
          will generate significant roaming revenues.

     o    Significant overlap with Sprint PCS and Horizon Telcom local telephone
          service  areas.  Approximately  20% of the people in our territory are
          residents in Sprint Local Telephone Division markets.  We believe that
          we can take  advantage  of  Sprint  PCS'  local  telephone  customers'
          familiarity  with Sprint PCS' brand and product quality when marketing
          our wireless service. Similarly, we benefit from local brand awareness
          of Horizon Telcom,  the majority owner of Horizon PCS.  Horizon Telcom
          provides local telephone service in our Chillicothe, Ohio market where
          we  have  a  company  record   penetration  of  covered  residents  of
          approximately  17%.  The former  owners of Bright PCS also offer local
          telephone  service  in  northwestern  Ohio,  and we expect to  benefit
          positively  from  their  long-term   relationships  with  their  local
          telephone customers.

     o    Large student  population.  There are over 240,000 students  attending
          more  than 60  four-year  colleges  and  universities  located  in our
          territories,  including Notre Dame, Penn State,  Ohio University,  the
          University of Virginia,  Virginia  Tech and West Virginia  University.
          There are also numerous other colleges and universities throughout our
          markets.  We believe college  students are among the heaviest users of
          wireless services.

     o    Popular resorts and day-trip destinations.  There are more than 25 ski
          resorts,  three major NASCAR speedways,  popular resorts,  state parks
          and other tourist destinations in our service area.

     Potential for significant  roaming  revenue.  We receive Sprint PCS roaming
revenue from Sprint PCS subscribers  based outside our territory who roam on our
network.  Our  territory is adjacent to or connects 15 major  markets  owned and
operated by Sprint  PCS,  including  Buffalo,  Chicago,  Cincinnati,  Cleveland,
Columbus, Detroit, Indianapolis,  Knoxville,  Lexington, New York, Philadelphia,
Pittsburgh,  Raleigh/ Durham, Richmond and Washington D.C. These markets include
five of the ten largest  metropolitan  areas in the United States,  which have a
total  population of  approximately  59 million  residents.  Our territory  also
contains more than 2,600 interstate miles as follows:



                                       13




                                                                                  
                                                                     Estimated Total Interstate Miles(1):
                                                                          Between              In Our
   Interstate                 Major Destination Cities                Destinations          Territory
- --------------------   ---------------------------------------   -----------------------------------------
    I-80/I-90               Chicago, IL to New York, NY                     787                 478
      I-90                  Cleveland, OH to Buffalo, NY                    188                 117
      I-75                 Detroit, MI to Cincinnati, OH                    264                  57
      I-77                 Cleveland, OH to Charlotte, NC                   510                 314
      I-79                   Erie, PA to Charleston, WV                     337                 234
      I-81                 Syracuse, NY to Knoxville, TN                    790                 419
      I-64                 Lexington, KY to Richmond, VA                    473                 350
      I-69                Indianapolis, IN to Lansing, MI                   241                 106
      I-476               Scranton, PA to Philadelphia, PA                  124                  60
Other interstates                                                            --                 519
                                                                        -------              ------
                                                                          3,714               2,654

- ---------
(1)  Source: Rand McNally.

     Our  territory  also  includes  numerous  other  Federal  and  major  state
highways.  The  proximity  of our  markets to major  Sprint PCS  markets and the
concentration  of  major  interstates  and  highways  in  our  territory  create
significant potential for roaming revenues.

     High-capacity, spectrum efficient network. We have built an all-digital PCS
network that we believe is  high-quality.  Our strategy is to provide service to
the largest  communities  in our markets and the  interstates  and primary roads
connecting  these  communities  to one another and to the adjacent major markets
owned and operated by Sprint PCS. We believe that our network  design will allow
our network to handle more customers with fewer dropped calls and better clarity
than our  competitors.  In accordance  with Sprint PCS' national plan, we are in
the process of  upgrading  most of our  network to 1XRTT,  a 3G  technology,  by
mid-year 2002. Because we believe our CDMA technology is more efficient than GSM
or TDMA,  we  believe  that,  unlike  our GSM or TDMA  competitors,  we will not
require additional  spectrum in order to operate our 3G network.  We believe our
early  deployment of 3G technology will provide us with a competitive  advantage
in the market for wireless data services.

     Fully-funded business plan. We are currently fully-funded under our revised
business plan,  which includes  completing the build-out of a network which will
cover 7.9 million  residents and operating 50  company-owned  retail stores.  At
December 31, 2001, our network  covered 6.9 million people and 38  company-owned
retail stores were in operation.  We expect to achieve positive  earnings before
interest, taxes, depreciation and amortization in the third quarter of 2003. Our
current  projections of operating results are a function of a number of factors,
many of which are beyond our control.

     Proven track record;  strong  management  and  sponsorship.  We entered the
wireless industry in 1997 to capitalize on the strong growth  opportunities that
we believed  existed and launched  independent PCS service before Sprint PCS was
offering  affiliation  opportunities.   To  successfully  offer  service  as  an
independent provider, we were required to finance,  build and launch our initial
markets without any of the benefits of  affiliation.  As a result of our success
as an  independent  PCS  provider  we were able to become a charter  Sprint  PCS
affiliate.  Since then we have expanded our territory from a total population of
less than 1.0 million in 1998 to a total  population of 10.2 million  today.  We
have  accomplished  this by  developing  our  relationship  with the  Alliances,
investing in and subsequently acquiring Bright PCS, and establishing a strategic
partnership with Sprint PCS.

Business Strategy

     We believe the following  elements of our business  strategy will enable us
to rapidly complete our network, distinguish our wireless service offerings from
those of our competitors and compete successfully in the wireless communications
marketplace:



                                       14


     Taking full advantage of the benefits of our  affiliation  with Sprint PCS.
The benefits of our affiliation with Sprint PCS include:

     o    Sprint PCS brand awareness and national marketing programs;

     o    access to established  Sprint PCS  distribution  channels and outlets,
          national marketing plans and marketing strategies;

     o    Sprint PCS nationwide coverage;

     o    availability of discount  prices for network and subscriber  equipment
          under Sprint PCS' vendor contracts;

     o    revenues from Sprint PCS subscribers traveling onto our network;

     o    use of Sprint PCS' back office including customer activation,  billing
          and customer care; and

     o    use  of  Sprint  PCS'  national   network   control  center  which  is
          responsible for continually  monitoring the performance of our network
          and providing rapid response for systems maintenance needs.

     Rapidly  completing  the  expanded  build-out  of  our  network.   We  have
successfully  developed several key relationships  which allow us to efficiently
launch our markets.  For the build-out in our Bright PCS markets and for fill-in
coverage in our initial markets, we rely on our build-to-suit  arrangements with
SBA Communications  Corporation ("SBA"). These arrangements allow us to minimize
capital costs and take  advantage of SBA's  expertise in quickly  completing the
site  acquisition  process.  For markets with a high  concentration  of existing
towers or zoning challenges,  we employ a co-location  strategy. In our Virginia
and West  Virginia  markets,  we use our  network  services  agreement  with the
Alliances (See "Alliances  Network  Services  Agreement"  below) to increase our
coverage to our markets  with a total  population  of 2.9  million.  For our new
markets in Pennsylvania,  New York, Ohio, and New Jersey,  we purchased  network
assets currently under construction from Sprint PCS, enabling us to launch these
markets much  earlier  than if we had to complete the entire  build-out of these
markets independently.

     Executing an integrated local marketing strategy. Our marketing strategy is
to take full advantage of Sprint's and Sprint PCS' nationwide presence and brand
names while at the same time establishing a strong local presence in each of our
markets.  We emphasize the improved clarity and quality,  enhanced  features and
favorable  pricing  of Sprint  PCS  products  and  services  and  replicate  the
marketing  strategies  that have  resulted  in Sprint PCS  becoming  the fastest
growing wireless  service  providers in the country.  In addition,  on the local
level, we are or soon will be:

     o    establishing up to 50 Sprint PCS stores within our territory;

     o    establishing local third-party sales and distribution relationships on
          an as-needed basis;

     o    directing our media efforts at the community  level by  advertising in
          local publications and radio;

     o    sponsoring local and regional events; and

     o    using the local  telephone  offices of Sprint and the former owners of
          Bright PCS which are located in our markets to offer our  products and
          services.

     Continuing  to explore  opportunities  to expand our  territory and provide
complementary products and services.  Since the initial grant of our markets, we
have significantly  expanded the geographic scope of our territory through three
separate  transactions.  We expect to continually evaluate ways to strategically
expand our territory.  Similarly,  we expect to consider offering  complementary
products and services.




                                       15




Markets

     Our territory  covers 54 markets in parts of Indiana,  Kentucky,  Maryland,
Michigan, New Jersey, New York, North Carolina, Ohio,  Pennsylvania,  Tennessee,
Virginia  and  West  Virginia.  Sprint  PCS has  launched  service  in 15  major
metropolitan  areas that are  adjacent to our markets and have a combined  total
population  of  approximately  59 million.  We believe that  connecting or being
adjacent to existing  Sprint PCS markets is important to Sprint PCS' strategy to
provide seamless, nationwide PCS service.

     The following chart identifies our markets:

                                 Sprint PCS      MHz of           Estimated
Market                            Grant(1)      Spectrum     Total Population(2)
- ------                            --------      --------     -------------------
Fort Wayne, IN                     Bright          10               689,200
Kingsport (Tri-Cities), TN           2nd           20               689,100
Scranton, PA                         3rd           30               664,700
Roanoke, VA                          2nd           10               645,200
Charleston, WV                       1st           20               492,700
Huntington, WV                       1st           20               369,700
South Bend, IN                     Bright          10               348,800
Erie, PA                             3rd           10               280,200
Elkhart, IN                        Bright          10               256,900
Lima, OH                           Bright          30               251,800
Olean, NY                            3rd           30               240,200
Charlottesville, VA                  2nd           30               218,600
Clarksburg, WV                       2nd           30               195,600
Sunbury, PA                          3rd           30               194,300
Zanesville, OH                       1st           20               187,200
Kokomo, IN                         Bright          30               186,000
Williamson, WV                       2nd           20               183,900
Parkersburg, WV                      1st           20               182,000
Jamestown, NY                        3rd           30               180,100
Bluefield, WV                        2nd           20               176,200
New York, NY (Partial)(3)            3rd           30               169,673
Beckley, WV                          2nd           20               169,500
Danville, VA                         2nd           10               168,600
Williamsport, PA                     3rd           30               161,200
Benton Harbor, MI                  Bright          10               160,100
Lynchburg, VA                        2nd           10               160,100
Cumberland, MD                       2nd           10               159,000
Findlay, OH                        Bright          30               152,900
Pottsville, PA                       3rd           30               151,000
State College, PA                    3rd           30               134,900
Athens, OH                           1st           20               132,100
Stroudsburg, PA                      3rd           30               128,100
Du Bois, PA                          3rd           30               127,900
Cincinnati, OH (Partial)(3)          2nd           10               127,400
Sharon, PA                           3rd           10               122,300
Michigan City, IN (Partial)(3)     Bright          10               109,900
Marion, IN                         Bright          30               108,600
Morgantown, WV                       2nd           30               107,800
Staunton, VA                         2nd           10               107,600
Chillicothe, OH (4)                  1st           35               104,700
Oil City, PA                         3rd           30               104,500
Ashtabula, OH                        3rd           10               103,500



                                       16




                                  Sprint PCS     MHz of           Estimated
Market                             Grant(1)     Spectrum     Total Population(2)
- ------                             --------     --------     -------------------

Portsmouth, OH                        1st          20                93,800
Martinsville, VA                      2nd          10                90,400
Meadville, PA                         3rd          10                90,000
Allentown, PA (Partial)(3)            3rd          30                59,094
Fairmont, WV                          2nd          30                56,800
Knoxville, TN (Partial)(3)            3rd          10                54,201
Dayton, OH (Partial)(3)             Bright         10                41,065
Logan, WV                             2nd          10                40,900
Canton, OH (Partial)(3)               2nd          10                36,215
Toledo, OH (Partial)(3)             Bright         30                30,066
Kalamazoo, MI (Partial)(3)          Bright         30                20,009
Battle Creek, MI (Partial)(3)       Bright         30                 8,980
                                                                -----------
   Estimated total population                                    10,225,303

- -----------------

(1)  Indicates  the grant from  Sprint PCS in which we received  our  respective
     markets.  "Bright" indicates markets granted to Bright PCS in October 1999.
     The following  summarizes our other grants:
         1st: June 1998
         2nd: August 1999
         3rd: May 2000
(2)  Estimated total  population is based on January 1, 1999 estimates  compiled
     by Rand McNally  Commercial Atlas & Marketing Guide, 2000 Edition.
(3)  The estimated total  population in these markets  represents the population
     of  the  counties  within  the  market  granted  to us in  the  Sprint  PCS
     agreements, not the total population of that market.
(4)  Includes 15 MHz of spectrum owned directly by us.

Network Build-Out Plan

     Overview.  Our  network  build-out  strategy  is to provide  service to the
largest  communities in our markets and to cover  interstates  and primary roads
connecting  these  communities to each other,  and to the adjacent major markets
owned and operated by Sprint PCS. We believe  that our  schedule for  completing
the build-out is achievable based on our prior experience in network  build-out,
the  digital  PCS  technology  we will  use to  build  our PCS  network  and the
established  standards of Sprint PCS. We have  designed our  build-out to exceed
the requirements of the Sprint PCS agreements.

     Our markets have a total population of  approximately  10.2 million people.
As  of  December  31,  2001,  we  had  launched   service  in  markets  covering
approximately  6.9  million  residents,  or 68% of the total  population  in our
territory and had  approximately  194,100  customers.  According to our original
business  plan,  our  network,  when  completed,  would have covered 6.9 million
residents.  We have  decided  to expand the  coverage  in our  markets  from 6.9
million to 7.9 million  residents,  increasing our planned  coverage from 68% to
77% of the total  population  of our  territory.  We believe  that our  expanded
network will be substantially complete by December 31, 2002.

Network Build-Out Elements

     As part of our network  build-out  strategy,  we entered  into  outsourcing
relationships  with the third parties  described  below to assist us in building
out our network.  We believe that these  relationships  result in a more timely,
efficient and cost effective build-out process.

     Radio frequency  design.  We have engaged an outside design firm to provide
radio frequency design,  engineering and optimization  services for our markets.
This firm assists us in determining  the required number of cell sites needed to
operate the network and identifies the general geographic areas in which each of
the required cell sites will be located.

     Site acquisition, project management and construction. We use a combination
of build-to-suit and co-location opportunities in the design and construction of
our network. We consider these arrangements to be preferable to building our own
towers.



                                       17


     Build-to-suit  arrangements are contractual  relationships  whereby a tower
company  constructs  and owns a cell  tower at a location  which we approve  and
leases  the  cell  tower  to us  for  use  in  our  network.  Co-location  is an
arrangement  whereby a  wireless  service  provider,  like us, is allowed to use
another  party's  cell  tower  as  part  of its  network.  Generally  we  prefer
build-to-suit  opportunities  because  of the  favorable  development  fees  and
leasing terms associated with our arrangement with SBA. Under our  build-to-suit
agreement, SBA acquires the site, builds the tower and leases it to us.

     In situations where we determine that build-to-suit is not appropriate,  we
use a co-location  strategy.  For sites where  co-location  leases are utilized,
zoning,  permitting  and  surveying  approvals  and  licenses  have already been
secured,  which  minimizes  our  start-up  costs and  accelerates  access to the
markets.

     We expect  that  approximately  1,380 sites will be required to achieve our
planned coverage of the residents in our territory,  including those provided to
us through our network services agreement.

     Microwave  relocation.  At the time of the FCC's  auction of PCS  licenses,
other third parties were using portions of the same frequency bandwidths for the
operation of microwave  facilities.  The FCC has established  procedures for PCS
licensees  to relocate  these  existing  microwave  paths,  generally at the PCS
licensee's   expense.   Sprint  PCS  relocates  the  microwave  paths  that  use
frequencies  owned by Sprint  PCS,  and is  analyzing  these  relocations  as we
continue the  build-out of our network.  Sprint PCS is also paying for a portion
of the relocation costs.  Sprint PCS has  substantially  completed the necessary
relocation for the microwave paths in our markets.

     Switching. We currently use two switching centers in Chillicothe, Ohio, and
Fort Wayne,  Indiana,  to provide  services to our network.  We also utilize the
Alliance's  two switching  centers under our network  services  agreement,  (see
"Alliances  Network  Services  Agreement"  below) and use  Sprint PCS  switching
centers  on an  interim  basis to more  rapidly  launch  our  markets in western
Pennsylvania  and northern  Ohio. A switching  center serves  several  purposes,
including  routing calls,  managing call handoff,  managing access to the public
telephone  network and providing  access to voice mail. As of December 31, 2001,
we are constructing two additional  switching  centers which we plan to complete
in 2002: one in Johnson City, Tennessee, and one in Erie, Pennsylvania, which we
plan to complete in 2002. The new Nortel switch in Johnson City will replace the
older Motorola switch in  Chillicothe.  We believe the capacity of our switching
centers is adequate to accommodate our planned growth.

     Interconnection.  Our  network  connects  to the public  telephone  network
through local exchange carriers.  Through our Sprint PCS agreements,  we benefit
from Sprint PCS-negotiated agreements with local exchange carriers, which govern
the  terms  of  the  relationship   between  telephone  service  carriers  which
interconnect in order to provide service between networks.

     Long distance and back haul. We use Sprint and other third party  providers
for long distance  services and for back haul  services.  Back haul services are
the  telecommunications  services that other carriers provide to carry our voice
traffic  from our cell  tower  sites to our  switching  facilities.  When we use
Sprint, we receive the same preferred rates made available to Sprint PCS sites.

     Network monitoring. We use Sprint PCS' Network Operations Control Center to
monitor  continuously our owned and operated  network.  The Alliances  operate a
comparable network operations control center that provides network monitoring in
our resale markets.

SBA Agreement

     Prior to August 1999,  Horizon Telcom owned the cell site towers we used in
our network.  In August 1999,  Horizon  Telcom sold to SBA the towers we used in
our network;  we subsequently  entered into lease  arrangements with SBA. We now
pay a fixed amount per month,  per cell site,  to SBA for the right to use their
towers in our  markets.  This  fixed  fee is  subject  to an  annual  percentage
increase for each site  beginning on the third  anniversary of the date we began
using the site.  We believe the rates we pay under this  agreement are generally
more favorable than average co-location rates available in our markets.

     In August 1999, we also entered into a  build-to-suit  agreement  with SBA.
Under this  agreement,  SBA  acquires  and  develops  the sites and installs the
towers at locations we approve.  We receive a site  development fee from SBA for


                                       18


tower sites which SBA constructs on our behalf. We have agreed to lease space on
a number of existing SBA towers for which we pay a fixed  amount per month,  per
cell site. For some of the leases, we receive a one-year rent abatement on these
sites. Rent expense for the leases which include abatement will be recognized on
a straight-line basis over the life of the lease.

Motorola Product Supply Agreement

     In December 1999, we entered into a product supply  agreement with Motorola
for  the  purchase  of the  telecommunications  products  and  services  for our
network. Motorola also provides installation services for our network equipment.
We intend to use  Motorola  equipment  for the  build-out  of our new markets in
Pennsylvania,  New York,  Ohio and New Jersey and the Bright PCS markets.  Since
entering into the Sprint PCS  agreements in June 1998,  we have  benefited  from
Sprint PCS' volume pricing arrangements with Motorola on our equipment purchases
and expect to continue to benefit going forward.

Alliances Network Services Agreement

     The Alliances are two related,  independent PCS providers  offering service
under the NTELOS brand name. In August 1999, we entered into a network  services
agreement  with  the  Alliances  for 13 of our  markets  in  Virginia  and  West
Virginia.  Under this agreement,  we are entitled to use the Alliances' wireless
network and equipment to provide services to our customers in these markets. The
Alliances  are  required  to  maintain  their  network to Sprint  PCS  technical
standards.  We pay the Alliances a minimum  monthly charge for a fixed number of
minutes and a per minute of use charge for minutes in excess of the fixed number
of minutes.

     We believe this arrangement eliminates or defers capital costs, and reduces
network  expenses while permitting a faster launch of service and preserving our
capital  for  other  uses.  In  addition,  this  arrangement  gives us access to
additional  spectrum  in markets  where  Sprint PCS has  limited  bandwidth  and
reduces our risk of technological  obsolescence in these markets. We are subject
to the risk  that the  Alliances  will not  satisfactorily  build-out,  operate,
maintain  or  upgrade  their   network.   See  "Risk  Factors"  under  "ITEM  7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation" included herein.

     As of December 31, 2001,  the  Alliances had deployed 481 cell sites within
our  markets  in  West  Virginia  and  Virginia  and  had  complied  with  their
contractual  build-out  requirements to date. At December 31, 2001, the Alliance
provided coverage to 62% of the total population of 2.9 million residents in the
markets covered by our network services agreement.

     In the event we terminate our agreement  with the Alliances  because of the
Alliances'  breach of the  agreement,  we have the right to  continue to use the
Alliances'  network  for up to 36 months  after the  termination  at rates which
reflect  a  significant  discount  from the  standard  pricing  terms  under our
agreement.  This is intended to enable us to continue to provide services to our
customers  while we build out our own network.  In addition,  after December 31,
2003,  we  have  the  right  to  overbuild   the   Alliances'   markets,   on  a
market-by-market basis, at any time for any reason.

Products And Services

    Our products and services mirror the service offerings of Sprint PCS and are
designed to integrate seamlessly with the Sprint PCS nationwide network. Sprint
PCS Wireless Services currently serve the majority of the nation's metropolitan
areas, including more than 4,000 cities and communities, providing customers
with affordable, reliable 100% digital, 100% PCS services. The Sprint PCS
service package we offer includes the following:

     100% digital wireless mobility and nationwide service.  Our primary service
is wireless  mobility  coverage.  Our PCS  network is part of the  largest  100%
digital, 100% PCS network in the nation and our customers are able to use Sprint
PCS services in our markets and seamlessly throughout the Sprint PCS network. We
offer customers in our territory  enhanced voice clarity,  advanced features and
simple,  affordable  Sprint PCS pricing  plans.  These plans  include  free long
distance and wireless  airtime minutes for use throughout the Sprint PCS network
at no additional  charge. Our basic wireless service includes voice mail, caller
ID,  enhanced call waiting,  three-way  calling,  call  forwarding,  distinctive
ringing and call blocking.



                                       19


     Nationwide service.  Dual-band/dual-mode handsets allow roaming on wireless
networks where Sprint PCS is not available and with which Sprint PCS has roaming
agreements.  These  handsets  are  designed  to operate  on analog  and  digital
cellular networks, as well as on Sprint PCS' digital PCS networks.

     Advanced handsets.  CDMA handsets offer significantly extended battery life
relative to earlier technologies,  providing up to five days of standby time and
approximately  two to four hours of talk time.  Handsets  operating on a digital
system  are  capable  of saving  battery  life  while  turned on but not in use,
improving   efficiency   and  extending   the  handset's   use.  We  also  offer
dual-band/dual-mode  handsets that allow  customers to make and receive calls on
both PCS and cellular  frequency  bands and both  digital or analog  technology.
These  handsets  allow  roaming on cellular  networks  where  Sprint PCS digital
service is not  available  through  carriers  with which  Sprint PCS has roaming
agreements.  All handsets are equipped with preprogrammed features such as speed
dial and last number redial,  and are sold under the Sprint and Sprint PCS brand
names.

     Improved voice quality.  We believe the Sprint PCS CDMA  technology  offers
significantly  improved  voice  quality  compared  to  existing  analog and TDMA
networks, more powerful error correction, less susceptibility to call fading and
enhanced interference rejection; all of which result in fewer dropped calls. See
"CDMA  Technology"  below for a discussion of the reasons CDMA technology offers
improved voice quality.

     Privacy  and  security.  Sprint PCS  provides  secure  voice  transmissions
encoded into a digital format to prevent  eavesdropping and unauthorized cloning
of subscriber identification numbers.

     Easy activation.  Customers can purchase a Sprint PCS handset off the shelf
at a retail location and activate their service by calling  customer  service or
by visiting  Sprint PCS' website.  Either option allows the customer to activate
the handset  over the air. We believe  over-the-air  activation  will reduce the
training requirements for salespersons at retail locations.

     Customer care. By using Sprint PCS'  established  back office services such
as customer care and billing  services,  we believe our operating  costs will be
reduced. By using Sprint PCS' services, we also expect to more rapidly implement
new products and services offered by Sprint PCS. Sprint PCS offers customer care
24 hours a day,  seven  days a week.  Our  customers  can call  the  Sprint  PCS
toll-free customer care number from anywhere on the national Sprint PCS network.
All Sprint PCS phones are  preprogrammed  with a speed dial  feature that allows
customers to easily reach customer care at any time.

     Access to the Sprint PCS wireless web. We support and market the Sprint PCS
Wireless  Web  throughout  our  network.  The  Sprint  PCS  Wireless  Web allows
subscribers with  data-capable  handsets to connect their portable  computers or
personal  digital  assistants  to the  Internet.  Sprint  PCS  subscribers  with
data-capable  handsets  also have the  ability to receive  periodic  information
updates  such as stock  prices,  airline  schedules,  sports  scores and weather
reports  directly on their  handsets.  Sprint PCS subscribers  with  Web-browser
enabled  handsets have the ability to connect to and browse  specially  designed
text-based  Internet  sites on an interactive  basis.  Sprint PCS has agreements
with  Internet  providers to provide  services for the Sprint PCS Wireless  Web.
Sprint PCS offers  Sprint PCS Wireless Web as an add-on to existing  Sprint PCS'
Free and Clear pricing plans.

     Clear Pay pricing  plan.  We offer  Sprint PCS' "Clear Pay" pricing plan in
our markets. The "Clear Pay" plan is a credit policy which is designed to enable
potential  subscribers  who may not have a credit  history  that  qualifies  for
standard Sprint PCS post-pay pricing plans to become subscribers  without having
to pay high rates  customarily  associated  with pre-paid  plans or to provide a
large  deposit.  We believe  the "Clear  Pay"  pricing  plan allows us to obtain
subscribers  which we would not be able to otherwise  obtain if we used standard
post-pay credit policies.

     Other  services.  We believe new features and services will be developed on
the Sprint PCS  nationwide  network to take advantage of CDMA  technology.  As a
leading wireless provider,  Sprint PCS conducts ongoing research and development
to produce innovative services that give Sprint PCS a competitive advantage.  We
intend to offer a portfolio of products and services  developed by Sprint PCS to
accommodate  the  growth in, and the unique  requirements  of,  high-speed  data
traffic and demand for video services.  We plan to provide,  when  available,  a
number of applications for wireless data services including facsimile,  Internet
access, wireless local area networks and point-of-sale terminal connections.



                                       20


Marketing Strategies

     Our marketing and sales strategy uses Sprint PCS'  strategies and developed
national  distribution  channels  that have  helped  Sprint PCS  generate  rapid
customer growth.  We augment Sprint PCS' strategies with strategies  tailored to
our specific territory.

     Use of Sprint PCS' brand equity and marketing.  We feature  exclusively and
prominently the nationally  recognized  Sprint and Sprint PCS brand names in our
marketing  effort.  From the  customers'  point of view,  they  will use our PCS
network and the Sprint PCS national  network  seamlessly  as a unified  national
network.  We are  building on Sprint PCS'  national  distribution  channels  and
advertising programs.

     Pricing.  We believe our use of the Sprint PCS pricing  strategy will offer
customers in our territory simple, easy-to-understand service plans. Sprint PCS'
consumer  pricing  plans  are  typically  structured  with  competitive  monthly
recurring  charges and large  local  calling  areas,  service  features  such as
voicemail,  enhanced  caller ID, call waiting and three-way  calling and what we
believe to be competitive  per-minute rates.  Lower per-minute rates relative to
analog cellular providers are possible in part because the CDMA system that both
we and Sprint PCS employ has  greater  capacity  than  current  analog  cellular
systems which we believe will enable us to market high usage  customer  plans at
lower prices. All of Sprint PCS' current national plans:

     o    include minutes in any Sprint PCS market with no roaming charges;

     o    offer a wide  selection of phones to meet the needs of  consumers  and
          businesses; and

     o    provide a limited-time money-back guarantee on Sprint PCS handsets.

     In addition,  Sprint PCS' national  Free and Clear plans,  which we believe
offer simple, affordable plans for every consumer and business customer, include
the option to choose free long distance  calling from anywhere on its nationwide
network, a package of off-peak minutes or Sprint PCS Wireless Web.

     Local focus. Our local focus enables us to supplement Sprint PCS' marketing
strategies  with our own  strategies  tailored to each of our specific  markets.
These include  attracting  local  businesses to diversify our  distribution  and
using local radio and newspaper advertising to sell our products and services in
each of our launched markets. We have established a local sales force to execute
our marketing strategy through  company-owned Sprint PCS stores, and also employ
a direct  sales force  targeted  to business  sales.  In  addition,  Sprint PCS'
existing  agreements with national retailers provide us with immediate access to
over 455 retail locations in our territory. The former owners of Bright PCS also
offer Sprint PCS products in their local telephone offices in northwestern Ohio.
Sprint-owned   local  exchange  carriers  provide  local  telephone  service  to
approximately  20% of the total  population in our territory,  which provides us
with an  additional  distribution  channel  through  which we can  market  to an
established base of Sprint customers.  Some of the Sprint local exchange markets
have a store  for  Sprint  customers  to pay their  bills,  which we use to sell
Sprint PCS products and services.

     Advertising  and   promotions.   Sprint  PCS  uses  national  and  regional
television, radio, print, outdoor and other advertising campaigns to promote its
products.  We benefit  from this  national  advertising  in our  territory at no
additional cost to us.

     Sponsorships.  Sprint PCS is a sponsor of  numerous  selected,  broad-based
national and regional events.  These sponsorships  provide Sprint PCS with brand
name and product  recognition in high profile events,  provide a forum for sales
and promotional events and enhance our promotional efforts in our territory.

     Bundling of services.  We intend to take advantage of the complete array of
communications  services  offered by  bundling  Sprint PCS  services  with other
Sprint products, such as long distance and Internet access.




                                       21




Sales And Distribution

     Our sales and distribution  plan mirrors Sprint PCS' multiple channel sales
and distribution  plan. Key elements of our sales and distribution  plan consist
of the following:

     Sprint store  within a RadioShack  store.  Sprint has an  arrangement  with
RadioShack  to  install  a "store  within a store"  for the sale of  Sprint  PCS
Service. RadioShack has approximately 178 stores in our territory.

     Other national and regional third party retail stores. We also benefit from
the  distribution  agreements  established by Sprint PCS with other national and
regional retailers which currently include Best Buy, Circuit City, Office Depot,
OfficeMax,  Ritz Camera,  Staples, Cord Camera, The Wiz, Wal-Mart and h.h. gregg
department stores. At present,  these retailers operate approximately 277 retail
stores in our territory.  We also believe that we benefit from stores located in
major Sprint PCS markets near our markets because residents of our territory who
buy PCS handsets at those stores become our subscribers.

     Sprint PCS stores.  At December 31,  2001,  we owned and operated 38 Sprint
PCS stores.  We plan to have up to 50 Sprint PCS stores in our  territory by the
end of  2002.  These  stores  will be  located  in  larger  markets  within  our
territory,  which we believe will  provide us with strong  local  presence and a
high degree of visibility.  Following the Sprint PCS model, these stores will be
designed to facilitate retail sales, bill collection and customer service.

     Local  telephone  stores.  We also plan to offer  Sprint PCS  products  and
services  through the Sprint  Local  Telephone  Division  retail  centers in our
service area and through local telephone service centers of the former owners of
Bright PCS and their affiliates located in our markets.

     National  accounts  and  direct  selling.  We  participate  in Sprint  PCS'
national accounts program. Sprint PCS has a national accounts team which focuses
on the corporate  headquarters of Fortune 500 companies.  Once a  representative
reaches an agreement with the corporate headquarters,  we service the offices of
that  corporation  located in our territory.  Our direct sales force will target
the employees of these  corporations  in our territory and cultivate other local
business clients.

     Inbound telemarketing. Sprint PCS provides inbound telemarketing sales when
customers  call from our  territory.  As the  exclusive  provider  of Sprint PCS
products and services in our market,  we use the national Sprint  1-800-480-4PCS
number  campaigns that generate  call-in leads.  These leads are then handled by
Sprint PCS' inbound telemarketing group.

     Electronic  commerce.  A visitor to Sprint PCS' Internet site can order and
pay for a handset and select a service  plan.  Customers  visiting  the site can
review the status of their account,  including the number of minutes used in the
current  billing  cycle.  We manage  customers  in our  territory  who  purchase
products and services over the Sprint PCS Internet.

CDMA (Code Division Multiple Access) Technology

     Sprint PCS' nationwide network and its affiliates' networks all use digital
CDMA technology.  CDMA technology is fundamental to  accomplishing  our business
objective  of  providing  high-volume,  high-quality  airtime at a low cost.  We
believe CDMA provides important system performance benefits.

     Voice  quality.  We believe  CDMA  systems  offer less  interference,  more
powerful error correction and less susceptibility to fading than analog systems.
Using enhanced voice-coding techniques,  CDMA systems achieve voice quality that
is comparable to that of the typical wireline telephone.  This CDMA voice-coding
technology also filters annoying background noise more effectively than existing
wireline, analog cellular or other digital PCS phones.

     Capacity.  CDMA  technology  allows a greater  number of calls  within  one
specific  frequency and reuses the entire frequency  spectrum in each cell. CDMA
systems provide  capacity gains of up to seven times over current analog systems
and up to three  times  greater  than TDMA and GSM  systems  used by some of our
competitors.  Additional  voice  capacity  improvements  are  expected  for CDMA
networks  over  the  next  two  years  as  new 3G  standards  are  approved  and


                                       22


implemented.  Additionally,  3G will allow higher data transmission  speeds than
are currently available.

     CDMA  technology  is designed to provide  flexible or "soft"  capacity that
permits networks like ours to temporarily increase the number of telephone calls
that can be handled within a cell. When capacity limitations in analog, TDMA and
GSM systems are reached, additional callers in a given cell must be given a busy
signal. Using CDMA technology, networks like ours can allow a small reduction in
voice quality to provide temporary  increases in capacity.  This reduces blocked
calls and increases the probability of a successful cell-to-cell hand-off.

     Soft hand-off.  As a subscriber  travels from one cell site to another cell
site,  the call must be  "handed-off"  to the next site.  CDMA systems  transfer
calls  throughout the network using a technique  referred to as a soft hand-off,
which connects a mobile customer's call with a new cell site while maintaining a
connection  with the cell site  currently  in use.  CDMA  networks  monitor  the
quality of the transmission received by both cell sites simultaneously to select
a better  transmission  path and to ensure that the network does not  disconnect
the call in one cell until it is clearly  established in a new one. As a result,
fewer calls are dropped  compared to analog,  TDMA and GSM networks  which use a
"hard  hand-off"  and  disconnect  the call  from the  current  cell  site as it
connects with a new one.

     Integrated  services.  CDMA systems permit us to offer  advanced  features,
including voice mail, caller ID, enhanced call waiting,  three-way calling, call
forwarding, Internet access, paging and text-messaging.  These advanced features
may also be offered by companies utilizing competing technologies.

     Privacy  and  security.  Another  benefit  of  CDMA  technology  is that it
combines a constantly  changing coding scheme with a low-power signal to enhance
security and privacy.  Vendors are currently  developing  additional  encryption
capabilities which we believe will further enhance overall network security.

     Frequency  planning.  Frequency planning is the process used to analyze and
test alternative patterns of frequency use within a wireless network to minimize
interference  between  one  call and  another  call  and to  maximize  capacity.
Currently,  cellular  service  providers  spend  considerable  money and time on
frequency  planning.  Since  TDMA and GSM based  systems  have  frequency  reuse
constraints similar to present analog systems, frequency reuse planning for TDMA
and GSM based  systems is expected to be  comparable to planning for the current
analog systems. With CDMA technology, however, the same group of frequencies can
be reused in every cell,  substantially  reducing the need for costly  frequency
reuse patterning and constant frequency plan management.

     Battery life. Due to their greater  efficiency in power  consumption,  CDMA
handsets provide up to three to five days of standby time and  approximately two
to four hours of talk time  availability.  We believe this generally exceeds the
battery life of handsets using alternative digital or analog technologies.

     Third generation technology.  In addition,  wireless carriers are beginning
to  implement  a new "third  generation,"  or "3G,"  technology  throughout  the
industry. The 3G technology is intended to increase networks' capacity for voice
calls and enable better transmission of high-speed data. Sprint PCS has selected
a version of 3G  technology,  1XRTT,  for its own networks  which requires us to
upgrade our network to provide it. We currently  estimate  this network  upgrade
will cost  approximately  $35  million,  but  actual  costs  could  exceed  this
estimate.  To date, this technology has not been deployed on a commercial  basis
by Sprint PCS.  Because we believe that our CDMS  technology  is more  efficient
than GSM or TDMA, we believe that, unlike our GSM and TDMA competitors,  we will
not require additional  spectrum in order to operate our 3G network.  We believe
that our early  deployment of 3G  technology  will provide us with a competitive
advantage in the market for wireless data services.

     Benefits  of other  technologies.  While  CDMA has the  benefits  discussed
above,  TDMA networks are generally  less  expensive  when  overlaying  existing
analog systems. In addition, the GSM technology standard,  unlike CDMA, supports
a more  robust  interoperability  standard  which more  easily  allows a network
operator to use equipment  from several  different  vendors in the same network.
This,  along with the fact that the GSM  technology  is  currently  more  widely
deployed throughout the world than CDMA, provides economies of scale for handset
and equipment  purchases.  A standards process is also underway which will allow
wireless handsets to support analog, TDMA and GSM technologies in a single unit.
Currently, there are no plans to have CDMA handsets that support either the TDMA
or GSM technologies.



                                       23


Competition

     Given the broad geographic coverage of our territory,  the competition that
we face from other  wireless  providers is  fragmented.  We compete,  to varying
degrees,  with regional and national  cellular,  PCS and other wireless  service
providers.  Currently,  we believe our  strongest  competition  is from cellular
providers,  many of which have been  operating in our markets and building their
customer base for a number of years.

     Our largest single cellular  competitor is Verizon  Wireless,  which offers
service in the majority of our  markets.  We also face  significant  competition
from AT&T Wireless,  which operates in conjunction with its affiliates in almost
all of our markets.  After Verizon and AT&T Wireless,  our strongest competitors
are regional wireless providers, ALLTEL, Centennial and NTELOS.

     The following table lists the primary  operational  competitors known to us
within our various geographic areas:

                                         PRIMARY                   TYPE OF
GEOGRAPHIC AREA                          OPERATING COMPETITORS     SERVICE
- ---------------                          ---------------------     -------

Ohio markets...........................  ALLTEL                    Cellular
                                         AT&T Wireless             Cellular
                                         Verizon Wireless          Cellular
                                         Nextel                    ESMR

Indiana markets........................  Centennial                Cellular
                                         CenturyTel                Cellular
                                         Verizon Wireless          Cellular
                                         VoiceStream               PCS
                                         Nextel                    EMSR

Pennsylvania and New York markets......  AT&T Wireless             Cellular
                                         Verizon Wireless          Cellular
                                         VoiceStream               PCS
                                         Nextel                    ESMR

Virginia and West Virginia markets.....  ALLTEL                    Cellular
                                         AT&T Wireless (1)         Cellular/PCS
                                         Verizon Wireless          Cellular
                                         NTELOS                    PCS

Tennessee markets......................  ALLTEL                    Cellular
                                         Verizon Wireless          Cellular
                                         Cingular                  PCS
                                         AT&T Wireless (1)         PCS
                                         Nextel                    ESMR

(1)  Includes Triton PCS, an AT&T Wireless  affiliate offering AT&T Wireless and
     SunCom co-branded service.

     Our  primary  competitors  offer  a  wireless  service  that  is  generally
comparable to our PCS service. However, as a Sprint PCS affiliate, we believe we
are positioned to successfully  compete with all of these wireless providers due
to the strength of the Sprint PCS brand name,  distribution  channels and Sprint
PCS' nationwide  CDMA-only  network.  Verizon Wireless,  in particular,  lacks a
single  technology  throughout  all of its  markets.  We also  believe  that our
primary competitors do not offer 100% digital technology.

     Nextel  Communications,  together with its affiliate Nextel  Partners,  has
licenses to offer  service in the vast  majority  of our  markets and  currently
offers service to less than half of our planned  covered  residents.  We believe
Nextel's  coverage  in many of these  markets  is focused  primarily  on highway
coverage as opposed to community coverage.



                                       24


     Our ability to compete  effectively  with these other providers will depend
on a number of factors,  including the continued  success of CDMA  technology in
providing  better  call  clarity  and  quality as  compared  to analog  cellular
systems, Sprint PCS' competitive pricing with various options suiting individual
customer's calling needs, the continued  expansion and improvement of the Sprint
PCS nationwide  network,  our extensive direct and indirect sales channels,  our
centralized  Sprint PCS  customer  care  systems,  and our  selection of handset
options.

     Many of our competitors  have access to more licensed  spectrum than the 10
or 20MHz licensed to Sprint PCS in some of our markets.  Many of our competitors
also have established infrastructures,  marketing programs and brand names. Many
of our  competitors  may be able to offer  coverage  in areas not  served by our
network,  or, because of their calling  volumes or their  affiliations  with, or
ownership of, other wireless providers,  may be able to offer roaming rates that
are lower than those  offered by Sprint PCS.  PCS  operators  compete with us in
providing some or all of the services  available  through the Sprint PCS network
and may  provide  services  that we do not.  Additionally,  we  expect  existing
cellular  providers  will continue to upgrade  their systems to provide  digital
wireless communication services competitive with Sprint PCS.

     We also face limited  competition from  "resellers"  which provide wireless
service to customers  but do not hold FCC licenses or own  facilities.  Instead,
the  reseller  buys blocks of wireless  telephone  numbers and  capacity  from a
licensed carrier and resells service through its own distribution network to the
public.  Thus, a reseller is both a customer of a wireless  licensee's  services
and a competitor of that and other licensees.  The FCC requires all cellular and
PCS licensees to permit resale of carrier service to resellers.  Although Sprint
PCS is required to resell PCS in our markets,  currently  there are no resellers
of Sprint PCS in our markets. Any reseller of Sprint PCS in our markets would be
required to pay us for the use of our  capacity  and their use of the Sprint PCS
service marks in our markets would be restricted to describing their handsets as
operational on the Sprint PCS network.

     In  addition,   we  compete   with   paging,   dispatch  and  other  mobile
telecommunications  companies in our markets. Potential users of PCS systems may
find their  communications  needs  satisfied  by other  current  and  developing
technologies.  One or  two-way  paging or beeper  services  that  feature  voice
messaging  and data  display as well as  tone-only  service may be adequate  for
potential customers who do not need immediate two-way voice communications.

     In the  future,  we  expect to face  increased  competition  from  entities
providing similar services using other  communications  technologies,  including
satellite-based  telecommunications  and fixed  wireless  systems.  While few of
these  technologies  and services are  currently  operational,  others are being
developed or may be developed in the future.

     Over the past several  years the FCC has  auctioned,  and will  continue to
auction  large  amounts of wireless  spectrum that could be used to compete with
Sprint PCS service. Based upon increased competition,  we anticipate that market
prices for two-way wireless  services  generally will decline in the future.  We
will compete to attract and retain customers principally on the basis of:

     o    the  strength of the Sprint and Sprint PCS brand  names,  services and
          features;

     o    the location of our markets;

     o    the size of our territory;

     o    national network coverage and reliability;

     o    customer care; and

     o    pricing.




                                       25




Intellectual Property

     "Sprint," the Sprint  diamond design logo,  "Sprint PCS," "Sprint  Personal
Communications  Services,"  "The Clear  Alternative to Cellular" and "Experience
the Clear  Alternative to Cellular Today" are service marks  registered with the
United  States  Patent and  Trademark  Office.  These service marks are owned by
Sprint.  Pursuant to the trademark and service mark license agreements,  we have
the right to use,  royalty-free,  the Sprint and Sprint PCS brand  names and the
Sprint diamond design logo and other service marks of Sprint in connection  with
marketing,  offering and providing licensed services to end-users and resellers,
solely within our territory.

     Except in  limited  instances,  Sprint  PCS has  agreed not to grant to any
other  person a right or license  to provide or resell,  or act as agent for any
person offering,  licensed services under the licensed marks in our market areas
except as to Sprint PCS' marketing to national accounts and the limited right of
resellers of Sprint PCS to sell their products and services in our market areas.
In all other  instances,  Sprint PCS reserves for itself and its  affiliates the
right to use the  licensed  marks in  providing  its  services,  subject  to its
exclusivity   obligations   described  above,  whether  within  or  without  our
territory.

     The trademark license agreements contain numerous restrictions with respect
to the use and  modification of any of the licensed  marks.  See "The Sprint PCS
Agreements: The Trademark and Service Mark License Agreements."

     This annual report on Form 10-K  includes  product  names,  trade names and
trademarks of other  companies.  We do not have any rights with respect to these
product names, trade names and trademarks.

THE SPRINT PCS AGREEMENTS

     The  following is a summary of the  material  terms and  provisions  of the
Sprint PCS agreements. The summary applies to the Sprint PCS agreements for both
Horizon Personal Communications and Bright PCS except where otherwise indicated.
The Sprint PCS agreements,  in their entirety,  are included as exhibits to this
annual report of Form 10-K.

Overview of Sprint PCS relationship and agreements

     We have eight major  agreements  with Sprint and Sprint PCS  (collectively,
the "Sprint PCS  Agreements").  Under the Sprint PCS agreements,  we exclusively
market PCS services  under the Sprint and Sprint PCS brand names in our markets.
The Sprint PCS  agreements  require us to interface with the Sprint PCS wireless
network by building our network to operate on PCS frequencies licensed to Sprint
PCS in the 1900 MHz  range.  The Sprint  PCS  agreements  also give us access to
Sprint PCS'  equipment  discounts,  roaming  revenue  from Sprint PCS  customers
traveling into our territory, and various other back office services. The Sprint
PCS agreements provide strategic advantages, including avoiding the need to fund
up-front  spectrum  acquisition  costs and the costs of maintaining  billing and
other customer services  infrastructure.  The Sprint PCS agreements have initial
terms of twenty  years with three  ten-year  renewals  which would  lengthen the
contracts  to  a  total  of  fifty  years.   The  Sprint  PCS  agreements   will
automatically  renew for each  additional  ten-year term unless we or Sprint PCS
provide the other with two years' prior  written  notice to terminate the Sprint
PCS agreements. The initial terms of the agreements will expire in 2018.

     The agreements consist of one of each of the following for Horizon Personal
Communications and one of each for Bright PCS:

     o    the management agreement;

     o    the services agreement;

     o    the trademark and service mark license agreement with Sprint; and

     o    the trademark and service mark license agreement with Sprint PCS.



                                       26


The Management Agreement

     Under our Sprint PCS agreements, we have agreed to:

     o    construct  and manage a network in our  territory in  compliance  with
          Sprint PCS' PCS licenses and the terms of the management agreement;

     o    distribute,  during the term of the management  agreement,  Sprint PCS
          products and services;

     o    conduct advertising and promotion activities in our territory; and

     o    manage  that  portion of Sprint  PCS'  customer  base  assigned to our
          territory.

     Sprint PCS will monitor our network operations and has unconditional access
to our network.

     Exclusivity. We are designated as the only person or entity that can manage
or  operate  a PCS  network  for  Sprint  PCS in our  territory.  Sprint  PCS is
prohibited  from  owning,  operating,  building  or  managing  another  wireless
mobility  communications network in our territory while our management agreement
is in place and no event  has  occurred  that  would  permit  the  agreement  to
terminate. Sprint PCS is permitted under our agreement to make national sales to
companies in our territory,  and as required by the FCC, to permit resale of the
Sprint PCS  products  and  services in our  territory.  We accrue the  financial
benefits of either of these activities.

     Network  build-out:  The  management  agreement  specifies the terms of the
Sprint PCS affiliation,  including the required network  build-out plan. We have
agreed to  operate  our  network to  provide  for a  seamless  handoff of a call
initiated in our territory to a neighboring Sprint PCS network.

     Under our original Sprint PCS agreements,  we were required to complete the
build-out in several of our markets in Pennsylvania and New York by December 31,
2000.  We and Sprint PCS agreed to an amendment of our  build-out  requirements,
which extended the date by which we were to launch coverage in several markets.

     Under the amended Sprint PCS agreement,  portions of the New York, Sunbury,
Williamsport,  Oil City, Dubois,  Erie,  Meadville,  Sharon,  Olean,  Jamestown,
Scranton,  State College,  Stroudsburg,  Allentown and  Pottsville  markets were
required to be  completed  and  launched by October 31,  2001.  Although we have
launched service in portions of each of these markets, we have not completed all
of the build-out  requirements.  We notified Sprint PCS in November 2001 that it
is our  position  that the  reasons  for the delay  constitute  events of "force
majeure" as described in the Sprint PCS  agreements and that,  consequently,  no
monetary penalties or other remedies would be applicable to missing the original
launch date. The delay has been primarily  caused due to delays in obtaining the
required  backhaul  services from local  exchange  carriers and zoning and other
approvals  from  governmental  authorities.  On  January  30,  2002,  Sprint PCS
notified  us  that,  as a result  of these  force  majeure  events,  it does not
consider our build-out delay to be a breach of the Sprint PCS agreement. We have
agreed to continue to use  commercially  reasonable  efforts to reach  build-out
completion  by either June 30, 2002 (for most of the affected  markets) or April
30,  2002  (for a few of these  markets).  If we fail to launch a market by more
than 90 days after the  extended  deadlines  and if our  failure  is  ultimately
determined to be for non-force majeure reasons,  Sprint PCS would have the right
to terminate our Sprint PCS agreements or enforce monetary penalties.

     Products and services. The management agreement identifies the products and
services that we can offer in our territory.  These services  include Sprint PCS
consumer  and business  products  and  services  available as of the date of the
agreements,  or as  modified  by Sprint  PCS.  We are  allowed to sell  wireless
products  and  services  that are not Sprint PCS  products and services if those
additional  products  and  services  do not  otherwise  violate the terms of the
agreement,   cause  distribution   channel  conflicts,   materially  impede  the
development of the Sprint PCS network, cause consumer confusion with Sprint PCS'
products  and  services  or  violate  the  trademark  lease  agreements.  We may
cross-sell  services such as Internet  access,  customer  premise  equipment and
prepaid phone cards with Sprint, Sprint PCS and other Sprint PCS affiliates.  If
we decide to use third  parties to provide these  services,  we must give Sprint
PCS an opportunity to provide the services on the same terms and conditions.  We
cannot  offer  wireless  local  loop  services  specifically  designed  for  the
competitive  local exchange market in areas where Sprint owns the local exchange


                                       27


carrier unless we name the Sprint owned local exchange  carrier as the exclusive
distributor  or  Sprint  PCS  approves  the  terms and  conditions.  Subject  to
agreements existing before we became a Sprint PCS affiliate,  we are required to
use Sprint's long distance service which we can buy at wholesale rates.

     Service  pricing.  We  must  offer  Sprint  PCS  subscriber  pricing  plans
designated for regional or national  offerings,  including  Sprint PCS' Free and
Clear plans.  We are permitted to establish our own local price plans for Sprint
PCS' products and services  offered only in our territory,  subject to the terms
of the  agreement,  consistency  with Sprint PCS' regional and national  pricing
plans,  regulatory  requirements,  capability and cost of implementing  the rate
plans in Sprint PCS' systems and Sprint PCS' approval.

     Fees.  We are entitled to receive from Sprint PCS an amount equal to 92% of
collected  revenues under the Sprint PCS agreements.  Collected revenues include
revenue from Sprint PCS subscribers based in our territory,  excluding  outbound
roaming, and inbound non-Sprint PCS roaming. Except in the case of taxes, we are
entitled to 100% of the  following  revenues that are not  considered  collected
revenues:

     o    outbound non-Sprint PCS roaming revenue;

     o    inbound and outbound Sprint PCS roaming fees;

     o    proceeds  from the  sales of  handsets  and  accessories  through  our
          distribution channels;

     o    proceeds from sales not in the ordinary course of business; and

     o    amounts collected with respect to taxes.

     Roaming.  Although  many  Sprint PCS  subscribers  will  purchase a bundled
pricing  plan that allows  roaming  anywhere on the Sprint PCS' and  affiliates'
network without  incremental roaming charges, we will earn roaming revenues from
every minute that a Sprint PCS  subscriber  not based in our  territory  and any
non-Sprint  subscriber  uses our network.  We will earn revenues from Sprint PCS
based on an  established  per-minute  rate for  Sprint  PCS' or its  affiliates'
subscribers  roaming in our territory.  Similarly,  we will pay for every minute
our own subscribers use the Sprint PCS nationwide network outside our territory.
The analog roaming rate onto a non-Sprint  PCS  provider's  network is set under
Sprint PCS' third-party roaming agreements.

     Advertising  and  promotions.  Sprint PCS is  responsible  for all national
advertising  and  promotion  of the Sprint PCS  products  and  services.  We are
responsible for  advertising  and promotion in our territory,  including the pro
rata cost of any promotion or advertising  done by any third-party  retailers in
our territory  pursuant to a national  cooperative  advertising  agreement  with
Sprint.  Sprint  PCS'  service  area  includes  the  urban  markets  around  our
territory.  Sprint  PCS will pay for  advertising  in these  markets.  Given the
proximity  of these  markets to ours,  we expect  considerable  spill-over  from
Sprint PCS' advertising in surrounding urban markets.

     Program requirements.  We must comply with Sprint PCS' program requirements
for  technical  standards,  customer  service  standards,  national and regional
distribution and national  accounts programs to the extent that Sprint PCS meets
these requirements.  Sprint PCS can adjust the program requirements from time to
time. We have the right to appeal to Sprint PCS'  management  adjustments  which
could cause an unreasonable increase in cost to us if the adjustment: (1) causes
us to incur a cost  exceeding  5% of the sum of our equity plus our  outstanding
long-term  debt, or (2) causes our long-term  operating  expenses to increase by
more than 5% (10% for Bright PCS) on a net present  value  basis.  If Sprint PCS
denies our appeal,  we must then comply with the program  adjustment,  or Sprint
PCS has the right to exercise the termination  rights described below.  There is
no  cross-default  provision  between  the Sprint  PCS  agreements  for  Horizon
Personal Communications and the Sprint PCS agreements for Bright PCS.

     Non-competition.  We may not offer Sprint PCS products and services outside
our  territory  without the prior  written  approval  of Sprint PCS.  Within our
territory  we may  offer,  market or  promote  telecommunications  products  and
services  only  under the Sprint PCS  brands,  our own brand,  brands of related
parties of ours or other  products and services  approved  under the  management
agreement, except that no brand of a significant competitor of Sprint PCS or its
related  parties may be used for those  products and services.  To the extent we
have or obtain  licenses to provide PCS services  outside our territory,  we may


                                       28


not use the spectrum to offer Sprint PCS  products  and services  without  prior
written consent from Sprint PCS.

     Termination  of  management  agreement.  The  management  agreement  can be
terminated as a result of:

     o    termination of Sprint PCS' PCS licenses;

     o    an uncured breach under the management agreement;

     o    bankruptcy of a party to the management agreement;

     o    the management  agreement not complying with any applicable law in any
          material respect;

     o    the  termination  of either of the  trademark and service mark license
          agreements; or

     o    our failure to obtain the financing necessary for the build-out of our
          network and for our working capital needs.

     The  termination  or  non-renewal  of either of the  management  agreements
triggers our rights and those of Sprint PCS, as described below.

     If we have the right to terminate the  management  agreement  because of an
event of  termination  caused  by a  Sprint  PCS  breach  under  the  management
agreement, we may generally:

     o    require  Sprint PCS to purchase  all of our  operating  assets used in
          connection with our network for an amount equal to at least 80% of our
          Entire Business Value as defined below;

     o    if Sprint PCS is the licensee for 20MHz or more of the spectrum on the
          date the management agreement was executed, require Sprint PCS to sell
          to us,  subject  to  governmental  approval,  up to 10MHz of  licensed
          spectrum for an amount  equal to the greater of (1) the original  cost
          to Sprint PCS of the license plus any microwave  relocation costs paid
          by Sprint PCS or (2) 9% of our Entire Business Value; or

     o    sue Sprint PCS for  damages  or submit the matter to  arbitration  and
          thereby not terminate the management agreement.

     If Sprint PCS has the right to terminate the management  agreement  because
of an event of termination caused by us, Sprint PCS may generally:

     o    require  us to sell our  operating  assets to Sprint PCS for an amount
          equal to 72% of our Entire Business Value;

     o    require us to purchase,  subject to governmental approval, up to 10MHz
          of  licensed  spectrum  for an amount  equal to the greater of (1) the
          original  cost  to  Sprint  PCS  of the  license  plus  any  microwave
          relocation  costs  paid by  Sprint or (2) 10% of our  Entire  Business
          Value;

     o    take any  action as Sprint PCS deems  necessary  to cure our breach of
          the management  agreement,  including assuming  responsibility for and
          operating our network; or

     o    sue us for damages or submit the matter to arbitration and thereby not
          terminate the management agreement.

     Non-renewal.  If Sprint PCS gives us timely  notice that it does not intend
to renew the management agreement, we may:



                                       29


     o    require  Sprint PCS to purchase  all of our  operating  assets used in
          connection  with our network for an amount  equal to 80% of our Entire
          Business Value; or

     o    if Sprint PCS is the licensee for 20MHz or more of the spectrum on the
          date the management agreement was executed, require Sprint PCS to sell
          to us,  subject  to  governmental  approval,  up to 10MHz of  licensed
          spectrum for an amount  equal to the greater of (1) the original  cost
          to Sprint PCS of the license plus any microwave  relocation costs paid
          by Sprint PCS or (2) 10% of our Entire Business Value.

     If we give Sprint PCS timely notice of non-renewal,  or we both give notice
of  non-renewal,  or the  management  agreement can be terminated for failure to
comply with legal requirements or regulatory considerations, Sprint PCS may:

     o    purchase all of our operating assets for an amount equal to 80% of our
          Entire Business Value; or

     o    require us to purchase, subject to governmental approval, up to 10 MHz
          of  licensed  spectrum  for an amount  equal to the greater of (1) the
          original  cost  to  Sprint  PCS  of the  license  plus  any  microwave
          relocation  costs paid by Sprint PCS or (2) 10% of our Entire Business
          Value.

     Determination  of Entire Business Value. If the Entire Business Value is to
be determined,  we and Sprint PCS will each select one independent appraiser and
the two appraisers  will select a third  appraiser.  The three  appraisers  will
determine the Entire Business Value on a going concern basis using the following
guidelines:

     o    the Entire  Business Value is based on the price a willing buyer would
          pay a willing seller for the entire on-going business;

     o    then-current customary means of valuing a wireless  telecommunications
          business will be used;

     o    the business is  conducted  under the Sprint and Sprint PCS brands and
          the Sprint PCS agreements;

     o    that we own the spectrum and frequencies presently owned by Sprint PCS
          that we use and are subject to the Sprint PCS agreements; and

     o    the valuation  will not include any value for  businesses not directly
          related to the Sprint PCS products and services,  and these businesses
          will not be included in the sale.

     Indemnification.  We have agreed to indemnify Sprint PCS and its directors,
employees  and agents  and  related  parties of Sprint PCS and their  directors,
employees  and agents  against any and all claims  against any of these  parties
arising  from our  violation  of any law, a breach by us of any  representation,
warranty  or  covenant  contained  in the  management  agreement  or  any  other
agreement  between us and Sprint PCS, our ownership of the  operating  assets or
the  actions or the  failure to act of anyone who is  employed or hired by us in
the performance of any work under this  agreement,  except we will not indemnify
Sprint PCS for any  claims  arising  solely  from  their  negligence  or willful
misconduct.  Sprint PCS has agreed to indemnify us and our directors,  employees
and agents against all claims  against any of these parties  arising from Sprint
PCS'  violation  of any law,  from  Sprint  PCS'  breach of any  representation,
warranty  or  covenant  contained  in the  management  agreement  or  any  other
agreement  between  Sprint PCS and us, or the  actions or the  failure to act of
anyone who is  employed  or hired by Sprint PCS in the  performance  of any work
under the management  agreement  except Sprint PCS will not indemnify us for any
claims arising solely from our negligence or willful misconduct.

     Sprint PCS  warrants.  In  connection  with  Sprint PCS' grant to us of our
markets in  Pennsylvania,  New York, Ohio and New Jersey,  Horizon PCS agreed to
grant to Sprint PCS  warrants to acquire  shares of Horizon  PCS' class A common
stock. (See "Recent Sales of Unregistered  Securities" under "ITEM 5. Market for
Registrant's Common Equity and Related Stockholder Matters" included herein).

                                       30



The Services Agreements

     The services agreements outline back office services provided by Sprint PCS
and available to us at  established  rates.  Sprint PCS can change any or all of
the service  rates one time in each twelve month  period.  Some of the available
services include:  billing,  customer care,  activation,  credit checks, handset
logistics,  home  locator  record,  voice  mail,  prepaid  services,   directory
assistance,   operator  services,  roaming  fees,  roaming  clearinghouse  fees,
interconnect fees and inter-service  area fees. Sprint PCS offers three packages
of available services.  Each package identifies which services must be purchased
from Sprint PCS and which may be purchased  from a vendor or provided  in-house.
Essentially,  services such as billing, activation and customer care must either
all be purchased  from Sprint PCS or we may provide  those  services  ourselves.
When we signed  our  original  Sprint  PCS  agreements,  we  elected  to provide
billing,  activation  and customer care services on our own. In connection  with
the May 2000  grant by  Sprint  PCS of  additional  markets  to us, we agreed to
change our  arrangement  under the  services  agreement  so that Sprint PCS will
provide  activation,  billing and customer care.  Accordingly,  in June 2001, we
discontinued  the  use  of  our  own  activation,  billing,  and  customer  care
capabilities. We now purchase those services from Sprint PCS. For our Bright PCS
markets  and our new  markets  in  Pennsylvania,  New  York and New  Jersey,  we
launched  these  markets  using Sprint PCS billing and customer  care  services.
Sprint PCS may contract  with third  parties to provide  expertise  and services
identical  or similar to those to be made  available  or provided to us. We have
agreed  not to use  the  services  received  under  the  services  agreement  in
connection with any other business or outside our territory.  We may discontinue
use of any service  upon three  months'  prior  written  notice.  Sprint PCS may
discontinue  a service  provided  that Sprint PCS  provides us with nine months'
prior notice.

     We have agreed with Sprint PCS to indemnify each other as well as officers,
directors, employees and other related parties and their officers, directors and
employees  for  violations  of law or the  services  agreement  except  for  any
liabilities  resulting from the indemnitee's  negligence or willful  misconduct.
The services  agreement  also provides  that no party to the  agreement  will be
liable  to  the  other  party  for  special,  indirect,  incidental,  exemplary,
consequential  or  punitive  damages,  or  loss  of  profits  arising  from  the
relationship  of the parties or the conduct of business under, or breach of, the
services  agreement  except as may otherwise be required by the  indemnification
provisions.  The services agreement automatically terminates upon termination of
the management  agreement and neither party may terminate the services agreement
for any reason other than the termination of the management agreement.

The Trademark and Service Mark License Agreements

     We have  non-transferable,  royalty-free  licenses  to use the  Sprint  and
Sprint PCS brand names and "diamond" symbol,  and several other U.S.  trademarks
and service marks such as "The Clear  Alternative to Cellular" and "Clear Across
the Nation" on Sprint PCS products and services.  We believe that the Sprint and
Sprint  PCS brand  names and  symbols  enjoy a very  high  degree of  awareness,
providing us an immediate  benefit in the market place.  Our use of the licensed
marks is subject to our adherence to quality standards  determined by Sprint and
Sprint PCS and use of the  licensed  marks in a manner  which  would not reflect
adversely  on the image of quality  symbolized  by the licensed  marks.  We have
agreed to promptly  notify Sprint and Sprint PCS of any  infringement  of any of
the licensed  marks within our territory of which we become aware and to provide
assistance to Sprint and Sprint PCS in connection  with Sprint's and Sprint PCS'
enforcement of their  respective  rights.  We have agreed with Sprint and Sprint
PCS to indemnify  each other for losses  incurred in connection  with a material
breach of the  trademark  license  agreements.  In  addition,  we have agreed to
indemnify  Sprint and Sprint PCS from any loss  suffered by reason of our use of
the licensed marks or marketing, promotion,  advertisement,  distribution, lease
or sale of any Sprint or Sprint PCS  products  and  services  other than  losses
arising  solely  out of our use of the  licensed  marks in  compliance  with the
contractual guidelines.

     Sprint and Sprint PCS can  terminate the trademark and service mark license
agreements  if we file for  bankruptcy,  materially  breach the agreement or our
management  agreement is terminated.  We can terminate the trademark and service
mark license agreements upon Sprint's or Sprint PCS' abandonment of the licensed
marks or if Sprint  or  Sprint  PCS  files  for  bankruptcy,  or the  management
agreement is terminated.




                                       31




Consent and  Agreement  for the  Benefit of the  Holders of the  Secured  Credit
Facility

     On September  26, 2000,  Horizon PCS entered into a senior  secured  credit
facility (the "secured credit facility") with a group of financial  institutions
to provide an  aggregate  commitment,  subject to certain  conditions,  of up to
$250.0  million.  The secured credit facility is  collateralized  by a perfected
security interest in substantially all of the Company's  tangible and intangible
current and future assets,  including an assignment of Horizon PCS'  affiliation
agreements  with Sprint PCS and a pledge of all of the capital  stock of Horizon
PCS and its subsidiaries.

     Sprint PCS  entered  into a consent  and  agreement  for the benefit of the
holders of the indebtedness  under the secured credit  facility.  This agreement
was  acknowledged  by us, and modified Sprint PCS' rights and remedies under our
Sprint PCS  agreements,  for the benefit of the existing  and future  holders of
indebtedness  under our  secured  credit  facility  and any  refinancing  of the
secured  credit  facility,  which was a condition  to the funding of any amounts
under our secured credit facility.

     The senior secured consent principally provides for the following:

     o    Sprint PCS' consent to the pledge of substantially  all of our assets,
          including our rights in the Sprint PCS agreements;

     o    Sprint  PCS'  consent  to the pledge of all our  equity  interests  in
          Horizon  Personal  Communications,  Inc.  and the  pledge  by  Horizon
          Personal  Communications,  Inc. of all of its equity interests in each
          of its subsidiaries;

     o    for  redirection of payments due to us under our Sprint PCS agreements
          to the  administrative  agent during the  continuation  of our default
          under our secured credit facility;

     o    for  Sprint  PCS to  maintain  10 MHz  of PCS  spectrum  in all of our
          markets  until  our  secured  credit  facility  is  satisfied  or  our
          operating  assets are sold after our default under our secured  credit
          facility;

     o    for Sprint PCS and the administrative agent to provide each other with
          notices  of default  by us under the  Sprint  PCS  agreements  and the
          secured credit facility, respectively; and

     o    the ability to appoint interim replacements, including Sprint PCS or a
          designee of the  administrative  agent,  to operate our portion of the
          Sprint  PCS  network  under  the  Sprint  PCS   agreements   after  an
          acceleration  of or event of default under our secured credit facility
          or an event of termination under the Sprint PCS agreements.

     Sprint PCS' right to purchase on acceleration of amounts  outstanding under
our secured credit  facility.  Subject to the requirements of applicable law, so
long as our secured  credit  facility  remains  outstanding,  Sprint PCS has the
right to  purchase  our  operating  assets or  pledged  equity of our  operating
subsidiaries,  upon its  receipt  of notice of an  acceleration  of our  secured
credit facility upon the following terms:

     o    Sprint  PCS  elects to make such a purchase  of our  operating  assets
          within a specified period;

     o    the purchase price of our operating assets is the greater of an amount
          equal to 72% of our "Entire Business Value" or the amount we owe under
          our secured credit facility;

     o    if  Sprint  PCS has given  notice of its  intention  to  exercise  the
          purchase right for our operating assets, then the administrative agent
          is prohibited  from enforcing its security  interest for a time period
          after the  acceleration  or until Sprint PCS rescinds its intention to
          purchase; and

     o    if we receive a written offer within a time period after  acceleration
          that is acceptable  to us to purchase our operating  assets or pledged
          equity of our  operating  subsidiaries  after the  acceleration,  then
          Sprint PCS has the right to purchase our  operating  assets or pledged
          equity of our operating subsidiaries on terms at least as favorable to
          us as the offer we receive.



                                       32


     Sale of operating assets to third parties.  If Sprint PCS does not purchase
our operating assets after an acceleration of the obligations  under our secured
credit  facility,  then  the  administrative  agent  will be  able  to sell  the
operating assets,  subject to the requirements of applicable law,  including the
law relating to foreclosures of security  interests.  The  administrative  agent
will have two options:

     o    to sell the assets to an entity that meets the  requirements to be our
          successor under the Sprint PCS agreements; or

     o    to sell the assets to any other third-party  (including competitors of
          Sprint PCS), principally subject to the condition that Sprint PCS does
          not have to accept the  third-party  as a Sprint PCS affiliate and may
          terminate our Sprint PCS agreements.

             REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY

     The FCC regulates the licensing,  construction,  operation, acquisition and
interconnection  arrangements  of  wireless  telecommunications  systems  in the
United States.  As an FCC licensee in our  Chillicothe,  Ohio market,  and as an
entity  facilitating PCS operations on Sprint PCS' spectrum under our Sprint PCS
agreements,  we  must  ensure  that  all  of  our  operations  comply  with  FCC
requirements.

     The FCC has adopted,  or is in the process of adopting,  a series of rules,
regulations and policies to, among other things:

     o    grant or deny licenses for PCS frequencies;

     o    grant or deny PCS license renewals;

     o    rule on assignments and/or transfers of control of PCS licenses;

     o    govern the  interconnection of PCS networks with the networks of other
          wireless and wireline carriers;

     o    possibly  facilitate  the offering of a "calling  party pays"  service
          which would require that a party who calls a subscriber  would pay for
          the call;

     o    establish access and universal service funding provisions in an effort
          to raise funds to help defray the cost of providing telecommunications
          services to rural and other high-cost areas;

     o    possibly permit  commercial  mobile radio service  spectrum to be used
          for  transmission  of  programming  material  targeted  to  a  limited
          audience;

     o    impose fines and forfeitures for violations of any of the FCC's rules;
          and

     o    regulate the technical standards of PCS networks.

     The FCC  currently  prohibits  a  single  entity  from  having  a  combined
attributable  interest  of  20% or  greater  in  broadband  PCS,  cellular,  and
specialized mobile radio service licenses totaling more than 55 MHz in any urban
areas or rural areas.  This  "spectrum  cap" was raised from 45 MHz to 55 MHz in
urban  areas as the  result of recent  FCC  action.  Interests  held by  passive
institutional  investors,  small companies and rural telephone companies are not
usually deemed  attributable for purposes of this prohibition if these interests
do not exceed  40%.  The FCC  recently  decided  that this  restriction  will be
eliminated on January 1, 2003. We cannot predict whether these actions will lead
to more consolidation in the wireless  telecommunication  industry generally, or
in any of our PCS service areas.

Transfers and Assignments of PCS Licenses

     The FCC must  give  prior  approval  to the  assignment  of,  or  transfers
involving,  substantial  changes  in  ownership  or  control  of a PCS  license.
Non-controlling  interests in an entity that holds a PCS license or operates PCS
networks  generally  may be  bought  or sold  without  prior  FCC  approval.  In


                                       33


addition,  a recent FCC order requires only  post-consummation  notification  of
certain pro forma assignments or transfers of control.

Conditions of PCS Licenses

     All PCS  licenses are granted for ten-year  terms  conditioned  upon timely
compliance  with  the  FCC's  build-out  requirements.  Pursuant  to  the  FCC's
build-out  requirements,  all 30 MHz  broadband  PCS  licensees  must  construct
facilities that offer coverage to one-third of the population  within five years
and to two-thirds of the population  within ten years, and all 10 MHz and 15 MHz
broadband PCS licensees  must  construct  facilities  that offer  coverage to at
least  one-quarter  of the  population  within  five  years or make a showing of
"substantial service" within that five-year period.  Failure to meet these build
out requirements  can result in license  cancellation  without a hearing.  Other
rule violations could result in license  revocations and/ or monetary fines. The
FCC also requires  licensees to maintain a certain  degree of control over their
licenses.  The Sprint PCS  agreements  reflect an  arrangement  that the parties
believe meets the FCC requirements  for licensee  control of licensed  spectrum.
However,  the FCC decides whether a licensee has maintained the requisite degree
of control on a  case-by-case  basis,  upon  consideration  of the  "totality of
circumstances."  It is therefore  difficult to predict in advance with  absolute
certainty whether a particular arrangement will pass FCC muster. If the FCC were
to determine that our agreements with Sprint PCS need to be modified to increase
the level of licensee control, the Sprint PCS agreements may be modified to cure
any purported  deficiency  regarding  licensee control of the licensed spectrum.
However  the   business   arrangement   between  the  parties  may  have  to  be
restructured.

PCS License Renewal

     PCS licensees can renew their licenses for additional  ten-year terms.  PCS
renewal  applications  are not  subject to  auctions.  However,  under the FCC's
rules,  third  parties may oppose  renewal  applications  and/or file  competing
applications.  If one or  more  competing  applications  are  filed,  a  renewal
application will be subject to a comparative  renewal  hearing.  The FCC's rules
afford PCS renewal  applicants  involved in comparative  renewal hearings with a
"renewal  expectancy." The renewal expectancy is the most important  comparative
factor in a  comparative  renewal  hearing and is  applicable if the PCS renewal
applicant has: (1) provided  "substantial  service" during its license term; and
(2) substantially  complied with all applicable laws and FCC rules and policies.
The FCC's rules define "substantial  service" in this context as service that is
sound,  favorable  and  substantially  above the level of mediocre  service that
might minimally warrant renewal.

Interconnection

     The FCC has the  authority  to  order  interconnection  between  commercial
mobile  radio  providers  and any  other  common  carrier.  The FCC has  ordered
traditional  telephone  companies to provide  compensation to commercial  mobile
radio providers for the  termination of traffic.  Using these new rules, we have
negotiated  interconnection  agreements for the Sprint PCS network in our market
area with the major regional Bell operating  companies,  GTE, Sprint and several
smaller  independent  local exchange  carriers.  Interconnection  agreements are
negotiated on a state-wide basis. If an agreement cannot be reached,  parties to
interconnection   negotiations   can  submit   outstanding   disputes  to  state
authorities for arbitration.  Negotiated  interconnection agreements are subject
to state approval.  On July 18, 2000, the FCC adopted an order denying  requests
for mandatory  interconnection between resellers' switches and commercial mobile
radio  providers'  networks,  and  declining to impose  general  interconnection
obligations between these networks.

Allocation of Additional PCS and Other Wireless Licenses

     The FCC from time to time  re-auctions  PCS licenses that it has re-claimed
from other carriers,  or PCS licenses that carriers have voluntarily returned to
the agency. The FCC also periodically allocates and assigns new spectrum for the
provision of wireless  services.  It is possible  that such actions could create
new  competitors  in our current PCS service  areas,  and we cannot  predict the
effect that such actions would have on our business.




                                       34




Other FCC Requirements

     In June 1996,  the FCC adopted rules that prohibit  broadband PCS providers
from  unreasonably  restricting  or  disallowing  resale  of their  services  or
unreasonably   discriminating   against   resellers.   Resale  obligations  will
automatically  expire on November 24, 2002. The FCC recently  decided that these
prohibitions  apply to services and not to equipment  such as handsets,  whether
alone or in bundled packages.

     The FCC also  adopted  rules in June 1996 that require  local  exchange and
most  commercial  mobile  radio  carriers,  to program  their  networks to allow
customers to change service providers without changing telephone numbers,  which
is  referred  to as  service  provider  number  portability.  The FCC  currently
requires most commercial mobile radio carriers to implement  nationwide roaming.
Most  commercial  mobile radio  carriers  are  required to implement  nationwide
roaming by November 24, 2002 as well. The FCC currently requires most commercial
mobile  radio  providers  to be able to deliver  calls from  their  networks  to
numbers  anywhere  in  the  country,  and to  contribute  to  the  Local  Number
Portability Fund.

     The FCC has adopted rules  permitting  broadband  PCS and other  commercial
mobile radio  providers to provide  wireless local loop and other fixed services
that would  directly  compete  with the  wireline  services  of local  telephone
companies. In June 1996, the FCC adopted rules requiring broadband PCS and other
commercial  mobile radio  providers to implement  enhanced  emergency 911 (E911)
automatic location  identification (ALI) capabilities within 18 months after the
effective  date of the FCC's rules.  Sprint PCS' initial  compliance  with these
rules occurred on or before October 1, 2001.

     Additional  compliance  deadlines  include:  (1)  ensuring  that 25% of new
mobile phones  activated  after December 31, 2001 are ALI capable;  (2) ensuring
that 50% of new mobile phones activated after June 30, 2002 are ALI capable; and
(3) ensuring that 95% of all customer  mobile phones are ALI capable by December
31, 2005.  On October 12, 2001,  the FCC granted  Sprint PCS an extension of the
December 31, 2001 deadline, valid until July 31, 2002. Sprint PCS was also given
more time in which to upgrade its E911 system  software.  Horizon's  Chillicothe
PCS system,  the licenses to which  Horizon PCS owns,  is currently  exempt from
E911 ALI requirements.

     On  June  10,  1999,  the  FCC  initiated  a  regulatory   proceeding  (the
competitive  networks proceeding) seeking comment from the public on a number of
issues related to competitive access to multiple-tenant buildings, including the
following:

     o    the FCC's tentative conclusion that the Communications Act of 1934, as
          amended,  requires  utilities  to permit  telecommunications  carriers
          access to rooftop and other rights-of-way in multiple tenant buildings
          under  just,  reasonable  and   nondiscriminatory   rates,  terms  and
          conditions; and

     o    whether   building   owners   that   make   access   available   to  a
          telecommunications carrier should be required to make access available
          to all other telecommunications carriers on a nondiscriminatory basis,
          and whether the FCC has the authority to impose such a requirement.

     On October 25, 2000, the FCC issued an order that addressed  certain of the
issues in the competitive networks proceeding. Notably, the FCC:

     o    prohibits  carriers from entering into contracts that restrict  owners
          of commercial  office buildings from permitting  access from competing
          carriers;

     o    clarifies the FCC's rules governing control of in-building wiring;

     o    concludes that utilities that own conduits or  rights-of-way  within a
          building must give non-discretionary access thereto; and

     o    concludes  that  parties  with  a  direct  or  indirect  ownership  or
          leasehold  interest in property,  including  building tenants,  should
          have the ability to place  antennas one meter or less in diameter used
          to receive or transmit any fixed wireless service in certain areas.



                                       35


     This proceeding  could affect the availability and pricing of sites for our
antennae and those of our competitors.

Communications Assistance for Law Enforcement Act

     The  Communications  Assistance  for Law  Enforcement  Act,  or CALEA,  was
enacted  in  1994  to  preserve  electronic  surveillance  capabilities  by  law
enforcement  officials  in  the  face  of  rapidly  changing  telecommunications
technology.  CALEA requires telecommunications carriers, including us, to modify
their  equipment,  facilities,  and services to allow for authorized  electronic
surveillance  based on either  industry  or FCC  standards.  The FCC has adopted
rules  implementing  this  statute and has  established  various  implementation
deadlines.   Like  other  wireless  carriers,  Sprint  PCs  has  sought  certain
extensions  of the  deadlines,  and these  requests  remain  pending.  We may be
subjected to fines of as much as $10,000 per day if we are unable to comply with
a surveillance  request from law enforcement due to the lack of a required CALEA
capability for which we or Sprint PCS have not sought or received and extension.

Other Federal Regulations

     Wireless systems must comply with FCC and Federal  Aviation  Administration
("FAA")  regulations   regarding  the  siting,   lighting  and  construction  of
transmitter towers and antennas. In addition, FCC environmental  regulations may
cause  some cell  site  locations  to become  subject  to  regulation  under the
National  Environmental Policy Act (NEPA). The FCC is required to implement this
Act by requiring carriers to meet land use and radio frequency standards.

     In general,  carriers are required to clear any tower or antenna  structure
proposals with the FAA if the structure  will be 200 feet or more in height,  or
will be within 20,000 feet of an airport. Carriers must also ensure that antenna
structures  will  comply with  NEPA-related  regulations  protecting  wilderness
areas, wildlife preserves,  endangered species habitats, Indian religious sites,
flood plains,  wetlands,  and historic  places.  In protecting  historic places,
carriers must comply with the requirements of the National Historic Preservation
Act and the  regulations  of the  National  Council  for  Historic  Preservation
(NCHP).  This  generally  requires  consultation  with  the  appropriate  "State
Historic Preservation Officer" (SHPO) prior to each site construction.  However,
in March 2001,  the FCC issued a  programmatic  agreement  approved by the NCHP,
which allows carriers to avoid SHPO approval and other  time-consuming  historic
preservation  measures,  if the carrier  proposes to use an existing tower,  and
satisfies certain other conditions.

     Carriers must comply with certain other FCC requirements:

     o    payment of annual regulatory user fees;

     o    submission of FCC Form 499A and 499Q  reports,  providing the FCC with
          information  needed  to  calculate  universal  service,  local  number
          portability and other contribution amounts owed by the carrier;

     o    compliance with the FCC's 711 hearing-impaired  access requirements by
          October 1, 2001;

     o    compliance   with  the  FCC's   digital  TTY  (access  for  the  deaf)
          requirements,  including  purchase of necessary software and equipment
          by December 31, 2001,  implementation  by June 30, 2002, and filing of
          quarterly progress reports during the interim;

     o    submission of annual Form 395 employment report;

     o    periodic filing of Form 602 ownership report; and

     o    submission of other required  reports,  as applicable,  including Form
          502 Number Utilization and Forecast Report, Form 477 Local Competition
          and Broadband Reporting Worksheet, From 478 Slamming Complaint Report,
          International Traffic Data Report, and Annual Financial Report.


                                       36

Review of Universal Service Requirements

     The FCC and the  states are  required  to  establish  a  universal  service
program to ensure  that  affordable,  quality  telecommunications  services  are
available to all Americans.  Sprint PCS is required to contribute to the Federal
universal  service  program  as well as  existing  state  programs.  The FCC has
determined  that  Sprint PCS'  contribution  to the  Federal  universal  service
program is a variable  percentage  of  "end-user  telecommunications  revenues."
Although many states are likely to adopt a similar assessment  methodology,  the
states are free to calculate  telecommunications  service provider contributions
in any manner they choose as long as the  process is not  inconsistent  with the
FCC's rules. At the present time it is not possible to predict the extent of the
Sprint PCS total Federal and state universal service  assessments or its ability
to recover from the universal service fund.

Wireless Facilities Siting

     States and  localities  are  allowed to apply  zoning  requirements  to PCS
facility and tower proposals, but are not permitted to regulate the placement of
wireless  facilities so as to prohibit the provision of wireless  services or to
discriminate  among  providers  of these  services.  In  addition,  so long as a
wireless  system  complies  with the FCC's  rules,  states  and  localities  are
prohibited from using radio frequency  health effects as a basis to regulate the
placement,  construction  or  operation  of  wireless  facilities.  The  FCC  is
considering numerous requests for preemption of local actions affecting wireless
facilities  siting.  The Federal courts have been  inconsistent in deciding such
disputes.

State Regulation of Wireless Service

     Section 332 of the  Communications  Act preempts states from regulating the
rates and entry of commercial mobile radio providers,  like us. However,  states
may attempt to regulate  other  aspects of our service  provision.  In addition,
states may petition the FCC to regulate these  providers and the FCC may grant a
state's petition if the state  demonstrates  that (1) market  conditions fail to
protect  subscribers  from  unjust  and  unreasonable  rates or  rates  that are
unjustly or unreasonably discriminatory,  or (2) when commercial mobile radio is
a replacement for landline  telephone service within the state. To date, the FCC
has granted no petition  of this type.  To the extent that we may provide  fixed
wireless service, we may be subject to additional state regulation.

ITEM 2.  Properties

     Management believes that its property, plant and equipment are adequate for
its business at Chillicothe Telephone, Horizon Technology and Services, although
additional  property,  plant  and  equipment  is being  added.  The  Chillicothe
Telephone  Company  built a new  22,500  square  foot  operations  and  training
facility,  which was completed in the summer of 2001. This building is leased by
Horizon  Technology  from  Chillicothe  Telephone  and is used for their primary
offices.  Our properties consist of land,  buildings,  central office equipment,
exchange and toll switches,  data transmission  equipment,  underground conduits
and  cable,  aerial  cable,  poles,  wires,   telephone  instruments  and  other
equipment. Our principal operations are conducted in a group of buildings we own
on East Main  Street,  Chillicothe,  Ohio.  These  headquarters  buildings  have
approximately 40,000 square feet of floor space.

     Chillicothe  Telephone occupies several properties and buildings comprising
approximately 51,000 square feet in the aggregate,  used for telephone switches,
warehouse and office space.  Chillicothe  Telephone  installed new plant record,
mapping and billing software in 2000.  Chillicothe Telephone also maintains over
100  vehicles  used  in  servicing   customers  and  maintaining  the  telephone
infrastructure  for residential  customers and business  services.  In addition,
Chillicothe Telephone has easements it uses in deploying its wireline network.

     Horizon PCS leases its principal  executive offices from Horizon Telcom and
are located at 68 E. Main Street,  Chillicothe,  Ohio 45601-0480,  which is also
the location of its first PCS store.  Horizon PCS also leases an  additional  37
other retail stores  throughout  its  territory.  Horizon PCS owns two switching
facilities in Fort Wayne, Indiana, and Chillicothe,  Ohio, and is in the process
of constructing two additional  switching centers in Tennessee and Pennsylvania.
One of the new centers  will replace the facility in  Chillicothe,  Ohio.  As of
December 31, 2001,  Horizon PCS leased space on 604 on-air  towers;  Horizon PCS
collocates with other wireless service  providers on approximately  72% of them.
Horizon  PCS  believes  that  their  facilities  are  adequate  for its  current
operations and are in good condition and additional leased space can be obtained
if needed on commercially reasonable terms.




                                       37


ITEM 3.  Legal Proceedings

     We are not  aware  of any  pending  legal  proceedings  against  us  which,
individually or in the aggregate, if adversely determined, would have a material
adverse effect on our financial condition or results of operations.

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

     No  matters  were  submitted  to a vote of  shareholders  during the fourth
quarter of 2001.

                                     PART II

ITEM 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     To date,  both our class A common  stock and our class B  nonvoting  common
stock have traded  principally in local  transactions  without the benefit of an
established  public trading market,  or an organized system for reporting prices
paid.

     There is currently no market for the Company's common stock. The authorized
capital  stock of Horizon  Telcom  consists of 200,000  shares of class A common
stock, without par value and 500,000 shares of class B common stock, without par
value.  Class A common stock is  exchangeable at a one to one ratio with class B
common  stock.  Holders  of class A common  stock are  entitled  to one vote per
share.  Holders of class B common  stock do not have  voting  rights,  except as
otherwise required by law.

     We paid the following  quarterly  cash  dividends per share during the past
two calendar years, adjusted to reflect the stock split in 2000:

                                                 2001       2000
                                                 ----       ----

         First Quarter...................    $   1.15   $   1.15
         Second Quarter..................        1.25       1.15
         Third Quarter...................        1.25       1.15
         Fourth Quarter..................        1.25       1.15
                                             --------   --------
                  Total..................    $   4.90   $   4.60
                                             ========   ========


     Dividends are paid only as and when declared by our board of directors,  in
its sole discretion,  based on our financial  condition,  results of operations,
market conditions and such other factors as it may deem appropriate.

     There were 348 holders of record of our class A common stock as of December
31,  2001.  There were 684  holders of record of our class B common  stock as of
December  31,  2001.  This number does not include  beneficial  owners of common
stock whose shares are held in the name of various dealers, depositories, banks,
brokers or other fiduciaries.



                                       38



Recent Sales of Unregistered Securities

     (1)  On November 17, 1999, the Registrant granted stock options to purchase
          a total of 950 shares of the class B common stock of the Registrant at
          an exercise price of $60.00 per share.

     (2)  On June 27, 2000, in connection  with the  acquisition  of Bright PCS,
          Horizon PCS issued an  aggregate  of  4,678,800  shares of its class B
          common stock and  distributed  31,912 shares of Horizon  Telcom common
          stock (7,978 shares of class A common stock and 23,934 shares of class
          B common  stock) to the  former  non-Horizon  members of Bright PCS in
          return for the contribution by the former members of approximately 70%
          of their ownership interest in Bright PCS.

     (3)  On June 27,  2000,  Horizon PCS  granted  incentive  stock  options to
          purchase  3,874,047  shares of Horizon PCS' class B common stock at an
          exercise  price of $0.1209  per  share,  and  nonqualified  options to
          purchase  322,837  shares of its class B common stock,  at an exercise
          price of $0.1209 per share.  These options were granted in replacement
          of  stock  options   which  had  been  granted  by  Horizon   Personal
          Communications,  Inc. on November 16, 1999, prior to the incorporation
          of  Horizon   PCS  as  a  holding   company   for   Horizon   Personal
          Communications, Inc. and Bright PCS.

     (4)  In  connection  with Sprint PCS' grant of Horizon  PCS' new markets on
          May 19,  2000,  Horizon PCS agreed to grant  warrants to Sprint PCS to
          acquire  2,510,460  shares of Horizon  PCS' class A common stock at an
          exercise price equal to the initial  public  offering price per share.
          The warrants will expire on the 3rd  anniversary  of the completion of
          an initial public offering of Horizon PCS' common stock.

     (5)  On February 15, 2000, Horizon Personal  Communications,  Inc. borrowed
          $13.0  million from First Union  Investors,  Inc. in  connection  with
          Horizon  Personal  Communications,  Inc.'s  purchase  of shares of the
          outstanding  common stock of Horizon  Telcom.  In connection  with the
          loan transaction,  Horizon PCS and First Union Investors, Inc., agreed
          that,  upon  the  completion  of  certain  types  of  offerings,   the
          outstanding principal amount, and accrued interest thereon,  under the
          note to First Union Investors,  Inc. would be converted into shares of
          the same class of Horizon  PCS'  capital  stock as that  issued in the
          offering.  In September  2000, the First Union note was converted into
          convertible  preferred stock as part of the  transaction  described in
          item (8) below.

     (6)  On  September  8,  2000,  Horizon  PCS  effected  a 1.1697 for 1 stock
          dividend of its issued and  outstanding  class B common stock and made
          corresponding adjustments to the outstanding options and warrants.

     (7)  On September  26, 2000,  Horizon PCS issued  26,087,237  shares of its
          convertible  preferred stock at a weighted  average  purchase price of
          $5.39 per share (consisting of 10,252,239 shares of Series A Preferred
          Stock at $5.88 per share and 15,834,998 shares of Series A-1 Preferred
          Stock at $5.07 per share).  The purchasers of the preferred  stock and
          the amount purchased are listed in the table below.

                                                           Number of  Shares
          Name of Purchaser                            Series A       Series A-1
          -----------------                            --------       ----------
          Apollo Investment Fund IV, L.P.............7,854,719        12,132,161
          Apollo Overseas Partners IV, L.P.............436,097           673,582
          Ares Leveraged Investment Fund, L.P..........467,687           722,375
          Ares Leveraged Investment Fund II, L.P.......467,687           722,375
          First Union Capital Partners, L.P..........1,026,049         1,584,505

     (8)  On  September  26,  2000,  Horizon PCS issued  295,000  units  (Units)
          consisting of $295.0 million  principal  amount of 14% Senior Discount
          Notes due 2010 and  warrants to purchase  3,805,500  shares of class A
          common  stock at an  exercise  price of $5.88 per share.  The  initial
          purchasers  of the Units and the  amount  purchased  are listed in the
          table below.





                                       39



                                                                                
          Initial Purchasers                                                    Number of Units
          ------------------                                                    ---------------
          Credit Suisse First Boston Corporation, (formerly Donaldson, Lufkin
            & Jenrette Securities Corporation)..................................        206,500
          First Union Securities, Inc.........................................           88,500
                                                                                ---------------

                             Total.............................................         295,000
                                                                                ===============



     (9)  During 2000,  three persons  holding options to acquire Horizon Telcom
          class B common stock each exercised the vested portions of the options
          (37 shares each at $60 per share).  One person exercised in July 2000,
          and the other two  exercised  in August  2000.  Each  optionee  was an
          executive officer or director. See "ITEM 11. Executive Compensation."

     (10) In February  2001,  Horizon PCS decided to distribute a total of 7,249
          shares of Horizon  Telcom common stock (1,819 shares of class A common
          stock and 5,430 shares of class B common  stock) to a group of Horizon
          PCS' officers and employees in the form of a bonus.

     (11) In May 2001 and  November  2001,  Horizon  PCS  issued  an  additional
          1,163,051  and  1,021,882  shares,  respectively,  of its  convertible
          preferred  stock  as  a   dividend-in-kind   to  the  holders  of  the
          outstanding convertible preferred stock.

     (12) In September 2001, a previous owner of Bright PCS gifted 26,646 shares
          of Horizon PCS' class B common stock. This transaction resulted in the
          conversion  of the class B shares into 26,646  shares of Horizon  PCS'
          class A common stock.

     (13) On December  7, 2001,  the Company  issued $175  million in  principal
          amount  of  13.75%  Senior  Notes  due  June  15,  2011.  The  initial
          purchasers of these notes are listed in the table below.

                                                                      Amount
          Initial Purchasers                                        Purchased
          ------------------                                        ---------
          Credit Suisse First Boston Corporation.................. $87,500,000
          First Union Securities, Inc...............................52,500,000
          Bear, Stearns & Co. Inc...................................17,500,000
          Lehman Brothers Inc.......................................17,500,000
                                                                    ----------
                Total.............................................$175,000,000
                                                                   ===========

     Exemption  from the  registration  provisions of the Securities Act for the
transaction  described in  paragraphs  (6), (9),  (10),  (11) and (12) above was
claimed on the basis  that such  transactions  did not  constitute  an  "offer,"
"offer to sell,"  "sale,"  or "offer to buy" under  Section 5 of the  Securities
Act.  Exemption from the  registration  provisions of the Securities Act for the
other  transactions  described  above  was  claimed  under  Section  4(2) of the
Securities Act and the rules and regulations promulgated thereunder on the basis
that such transactions did not involve any public offering,  the purchasers were
sophisticated with access to the kind of information  registration would provide
and that  such  purchasers  acquired  such  securities  without  a view  towards
distribution thereof. In addition, exemption from the registration provisions of
the  Securities  Act for the  transactions  described in  paragraphs 1 and 9 was
claimed  under  Section  3(b)  of the  Securities  Act on the  basis  that  such
securities were sold pursuant to a written compensatory benefit plan or pursuant
to a written  contract  relating to  compensation  and not for  capital  raising
purposes  under  Rule  701  of  the  Securities  Act,  and  exemption  from  the
registration  provisions of the Securities Act for the transactions described in
paragraphs 7 and 8 above was claimed under Rule 144A of the Securities Act.

Transfer Agent And Registrar

     The  registrar  and  transfer  agent for  Horizon  Telcom  common  stock is
National City Bank of Ohio.

                                       40



ITEM 6. Selected Financial Data

     The  following  table  sets  forth  our  selected  historical  consolidated
financial  data. We derived the data as of and for the five years ended December
31, 2001,  2000,  1999,  1998 and 1997 from our audited  consolidated  financial
statements and related notes.  This data should be read in conjunction  with our
audited consolidated  financial statements and related notes for the years ended
December 31, 2001,  2000 and 1999 included under "ITEM 8.  Financial  Statements
and  Supplementary  Data" and "ITEM 7.  Management's  Discussion and Analysis of
Financial Condition and Results of Operation."



                                                                               

                                                        FOR THE YEAR ENDED DECEMBER 31,
                                 --------------------------------------------------------------------------
                                      2001           2000            1999           1998           1997
                                 -------------  -------------   -------------  -------------  -------------

     Operating Revenues          $ 170,140,016  $  73,999,642   $  49,406,480  $  41,518,407  $  37,493,461
     Operating Income (Loss)       (81,393,053)   (37,142,923)     (4,504,463)     2,038,267      3,372,840
     Net Income (Loss)            (118,820,602)   (44,673,246)     (4,481,098)    (1,207,083)     1,853,184
     Diluted Earnings (Loss)
       Per Share of Common
       Stock (1)                       (329.59)       (129.03)         (11.23)         (3.03)          4.65
     Cash Dividends on Common
       Stock                         1,767,088      1,793,038       1,815,014      1,815,014      1,815,014
     Dividends Per Share on
       Common Stock (1)                   4.90           4.60            4.55           4.55           4.55
     Capital Expenditures          132,506,210    101,491,729      17,799,773     15,984,218     39,794,525


                                                              AS OF DECEMBER 31,
                                   -------------------------------------------------------------------------
                                      2001           2000            1999           1998           1997
                                 -------------  -------------   -------------  -------------  --------------
     Property, Plant and
       Equipment in-service,
       at cost                   $ 298,096,580  $170,960,204    $ 111,297,730  $ 112,026,207  $  85,048,600
     Total Assets                  577,913,866   466,299,843      101,713,365    106,102,379    107,433,495
     Long-Term Debt                402,055,643   205,283,104       45,557,965     53,180,442     26,711,248
     Convertible Preferred
       Stock of Subsidiary -
       book value                  145,349,043   134,421,881               --             --             --
     Non-financial data:
     Total Access Lines                 38,892        37,824           36,832         36,554         34,918
     Total Horizon PCS
       Subscribers (2)                 194,100        66,400           13,700          2,100            300
     Total bright.net Subscribers       14,929        15,000           14,544         11,760          7,022




- ----------------
(1)  Earnings  (loss) and  dividends per share have been adjusted to reflect the
     change in number of shares caused by the  three-for-one  stock split in the
     form of a stock dividend.

(2)  Represents approximate number of subscribers.


ITEM 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operation

Overview

     This discussion  reflects the operations of Horizon  Telcom,  Inc., and its
subsidiaries,  The Chillicothe  Telephone  Company,  Horizon PCS, Inc.,  Horizon
Services,  Inc. and Horizon  Technology,  Inc. (formerly United  Communications,
Inc.).  This  discussion  and analysis  should be read in  conjunction  with the
consolidated  financial  statements and the related  notes.  Note 1 of "Notes to
Consolidated  Financial Statement" contains information related to the Company's
significant accounting policies.

     Horizon Telcom operates primarily within two operating  segments:  landline
telephone services and wireless personal communications  services. See Note 3 of
"Notes  to  Consolidated   Financial   Statements"   for  additional   financial
information regarding Horizon Telcom's operating segments.



                                       41


     At December 31, 2001, Chillicothe Telephone serviced 38,892 access lines in
Chillicothe, Ohio and the surrounding area. Horizon Technology provided Internet
service to 14,929 customers through its bright.net Internet service. Horizon PCS
managed approximately 194,100 subscribers in its territories.

     At  December  31,  2001,  Horizon  PCS had  launched  service in 54 markets
covering approximately 6.9 million residents,  or approximately 68% of the total
population  in its  territory,  and  managed  approximately  194,100  customers.
According to our original business plan, our network, when completed, would have
covered 6.9 million residents.  We decided to expand the coverage in our markets
from 6.9 million to 7.9 million residents,  increasing our planned coverage from
68% to 77% of the  total  population  of our  territory.  We  believe  that  our
expanded network will be substantially complete by December 31, 2002.

     Sprint PCS has  invested  approximately  $57.0  million to purchase the PCS
licenses in our  territory  and has incurred  additional  expenses for microwave
clearing. Under the Sprint PCS agreements,  we manage our network on Sprint PCS'
licensed  spectrum  and have the right to use the  Sprint  and  Sprint PCS brand
names.

Results of Operation

     The landline  telephone  services operating segment consists of basic local
and  long-distance  toll,  network access services,  and other telephone service
revenue.

     IntraLATA (i.e., the area of southern Ohio,  including Columbus  originally
covered  by area code 614),  basic  local  exchange  and  long-distance  service
revenue consists of flat rate services and measured services billed to customers
utilizing    Chillicothe    Telephone's   telephone   network.   Long   distance
intraLATA/interstate  revenue consists of message services that terminate beyond
the basic service area of the originating wire center.

     Network  access revenue  consists of revenue  derived from the provision of
exchange  access services to an  interexchange  carrier or to an end user beyond
the exchange  carrier's network.  Other revenue includes  directory  advertising
related to a telephone directory published annually.

     The wireless personal  communications  services  operating segment consists
primarily of PCS subscriber  revenues,  Sprint PCS roaming revenues,  non-Sprint
PCS roaming revenues and PCS equipment  sales.  PCS subscriber  revenues consist
primarily of monthly  service fees and other charges billed to our customers for
Sprint PCS service in our territory  under a variety of service  plans.  Roaming
revenues consist of Sprint PCS roaming and travel and non-Sprint PCS roaming and
travel.  We receive Sprint PCS roaming revenues at a per minute rate from Sprint
PCS or another Sprint PCS affiliate when Sprint PCS subscribers based outside of
our territory use our portion of the Sprint PCS network.  Non-Sprint PCS roaming
revenues  include payments from wireless  service  providers,  other than Sprint
PCS, when those providers'  subscribers roam on our network. PCS equipment sales
consist of digital handsets and accessories sold to our customers.

     We record 100% of PCS subscriber  revenues from Sprint PCS customers  based
in our  territories,  Sprint PCS roaming  revenues  from Sprint PCS  subscribers
based  outside our  markets and  non-Sprint  PCS  roaming  revenues.  Sprint PCS
retains 8% of all  collected  service  revenue as a  management  fee.  Collected
service  revenues  include PCS  subscriber  revenues and  non-Sprint PCS roaming
revenues,  but exclude  Sprint PCS roaming  revenues and revenues  from sales of
equipment.  We  report  the  amounts  retained  by  Sprint  PCS as  general  and
administrative expenses.

     Other revenues include Internet access services,  equipment  systems sales,
and information  services.  Internet access revenues for our bright.net services
are monthly  service fees and other charges billed to our bright.net  customers.
Service fees primarily consist of monthly recurring charges billed to customers.
Equipment  system sales and other revenues  consist of sales made by Chillicothe
Telephone to various  businesses  or other  residential  customers for equipment
used on the telephone system.  Revenue also consists of paging services provided
by Horizon Technology until its divestiture of that business in December 2000.



                                       42


    The following tables set forth a breakdown of operating revenues by segment.



                                                                                 
                                                            Years Ended December 31,
                                                  2001                2000                 1999
                                          -------------------  -------------------  -----------------
                                            Amount        %      Amount        %      Amount        %
                                            ------        -      ------        -      ------        -
                                                     (Dollars in thousands, except PCS ARPU)


Landline telephone services               $   39,785      23%  $   37,597    51%    $   37,309    76%
Wireless personal communications
   services                                  123,011      73%      29,171    39%         4,896    10%
Other revenues                                 7,344       4%       7,232    10%         7,201    14%
                                          ----------  ------   ----------  ----     ----------  ----
     Total revenues                       $  170,140     100%  $   74,000   100%    $   49,406   100%
                                          ==========  ======   ==========  ====     ==========  ====

PCS ARPU (including roaming) (1)          $       83           $       75           $      64
PCS ARPU (excluding roaming) (1)                  56                   51                  55



- ---------------

(1)  ARPU, average revenue per unit, is an industry term that measures total PCS
     service  revenues  per month from our  subscribers  divided by the  average
     number of digital subscriber units for that month. ARPU, including roaming,
     is ARPU with Sprint PCS roaming and non-Sprint PCS roaming.  ARPU excluding
     roaming excludes Sprint PCS roaming and non-Sprint PCS roaming.

Year  Ended December 31, 2001, Compared to Year Ended December 31, 2000

Operating Revenues

Landline telephone services


                                                                             

                                                     2001         2000        $ change     % change
                                                 -----------  -----------  ------------  ----------
                                                                (Dollars in thousands)
Basic local, long-distance and other landline..  $    19,587  $    20,320  $       (733)         (4%)
Network access.................................       20,198       17,276         2,922           17%



     Basic local and  long-distance  service  revenue was relatively flat to the
comparable  prior year  period.  The increase in network  access  revenues was a
result of increased usage on our network.


Wireless Personal Communications Services



                                                                             

                                                     2001         2000        $ change     % change
                                                 -----------  -----------  ------------  ----------
                                                                (Dollars in thousands)
PCS service revenues...........................  $   115,906  $    26,110  $     89,796         344%
PCS equipment revenues.........................        7,105        3,061         4,044         132%



     The growth in service revenues is primarily the result of the growth in our
customer  base as well as an increase in roaming  revenue.  Subscriber  revenues
increased  $59.7  million  for the year  ended  December  31,  2001.  We managed
approximately  194,100 customers at December 31, 2001, compared to approximately
66,400 at December 31, 2000.  We believe our customer  base has grown because we
have launched additional markets and increased our sales force.

     Roaming  revenues  increased by $30.1 million  primarily as a result of our
continued  build out of our network.  We expect  continued  volume  increases in
Sprint  PCS  roaming  revenues  as we  complete  the  remainder  of our  network
build-out.

     PCS  ARPU  excluding  roaming  increased  in 2001 to $56  from $51 in 2000,
primarily  as a result of  increased  minutes  of use by our  customers.  As our
customers exceed their allotted plan minutes,  they incur additional charges for
their usage. ARPU including roaming increased from $75 to $83 for the year ended
December 31, 2000, and December 31, 2001, respectively.  This increase primarily
resulted  from  the  continued  build  out of our  network,  including  highways
covering northwest Ohio, northern Indiana and Pennsylvania.



                                       43


     On April 27, 2001, Sprint PCS and its affiliates  announced an agreement on
a new Sprint PCS roaming rate; the receivable and payable roaming rate decreased
from $0.20 per minute to $0.15 per minute  effective June 1, 2001, and decreased
further to $0.12 per minute  effective  October 1, 2001.  The Sprint PCS roaming
rate will be changed to $0.10 per minute in 2002.  After 2002,  the rate will be
changed to "a fair and reasonable  return,"  which has not yet been  determined.
This decrease in the rate will reduce our revenue and expense per minute, but we
anticipate this rate reduction will be offset by volume increases from continued
build-out of our network and  subscriber  growth,  resulting in greater  overall
roaming revenue and expense in the future.

     PCS  equipment  revenues  consist  of  handsets  and  accessories  sold  to
customers  through  Horizon PCS' stores and through its direct sales force.  The
increase in  equipment  revenues is the result of our  increase in the number of
handsets sold by Horizon PCS stores and direct sales force, somewhat offset by a
lower sales price per unit.

Other Revenues



                                                                             

                                                    2001         2000        $ change     % change
                                                 -----------  -----------  ------------  ----------
                                                                (Dollars in thousands)
Internet access services.......................  $     3,131  $     3,625    $   (494)        (14%)
Equipment systems, information services and
  other revenues...............................        4,213        3,607         606          17%



     Other revenues were essentially flat from year end 2000 to 2001, increasing
by  approximately  $100,000.  Other  revenues  were  impacted by increased  VDSL
revenue as we continue to build our customer base, offset by decreased  revenues
from our  bright.net  Internet  services.  Our  Internet  access  services saw a
decrease in customers during 2001, resulting in lower overall revenues.

Operating Expenses

     Cost of goods  sold.  Cost of goods sold  primarily  includes  the costs of
handsets and accessories sold to customers. Cost of goods sold also includes, to
a lesser  extent,  the cost of business  system  sales  incurred by  Chillicothe
Telephone.  Cost of goods sold for the year ended  December 31, 2001,  was $15.6
million,  compared to $10.5  million for the year ended  December 31,  2000,  an
increase of $5.1  million.  The increase in the cost of goods sold is the result
of the growth in our  wireless  customers  (approximately  66,400  customers  at
December  31, 2000  compared to  approximately  194,100 at December  31,  2001),
partially  offset  by  the  decreasing  per  unit  cost  of  the  handsets.  For
competitive and marketing reasons,  we have sold handsets to our customers below
our cost and expect to continue  to sell  handsets at a price below our cost for
the foreseeable future.

     Cost of service.  Cost of service  for  Chillicothe  Telephone  and Horizon
Technology  includes  the  support,  switching,  access and  circuitry  expenses
utilized  for  maintaining  telephone  service.  Cost of service  also  includes
expenses related to the startup and installation of Chillicothe Telephone's VDSL
service.  Cost of  service  for  Horizon  PCS  includes  costs  associated  with
operating its network, including site rent, utilities, maintenance,  engineering
personnel  and other  expenses  related  to  operations.  Cost of  service  also
includes  interconnection  expenses,  customer care, Sprint charges,  Sprint PCS
roaming fees and  non-Sprint  roaming fees.  Horizon PCS pays Sprint PCS roaming
fees when  Horizon  PCS'  customers  use  Sprint  PCS'  network  outside  of our
territory.  Horizon  PCS pays  non-Sprint  PCS  roaming  fees to other  wireless
service providers when our customers use their networks.

     Also  included in cost of service are costs  incurred  under  Horizon  PCS'
network  services  agreement with the  Alliances.  In the third quarter of 2001,
Horizon PCS  negotiated an amendment to its  agreement  with the Alliances and a
related amendment to its Sprint PCS agreements.  Under the Alliances  amendment,
Horizon  PCS is  obligated  to pay a minimum  monthly  fee for a stated  minimum
period.  Horizon  PCS  expects  to  incur  lower  overall  fees  under  this new
arrangement at expected usage levels as compared to the previous  agreement that
was based on a per minute fee. The Alliances are also obligated to upgrade their
networks  to provide 3G  technology.  In  connection  with this  amendment,  the
Alliances  have agreed with Sprint PCS to modify their  networks to cause Sprint
PCS to be in  compliance  with  the  FCC's  construction  requirements  for  PCS
networks.  Horizon  PCS  will  be  responsible  for  completion  of the  network
modifications if the Alliances fail to comply.



                                       44


     Cost of service for the year ended  December  31, 2001 was $115.2  million,
compared to $41.5  million for the year ended  December 31, 2000, an increase of
$73.7 million.  Chillicothe  Telephone's cost of service  increased $1.2 million
during the year ended December 31, 2001, compared to the year ended December 31,
2000.  This increase was a result of increased costs related to the build-out of
the VDSL network and upgrading the landline network to fiber optic cable of $1.0
million and  additional  expenses of  $200,000  to upgrade  switching  and other
central office equipment.

     Horizon PCS'  increase of $72.5  million,  reflects the increase in roaming
fees of $29.9  million  and an  increase  in costs  incurred  under our  network
services agreement with the Alliances of $12.4 million,  both as a result of our
subscriber growth during 2001. Additionally,  cost of service in 2001 was higher
than 2000 due to the  increase  in network  operations,  including  tower  lease
expense, circuit costs and payroll expense, of $17.6 million, increased customer
care,  activations and billing expense of $9.6 million,  as a result of customer
growth and the increase in other  variable  expenses,  including  switching  and
national platform expenses, of $3.0 million.

     Selling and marketing  expenses.  Selling and marketing expenses consist of
costs  associated  with  operating  Horizon  PCS'  38  retail  stores  including
marketing,  advertising,  payroll and sales  commissions.  Selling and marketing
expense also includes salaries and commissions paid to our sales representatives
and sales support personnel,  commissions paid to national and local third party
distribution  channels and subsidies on handsets sold by third parties for which
we do not record  revenue,  and expenses  related to  Chillicothe  Telephone and
Horizon Technology marketing and advertising programs.

     Selling and  marketing  expenses  rose to $50.5  million for the year ended
December 31,  2001,  compared to $19.6  million for the year ended  December 31,
2000, an increase of $30.9  million.  Horizon PCS'  increase was $31.0  million,
while Chillicothe Telephone and Horizon Technology were essentially flat.

     Horizon  PCS'  increase  reflects the increase in the costs of operating 38
retail  stores,  22 of which  were  launched  during  2001.  The  costs  include
marketing and advertising in our sales territory of $17.6 million,  the increase
in subsidies on handsets sold by third parties of $10.1 million and the increase
in  commissions  paid to third  parties of $3.3 million.  We expect  selling and
marketing expense to increase in the aggregate as we expand our coverage, launch
additional stores and add customers.

     General  and  administrative  expenses.  General and  administrative  costs
include the costs related to corporate support functions.  These include finance
functions,  billing and collections,  accounting  services,  computer access and
administration,  executive,  supervisory,  consulting, customer relations, human
resources and other administrative  services.  The Sprint management fee is also
included in general and administrative expenses.

     General and administrative  expenses rose by $17.4 million to $43.0 million
for the year ended  December 31, 2001,  compared to the year ended  December 31,
2000.  Horizon PCS' increase was $15.9 million which reflects an increase in the
provision of doubtful  accounts of $5.0  million,  an increase in the Sprint PCS
management  fee of $4.6  million (as a result of higher  subscriber  revenues in
2001),  increased  professional fees,  including  non-recurring costs related to
pursuing strategic business  alternatives of $1.3 million,  increased  headcount
and professional  services at Horizon  Services,  needed to support Horizon PCS'
growth,  of $1.8 million,  and other general  expenses,  including  property and
franchise taxes, of $3.2 million.  Chillicothe  Telephone,  Horizon Services and
Horizon  Technology  saw an increase of $1.5  million  related to an increase in
billing  support  services,  information  technology  and  Horizon  Technology's
administrative services.

     Non-cash  compensation  expense.  For the years ended December 31, 2001 and
2000, we recorded stock-based compensation expense of approximately $1.1 million
and $853,000,  respectively. This compensation expense includes the amortization
of the  value  of stock  options  granted  in 2000  and  1999 and  approximately
$725,000 of expense recorded in connection with Horizon PCS' distribution of its
shares of Horizon  Telcom stock to Horizon PCS  employees as a bonus in 2001 and
$179,000  recorded in 2000  related to a bonus  distribution  of Horizon  Telcom
stock  to  Horizon  Telcom  employees.  All of  the  2001  compensation  expense
represents general and administrative expense.  Stock-based compensation expense
will continue to be recognized  through the conclusion of the vesting period for
the Company's stock options.  The annual non-cash  compensation expense expected
to be  recognized  for these stock  options is  approximately  $413,000 in 2002,
$389,000 in 2003, $193,000 in 2004, and $71,000 in 2005.



                                       45


     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expenses  increased by $13.0  million to a total of $26.1  million in 2001.  The
increase  reflects  the  continuing  construction  of our  network  as we funded
approximately $116.6 million of PCS-related capital expenditures during 2001, as
well as an  additional  $16.0  million  capital  additions  for VDSL  and  other
landline telephone services. In addition,  because our acquisition of Bright PCS
was accounted  for as a purchase  transaction,  amortization  has increased as a
result of amortizing the intangible assets.  Goodwill amortization will cease as
of December 31, 2001 with the  adoption of  Statement  of  Financial  Accounting
Standards ("SFAS") No. 142. See "Recent Accounting Pronouncements" below.

     Amortization  expense also includes  amortization  of an  intangible  asset
recorded in September  2000  related to the new markets  granted to us by Sprint
PCS. We agreed to grant warrants to purchase shares of Horizon PCS' common stock
to  Sprint  PCS in  exchange  for the right to  provide  service  in  additional
markets.  The warrants will be issued to Sprint PCS at the earlier of an initial
public  offering of Horizon PCS' common stock or July 31, 2003.  The  intangible
asset is being  amortized  over the remaining  term of the Sprint PCS management
agreement,  resulting in $752,000 of amortization expense per year. Amortization
expense related to this intangible asset was approximately $752,000 and $188,000
for the years ended December 31, 2001 and 2000, respectively.

     Interest  expense,  net.  Interest  expense for the year ended December 31,
2001,  was $29.6  million,  compared to $12.2  million in 2000.  The increase in
interest  expense is the result of our additional  debt  outstanding  during the
year ended December 31, 2001, compared to 2000.

     Interest  expense on Chillicothe  Telephone's line of credit and term loans
was $2.4 million during 2001.  Additional draws on Chillicothe  Telephone's line
of credit  during 2001 is  reflected  in the  increase  in  interest  expense of
$700,000  compared  to 2000.  Chillicothe  Telephone's  line of  credit  accrues
interest on the outstanding balance at a fluctuating rate tied to the LIBOR rate
(3.63% at December  31, 2001,  based on LIBOR plus 155 basis  points) and is due
and payable monthly.  The outstanding  balance on the line of credit at December
31, 2001,  was $19.2 million  compared to $12.8 million at December 31, 2000. At
December 31, 2001, the balance on Chillicothe  Telephone's  term loans was $20.0
million including current maturities and the weighted average rate was 6.66%.

     Interest on the outstanding balance of Horizon PCS' secured credit facility
accrues at LIBOR plus a specified margin.  On June 29, 2001,  Horizon PCS agreed
to several  changes in the secured  credit  facility  including a 25 basis point
increase in the annual interest rate. At December 31, 2001, the interest rate on
Horizon PCS' secured credit facility was approximately  6.16%.  Interest expense
on the secured credit facility was $4.8 million and $1.2 million during 2001 and
2000 respectively.

     Horizon  PCS is  required,  and  expects,  to borrow an  additional  $105.0
million by March 26, 2002, under the terms of the secured credit  facility.  The
interest rate on the tranche that must be drawn by March 26, 2002, will be LIBOR
plus 375 basis points (5.66% at December 31, 2001).

     Horizon PCS accrues  interest at a rate of 14.00% per annum on its discount
notes  through  October 1, 2005,  and will pay  interest  semi-annually  in cash
thereafter. Unaccreted interest expense on the discount notes was $135.9 million
at December 31, 2001.  Interest  expense on the discount notes was $23.8 million
and $5.1 million during 2001 and 2000, respectively.

     On June 15,  2002,  Horizon  PCS will  begin  making  semi-annual  interest
payments  on its  senior  notes  issued in  December  2001 at an annual  rate of
13.75%. Interest expense on the senior notes was $1.5 million during 2001.

     Interest expense also includes  approximately $1.1 million and $1.0 million
in 2001 and 2000, respectively, of amortization from the deferred financing fees
related to our secured credit facility, our discount notes and our senior notes.
Also  contributing  to the  increase  in interest  expense  during 2001 was $2.8
million in commitment  fees we paid on the unused  portion of our secured credit
facility.

     The increase in interest expense as a result of our additional indebtedness
was somewhat offset by capitalized  interest  related to our network  build-out.
Capitalized  interest  during 2001 and 2000 was $6.8  million and $1.7  million,
respectively.  We expect our  interest  expense to  increase in the future as we
borrow  under our secured  credit  facility to fund our  network  build-out  and
operating losses.



                                       46


     Subsidiary  preferred stock dividends.  Horizon PCS' convertible  preferred
stock  pays  a  stock   dividend  at  the  rate  of  7.5%  per  annum,   payable
semi-annually, commencing April 30, 2001. On May 1, 2001 we issued an additional
1,163,051  shares of preferred  stock in payment of the stock  dividend  through
April 30, 2001.  On November 1, 2001,  we issued  1,021,882  shares of preferred
stock in payment of the stock dividend through October 31, 2001.

     Interest income and other,  net. Interest income and other in 2001 was $3.9
million and consisted primarily of interest income, offset by a loss on disposal
of Horizon  PCS'  assets.  Interest  income was  generated  from the  short-term
investment  of cash proceeds  from Horizon PCS' private  equity sales,  discount
notes and drawings under the secured credit facility, all completed on September
26, 2000.  Additionally,  in  conjunction  with Horizon PCS'  offering of $175.0
million in senior  notes in December  2001,  Horizon PCS was  required to escrow
approximately $48.7 million of the proceeds (in an interest-bearing account) for
the first  four  interest  payments  due under the  notes'  terms.  Horizon  PCS
recorded $69,000 of interest income on the escrow funds.

     During  2001,  Horizon PCS  incurred a loss of  approximately  $1.3 million
related  to  the  upgrade  of  network  equipment  to 3G  technology.  The  loss
represents the net book value of the assets disposed of, less proceeds  received
for the equipment. We expect to incur additional expenses in 2002 as we continue
to upgrade our network.

     Income tax  (expense)  benefit.  We  recorded  an income tax  expense  from
continuing  operations of approximately $1.8 million for the year ended December
31,  2001.  Before  September  26,  2000,   Horizon  PCS  was  included  in  the
consolidated  Federal income tax return of Horizon Telcom.  Horizon PCS provided
for Federal  income taxes on a pro-rata  basis,  consistent  with a consolidated
tax-sharing  agreement.  As a result  of the sale of the  convertible  preferred
stock on September 26, 2000,  Horizon PCS will not be able to participate in the
tax-sharing  agreement  nor will  Horizon  Telcom be able to  recognize  any net
operating loss benefits from Horizon PCS. Thus, Horizon PCS has filed a separate
Federal  income tax return for the short  period after  deconsolidation  through
December 31, 2000, and will file a separate  return for all subsequent  periods.
We expect to  continue  to record  income  tax  expense  as a result of this tax
deconsolidation,  because  the  remaining  members  of  the  consolidated  group
generate net taxable income.

   Minority interest in loss. As part of the acquisition of Bright Personal
Communication Services, LLC (Bright PCS), the former members of Bright PCS have
approximately an 8% ownership in Horizon PCS, excluding the impact of the
possible conversion of convertible preferred stock and exercise of options and
warrants. Horizon Telcom accounts for this ownership by recording the portion of
net income (loss) attributable to the minority shareholders as minority interest
in earnings (loss) in the accompanying consolidated statement of operations. For
the year ended December 31, 2001, approximately $1.0 million of the net loss for
the year was allocated to the minority interest, reducing the minority interest
balance to zero. There will not be any further allocations to minority interests
until such time as Horizon PCS becomes profitable and any unallocated losses to
minority interests are offset with income in future periods.

     Loss before  extraordinary  items. Our loss before  extraordinary items for
the year ended  December 31, 2001 was $118.8  million  compared to $44.2 million
for the year ended  December  31, 2000.  The  increase in our loss  reflects the
continued  expenses  related to launching  Horizon PCS' markets and building our
PCS customer base.

     Extraordinary  loss.  As a result of the  September  26, 2000,  financings,
Horizon PCS retired  long-term  debt  payable to  financial  institutions.  As a
result of the debt  extinguishment,  we expensed the unamortized  portion of the
related   financing   costs,   as  well  as  fees   associated   with  the  debt
extinguishments.  These fees and expenses  amounted to $748,000 and are shown on
the statement of operations net of a tax benefit of $262,000.

     Other  comprehensive  income (loss).  During 2001, the Company  recorded an
unrealized  gain,  net of associated  tax, of $2.2 million on its  investment in
marketable securities classified as  available-for-sale.  This gain reflects the
increased  market  value at December  31, 2001,  which  exceeded its cost.  This
investment can fluctuate in value.

     In the first quarter of 2001,  Horizon PCS entered into a two-year interest
rate swap  effectively  fixing $25.0 million of our term loan borrowed under the
secured credit facility at a rate of 9.4%. In the third quarter of 2001, Horizon
PCS entered into another  two-year  interest  rate swap  effectively  fixing the
remaining  $25.0  million of our term loan  borrowed  under the  secured  credit
facility  at 7.65%.  A loss of  approximately  $838,000  was  recorded  in other
comprehensive income (loss) during the year ended December 31, 2001. The Company
also  recognized  a  loss  in  the  consolidated   statement  of  operations  of


                                       47


approximately  $176,000 during 2001 related to the ineffectiveness of the hedge.
Other  comprehensive  income may fluctuate based on changes in the fair value of
the swap instrument.

Year Ended December 31, 2000, Compared to Year Ended December 31, 1999

Operating Revenues

Landline telephone services



                                                                             
                                                     2000         1999        $ change     % change
                                                 -----------  -----------  ------------  ----------
                                                                (Dollars in thousands)
Basic local, long-distance and other landline..  $    20,320  $    19,800     $    520           3%
Network access.................................       17,276       17,509         (233)         (1%)

     Landline  telephone  services were essentially flat to the comparable prior
year period.

Wireless Personal Communications Services





                                                                             
                                                     2000         1999        $ change     % change
                                                 -----------  -----------  ------------  ----------
                                                                (Dollars in thousands)

PCS service revenues...........................  $    26,110  $     4,295  $     21,815       508%
PCS equipment revenues.........................        3,061          600         2,461       410%



     The growth in service  revenues is the result of the growth in our customer
base as well as an increase in travel  revenue.  Subscriber  revenues  increased
$14.0 million for the year ended 2000. We managed approximately 66,400 customers
at December 31, 2000, compared to approximately  13,700 at December 31, 1999. We
believe our customer base has grown because we have launched  additional markets
and increased our sales force.

     Roaming  revenues  increased  $7.8 million in 2000  compared to 1999.  This
increase  primarily resulted from the launch of portions of our network covering
two  heavily  traveled  interstate  highways  in western  Virginia in the fourth
quarter  of 1999,  as well as our  launch  of our  northwest  Ohio and  northern
Indiana markets in the fourth quarter of 2000. We expect continued  increases in
Sprint PCS roaming revenues  attributable to volume as we complete the remainder
of our network  build-out,  including  completing  other portions of our network
covering additional heavily traveled highways.  These volume-based  increases in
roaming  revenues may be offset in large  measure over the next two years by the
expected reduction in the per minute Sprint PCS roaming rate.

     PCS ARPU excluding roaming decreased from the year ended December 31, 1999,
to the year ended December 31, 2000,  primarily as a result of the change in the
mix of the packages our subscribers have selected.  During 2000, our subscribers
selected  packages with lower monthly  recurring  charges made  available to our
subscribers as a result of our seasonal  promotions.  The decrease caused by the
change  in the mix of  packages  was  partially  offset by the  increase  in the
charges to our  subscribers  for  minute  sensitive  usage  (long  distance  and
overage) and the growth in our Sprint PCS roaming  revenues.  PCS ARPU including
roaming  increased  in the year ended  December 31, 2000 as compared to the same
period in 1999,  as a result of the increase in roaming  revenue from  customers
other  than our own on our  network.  We expect  PCS ARPU  including  roaming to
decrease due to the reduction in the Sprint PCS roaming rate.

     PCS  equipment  revenues  consist  of  handsets  and  accessories  sold  to
customers.  The increase in equipment  revenues is the result of our increase in
customers.



                                       48




Other Revenues



                                                                             
                                                     2000         1999        $ change     % change
                                                 -----------  -----------  ------------  ----------
                                                                (Dollars in thousands)
Internet access services.......................  $     3,625  $     3,136  $        489          16%
Equipment systems, information services and
  other revenues...............................        3,607        4,066          (459)        (11%)




     Internet  access  services  increased  from  $3.1  million  in 1999 to $3.6
million in 2000,  an  increase  of  $500,000  or 16%.  The number of  bright.net
customers increased during 2000, accounting for the increase in revenue.

     Other revenue at Chillicothe  Telephone decreased as business systems sales
decreased due to four large account sales in 1999 that did not recur in 2000. In
addition,  Chillicothe  Telephone's  maintenance  contract revenue  decreased by
approximately $100,000.

Operating Expenses

     Cost of goods  sold.  Cost of goods  sold for the year ended  December  31,
2000, was $10.5 million compared to $3.5 million for the year ended December 31,
1999, an increase of $7.0 million. The increase in the cost of goods sold is the
result  of the  growth  in  our  wireless  customers,  partially  offset  by the
decreasing unit cost of the handsets.  For competitive and marketing reasons, we
have sold  handsets  to our  customers  below our cost and expect to continue to
sell handsets at a price below our cost for the foreseeable future.

     Chillicothe  Telephone  experienced  reduced  revenue for  business  system
sales,  resulting in a lower cost of goods sold. This resulted in a reduction to
cost of  goods  sold in 2000 of  approximately  $400,000.  The  increase  in PCS
handset cost of goods sold accounted for $7.4 million of the total cost of goods
sold increase.  This was partially offset by the reduction in cost of goods sold
for the Chillicothe Telephone business system sales.

     Cost of service.  Cost of service for the year ended December 31, 2000, was
$41.5  million,  compared to $18.5 million for the year ended December 31, 1999,
an increase of $23.0 million.  Chillicothe  Telephone's and Horizon Technology's
cost of service  increased $3.7 million from the year ended December 31, 1999 to
the year ended December 31, 2000.  This was a result of increased  telephone and
network costs of $700,000,  additional expenses at Horizon Technology related to
startup services for its consulting business, including Web design, of $600,000,
VDSL expenses of $800,000  resulting  from the  installation  and startup of the
VDSL product,  $500,000 from increased access line fees for bright.net  Internet
service,  and other  miscellaneous  expenses,  including  operator service fees,
maintenance and labor, regular telephone installation, and other expenses, which
increased in the aggregate by $1.1 million for the year ended 2000.

     Horizon  PCS'  increase of $19.3  million  reflects the increase in roaming
fees of $5.8 million,  an increase in costs incurred under our network  services
agreement with the Alliances of $6.7 million,  additional costs for rent expense
for the  additional  towers  leased of $1.5  million,  additional  customer care
support of $2.7  million and network  operational  and payroll  expenses of $2.6
million.

     Selling and  marketing  expenses.  Selling and  marketing  expenses rose to
$19.6 million for the year ended December 31, 2000, compared to $5.6 million for
1999, an increase of $14.0 million.  Of the increase,  $14.5 million was related
to Horizon PCS, while Chillicothe  Telephone and Horizon Technology decreased by
$500,000.  The $500,000 decrease relates primarily to lower advertising incurred
during 2000.

     Horizon PCS' increase in selling and  marketing of $14.5  million  reflects
the increase in the costs of operating our 16 retail stores of $7.7 million, the
increase in subsidies on handsets sold by third parties of $4.0 million, and the
increase in commissions paid to third parties of $2.8 million.

     General and administrative  expenses.  General and administrative  expenses
rose by $8.8  million to $25.6  million for the year ended  December  31,  2000,
compared to the year ended  December  31, 1999.  Horizon PCS'  increase was $8.6
million.  This increase  reflects the 8% fee paid to Sprint PCS on our increased
collected service revenues of $1.2 million, increased headcount and professional


                                       49


services  at  Horizon  Services  needed to support  our growth of $3.6  million,
increased building and maintenance expenses of $1.4 million,  consulting,  legal
and bank fees of $900,000, an increase in the provision for doubtful accounts of
$1.0 million,  and increased other general  expenses of $500,000.  The remaining
$200,000 increase from Chillicothe  Telephone reflects increased  consulting and
general and administrative expenses.

     Non-cash  compensation  expense.  For the years ended December 31, 2000 and
1999,  we recorded  stock-based  compensation  expense of  $674,000  and $2,700,
respectively, for the amortization of the value of stock options granted in 2000
and 1999 and approximately  $179,000 of expense recorded in conjunction with the
distribution  of  Horizon  Telcom  stock  to its  employees  as a bonus in 2000.
Approximately  $100,000 of this  expense in 2000 was related to cost of services
and the remainder  represents  general and administrative  expense.  Stock-based
compensation  expense will continue to be recognized  through the  conclusion of
the vesting period of the stock options.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expenses  increased  by $3.5  million to a total of $13.1  million in 2000.  The
increase  reflects  the  continuing  construction  of our PCS network as well as
capital additions for VDSL and other telephone services. Because our acquisition
of Bright PCS was accounted  for as a purchase  transaction,  amortization  will
increase as a result of amortizing the related goodwill and intangible assets.

     At September 30, 2000,  Horizon PCS recorded an  intangible  asset of $13.4
million for the value of  warrants we agreed to grant to Sprint in exchange  for
the right to provide service in additional  markets.  This intangible asset will
be amortized  over the remaining  term of the Sprint PCS  management  agreement,
resulting in $752,000 of  amortization  expense per year.  Amortization  expense
related to the intangible  asset was  approximately  $188,000 for the year ended
December 31, 2000.

     Interest  expense,  net.  Aggregate  interest  expense  for the year  ended
December  31,  2000 was $12.2  million,  compared to $3.6  million in 1999.  The
increase in interest  expense is the result of our additional  debt  outstanding
during the year ended December 31, 2000, compared to the same period in 1999. We
expect our  interest  expense to increase  in the future as we borrow  under our
senior credit facility to fund our network build out and operating losses.

     Chillicothe  Telephone's  line of credit  resulted in  additional  interest
expense of  $100,000 in 2000.  Chillicothe  Telephone's  line of credit  accrues
interest on the outstanding balance at a fluctuating rate tied to the LIBOR rate
(8.3% as of December 31, 2000) and is due and payable  monthly.  The outstanding
balance at December 31, 2000, was $12.8 million.

     Horizon PCS incurred  approximately  $2.0 million of interest  expense from
the secured  credit  facility  entered into in September  2000.  Interest on the
Horizon PCS secured  credit  facility  accrues at LIBOR plus a specified  margin
(the rate was  approximately  10.6% at December 31,  2000).  Horizon PCS accrues
interest at a rate of 14% per annum on our  discount  notes  through  October 1,
2005, and will pay interest semi-annually in cash thereafter.  Non-cash interest
expense also included the amortized amount of deferred financing fees related to
the Horizon PCS secured credit facility,  the Horizon PCS discount notes and the
accretion  of the  discount  related to the Horizon PCS  discount  notes.  Total
non-cash interest expense for the year ended December 31, 2000, was $6.5 million
compared to $4,700 for the same period in 1999.  In addition,  the $13.0 million
short-term convertible note issued to obtain funds used to purchase common stock
of Horizon Telcom  resulted in an increase in interest  expense of $1.1 million.
This  convertible  note  was  converted  into  Horizon  PCS  preferred  stock in
September 2000.

     Subsidiary  preferred  stock dividend.  Horizon PCS  convertible  preferred
stock pays a stock dividend at the rate of 7.5% per annum, payable semi-annually
commencing  April 30. For the year ended  December  31,  2000,  we recorded  the
accrual of a stock dividend payable in additional convertible preferred stock of
$2.8 million.

     Interest income and other,  net. Interest income and other in 2000 was $4.7
million and consisted primarily of interest income of approximately $4.4 million
and other miscellaneous  income of approximately  $300,000.  Interest income was
generated  from cash proceeds from Horizon PCS' private  equity sales,  discount
notes and drawings under Horizon PCS' secured credit facility,  all completed on
September 26, 2000. In 2000,  the proceeds were invested in short-term  accounts


                                       50


waiting  to be  deployed.  As  capital  expenditures  are made to  complete  the
build-out of our  network,  decreasing  cash  balances may result in lower daily
interest income in the future.

     During 1999, in connection  with  entering the network  services  agreement
with the Alliances,  we sold certain PCS ancillary and base station equipment to
the  Alliances.  The sale  resulted  in a gain of  approximately  $1.4  million,
representing  the excess of cash proceeds over the  historical net book value of
the assets sold.

     Income tax  benefit.  We  recorded an income tax  benefit  from  continuing
operations of  approximately  $900,000 for the year.  This benefit was primarily
the result of the Company's net operating  loss offset by our  recognition of an
excess  loss  account  related to the  deconsolidation  of Horizon  PCS from the
Horizon Telcom  affiliated group and an increase in the valuation  allowance.  A
valuation  allowance  of $2.6  million  was  recorded in 2000 to the extent that
Horizon PCS'  deferred tax assets  exceeded  its  deferred  tax  liabilities  at
December 31, 2000.

     In connection  with Horizon PCS'  acquisition  of Bright PCS, a tax of $3.7
million  was  generated  based on the excess of the fair value of the  Company's
stock over Horizon PCS' cost basis in the stock.  The tax on the exchange of the
stock was charged directly to equity and not recorded as income tax expense.

     We  generated a tax of $4.6  million on a stock  dividend of 10% of Horizon
Telcom  stock  held by  Horizon  PCS to  Horizon  Telcom.  The tax on the  stock
dividend  was  charged  directly  to equity  and not  recorded  as an income tax
expense.

     Minority  interest in loss. As part of the  acquisition of Bright  Personal
Communication  Services, LLC (Bright PCS), the former members of Bright PCS have
approximately  an 8%  ownership  in  Horizon  PCS,  excluding  the impact of the
possible  conversion of convertible  preferred stock and the exercise of options
and  warrants.  Horizon  Telcom  accounts for this  ownership  by recording  the
portion  of net income  (loss)  attributable  to the  minority  shareholders  as
minority interest in earnings (loss) in the accompanying  consolidated statement
of operations.  For the year ended December 31, 2000, approximately $2.3 million
of the net loss  for the year was  allocated  to the  minority  interest.  As of
December 31,  2000,  the  minority  interest in Horizon PCS in the  consolidated
balance  sheet was  approximately  $900,000.  Horizon  Telcom  will  continue to
allocate  a portion of net losses to  minority  interest  until it is reduced to
zero.  There would be no further  allocations to minority  interests  until such
time as Horizon PCS becomes  profitable and any  unallocated  losses to minority
interests are offset with income in future periods.

     Loss before  extraordinary  items. Our loss before  extraordinary items for
the year ended December 31, 2000, was $44.2 million compared to $4.5 million for
the year  ended  December  31,  1999.  The  increase  in our loss  reflects  the
continued  expenses  related to launching  Horizon PCS' markets and building our
customer base.

     Extraordinary  loss.  As a result of the  September  26,  2000,  financings
described earlier, we retired long-term debt payable to financial  institutions.
As a result of this debt extinguishment,  we expensed the unamortized portion of
the  related   financing  costs  as  well  as  fees  associated  with  the  debt
extinguishments.  These fees and expenses  amounted to $748,000 and are shown on
the statement of operations net of a tax benefit of $262,000.

Liquidity and Capital Resources

     In  1996,  Horizon  Telcom  was  formed  as  part  of a  reorganization  of
Chillicothe  Telephone and several of its affiliates.  Since that time,  Horizon
Telcom has met its needs for capital primarily by borrowing, by selling selected
businesses and assets, and by funds generated from operations.  In 2000, Horizon
Telcom also formed Horizon PCS, to which it transferred  its subsidiary  Horizon
Personal Communications. In June 2000, Horizon PCS acquired the remaining 74% of
Bright PCS.  Horizon PCS also entered into several major financing  transactions
in September 2000 and December 2001.

     On September 26, 2000, an investor group led by Apollo Management purchased
$126.5  million  of  Horizon  PCS'  convertible  preferred  stock  in a  private
placement. Concurrent with the closing, the holder of Horizon PCS' $14.1 million
short-term  convertible  note  (including  accrued  interest  of  $1.1  million)
converted the note into the same  convertible  preferred  stock purchased by the
investor group.



                                       51


     On  September  26,  2000,  Horizon PCS  received  $149.7  million  from the
issuance  of $295.0  million of senior  discount  notes due October 1, 2010 (the
"discount notes"). The discount notes accrete in value until October 1, 2005, at
a rate of 14.00% compounded semi-annually.  The discount notes do not require us
to pay cash interest until the fifth year after they are issued,  at which point
we will pay semi-annual interest until maturity.  The discount notes are general
unsecured  obligations  and are  guaranteed by our existing and future  domestic
restricted  subsidiaries.  The guarantees are senior subordinated obligations of
our  existing and future  domestic  restricted  subsidiaries.  The rights of the
holders of our discount notes to receive payments pursuant to the guarantees are
subordinated  in right of payment  to the  holders  of our  existing  and future
senior  indebtedness,  including  our $250.0  million  secured  credit  facility
described below.

     Also on September 26, 2000, Horizon PCS received $50.0 million as part of a
$225.0  million  secured  credit  facility  with a bank group led by First Union
National  Bank.  The  borrowing  capacity of the  secured  credit  facility  was
increased  to $250.0  million in  November  2000.  The secured  credit  facility
consists of the following two loans:

     o    a $155.0 million term loan, available in a $50.0 million tranche and a
          $105.0 million  tranche,  under which we may borrow to finance (i) the
          direct cost of the  construction  and operation of a regional  digital
          wireless  telecommunications  network on the Sprint PCS  system;  (ii)
          transaction  costs and expenses;  and (iii) working  capital and other
          general corporate purposes; and

     o    a $95.0 million  revolving credit facility,  the proceeds of which may
          be used to fund working capital.

     The $50.0  million  tranche was drawn on  September  26,  2000,  and had an
interest rate of 6.16% at December 31, 2001. As required,  we drew the remaining
$105.0 million  tranche in March,  2002. The interest rate on the $105.0 million
tranche, which had not been drawn as of December 31, 2001, was 5.66% at December
31, 2001.

     On June 29,  2001,  and  December 7, 2001,  Horizon PCS amended its secured
credit facility with the bank group.  These  modifications  amended and restated
certain financial covenants,  including EBITDA (earnings before interest, taxes,
depreciation and amortization) and revenue thresholds and imposed limitations on
capital  expenditures.  The June 2001 amendment also increased the base interest
rate by 25 basis points to LIBOR plus 375 to 425 basis points.

     Horizon PCS' secured credit facility includes financial covenants that must
be met each quarter.  Horizon PCS complied with these  covenants at December 31,
2001.  There is a  likelihood,  however,  that it will not meet the covenant for
EBITDA for the first quarter of 2002.  Although financial results for the end of
the first  quarter  are not  final,  subscriber  information  to date  indicates
significantly  higher  than  expected  gross and net  additions  to Horizon  PCS
subscribers for the quarter.  Although Horizon PCS ultimately  benefits from the
revenues  generated by new  subscribers,  Horizon PCS incurs  one-time  expenses
associated with new subscribers,  including commissions,  handset subsidies, set
up costs  for the  network  and  marketing  expenses.  As a  result,  these  new
subscriber costs negatively  affect Horizon PCS' EBITDA in the short-term during
the period of the addition of new subscribers which could lead to non-compliance
with the EBITDA covenant for the first quarter of 2002.

     We have  initiated  discussions  with the lead  bank in our  lending  group
concerning a possible  non-compliance with the covenant.  After quarter-end,  if
the financial  statements show a non-compliance,  we intend to immediately enter
into negotiations  with the bank group to obtain a waiver of the  non-compliance
and amendments to the covenants.

     The failure to comply with the covenant  would be an event of default under
our  secured  credit  facility,  and would give the  lenders the right to pursue
remedies.  These  remedies could include  acceleration  of amounts due under the
facility.  If the  lender  elected  to  accelerate  the  indebtedness  under the
facility,  this would also  represent  a default  under the  indentures  for our
senior notes and discount  notes.  If we fail to comply with the  covenant,  one
option  available  to us would be to prepay the  indebtedness  under the secured
credit facility, together with prepayment fees. If we prepaid the facility prior
to  acceleration,  we would avoid  default under the  indentures  for our senior
notes and discount notes. In the event of such a prepayment,  we believe that we
could obtain replacement  financing to the extent necessary to fund our business
plan.  There can be no  assurance,  however,  that we could  obtain  adequate or
timely replacement financing on acceptable terms or at all.

     On December 7, 2001,  Horizon PCS received $175.0 million from the issuance
of unsecured senior notes (the "senior notes") due on June 15, 2011. Interest is
paid semi-annually on June 15 and December 15 at 13.75% annually,  with interest


                                       52


payments commencing June 15, 2002. Approximately $48.7 million of the offering's
proceeds  were  placed in an escrow  account to fund the first four  semi-annual
interest payments.

     During the year ended December 31, 2000, Horizon PCS borrowed $13.0 million
in  the  form  of a  short-term  convertible  note  to  purchase  19.78%  of the
outstanding  capital  stock  of  Horizon  Telcom.  The  $14.1  million  total of
principal  and  accrued  interest  on this note was  converted  into 2.6 million
shares of  convertible  preferred  stock on  September  26,  2000.  In May 2000,
Horizon PCS  exchanged  31,912  shares of Horizon  Telcom  common  stock,  which
Horizon PCS  acquired  in February  2000,  along with 4.7 million  newly  issued
shares of Horizon PCS class B common  stock,  for the  remaining  74%  ownership
interest in Bright PCS which Horizon PCS did not previously own.

     The  following  table  summarizes   contractual   principal  maturities  of
long-term debt outstanding (which is recorded net of unaccreted  interest on the
balance sheet) and minimum  payments  required under operating  leases and other
long-term commitments as of December 31, 2001:



                                                      
                       Long-Term
                       Debt and                         Alliances
                        Current        Operating         Network
Year                  Maturities        Leases          Agreement          Total
- ----               ---------------  -------------   ---------------  -------------
2002................$..2,000,000  $  15,031,000    $   27,400,000  $    44,431,000
2003...................2,000,000     14,177,000        38,600,000       54,777,000
2004...................2,375,000     12,689,000                --       15,064,000
2005...................2,500,000      9,389,000                --       11,889,000
2006.....................500,000      4,891,000                --        5,391,000
Thereafter...........530,625,000      9,102,000                --      539,727,000
                     -----------      ---------   ---------------  ---------------
   Total...........$.540,000,000  $ .65,279,000    $   66,000,000  $   671,279,000
                   =============   =============  ===============  ===============


     At December 31, 2001, we had cash and cash  equivalents  of $127.2  million
and working  capital of $100.8  million.  At December 31, 2000,  we had cash and
cash  equivalents of $192.0 million and working capital of $153.3  million.  The
decrease  in cash and cash  equivalents  of $64.8  million  is  attributable  to
funding our loss from  continuing  operations of $118.8  million (this loss also
includes  certain  non-cash  charges)  and funding our capital  expenditures  of
$132.5 million for the year ended December 31, 2001.

     Net cash used in operating  activities was $56.8 million for the year ended
December 31, 2001.  This reflects the  continuing use of cash for our operations
to build our Horizon PCS customer  base,  including but not limited to providing
service in our markets and the costs of acquiring a new customer.  For the years
ended  December 31, 2001 and 2000,  our cost per gross  additional  customer was
approximately  $339 and $373,  respectively.  The net loss of $118.8 million was
partially offset by various noncash charges, including depreciation, and noncash
interest.

     Net cash used in investing activities was $178.3 million for the year ended
December  31,  2001,  reflecting  the  continuing  build-out  of the Horizon PCS
network as well as the deployment of capital necessary to offer VDSL service. At
December 31, 2001, we operated  approximately 604 cell sites in our PCS network.
This represents an addition of approximately  301 sites during 2001. In addition
to the  sites,  we have  increased  the  number  of  switching  stations  in our
territory  and have  increased our number of retail stores from 16 at the end of
2000 to 38 at December 31, 2001. We will incur additional  capital  expenditures
as we complete the build-out of our networks, including the launch of additional
PCS retail stores,  completing  additional cell sites and expanding  capacity at
our switches as needed.  The  investment  of  restricted  cash of $48.7  million
relates to the escrow funds required by the terms of the senior notes  discussed
above.

     Net cash provided by financing  activities  for the year ended December 31,
2001,  was $170.2 million  consisting  primarily of the $175.0 million raised in
the  December  2001  senior  notes  offering  and  $6.4  million  of  additional
borrowings under Chillicothe  Telephone's line of credit, offset by $2.0 million
of payments on Chillicothe  Telephone's  senior notes and dividends paid of $1.8
million.  In addition,  Horizon PCS paid approximately $7.4 million of financing
fees  related to both their  senior notes  offering  and the  amendments  to the
secured credit facility on June 29, 2001, and December 7, 2001.



                                       53


     From January 1, 2002, to December 31, 2002, we anticipate  that our funding
needs requirements will be approximately  $155.0 million, of which approximately
$70 million to $85 million will be used for capital expenditures;  the remainder
will be utilized  primarily to fund working  capital,  cash interest expense and
operating losses.  The actual funds required to build-out our PCS network and to
fund operating  losses,  working  capital needs and other capital needs may vary
materially from these estimates and additional  funds may be required because of
unforeseen delays, cost overruns,  unanticipated  expenses,  regulatory changes,
engineering  design  changes  and  required  technological  upgrades  and  other
technological risks.

     Other  future  cash  expenditures  that may require  additional  borrowings
include:

     o    expanding the PCS coverage  within our existing  operating  markets or
          improving call quality with fill-in coverage;

     o    opening  additional PCS retail  stores,  beyond our current plan of 50
          stores;

     o    mergers  or  acquisitions  of other  Sprint  PCS  affiliates  or other
          compatible PCS carriers;

     o    the grant to us by Sprint PCS of  additional  markets under our Sprint
          PCS agreements; and/or

     o    expanding our PCS network, if economically justifiable,  by exercising
          our right to build our own network in our markets which are covered by
          our network  services  agreement with the Alliances under the terms of
          that amended agreement.

     If we are unable to obtain necessary  additional  funding and we are unable
to complete our PCS network  build-out,  this may result in the  termination  of
Horizon  PCS'  agreement  with  Sprint  PCS.  We will no longer be able to offer
Sprint PCS products and services. In this event, Sprint PCS may purchase Horizon
PCS' operating assets or capital stock for 72% of the "Entire Business Value" as
defined by the Sprint PCS  agreements.  Also,  any delays in our  build-out  may
result in penalties under our Sprint PCS agreement, as amended.

     The Company has significant  related party  transactions that are described
under "ITEM 13. Certain Relationships and Related Transactions."

Regulatory Developments

     See "Local Telephone Services - Regulation of Chillicothe Telephone's Local
Exchange  Carrier  Business" and "Wireless  Personal  Communications  Services -
Regulation of the Wireless Telecommunications Industry" under "ITEM 1. Business"
for  discussions of regulatory  developments  that could have a future impact on
us.

Seasonality

     Our  local  and  long-distance   telephone,   Internet  and  data  services
businesses  are not  subject to  seasonal  influences.  Our  wireless  telephone
business  is subject to  seasonality  because the  wireless  industry is heavily
dependent on calendar fourth quarter results.  Among other things, that industry
relies on  significantly  higher  customer  additions  and handset  sales in the
calendar  fourth  quarter as compared to the other three  calendar  quarters.  A
number of factors contribute to this trend, including:

     o    the  increasing  use of retail  distribution,  which is more dependent
          upon the year-end holiday shopping season;

     o    the timing of new product and service announcements and introductions;

     o    competitive pricing pressures; and

     o    aggressive marketing and promotions.



                                       54


Inflation

     We believe that  inflation has not had an adverse  effect on our results of
operations.

Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  141,  "Business  Combinations"  and  SFAS  No.  142,  "Goodwill  and  Other
Intangible Assets".  SFAS No. 141 addresses  financial  accounting and reporting
for all  business  combinations  and  requires  that all  business  combinations
entered into subsequent to June 2001 be recorded under the purchase method. This
statement  also  addresses  financial  accounting and reporting for goodwill and
other intangible assets acquired in a business combination at acquisition.  SFAS
No. 142 addresses  financial  accounting  and reporting  for  intangible  assets
acquired  individually  or with a group of other  assets  at  acquisition.  This
statement  also  addresses  financial  accounting and reporting for goodwill and
other intangible assets subsequent to their  acquisition.  These statements will
be adopted by the Company on January 1, 2002.

     Goodwill  amortization  will cease as of December 31, 2001, and the Company
will be  required  to  complete an  impairment  test of the  remaining  goodwill
balance  annually (or more  frequently  if  impairment  indicators  arise).  The
Company  has not yet  determined  the  financial  impact the  adoption  of these
pronouncements will have on its financial position or results of operations.  As
of December 31, 2001, Horizon PCS has goodwill of approximately $7.2 million net
of  accumulated  expense  during 2001.  The valuation of this goodwill  would be
subject to an impairment test at the date of adoption. The Company will complete
the first step of the impairment  test by June 30, 2002 and, if necessary,  will
complete the second step by December 31, 2002.

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations."  This  statement  addresses  financial  accounting and
reporting for obligations associated with the retirements of tangible long-lived
assets  and  the  associated  asset  retirement   costs.  It  applies  to  legal
obligations associated with the retirement of long-lived assets that result from
the  acquisition,  construction,  development and (or) the normal operation of a
long-lived  asset.  The Company will adopt this statement  effective  January 1,
2003.  The adoption is not expected to have a material  effect on the  Company's
financial position, results of operations or cash flows.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets".  SFAS No. 144 addresses financial
accounting and reporting for the impairment of long-lived  assets. The statement
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for  Long-Lived  Assets to Be Disposed  Of," and the  accounting  and  reporting
provisions of APB Opinion No. 30. SFAS No. 144 removes  goodwill from its scope,
as goodwill is addressed in the impairment  test described  above under SFAS No.
142. The Company will adopt SFAS No. 144 on January 1, 2002. The adoption is not
expected to have a material effect on the Company's financial position,  results
of operations or cash flows.



                                       55



                                  RISK FACTORS

     You should  carefully  consider the risks described below in evaluating our
businesses.

RISKS RELATED TO CHILLICOTHE TELEPHONE, LONG DISTANCE AND INTERNET BUSINESS

     The  information  set forth  under  this  heading  describes  risk  factors
relating  to the  business  of our  wholly-owned  subsidiaries  the  Chillicothe
Telephone  Company,  Horizon  Technology and Horizon Services.  References under
this heading to "we," "us" and "our" are to those subsidiaries.

Significant competition in telecommunications services in our markets may cause
us to lose customers.

     We face, or will face,  significant  competition in the markets in which we
currently provide local telephone,  long distance,  data and Internet  services.
Many of our competitors  are  substantially  larger and have greater  financial,
technical and marketing resources than we do. In particular,  larger competitors
have  certain  advantages  over us, which could cause us to lose  customers  and
impede our ability to attract new customers, including:

     o    long-standing   relationships   and  greater  name   recognition  with
          customers;

     o    financial,   technical,   marketing,  personnel  and  other  resources
          substantially greater than ours;

     o    more capital to deploy services; and

     o    potential to lower prices of competitive services.

     These  factors  place  us  at  a  disadvantage   when  we  respond  to  our
competitors' pricing strategies,  technological  advances and other initiatives.
Additionally,  our competitors may develop services that are superior to ours or
that achieve greater market acceptance.

     We face  competition  from other  current and  potential  market  entrants,
including:

     o    domestic and international  long distance  providers seeking to enter,
          re-enter or expand entry into our local communications marketplace;

     o    other domestic and international competitive communications providers,
          resellers, cable television companies and electric utilities; and

     o    providers of broadband and Internet services.

     A  continuing  trend toward  combinations  and  strategic  alliances in the
communications  industry could give rise to significant  new  competitors.  This
could  cause  us to lose  customers  and  impede  our  ability  to  attract  new
customers.

We may not be able to successfully integrate new technologies or respond
effectively to customer requirements.

     The communications  industry is subject to rapid and significant changes in
technology,  frequent new service introductions and evolving industry standards.
We  cannot  predict  the  effect  of  these  changes  on  us  or  our  industry.
Technological  developments may reduce the  competitiveness  of our networks and
require unbudgeted upgrades or the procurement of additional products that could
be  expensive  and  time  consuming.   If  we  fail  to  adapt  successfully  to
technological  changes or obsolescence or fail to obtain access to important new
technologies,  we could lose  customers and be limited in our ability to attract
new customers.


                                       56


If our back office and customer care systems are unable to meet the needs of our
customers, we may lose customers.

     Sophisticated back office processes and information  management systems are
vital  to  our  anticipated   growth  and  our  ability  to  achieve   operating
efficiencies.  We are dependent on third-party vendors for billing,  service and
customer support  systems.  We cannot assure you that these systems will perform
as expected as we increase our number of  customers.  If they fail to perform as
expected,  we could lose customers.  The following could prevent our back office
and customer care systems from meeting the needs of our customers:

     o    failure of third-party  vendors to deliver  products and services in a
          timely manner at acceptable costs;

     o    our failure to identify key information and processing needs;

     o    our failure to integrate products or services effectively;

     o    our failure to upgrade systems as necessary; or

     o    our failure to attract and retain qualified systems support personnel.

     Furthermore,  as our suppliers revise and upgrade their hardware,  software
and equipment  technology,  we could encounter  difficulties in integrating this
new  technology  into our business or find that such new hardware,  software and
technology is not  appropriate for our business.  In addition,  our right to use
such hardware,  software and  technology  depends upon license  agreements  with
third  party  vendors.  Vendors  may  cancel or elect not to renew some of these
agreements, which may adversely affect our business.

Because we operate in a heavily regulated industry, changes in regulation could
have a significant effect on our revenues and compliance costs.

     We are  subject to  significant  regulation  that could  change in a manner
adverse to us. We operate in a heavily regulated  industry,  and the majority of
our revenues generally have been supported by regulations, including in the form
of support for the  provision  of telephone  services in rural  areas.  Laws and
regulations  applicable  to us and  our  competitors  may  be,  and  have  been,
challenged in the courts,  and could be changed by Congress or regulators at any
time. In addition, any of the following have the potential to have a significant
impact on us:

     Risk of loss or reduction of network access charge revenues.  Approximately
     12% of the  Company's  total  revenues  in 2001  came from  network  access
     charges,  which are paid to us by intrastate  carriers and interstate  long
     distance  carriers for originating and terminating  calls in the regions we
     serve.  The amount of access charge  revenues that we receive is calculated
     based on guidelines set by federal and state  regulatory  bodies,  and such
     guidelines  could  change  at any time.  The FCC  continues  to reform  the
     federal  access charge  system.  States often mirror these federal rules in
     establishing  intrastate  access  charges.  It is  unknown at this time how
     changes to the FCC's access charge regime will affect us. Federal  policies
     being  implemented by the FCC strongly favor access charge reform,  and our
     revenues from this source could be at risk. Regulatory developments of this
     type could adversely affect our business.

     Risk of  loss  or  reduction  of  Universal  Service  Support.  We  receive
     Universal Service Support Fund, or USSF,  revenues to support the high cost
     of our operations in rural markets. If Chillicothe Telephone were unable to
     receive support from the Universal Service Support Fund, or if such support
     was reduced, Chillicothe Telephone would be unable to operate as profitably
     as before such reduction.

     In addition,  potential  competitors  generally cannot, under current laws,
     receive  the  same  universal   service   support  enjoyed  by  Chillicothe
     Telephone. Chillicothe Telephone therefore enjoys a significant competitive
     advantage,  which could, however, be removed by regulators at any time. The
     Telecom Act provides that  competitors  could obtain the same support as we
     do if the Public Utilities Commission of Ohio determines that granting such
     support to competitors  would be in the public interest.  If such universal
     service support were to become available to potential competitors, we might
     not be able to compete as effectively  or otherwise  continue to operate as
     profitably in our  Chillicothe  Telephone  markets.  Any shift in universal
     service  regulation  could,  therefore,  have  an  adverse  effect  on  our
     business.

                                       57



     The method for calculating the amount of such support could change in 2002.
     It is unclear whether the chosen  methodology  will accurately  reflect the
     costs  incurred by Chillicothe  Telephone,  and whether it will provide for
     the same amount of universal  service  support that  Chillicothe  Telephone
     enjoyed  in the past.  The  outcome  of any of these  proceedings  or other
     legislative  or  regulatory  changes  could  affect the amount of universal
     service  support that we receive,  and could have an adverse  effect on our
     business.

     Risk of loss of protected status under interconnection  rules.  Chillicothe
     Telephone  takes  the  position  that it does not have to  comply  with the
     Telecom  Act's  more  burdensome   requirements  governing  the  rights  of
     competitors  to  interconnect  to  our  traditional   telephone  companies'
     networks  due  to  our  status  as a  rural  telephone  company.  If  state
     regulators  decide  that it is in the  public's  interest  to impose  these
     interconnection  requirements  on us,  more  competitors  could  enter  our
     traditional  telephone  markets  than are  currently  expected and we could
     incur additional administrative and regulatory expenses as a result of such
     newly imposed interconnection requirements.

     Risks  posed  by  costs  of  regulatory   compliance.   Regulations  create
     significant   compliance   costs  for  us.  Our  subsidiary  that  provides
     intrastate  services is also  generally  subject to  certification,  tariff
     filing  and other  ongoing  regulatory  requirements  by state  regulators.
     Challenges  to these  tariffs by regulators or third parties could cause us
     to incur substantial legal and administrative expenses.

     Regulatory   changes   in   the    telecommunications    industry   involve
uncertainties,  and the resolution of these uncertainties could adversely affect
our business by facilitating  greater competition against us, reducing potential
revenues or raising our costs.

     The Telecom Act provides for significant changes in the  telecommunications
industry,  including the local  telecommunications and long distance industries.
This  federal  statute and the related  regulations  remain  subject to judicial
review and  additional  rulemakings  of the FCC,  thus  making it  difficult  to
predict  what effect the  legislation  will have on us, our  operations  and our
competitors.   Several   regulatory  and  judicial   proceedings  have  recently
concluded, are underway or may soon be commenced,  that address issues affecting
our operations and those of our competitors, which may cause significant changes
to our industry. We cannot predict the outcome of these developments, nor can we
assure that these changes will not have a material adverse effect on us.

RISKS  RELATED TO HORIZON  PCS, OUR WIRELESS  PERSONAL  COMMUNICATIONS  SERVICES
BUSINESS

     The  information  set forth  under  this  heading  describes  risk  factors
relating  to  the  business  of  our  majority-owned   subsidiary  Horizon  PCS.
References under this heading to "we," "us" and "our" are to Horizon PCS.

We have  not had any  profitable  years in the past  five  years  and we may not
achieve or sustain operating  profitability or positive cash flow from operating
activities.

     At Horizon  PCS,  we expect to incur  significant  operating  losses and to
generate  significant  negative cash flow from operating  activities  until 2003
while we continue to construct  our network and grow our customer  base. We have
already  incurred a total of  approximately  $201.3  million  in losses  through
December 31, 2001.  Our operating  profitability  will depend upon many factors,
including  our  ability to market our  services,  achieve our  projected  market
penetration  and  manage  customer  turnover  rates.  If we do not  achieve  and
maintain   operating   profitability  and  positive  cash  flow  from  operating
activities  on a  timely  basis,  we may not be able to meet  our  debt  service
requirements,  and Horizon  Telcom could lose all or part of its  investment  in
Horizon PCS.

If we fail to complete the  build-out of our network,  Sprint PCS may  terminate
the Sprint PCS  agreements,  and we would no longer be able to offer  Sprint PCS
products and services from which we generate substantially all our revenues.

     Our long-term affiliation  agreements with Sprint PCS, which we refer to as
the Sprint PCS  agreements,  require us to build and  operate the portion of the
Sprint PCS  network  located in our  territory  in  accordance  with Sprint PCS'
technical specifications and coverage requirements.  The agreements also require
us to provide  minimum  network  coverage to the  population  within each of the
markets which make up our territory by specified  dates.  Under the terms of our
Sprint PCS  agreements,  we are  required  to  provide  additional  coverage  in
specified markets by April 28, 2002.


                                       58


     We did not launch  all of our  Bright PCS  markets by the date set forth in
the Sprint PCS agreements.  We were unable to obtain the required  backhaul from
local  exchange  carriers by that date,  despite using  commercially  reasonable
efforts.  We have  subsequently  obtained  the  required  backhaul  services and
launched  these  markets  and  Sprint  PCS  agreed  in  writing  that  we are in
compliance with the build-out requirements in these markets.

     Under our original Sprint PCS agreements,  we were required to complete the
build-out in several of our markets in Pennsylvania and New York by December 31,
2000.  Sprint PCS and HPC agreed to an amendment of the build-out  requirements,
which extended the dates by which we were to launch coverage in several markets.
The amended Sprint PCS agreement  provides for monetary  penalties to be paid by
us if coverage is not launched by these specified contract dates. The amounts of
the penalties range from $16,500 to $602,000 for each shortfall depending on the
market  and  length  of delay  (up to 180 days) in  launch,  and in some  cases,
whether the shortfall  relates to an initial  launch in the market or completion
of the  remaining  build-out.  The  penalties  must be paid in cash,  or if both
Horizon PCS and Sprint PCS agree, in shares of Horizon PCS capital stock.

     Under the amended Sprint PCS agreement,  portions of the New York, Sunbury,
Williamsport,  Oil City, Dubois,  Erie,  Meadville,  Sharon,  Olean,  Jamestown,
Scranton,  State College,  Stroudsburg,  Allentown and  Pottsville  markets were
required to be  completed  and  launched by October 31,  2001.  Although we have
launched service in portions of each of these markets, we have not completed all
of the build-out  requirements.  We notified Sprint PCS in November 2001 that it
is our  position  that the  reasons  for the delay  constitute  events of "force
majeure" as described in the Sprint PCS  agreements and that,  consequently,  no
monetary  penalties or other remedies  would be  applicable.  The delay has been
primarily caused due to delays in obtaining the required  backhaul services from
local  exchange  carriers  and  zoning  and other  approvals  from  governmental
authorities.  On January 30, 2002,  Sprint PCS notified us that,  as a result of
these force majeure  events,  it does not consider our  build-out  delay to be a
breach  of  the  Sprint  PCS  agreement.  We  have  agreed  to  continue  to use
commercially reasonable efforts to reach build-out completion by either June 30,
2002 (for most of the  affected  markets)  or April 30, 2002 (for a few of these
markets).

     We will  require  additional  expenditures  of  significant  funds  for the
continued development,  construction,  testing,  deployment and operation of our
network.  These  activities  are  expected to place  significant  demands on our
managerial, operational and financial resources. A failure to meet our build-out
requirements  for  any  of  our  markets,  or  to  meet  Sprint  PCS'  technical
requirements,  would constitute a breach of the Sprint PCS agreements that could
lead to their  termination  if not cured within the applicable  cure period.  If
Sprint  PCS  terminates  these  agreements,  we will no  longer be able to offer
Sprint PCS products and services. See "The Sprint PCS Agreements" under "ITEM 1.
Business" included herein.

Our substantial  indebtedness  could adversely  affect our financial  health and
prevent us from fulfilling our long-term debt obligations.

     As of December 31, 2001,  Horizon  PCS' total debt  outstanding  was $520.0
million,  comprised of $50.0 million borrowed under its secured credit facility,
$175.0  million due under its senior  notes  issued in December  2001 and $295.0
million   represented   by  its  discount  notes  (which  are  reported  on  the
consolidated  balance  sheet  at  December  31,  2001,  net  of  a  discount  of
approximately  $135.9  million).  In addition,  Horizon PCS was required to, and
did,  borrow an additional  $105.0 million under its secured credit  facility in
March 2002.

     Horizon PCS' secured credit facility includes financial covenants that must
be met each quarter.  Horizon PCS complied with these  covenants at December 31,
2001.  There is a  likelihood,  however,  that it will not meet the covenant for
EBITDA for the first quarter of 2002.  Although financial results for the end of
the first  quarter  are not  final,  subscriber  information  to date  indicates
significantly  higher  than  expected  gross and net  additions  to Horizon  PCS
subscribers for the quarter.  Although Horizon PCS ultimately  benefits from the
revenues  generated by new  subscribers,  Horizon PCS incurs  one-time  expenses
associated with new subscribers,  including commissions,  handset subsidies, set
up costs  for the  network  and  marketing  expenses.  As a  result,  these  new
subscriber costs negatively  affect Horizon PCS' EBITDA in the short-term during
the period of the addition of new subscribers which could lead to non-compliance
with the EBITDA covenant for the first quarter of 2002.

                                       59


     We have  initiated  discussions  with the lead  bank in our  lending  group
concerning a possible  non-compliance with the covenant.  After quarter-end,  if
the financial  statements show a non-compliance,  we intend to immediately enter
into negotiations  with the bank group to obtain a waiver of the  non-compliance
and amendments to the covenants.

     The failure to comply with the covenant  would be an event of default under
our  secured  credit  facility,  and would give the  lenders the right to pursue
remedies.  These  remedies could include  acceleration  of amounts due under the
facility.  If the  lender  elected  to  accelerate  the  indebtedness  under the
facility,  this would also  represent  a default  under the  indentures  for our
senior notes and discount  notes.  If we fail to comply with the  covenant,  one
option  available  to us would be to prepay the  indebtedness  under the secured
credit facility, together with prepayment fees. If we prepaid the facility prior
to  acceleration,  we would avoid  default under the  indentures  for our senior
notes and discount notes. In the event of such a prepayment,  we believe that we
could obtain replacement  financing to the extent necessary to fund our business
plan.  There can be no  assurance,  however,  that we could  obtain  adequate or
timely replacement financing on acceptable terms or at all.

     Our  substantial  debt  will  have  a  number  of  important  consequences,
including the following:

     o    we may not have sufficient funds to pay interest on, and principal of,
          our debt;

     o    we have to  dedicate  a  substantial  portion  of any cash  flow  from
          operations  to the payment of interest on, and principal of, our debt,
          which will reduce funds available for other purposes;

     o    we may  not be able  to  obtain  additional  financing  for  currently
          unanticipated  capital  requirements,  capital  expenditures,  working
          capital requirements and other corporate purposes;

     o    some  borrowings  likely will be at variable rates of interest,  which
          will result in higher  interest  expense in the event of  increases in
          market interest rates;

     o    due to the liens on substantially all of our assets and the pledges of
          equity  ownership of our  subsidiaries  that secure our secured credit
          facility, our lenders may control our assets upon a default;

     o    our debt increases our  vulnerability  to general adverse economic and
          industry conditions;

     o    our debt  limits our  flexibility  in planning  for,  or reacting  to,
          changes in our business and the industry in which we operate and;

     o    our debt  places  us at a  competitive  disadvantage  compared  to our
          competitors that have less debt.

To service our indebtedness,  we will require a significant  amount of cash. Our
ability to generate cash depends on many factors beyond our control.

     Our ability to make payments on and to refinance our  indebtedness,  and to
fund our network  build-out,  anticipated  operating  losses and working capital
requirements will depend on our ability to generate cash in the future. This, to
a certain  extent,  is  subject  to general  economic,  financial,  competitive,
legislative, regulatory and other factors that are beyond our control.

     We cannot be certain that our business will generate  sufficient  cash flow
from  operations  or that future  borrowings  will be  available to us under our
secured  credit  facility  in an  amount  sufficient  to  enable  us to pay  our
indebtedness, or to fund our other liquidity needs. We may need to refinance all
or a portion of our indebtedness,  including the notes on or before maturity. We
may not be able to refinance any of our indebtedness on commercially  reasonable
terms, or at all.


                                       60


If we fail to pay our debt,  our lenders may sell our loans to Sprint PCS giving
Sprint PCS the rights of a creditor to foreclose on our assets.

     If the  lenders  accelerate  the  amounts  due  under  our  secured  credit
facility,  Sprint  PCS has the right to  purchase  our  obligations  under  that
facility and become a senior  lender.  To the extent Sprint PCS purchases  these
obligations,  Sprint PCS'  interests  as a creditor  could  conflict  with ours.
Sprint PCS' rights as a senior  lender would  enable it to exercise  rights with
respect to our assets and Sprint PCS'  continuing  relationship  in a manner not
otherwise permitted under the Sprint PCS agreements.

If Sprint PCS terminates the Sprint PCS  agreements,  the buy-out  provisions of
those agreements may diminish the valuation of our company.

     Provisions  of the Sprint PCS  agreements  could  affect the  valuation  of
Horizon PCS, and decrease our ability to raise additional capital. If Sprint PCS
terminates  these  agreements,  Sprint PCS may purchase our operating  assets or
capital stock for 80% of the Entire Business Value. If the termination is due to
our breach of the Sprint PCS  agreements,  the percent is reduced to 72% instead
of 80%. Under our Sprint PCS agreements,  the Entire Business Value is generally
the fair market value of our wireless  business  valued on a going concern basis
as  determined  by an  independent  appraiser  and  assumes  that we own the FCC
licenses in our  territory.  In addition,  Sprint PCS must approve any change of
control  of our  ownership  and  consent  to any  assignment  of the  Sprint PCS
agreements.  Sprint  PCS also has a right of first  refusal if we decide to sell
our operating assets in our Bright PCS markets.  We are also subject to a number
of  restrictions  on the transfer of our  business  including a  prohibition  on
selling Horizon PCS or its operating assets to a number of identified and yet to
be identified  competitors of Sprint PCS or Sprint. These and other restrictions
in the Sprint PCS agreements may limit the marketability of and reduce the price
a buyer may be willing to pay for Horizon PCS or its business and may operate to
reduce the Entire Business Value of Horizon PCS.

The  termination  of our  strategic  affiliation  with Sprint PCS or Sprint PCS'
failure to  perform  its  obligations  under the  Sprint  PCS  agreements  would
severely restrict our ability to conduct our business.

     Because Sprint PCS owns the FCC licenses which we use in our territory, our
ability to offer Sprint PCS products and services on our network is dependent on
the Sprint PCS agreements  remaining in effect and not being terminated.  Sprint
PCS may  terminate  the Sprint PCS  agreements  for breach by us of any material
terms.  We also depend on Sprint PCS' ability to perform its  obligations  under
the Sprint PCS  agreements.  The termination of the Sprint PCS agreements or the
failure of Sprint PCS to perform its obligations under the Sprint PCS agreements
would   severely   restrict  our  ability  to  conduct  our   wireless   digital
communications business.

If Sprint PCS does not complete the  construction of its nationwide PCS network,
we may not be able to attract and retain customers, which would adversely affect
our revenues.

     Sprint PCS' network may not provide nationwide  coverage to the same extent
as its  competitors'  networks,  which  could  adversely  affect our  ability to
attract and retain  customers.  Sprint PCS is creating a nationwide  PCS network
through its own construction efforts and those of its affiliates. Today, neither
Sprint PCS nor any other PCS provider offers service in every area of the United
States. Sprint PCS has entered into affiliation  agreements similar to ours with
companies  in  other  territories  pursuant  to  its  nationwide  PCS  build-out
strategy.  Our business and results of operations depend on Sprint PCS' national
network and, to a lesser extent, on the networks of its other affiliates. Sprint
PCS and its affiliate program are subject,  to varying degrees, to the economic,
administrative,  logistical,  regulatory  and other  risks.  Sprint PCS' and its
other  affiliates' PCS operations may not be successful,  which, in turn,  could
adversely affect our ability to generate revenues.

We are  dependent  upon  Sprint PCS' back office  services  and its  third-party
vendors' back office systems, and problems with these systems, or termination of
these arrangements, could disrupt our business and possibly increase our costs.

     Because  Sprint PCS now provides our back office  systems,  our  operations
could be  disrupted  if Sprint  PCS is unable to  maintain  and  expand its back
office services,  or to efficiently outsource those services and systems through
third-party  vendors.  The rapid expansion of Sprint PCS' business will continue
to pose a significant  challenge to its internal support systems.  Additionally,
Sprint  PCS has  relied  on  third-party  vendors  for a  significant  number of
important  functions  and  components  of its internal  support  systems and may
continue  to rely on these  vendors  in the  future.  We depend  on Sprint  PCS'
willingness  to  continue to offer  these  services  to us and to provide  these
services at competitive costs. The Sprint PCS agreements provide that, upon nine
months'  prior  written  notice,  Sprint PCS may elect to terminate any of these
services.  If Sprint PCS  terminates a service for which we have not developed a
cost-effective  alternative,   our  operating  costs  may  increase  beyond  our
expectations and restrict our ability to operate successfully.

                                       61


We depend on other  telecommunications  companies  for some services  which,  if
delayed,  could  delay our  planned  network  build-out  and delay our  expected
increases in customers and revenues.

     We depend on other  telecommunications  companies to provide facilities and
transport  to  interconnect  portions  of our network and to connect our network
with the landline telephone system.  American Electric Power,  Ameritech,  AT&T,
Verizon,  Sprint  (long  distance)  and  Qwest  are  our  primary  suppliers  of
facilities and transport.  Without these services, we could not offer Sprint PCS
services to our customers in some areas.  From time to time, we have experienced
delays in  obtaining  facilities  and  transport  from these  companies,  and in
obtaining local telephone numbers for use by our customers,  which are sometimes
in short supply,  and we may continue to experience  delays and interruptions in
the  future.  Delays in  obtaining  facilities  and  transport  could  delay our
build-out  plans and our  business  may  suffer.  Delays  could also result in a
breach of our Sprint PCS agreements,  subjecting  these  agreements to potential
termination by Sprint PCS.

If we do not meet all of the  conditions  under the Horizon  PCS secured  credit
facility,  we may not be able to draw down all of the funds  under the  facility
and, as a result,  we may not be able to complete the  build-out of our network,
which may result in the termination of the Sprint PCS agreements.

     Our secured  credit  facility  provides for aggregate  borrowings of $250.0
million  of  which  $50.0   million  was  borrowed  as  of  December  31,  2001.
Availability of future borrowings will be subject to customary credit conditions
at each funding date, including the following:

     o    the absence of any default or event of default;

     o    the continuing accuracy of all representations and warranties; and

     o    no material adverse change.

     If we do not meet these conditions at each funding date, our senior secured
lenders may choose not to lend any or all of the remaining amounts, and if other
sources of funds are not available,  we may not be in a position to complete the
build-out of our  network.  If we do not have  sufficient  funds to complete our
network  build-out,  we may be in breach of the  Sprint  PCS  agreements  and in
default under our secured credit facility.

Material  restrictions  in our debt  instruments may make it difficult to obtain
additional  financing or take other necessary actions to react to changes in our
business.

     The indenture  governing the senior notes contain  various  covenants  that
limit our  ability  to engage in a variety of  transactions.  In  addition,  the
indenture  governing our discount  notes and the secured  credit  agreement both
impose  additional  material  operating and financial  restrictions on us. These
restrictions,  subject to  ordinary  course of  business  exceptions,  limit our
ability to engage in some transactions, including the following:

     o    designated types of mergers or consolidations;

     o    paying dividends or other distributions to our stockholders;

     o    making investments;

     o    selling assets;

     o    repurchasing our common stock;

     o    changing lines of business;

                                       62


     o    borrowing additional money; and

     o    transactions with affiliates.

     In addition,  our secured credit facility  requires us to maintain  certain
ratios, including:

     o    leverage ratios;

     o    an interest coverage ratio; and

     o    a fixed charges ratio,

and to satisfy certain tests, including tests relating to:

     o    minimum covered population;

     o    minimum number of PCS subscribers in our territory; and

     o    minimum total revenues.

     These  restrictions  could  limit our  ability  to obtain  debt  financing,
repurchase  stock,  refinance or pay  principal  or interest on our  outstanding
debt,  consummate  acquisitions  for  cash or debt or react  to  changes  in our
operating environment.

The terms of the convertible preferred stock may affect our financial results.

     The  terms of the  convertible  preferred  stock  give the  holders  of the
preferred stock the following principal rights:

     o    to initially designate two members of our board of directors,  subject
          to reduction based on future percentage ownership;

     o    to  approve  or   disapprove   fundamental   corporate   actions   and
          transactions;

     o    to  receive  dividends  in  the  form  of  additional  shares  of  our
          convertible  preferred stock, which may increase and accelerate upon a
          change in control; and

     o    to require us to redeem the convertible preferred stock in 2005.


     If we  become  subject  to  the  repurchase  right  or  change  of  control
redemption  requirements under the convertible preferred stock while our secured
credit facility, our discount notes or the senior notes are outstanding, we will
be  required  to seek the  consent  of the  lenders  under  our  secured  credit
facility,  the holders of the discount notes and the holders of the senior notes
to repurchase or redeem the convertible preferred stock, or attempt to refinance
the secured credit facility, the discount notes and the senior notes. If we fail
to obtain  these  consents,  there will be an event of  default  under the terms
governing our secured credit facility.  In addition,  if we do not repurchase or
redeem  the  convertible  preferred  stock and the  holders  of the  convertible
preferred  stock  obtain a judgment  against us, any  judgment in excess of $5.0
million would constitute an event of default under the indentures  governing the
discount notes and the senior notes.


If we  breach  our  agreement  with SBA  Communications  Corp.,  ("SBA"),  or it
otherwise  terminates  its  agreement  with us,  our right to  provide  wireless
service from most of our cell sites will be lost.

     We lease cell sites from SBA. We rely on our  contract  with SBA to provide
us with  access to most of our cell  sites and to the  towers  located  on these
sites. If SBA were to lose its underlying  rights to these sites, our ability to
provide  wireless  service  from these sites would end,  subject to our right to
cure defaults by SBA. If SBA terminates our agreement as a result of our breach,
we will lose our right to provide wireless services from most of our cell sites.

                                       63


We may have difficulty in obtaining infrastructure equipment and handsets, which
could result in delays in our network  build-out,  disruption of service or loss
of customers.

     If we cannot  acquire  the  equipment  required  to build our  network in a
timely  manner,  we may be unable to provide  wireless  communications  services
comparable to those of our competitors or to meet the requirements of the Sprint
PCS agreements.  The demand for the equipment  required to construct our network
is  considerable,  and  manufacturers  of this equipment could have  substantial
order  backlogs.  Accordingly,  the lead time for the delivery of this equipment
may be longer than  anticipated.  In addition,  the demand for specific types of
handsets  is  strong  and  the  manufacturers  of  those  handsets  may  have to
distribute their limited supply of products among their numerous customers. Some
of our competitors purchase large quantities of communications equipment and may
have  established  relationships  with  the  manufacturers  of  this  equipment.
Consequently, they may receive priority in the delivery of this equipment. If we
do not obtain  equipment or handsets in a timely manner,  we could suffer delays
in the  build-out  of our  network,  disruptions  in service and a reduction  in
customers.

If the West  Virginia PCS  Alliance  and  Virginia PCS Alliance  fail to provide
their network to us in their markets,  or if our network services agreement with
the  Alliances  is  otherwise  terminated,  we will lose the  ability to use the
Alliances' networks.

     West Virginia PCS Alliance and Virginia PCS Alliance,  which we refer to as
the  Alliances,  are two related,  independent  PCS  providers  whose network is
managed by NTELOS.  Under our network services agreement,  the Alliances provide
us with the use of and access to key  components of their network in most of our
markets in Virginia and West Virginia. We directly compete with the Alliances in
the markets where we use their  network.  If the Alliances  fail to maintain the
standards for their network as set forth in our network services  agreement with
them or  otherwise  fail to provide  their  network for our use,  our ability to
provide wireless services in these markets may be adversely affected, and we may
not be able to provide  seamless  service  for our  customers.  If we breach our
obligations  to the  Alliances,  or if the  Alliances  otherwise  terminate  the
network services agreement, we will lose our right to use the Alliances' network
to provide service in these markets. In that event, it is likely that we will be
required  to build our own network in those  markets  and incur the  substantial
costs associated with doing so.

Sprint PCS' vendor  discounts  may be  discontinued,  which could  increase  our
equipment  costs and require more capital than we had projected to build out our
network.

     We intend to continue to purchase our infrastructure equipment under Sprint
PCS' vendor agreements that include significant volume discounts.  If Sprint PCS
were unable to continue to obtain vendor discounts for its affiliates,  the loss
of  vendor  discounts  could  increase  our  equipment  costs  for  our  network
build-out.

Conflicts with Sprint PCS may not be resolved in our favor, which could restrict
our ability to manage our business and provide Sprint PCS products and services,
adversely affecting our relationships with our customers,  increase our expenses
or decrease our revenues.

     Under the Sprint PCS  agreements,  Sprint PCS has a  substantial  amount of
control over the conduct of our business. Conflicts between us may arise, and as
Sprint PCS owes us no duties  except as set forth in the Sprint PCS  agreements,
these  conflicts  may not be  resolved  in our favor.  The  conflicts  and their
resolution may harm our business. For example:

     o    Sprint PCS may price its  national  plans based on its own  objectives
          and may set price level and customer  credit  policies that may not be
          economically sufficient for our business;

     o    Sprint  PCS  may  increase  the  prices  we pay for  our  back  office
          services; and

     o    Sprint or Sprint PCS may make decisions that adversely  affect our use
          of the Sprint and Sprint PCS brand names, products or services.


                                       64


We may not be able to compete with larger,  more established  wireless providers
who have resources to  competitively  price their  products and services,  which
could impair our ability to attract and retain customers.

     Our ability to compete will depend in part on our ability to anticipate and
respond  to  various  competitive   factors  affecting  the   telecommunications
industry,  including  new services that may be  introduced,  changes in consumer
preferences,  demographic  trends,  economic  conditions  and  discount  pricing
strategies by competitors. In each market, we compete with at least two cellular
providers that have had their  infrastructure in place and have been operational
for a number of years. They have  significantly  greater financial and technical
resources  than we do,  could offer  attractive  pricing  options and may have a
wider variety of handset  options.  We expect that existing  cellular  providers
will continue to upgrade their systems and provide  expanded digital services to
compete with the Sprint PCS products and services  that we offer.  Many of these
wireless  providers  generally  require their  customers to enter into long-term
contracts,  which may make it more  difficult for us to attract  customers  away
from them.


     We will  also  compete  with  several  PCS  providers  and  other  existing
communications  companies in our markets and expect to compete with new entrants
as the FCC licenses additional  spectrum to mobile services providers.  A number
of our cellular, PCS and other wireless competitors have access to more licensed
spectrum  than the amount  licensed to Sprint PCS in most of our  territory  and
therefore will be able to provide  greater network call volume capacity than our
network to the extent that network  usage begins to reach or exceed the capacity
of our licensed spectrum.  Our inability to accommodate increases in call volume
could result in more dropped or disconnected calls. In addition, any competitive
difficulties  that  Sprint PCS may  experience  could also harm our  competitive
position and success.

We may not be able to offer competitive roaming  capability,  which could impair
our ability to attract and retain customers.

     We rely  on  agreements  with  competitors  to  provide  automatic  roaming
capability  to our PCS  customers in many of the areas of the United  States not
covered by the Sprint PCS network,  which primarily serves  metropolitan  areas.
Some competitors may be able to offer coverage in areas not served by the Sprint
PCS  network  or may be able to offer  roaming  rates  that are lower than those
offered by Sprint PCS and its affiliates. Some of our competitors are seeking to
reduce access to their networks through actions pending with the FCC.  Moreover,
the standard for the dominant air  interface  upon which PCS  customers  roam is
currently being  considered for elimination by the FCC as part of a streamlining
proceeding.  If the FCC eliminates  this standard,  our Sprint PCS customers may
have difficulty roaming in some markets.

There is no uniform signal transmission technology and if we decide to use other
technologies  in the future,  this  decision  could  substantially  increase our
equipment expenditures to replace the technology used on our network.

     The wireless  telecommunications industry is experiencing evolving industry
standards.  We have  employed  CDMA  technology,  which is the digital  wireless
communications  technology selected by Sprint PCS for its network.  CDMA may not
provide  the  advantages  expected by us and by Sprint PCS. In addition to CDMA,
there are two other principal signal  transmission  technologies,  time division
multiple access, or TDMA, and global systems for mobile communications,  or GSM.
These three signal transmission technologies are not compatible with each other.
If one of  these  technologies  or  another  technology  becomes  the  preferred
industry  standard,  we may be at a  competitive  disadvantage  and  competitive
pressures  may require  Sprint PCS to change its digital  technology  which,  in
turn, may require us to make changes at substantially increased costs.

We may not receive as much Sprint PCS roaming  revenue as we anticipate  and our
non-Sprint PCS roaming revenue is likely to be low.

     We are paid a fee from  Sprint  PCS or a Sprint  PCS  affiliate  for  every
minute that a Sprint PCS  subscriber  based  outside of our  territory  uses our
network.  Similarly,  we pay a fee to Sprint PCS or a Sprint PCS  affiliate  for
every  minute  that  our  customers  use the  Sprint  PCS  network  outside  our
territory.  Our customers  may use the Sprint PCS network  outside our territory
more frequently than we anticipate, and Sprint PCS subscribers based outside our
territory may use our network less  frequently  than we anticipate.  The fee for
each Sprint PCS roaming  minute used was decreased  from $0.20 per minute before


                                       65


June 1, 2001, to $0.15 per minute effective June 1, 2001, and further  decreased
to $0.12 per minute  effective  October 1, 2001. The Sprint PCS roaming rate was
changed to $0.10 per minute in 2002.  After 2002, the rate will be changed to "a
fair and reasonable return," which has not yet been determined.  As a result, we
may receive less Sprint PCS roaming revenue in the aggregate, than we previously
anticipated  or we may have to pay more Sprint PCS roaming fees in the aggregate
than  we  anticipate.  Furthermore,  we do not  expect  to  receive  substantial
non-Sprint PCS roaming revenue.

If Sprint PCS customers are not able to roam instantaneously or efficiently onto
other wireless networks, we may suffer a reduction in our revenues and number of
customers.

     The Sprint PCS network  operates at a different  frequency  and uses or may
use a different  signal  transmission  technology  than many analog cellular and
other digital systems. To access another provider's analog cellular, TDMA or GSM
digital  system when outside the territory  served by the Sprint PCS network,  a
Sprint  PCS  customer  is  required  to  utilize a  dual-band/dual-mode  handset
compatible with that provider's system. Generally,  because  dual-band/dual-mode
handsets incorporate two radios rather than one, they are more expensive, larger
and heavier than  single-band/single-mode  handsets. The Sprint PCS network does
not allow for call hand-off  between the Sprint PCS network and another wireless
network, so a customer must end a call in progress on the Sprint PCS network and
initiate a new call when outside the territory served by the Sprint PCS network.
In addition,  the quality of the service provided by a network provider during a
roaming call may not approximate  the quality of the service  provided by Sprint
PCS.  The price of a roaming  call may not be  competitive  with prices of other
wireless  companies for roaming calls,  and Sprint PCS customers may not be able
to use Sprint PCS  advanced  features,  such as  voicemail  notification,  while
roaming. These roaming issues may cause us to suffer a reduction in our revenues
and number of customers.

Parts of our territories  have limited  licensed  spectrum,  which may adversely
affect the quality of our service.

     In the majority of our markets,  Sprint PCS has licenses  covering 20 or 30
MHz of spectrum.  However, Sprint PCS has licenses covering only 10 MHz in parts
of our territory  covering  approximately  3.8 million  residents out of a total
population of over 10.2 million  residents.  In the future,  as our customers in
those areas increase in number,  this limited licensed  spectrum may not be able
to accommodate  increases in call volume and may lead to increased dropped calls
and may limit our ability to offer enhanced services.

Non-renewal  or  revocation  by  the  FCC  of  the  Sprint  PCS  licenses  would
significantly  harm our  business  because we would no longer  have the right to
offer wireless service through our network.

     We are dependent on Sprint PCS' licenses,  which are subject to renewal and
revocation  by the FCC.  Sprint PCS'  licenses in many of our  territories  will
expire as early as 2005 but may be renewed for additional  ten-year terms. There
may be opposition to renewal of Sprint PCS' licenses upon their  expiration  and
the  Sprint  PCS  licenses  may not be  renewed.  The FCC has  adopted  specific
standards to apply to PCS license renewals.  For example, if Sprint PCS does not
demonstrate  to the FCC  that  Sprint  PCS has  met the  five-year  construction
requirements for each of its PCS licenses,  it can lose those licenses.  Failure
to comply with these  standards in our territory  could cause the  imposition of
fines on Sprint PCS by the FCC or the revocation or forfeiture of the Sprint PCS
licenses for our territory,  which would  prohibit us from providing  service in
our markets.

If the Sprint PCS agreements do not comply with FCC requirements, Sprint PCS may
terminate  the Sprint PCS  agreements,  which could  result in our  inability to
provide service.

     The FCC requires that licensees  like Sprint PCS maintain  control of their
licensed spectrum and not delegate control to third-party  operators or managers
like us.  Although the Sprint PCS  agreements  reflect an  arrangement  that the
parties  believe  meets the FCC  requirements  for licensee  control of licensed
spectrum,  we cannot be certain that the FCC will agree with us. If the FCC were
to determine that the Sprint PCS agreements  need to be modified to increase the
level of  licensee  control,  we have  agreed  with  Sprint  PCS to use our best
efforts to modify the Sprint PCS agreements to comply with applicable law. If we
cannot  agree with Sprint PCS to modify the Sprint PCS  agreements,  they may be
terminated. If the Sprint PCS agreements are terminated, we would no longer be a
part  of the  Sprint  PCS  network  and we  would  have  extreme  difficulty  in
conducting our business.


                                       66



We may need more capital than we currently  anticipate to complete the build-out
of our  network,  and a delay or  failure  to obtain  additional  capital  could
decrease our revenues.

     The completion of our network build-out will require  substantial  capital.
Additional funds would be required in the event of:

     o    significant departures from our current business plan;

     o    unforeseen delays, cost overruns, unanticipated expenses; or

     o    regulatory, engineering design and other technological changes.

     For example,  it is possible that we will need substantial funds if we find
it necessary or desirable to overbuild the territory  currently  served  through
our  arrangements  with  the  Alliances.  Due to our  highly  leveraged  capital
structure,  additional financing may not be available or, if available,  may not
be obtained on a timely basis or on terms acceptable to us or within limitations
permitted  under our  existing  debt  covenants.  Failure  to obtain  additional
financing,  should  the  need  for it  develop,  could  result  in the  delay or
abandonment of our development and expansion plans, and we may be unable to fund
our ongoing operations.

Because  Sprint PCS has  recently  required us to upgrade our network to provide
"third generation" technology, we will face additional capital expenses.

     The wireless  industry is seeking to implement new "third  generation,"  or
"3G,"  technology.  Sprint PCS has recently  selected a version of 3G technology
for its own  networks  and  required us to upgrade our network to provide  those
services.   We  currently   estimate   that  this  network   upgrade  will  cost
approximately  $35 million,  but actual costs could  exceed this  estimate.  The
current deadline for completion of our 3G upgrade generally is June 30, 2002. If
we fail to meet the  upgrade  deadline,  we will be in breach of our  Sprint PCS
agreements.  If other wireless  carriers  implement  their 3G upgrades on a more
rapid  timetable,  or on a more  cost  efficient  basis,  or on a more  advanced
technology  basis,  we  will  likely  suffer  competitive  disadvantages  in our
markets.  While  there are  potential  advantages  with 3G  technology,  such as
increased  network  capacity  and  additional  capabilities  for  wireless  data
applications,  the technology has not been proven in the marketplace and has the
risks inherent in other technological innovations.

Unauthorized  use of our  network  and other  types of fraud  could  disrupt our
business and increase our costs.

     We will likely  incur costs  associated  with the  unauthorized  use of our
network,  including  administrative and capital costs associated with detecting,
monitoring  and reducing the incidence of fraud.  Fraud impacts  interconnection
costs, capacity costs, administrative costs, fraud prevention costs and payments
to other carriers for unbillable fraudulent roaming. Although we believe that we
have a plan in place to implement appropriate controls to minimize the effect to
us of fraudulent usage, our efforts may not be successful.

Expanding our territory may have a material adverse effect on our business.

     As part of our business  strategy,  we may expand our territory through the
grant of  additional  markets from Sprint PCS or through  acquisitions  of other
Sprint PCS affiliates.  We will evaluate  strategic  acquisitions  and alliances
principally  relating to our current operations.  These transactions may require
the approval of Sprint PCS and commonly involve a number of risks, including:

     o    difficulty assimilating acquired operations and personnel;

     o    diversion of management attention;

     o    disruption of ongoing business;

     o    inability to retain key personnel;

     o    inability to successfully  incorporate acquired assets and rights into
          our service offerings;



                                       67



     o    inability to maintain  uniform  standards,  controls,  procedures  and
          policies; and

     o    impairment of relationships with employees, customers or vendors.

     Failure to overcome these risks or any other problems  encountered in these
transactions could have a material adverse effect on our business. In connection
with these transactions,  we may also issue additional equity securities,  incur
additional debt or incur significant amortization expenses related to intangible
assets.

The  Sprint  PCS  agreements  and  our  Horizon  PCS  restated   certificate  of
incorporation include provisions that may discourage, delay or restrict any sale
of Horizon PCS'  operating  assets or common stock to the possible  detriment of
Horizon Telcom.

     The Sprint PCS agreements restrict our ability to sell our operating assets
and common stock. Generally,  Sprint PCS must approve a change of control of our
ownership and consent to any assignment of the Sprint PCS agreements. The Sprint
PCS  agreements  also give  Sprint PCS a right of first  refusal if we decide to
sell the  operating  assets of our  Bright  PCS  markets  to a third  party.  In
addition,  provisions of our restated  certificate of  incorporation  could also
operate  to  discourage,  delay or make more  difficult  a change in  control of
Horizon PCS. For example,  our Horizon PCS restated certificate of incorporation
provides for:

     o    two classes of common stock,  with our class B common stock having ten
          votes per share;

     o    the issuance of preferred stock without stockholder approval; and

     o    a classified board, with each board member serving a three-year term.

     The  restrictions  in the Sprint PCS  agreements  and the provisions of our
Horizon PCS restated  certificate of incorporation  could discourage any sale of
Horizon PCS' operating assets or common stock.

Horizon PCS will not be able to receive the tax benefit of future  losses  until
Horizon PCS begins to generate taxable income.

     From  our  inception   until  September  2000,  we  were  included  in  the
consolidated  Federal income tax return of Horizon  Telcom,  Inc.,  which owns a
majority of our outstanding common stock.  Under the tax-sharing  agreement with
Horizon Telcom,  Horizon Telcom filed a consolidated tax return and paid Horizon
PCS an amount equal to the tax savings realized by Horizon Telcom as a result of
our taxable operating losses being used to offset  consolidated  taxable income.
As a result  of the sale of  convertible  preferred  stock  in  September  2000,
Horizon PCS is no longer included in Horizon  Telcom's  consolidated  tax return
and, as a result,  will no longer be able to  recognize  any tax  benefits  from
Horizon PCS' operating losses until Horizon PCS generates taxable income.

Horizon  Telcom  will be able to  control  the  outcome of  significant  matters
presented to  stockholders  as a result of its ownership  position,  which could
potentially impair Horizon PCS' attractiveness as a takeover target.

     Horizon  Telcom  beneficially  owns  approximately  58.1% of  Horizon  PCS'
outstanding  common stock on fully  diluted  basis as of December  31, 2001.  In
addition,  the shares held by Horizon Telcom are class B shares,  which have ten
votes per share.  The class A shares have only one vote per share.  As a result,
Horizon Telcom holds approximately 84.5% of the voting power, on a fully diluted
basis.  Horizon  Telcom will have the voting  power to control  the  election of
Horizon  PCS'  board of  directors  and it will be able to cause  amendments  to
Horizon PCS'  restated  certificate  of  incorporation  or Horizon PCS' restated
bylaws.  Horizon  Telcom  also  may be able to cause  changes  in  Horizon  PCS'
business without seeking the approval of any other party.  These changes may not
be to the  advantage  of Horizon  PCS or in the best  interest  of Horizon  PCS'
stockholders or the holders of Horizon PCS' notes.  For example,  Horizon Telcom
will have the power to  prevent,  delay or cause a change in  control of Horizon
PCS and could take other actions that might be favorable to Horizon Telcom,  but
not necessarily to other  stockholders.  This may have the effect of delaying or
preventing a change in control.  In addition,  Horizon  Telcom is  controlled by
members of the McKell family,  who collectively own  approximately  60.6% of the
voting interests of Horizon Telcom.  Therefore,  the McKell family,  acting as a
group, may be able to exercise indirect control over Horizon PCS.

                                       68



We may  experience a high rate of customer  turnover,  which would  increase our
costs of operations and reduce our revenue and prospects for growth.

     Horizon PCS'  strategy to minimize  customer  turnover,  commonly  known as
churn,  may not be  successful.  As a result of customer  turnover,  we lose the
revenue  attributable  to these customers and increase the costs of establishing
and growing our customer base. The PCS industry has experienced a higher rate of
customer  turnover  as  compared  to  cellular  industry  averages.  The rate of
customer turnover is affected by the following factors, several of which are not
within our ability to address:

     o    extent of network coverage;

     o    reliability  issues such as blocked  calls,  dropped calls and handset
          problems;

     o    non-use of phones;

     o    change of employment;

     o    the decision not to require our  customers to sign  contracts,  unlike
          most cellular providers that do require contracts;

     o    a lack of affordability;

     o    price competition;

     o    Sprint PCS' customer credit policies;

     o    customer care concerns; and

     o    other competitive factors.

     A high rate of customer  turnover could  adversely  affect our  competitive
position,  results  of  operations  and our costs of,  or  losses  incurred  in,
obtaining new customers, especially because we subsidize some of the cost of the
handsets purchased by our customers.

Because the wireless  industry has  experienced  higher  customer  additions and
handset  sales in the fourth  calendar  quarter as  compared  to the other three
calendar  quarters,  a failure by us to acquire  significantly more customers in
the fourth quarter could have a disproportionate  negative effect on our results
of operations.

     The wireless industry is historically  dependent on fourth calendar quarter
results. Our overall results of operations could be significantly  reduced if we
have a worse than expected fourth calendar  quarter for any reason including the
following:

     o    our inability to match or beat pricing plans offered by competitors;

     o    our failure to adequately  promote Sprint PCS' products,  services and
          pricing plans;

     o    our inability to obtain an adequate supply or selection of handsets;

     o    a  downturn  in the  economy  of  some  or all of the  markets  in our
          territory; or

     o    a generally poor holiday shopping season.

                                       69


Regulation by government agencies may increase our costs of providing service or
require us to change our services, which could impair our financial performance.

     The  licensing,  construction,  use,  operation,  sale and  interconnection
arrangements  of wireless  telecommunications  systems are  regulated to varying
degrees by the FCC, the FAA and, depending on the jurisdiction,  state and local
regulatory  agencies and legislative  bodies.  Adverse decisions regarding these
regulatory  requirements  could negatively impact our operations and our cost of
doing business.

Use of hand-held  phones may pose health risks,  real or perceived,  which could
result in the  reduced use of our  services or  liability  for  personal  injury
claims.

     Media reports have suggested that radio  frequency  emissions from wireless
handsets may be linked to various health  problems,  including  cancer,  and may
interfere with various  electronic  medical devices,  including hearing aids and
pacemakers.  Concerns  over radio  frequency  emissions  may  discourage  use of
wireless handsets or expose us to potential  litigation.  Any resulting decrease
in demand for our services,  or costs of  litigation  and damage  awards,  could
impair our ability to profitably operate our business.

ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk

     We do not engage in commodity  futures trading  activities and do not enter
into  derivative  financial  instruments  for trading  purposes.  We also do not
engage in  transactions  in foreign  currencies  that would  expose us to market
risk.

     The following  table presents the estimated  future  outstanding  long-term
debt at the end of each year and future required annual  principal  payments for
each year then ended  associated with our financing based on our projected level
of long-term indebtedness:



                                                                                      


(Dollars in millions)                                    Years Ending December 31,
                                       2002         2003          2004          2005          2006      Thereafter
                                   -----------  ------------  ------------  ------------  ------------  ----------
Horizon PCS:
Secured credit facility,
  due 2008  (1)................    $    155.0     $  155.0    $    155.0    $    155.0    $    155.0    $    155.0
     Variable interest rate (2)          5.92%        5.92%         5.92%         5.92%         5.92%         5.92%
     Principal payments........    $        -     $      -    $      0.4    $      0.5    $      0.5    $    153.6
Discount notes, due 2010.......    $    184.9     $  210.8    $    240.0    $    283.7    $    295.0    $    295.0
     Fixed interest rate.......         14.00%       14.00%        14.00%        14.00%        14.00%        14.00%
     Principal payments........    $        -     $      -    $        -    $        -    $        -    $    295.0
Senior notes, due 2011.........    $    175.0     $  175.0    $    175.0    $    175.0    $    175.0    $    175.0
     Fixed interest rate.......         13.75%       13.75%        13.75%        13.75%        13.75%        13.75%
     Principal payments........    $        -     $      -    $        -    $        -    $        -    $    175.0


Chillicothe Telephone:
1998 Senior Notes, due 2018....    $     12.0   $     12.0    $     12.0    $     12.0      $   12.0     $    12.0
     Fixed interest rate.......          6.62%        6.62%         6.62%         6.62%         6.62%         6.62%
     Principal payments........    $        -   $        -    $        -    $        -      $      -      $   12.0
1993 Senior Notes, due 2005....    $      6.0   $      4.0    $      2.0    $        -      $      -      $      -
     Fixed interest rate ......          6.72%        6.72%         6.72%            -             -             -
     Principal payments........    $      2.0   $      2.0    $      2.0    $      2.0      $      -      $      -



- -------------------
(1)  Assumes  required draw by Horizon PCS of $105.0  million by March 26, 2002.
     At December 31,  2001,  Horizon PCS had borrowed  $50.0  million  under the
     secured credit facility.

(2)  Interest rate on the secured credit  facility  equals the London  Interbank
     Offered  Rate  ("LIBOR")  plus a margin  that  varies from 375 to 425 basis
     points.  At December 31, 2001, $50.0 million was effectively  fixed at 8.5%
     through an interest rate swap discussed below. The interest rate is assumed
     to equal 5.92% for all periods ($50.0  million  tranche at 6.25% and $105.0
     million tranche at 5.75%).



                                       70


     In the normal course of business,  our  operations  are exposed to interest
rate  risk on our  secured  credit  facility.  Our  primary  interest  rate risk
exposures  relate to 1) the interest  rate on our  financing,  2) our ability to
refinance our discount  notes at maturity at market rates,  and 3) the impact of
interest rate movements on our ability to meet interest expense requirements and
meet financial covenants under our debt instruments.


     We manage the interest rate risk on our outstanding  long-term debt through
the use of fixed and variable  rate debt and interest  rate swaps.  In the first
quarter of 2001,  we  entered  into a two-year  interest  rate swap  effectively
fixing $25.0 million of our term loan borrowed under the secured credit facility
at a rate of 9.4%.  In the  third  quarter  of 2001,  we  entered  into  another
two-year  interest rate swap  effectively  fixing the remaining $25.0 million of
our term loan  borrowed  under the secured  credit  facility at 7.65%.  While we
cannot  predict our ability to refinance  existing  debt or the impact  interest
rate  movements  will have on our  existing  debt,  we continue to evaluate  our
interest rate risk on an ongoing basis.

     As of December 31, 2001,  100% of our outstanding  variable-rate  long-term
debt has been  swapped  for  fixed-rate  debt,  thus  reducing  our  exposure to
interest rate risk. Therefore, an increase in the base lending rate would have a
less significant effect on our annual earnings. However, our swap interest rates
are currently  greater than the market  interest  rates.  Thus, our results from
operations  currently  reflect a higher interest  expense than had we not hedged
our position.  If we do not renew our swaps, or, if we do not hedge  incremental
borrowings  under our secured credit  facility,  of which we have $200.0 million
available at December 31, 2001, we will  increase our interest rate risk,  which
could have a material  impact on our future  earnings.  An increase of 1% in the
base-lending rate on our current unhedged portion of our borrowings would result
in a decrease in annual earnings of  approximately  $200,000.  We are exposed to
market  risk on our  long-term  debt  related  to the  current  market  value of
interest  rates  compared to our  fixed-rate  and hedged  variable-rate  debt. A
100-basis  point  change in  interest  rates  would have an impact on the market
value of our debt.


ITEM 8.  Financial Statements and Supplementary Data

     Our financial  statements and supplementary  data required by this item are
submitted  as a  separate  section  of this  annual  report  on Form  10-K.  See
"Financial Statements" commencing on page F-1.


ITEM 9.  Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
     Financial Disclosure

    None.



                                       71


                                    PART III

ITEM 10.  Directors and Executive Officers of the Registrant

Directors and Executive Officers


     The following are the  directors and executive  officers of Horizon  Telcom
during 2001 or as of the date hereof:


NAME                         AGE      POSITION


Robert McKell..............  78       Chairman of the Board, Director
Thomas McKell..............  66       President, Director of Horizon Telcom;
                                      President of Chillicothe Telephone
Peter M. Holland...........  36       Vice President of Finance, Treasurer and
                                      CFO of Horizon Telcom; Chief Financial
                                      Officer of Horizon PCS
Jack E. Thompson...........  68       Secretary, Director
William A. McKell..........  41       Chairman of the Board, President and Chief
                                      Executive Officer of Horizon PCS
Phoebe H. McKell...........  55       President of Horizon Services
Joseph S. McKell...........  76       Director
David McKell...............  74       Director
Helen M. Sproat............  69       Director
John E. Herrnstein.........  64       Director
Joseph G. Kear.............  78       Director
Larry A. Gates.............  64       Director
Jerry B. Whited............  51       Director

     ROBERT  MCKELL has served as Chairman of the Board of  Directors of Horizon
Telcom since its inception in 1996 and of Chillicothe  Telephone since 1988. Mr.
McKell has 55 years of telecommunications experience.

     THOMAS MCKELL has served as the President and a Director of Horizon  Telcom
since its inception in 1996 and of The Chillicothe Telephone Company since 1988.
Mr. McKell has 46 years of telecommunications experience and received a Bachelor
of Science in  Electrical  Engineering.  Mr.  McKell is the father of William A.
McKell.

     PETER M. HOLLAND has served as Vice  President of Finance and  Treasurer of
Horizon Telcom since  November  1999. He has also served as the Chief  Financial
Officer of Horizon PCS since its  inception  in April 2000 and has served as the
Chief Financial  Officer and a director of Horizon  Telcom's other  subsidiaries
since November  1999. Mr. Holland has been a member of the management  committee
of Bright PCS since its formation in September  1999.  Mr. Holland has nearly 14
years of  telecommunications  experience.  From May 1996 to December  1999,  Mr.
Holland  was a principal  and owner of The  Pinnacle  Group  located in Langley,


                                       72


Washington.   Pinnacle  provides  strategic  business  planning  and  regulatory
consulting services to independent  wireless and wireline  companies,  including
Horizon PCS. Prior to joining Pinnacle in May 1996, Mr. Holland was a manager in
Nextel  Communications'  Business Development and Corporate Strategy groups. Mr.
Holland  started  his  career  in   telecommunications   with  Ernst  &  Young's
telecommunications  consulting group and is a Certified Public  Accountant.  Mr.
Holland  received his  Bachelor of Business  Administration  with an  accounting
concentration from Pacific Lutheran University.

     JACK E. THOMPSON has been  Secretary  and Director of Horizon  Telcom since
its inception in 1996 and of Chillicothe  Telephone since May 1982. He served as
chief  financial  officer of Horizon  Telcom from its inception to May 2000, and
was  treasurer  of  Chillicothe  Telephone  from May 1982  until May  2000.  Mr.
Thompson has 35 years of telecommunications experience.

     WILLIAM A. MCKELL has served as Chairman of the Board,  President and Chief
Executive  Officer  of  Horizon  PCS since its  inception  in April 2000 and has
served as  President,  Chief  Executive  Officer  and  Chairman  of the Board of
Horizon  Personal  Communications  since May 1996 and as President of Bright PCS
since  its   formation  in  September   1999.   Mr.   McKell  has  14  years  of
telecommunications  experience.  Mr. McKell served as Vice  President of Network
Services  from January 1996 to April 1996 and Director of Network  Services from
August 1994 to December 1995 for The Chillicothe  Telephone Company.  Mr. McKell
is a graduate of Ohio Northern University and is the son of Thomas McKell.

     PHOEBE H. MCKELL has served as the President of Horizon  Services since its
inception in 1996.  Ms.  McKell has 23 years of  telecommunications  experience.
From  1989 to 1996,  she was  Director  of  Administration  for The  Chillicothe
Telephone Company.

     JOSEPH S. MCKELL has been a director of Horizon  Telcom since its inception
in 1996 and a director of  Chillicothe  Telephone  since  1983.  Mr.  McKell,  a
physician,  has  practiced  medicine  in  Chillicothe,  Ohio for more than forty
years.

     DAVID MCKELL has been a director of Horizon  Telcom since its  inception in
1996 and a director of Chillicothe Telephone for 36 years. He is now retired.

     HELEN M. SPROAT has been a director of Horizon  Telcom since its  inception
in 1996 and a director of The Chillicothe  Telephone Company since 1988. She has
owned and  managed  Hidden Hill  Gallery,  Springboro,  Ohio,  for more than six
years.

     JOHN E.  HERRNSTEIN  has  been a  director  of  Horizon  Telcom  since  its
inception in 1996, and a director of Chillicothe  Telcom since 1981. He has been
a registered representative and financial consultant for AG Edwards & Sons, Inc.
a securities brokerage firm for more than six years.

     JOSEPH G. KEAR has been a director of Horizon Telcom since its inception in
1996,  and of  Chillicothe  Telephone for 36 years.  Mr. Kear, an attorney,  has
practiced law in Chillicothe, Ohio for the past 53 years. He is now a partner at
Kear-Motes  law firm, a firm which was organized in January 2001.  Prior to that
time, he practiced law as a sole practitioner.

     LARRY A. GATES was appointed as a director of Horizon Telcom in November of
2001. Mr. Gates is the current  president of the of the Chillicothe  High School
Alumni Association, a Chillicothe Education Foundation board member, a member of
the Cavalier  Endowment Board of Trustees and a partner of Sunrush  Enterprises,
L.L.C.  Mr.  Gates is the former  Senior Vice  President,  Human  Resources  and
Administration,  for Phillip  Morris  Companies,  Inc. Mr. Gates  graduated from
Northeastern University with a bachelor's degree in Business Administration. Mr.
Gates resigned from the board of directors on February 20, 2002.

     JERRY B. WHITED was  appointed as a director of Horizon  Telcom in November
of 2001.  Mr.  Whited is a partner in the CPA firm of Whited,  Seigneur,  Sams &
Rahe. Mr. Whited serves on various  boards and  committees for local  non-profit
organizations,  including the  Bicentennial  Commission,  Chillicothe  Community
Foundation,  Ohio University  Chillicothe  Coordinating Council,  Adena Hospital
Finance  Committee,  the  Chillicothe  Chamber of Commerce,  and has  previously
served as president of the  Chillicothe  Rotary Club.  Mr. Whited also currently
serves  on the  Board of  Directors  for  Citizens  National  Bank.  Mr.  Whited
graduated from Bowling Green State University.

     Robert McKell,  Thomas McKell, David McKell and Joseph McKell are brothers.
Helen Sproat is their sister.  Phoebe  McKell is the daughter of Robert  McKell.
William McKell is the son of Thomas McKell.



                                       73


Board of Directors

     There are  presently  nine  members  of the board of  directors.  Following
election, directors serve for a term of one year, or until their successors have
been elected and qualified,  and are  compensated at the discretion of the board
of directors.  Executive  officers are ordinarily  elected annually and serve at
the discretion of the board of directors.

Director Compensation

     Directors  who  are  not  otherwise  employed  by  Horizon  Telcom  or  its
subsidiaries receive $2,200 per quarter as director compensation. Robert McKell,
Thomas McKell, and Jack Thompson receive $50 per quarter.

Board Committees

     We currently have an audit committee which is responsible for  recommending
to the  board of  directors  the  engagement  of our  independent  auditors  and
reviewing with the independent auditors the scope and results of the audits, our
internal  accounting  controls,  audit practices and the  professional  services
furnished  by  the  independent  auditors.  The  audit  committee  is  currently
comprised of three members.

     We also currently have a compensation  committee,  which is responsible for
reviewing and approving all compensation  arrangements for our officers,  and is
also  responsible  for  administering  the stock option plan.  The  compensation
committee is currently comprised of two members.

ITEM 11.  Executive Compensation

     The  following  table  presents  summary  information  with  respect to the
compensation paid to our Chief Executive Officer and each of our other executive
officers whose salary and bonus exceeded $100,000 during the year ended December
31, 2001:


                                       74





                                                                                          
                                                                                           Long-Term
                                                                                         Compensation
                                                              Annual Compensation         Securities
                                                          -----------------------------   Underlying        All Other
  Name and Principal Position                               Salary ($)     Bonus ($)      Options (#)    Compensation ($)
  ---------------------------                               ----------     ---------      -----------    ----------------
  Thomas McKell................................    2001      207,733           --             --               9,117 (1)
      President of Horizon Telcom; President of    2000      207,312           --             --               8,789 (2)
        Chillicothe Telephone                      1999      214,523           --             --              17,853 (3)

  William A. McKell............................    2001      195,833         65,935           --             116,885 (4)
      Chairman of the Board, President and         2000      154,167         21,458           --              12,497 (5)
        CEO of Horizon PCS                         1999      107,125          9,641        1,614,186           8,934 (6)


  Peter M. Holland.............................    2001      170,833         57,479           --             129,032 (8)
      Vice President of Finance,                   2000      150,000         20,625           --              11,971 (9)
        Treasurer and CFO of Horizon               1999         --             --          1,614,186              --
        Telcom; CFO of Horizon PCS (7)


  Joseph E. Corbin.............................    2001      121,667         44,428           --             126,797 (10)
      Vice President, Engineering/Operations       2000      105,000         14,438           --              20,254 (11)
        of  Horizon PCS                            1999       85,200          9,200          188,322          13,528 (12)


  Monesa S. Skocik.............................    2001      121,667         40,733           --             126,501 (13)
      Vice President, External Affairs of          2000      105,000         14,438           --              12,692 (14)
        Horizon PCS                                1999       65,750          6,850          188,322           3,024 (15)


- ------------------------

(1)  Includes a yearly car  allowance  of $7,040  and a 401(k)  contribution  of
     $2,077.
(2)  Includes a yearly car  allowance  of $7,189  and a 401(k)  contribution  of
     $1,600.
(3)  Includes a yearly car  allowance  of $6,773  and a 401(k)  contribution  of
     $11,080.
(4)  Includes an award of Horizon  Telcom  shares valued at $100,900 at the date
     of the award,  a yearly car allowance of $10,985 and a 401(k)  contribution
     of $5,000.
(5)  Includes a yearly car  allowance  of $7,784  and a 401(k)  contribution  of
     $4,713.
(6)  Includes a yearly car  allowance  of $7,428  and a 401(k)  contribution  of
     $1,506.
(7)  Mr.  Holland became Chief  Financial  Officer on November 17, 1999, but did
     not   receive   any   compensation   in   1999.   See   ITEM  13   "Certain
     Transactions-Consulting  Agreement"  for a discussion  of  consulting  fees
     received  by the  Pinnacle  Group,  a  company  that  was 50%  owned by Mr.
     Holland. Pinnacle received consulting fees of $267,000 in 1999, $204,000 in
     1998 and $419,000 in 1997.
(8)  Includes an award of Horizon  Telcom  shares valued at $116,000 at the date
     of the award, a yearly car allowance of $7,892 and a 401(k) contribution of
     $5,140.
(9)  Includes a yearly car  allowance  of $7,578  and a 401(k)  contribution  of
     $4,393.
(10) Includes an award of Horizon  Telcom  shares valued at $116,000 at the date
     of the award, a yearly car allowance of $7,839 and a 401(k) contribution of
     $2,958.
(11) Includes a yearly car  allowance  of $9,981  and a 401(k)  contribution  of
     $10,273.
(12) Includes a yearly car  allowance  of $4,328  and a 401(k)  contribution  of
     $9,200.
(13) Includes an award of Horizon  Telcom  shares valued at $116,000 at the date
     of the award, a yearly car allowance of $6,807 and a 401(k) contribution of
     $3,694.
(14) Includes a yearly car  allowance  of $6,330  and a 401(k)  contribution  of
     $6,362.
(15) Includes a 401(k) contribution of $3,024.

     None of the named  executive  officers  received stock options from Horizon
Telcom or Horizon PCS in 2001.




                                       75



Employment Agreements

     Horizon PCS entered into  employment  agreements  with  William  McKell and
Peter  Holland,  its  Chief  Executive  Officer  and  Chief  Financial  Officer,
respectively.  The  employment  agreements  provide for an annual base salary of
$200,000  to Mr.  McKell and  $175,000  to Mr.  Holland  beginning  in 2002.  In
addition  to their base  salary,  Mr.  McKell and Mr.  Holland  are  eligible to
receive an annual bonus up to 40% of their base salary. In addition,  Mr. McKell
and Mr.  Holland are eligible to  participate  in all of Horizon  PCS'  employee
benefit plans.

     The  employment  agreements  provide  that Mr.  McKell's  or Mr.  Holland's
employment may be terminated with or without cause, as defined in the agreement.
If either Mr. McKell or Mr. Holland is terminated  without cause, he is entitled
to receive 24 months base salary, the vesting of all of his stock options on the
date of  termination  and 24 months of health  and  dental  benefits.  Under the
employment  agreements,  both  Mr.  McKell  and Mr.  Holland  have  agreed  to a
restriction  on their  present  and future  employment.  They have agreed not to
compete in the  business  of  wireless  telecommunications  either  directly  or
indirectly  within our markets  while  employed by us and for a period of twelve
months after termination of employment.

Horizon Telcom 1999 Stock Option Plan

     The 1999 Stock Option Plan has been  adopted by our board of directors  and
stockholders.  The option plan  permits the  granting  of both  incentive  stock
options and  nonqualified  stock options to employees.  The aggregate  number of
shares of common stock that may be issued  pursuant to options granted under the
option plan is 10,000 shares,  including both shares of class A common stock and
shares of class B common stock,  subject to  adjustments in the event of certain
changes in the  outstanding  shares of common stock. In 1999, we granted options
to purchase  950 shares of class B common  stock at an exercise  price of $60.00
per share. No additional options were granted in 2000 or 2001.

     The option  plan will be  administered  by our board of  directors  or by a
compensation  committee  appointed  by our  board of  directors,  which  will be
authorized,  subject to the  provisions of the option plan, to grant options and
establish   rules  and   regulations  as  it  deems  necessary  for  the  proper
administration  of the  option  plan  and to make  whatever  determinations  and
interpretations it deems necessary or advisable.

     An  incentive  option  may not have an  exercise  price  less than the fair
market value of the common stock on the date of grant or an exercise period that
exceeds ten years from the date of grant. In the case of option holders that own
more than 10% of Horizon  Telcom's  stock,  the exercise  price for an incentive
option  cannot be less than 110% of the fair market value of the common stock on
the date of grant and the exercise period cannot exceed five years from the date
of grant.  Incentive options are also subject to other limitations,  which allow
the option holder to qualify for favorable tax treatment.  Nonqualified  options
may have an  exercise  price of less  than,  equal to or  greater  than the fair
market value of the underlying common stock on the date of grant but are limited
to an exercise period of no longer than ten years.

     The board of directors or the  compensation  committee  will  determine the
persons to whom options will be granted and the terms,  provisions,  limitations
and performance  requirements of each option granted,  and the exercise price of
an option.

     An  option  will not be not  transferable  except by will or by the laws of
descent or distribution or unless determined otherwise by our board of directors
or the compensation committee.

     The plan provides that all stock issued under the plan will be subject to a
right of first  refusal  in favor of  Horizon  Telcom.  Under the right of first
refusal,  each  holder of stock  issued  under the plan must  offer the stock to
Horizon Telcom prior to selling it to a third party.  If Horizon Telcom declines
to purchase the stock,  the  stockholder  may sell the stock to the third party,
but the stock will remain  subject to the Horizon Telcom right of first refusal.
The  right of first  refusal  shall  cease to apply  upon the  completion  of an
underwritten   initial  public  offering  of  Horizon   Telcom's  capital  stock
registered under the Securities Act.

     The plan contains  provisions that give the  compensation  committee or our
board of directors or the acquiring  entity's  board of directors  discretion to


                                       76


take  specified  actions if Horizon  Telcom is acquired,  unless the  individual
option grants provide otherwise.  Those actions can include the authorization to
purchase  option  grants  from  plan   participants,   or  make  adjustments  or
modifications to outstanding  options granted to protect and maintain the rights
and interests of the plan  participants  or, upon notice to  optionees,  require
that all  options  must be  exercised  within  a  specified  number  of days and
thereafter the option will terminate.  The board may provide for acceleration of
options upon the  occurrence  of events  specified in the option  agreement.  To
date,  all  individual  option  grants  have  provided  that  the  options  will
accelerate and become fully exercisable upon an acquisition of Horizon Telcom.

Horizon PCS 2000 Stock Option Plan

     The Horizon PCS Stock Option Plan has been adopted by Horizon PCS' board of
directors  and  stockholders.  That  option plan  permits  the  granting of both
incentive  stock  options  and  nonqualified  stock  options to  employees.  The
aggregate  number  of  shares of common  stock  that may be issued  pursuant  to
options granted under the option plan is 7,500,000 shares of Horizon PCS class A
common stock and 4,196,884  shares of Horizon PCS class B common stock,  subject
to  adjustments  in the event of certain  changes in the  outstanding  shares of
common stock. On December 1, 1999,  Horizon PCS'  subsidiary,  Horizon  Personal
Communications,  granted  options to  purchase  3,588,000  shares of its class B
common stock with an exercise price of $0.1414 per share to 13 individuals under
its 1999 Stock  Option  Plan.  After  Horizon  PCS was  incorporated,  it issued
options to replace those initial  options,  on the same economic  terms adjusted
for the fact that Horizon Personal Communications was a subsidiary. After taking
into account the adjustment, Horizon PCS issued 4,196,884 substituted options on
its class B common  stock at an  exercise  price of $0.1209.  In November  2000,
Horizon PCS granted  options to purchase  116,971 shares of Horizon PCS' class A
common stock at an exercise price of $5.88 per share.

     The Horizon PCS option plan will be  administered by its board of directors
or a compensation  committee appointed by its board of directors,  which will be
authorized,  subject to the  provisions of the option plan, to grant options and
establish   rules  and   regulations  as  it  deems  necessary  for  the  proper
administration  of the  option  plan  and to make  whatever  determinations  and
interpretations it deems necessary or advisable.

     An  incentive  option  may not have an  exercise  price  less than the fair
market value of the common stock on the date of grant or an exercise period that
exceeds ten years from the date of grant. In the case of option holders that own
more than 10% of Horizon PCS' stock,  the exercise price for an incentive option
cannot be less than 110% of the fair  market  value of the  common  stock on the
date of grant and the exercise  period cannot exceed five years from the date of
grant. Incentive options are also subject to other limitations,  which allow the
option holder to qualify for favorable tax treatment.  Nonqualified  options may
have an exercise  price of less than,  equal to or greater  than the fair market
value of the underlying  common stock on the date of grant but are limited to an
exercise  period  of no  loner  than  ten  years.  However,  we will  not  grant
non-qualified  options with an exercise price less than 85% of fair market value
of the common stock on the date of the grant.

     The board of directors or the  compensation  committee  will  determine the
persons to whom options will be granted and the terms,  provisions,  limitations
and performance  requirements of each option granted,  and the exercise price of
an option.

     An  option  will not be not  transferable  except by will or by the laws of
descent or distribution or unless determined otherwise by our board of directors
or the compensation committee.

     Unless previously exercised,  a vested option granted under the Horizon PCS
option plan will terminate automatically:

     o    twelve months after the employee's termination of employment by reason
          of disability or death; and

     o    three months after an employee's termination of employment for reasons
          other than disability or death.

     The plan  contains  provisions  that  give  the  Horizon  PCS  compensation
committee  or board of directors or the  acquiring  entity's  board of directors


                                       77


discretion  to take  specified  actions if Horizon PCS is  acquired,  unless the
individual  option  grants  provide  otherwise.  Those  actions  can include the
authorization  to  purchase  option  grants  from  plan  participants,  or  make
adjustments  or  modifications  to  outstanding  options  granted to protect and
maintain the rights and  interests of the plan  participant  or  accelerate  the
vesting of  outstanding  options.  To date,  all  individual  option grants have
provided that the options will accelerate and become fully  exercisable  upon an
acquisition of Horizon PCS.

     The Horizon PCS board of directors has adopted a policy to the effect that,
for at least one year from March 27, 2001, 3,000,000 of the shares authorized to
be issued under the plan are subject to the  condition  that they must either be
issued to  non-promoter  employees (as defined in the North American  Securities
Administration  Association's statement of policy on options and warrants) or at
an exercise  price no less than $5.88 per share.  The Horizon PCS board also has
undertaken  not to grant  options  (other  than under the Horizon PCS 2000 Stock
Option  Plan) with a term of longer than 5 years until the class A common  stock
is listed on either the New York Stock Exchange, the American Stock Exchange, or
the NASDAQ National Market.

     None of our named executive officers were granted stock options during
fiscal year 2001. Additionally, none of our named executive officers exercised
stock options in the fiscal year ended December 31, 2001. The following table
sets forth information concerning the number and value of unexercised options
held by each of our named executive officers on December 31, 2001. There was no
public market for our common stock as of December 31, 2001. Accordingly, the
fair market value on December 31, 2001, is based on an average assumed value of
$100 per share of Horizon Telcom common stock and $5.39 per share of Horizon PCS
common stock. This valuation at December 31, 2001, does not represent the actual
value of our stock at December 31, 2001.



                                                                                     

                 Aggregated Option Exercises In Fiscal Year 2001
                     And 2001 Fiscal Year-End Option Values

                                                Number of Securities               Value of Unexercised
                                               Underlying Unexercised                  In-The-Money
                                               Options At Year End (#)          Options At Year End ($) (1)
  Name                                       Exercisable      Unexercisable     Exercisable      Unexercisable
  ----                                    ---------------   --------------------------------   ---------------
  Thomas McKell................................   --                --               --                --
  William A.McKell......................          706,206*          907,980*       3,721,708*        4,785,053*
  Peter M. Holland......................          706,206*          907,980*       3,721,708*        4,785,053*
  Joseph E. Corbin......................          117,701*           70,621*         620,285*          372,171*
  Monesa S. Skocik.............................   117,701*           70,621*         620,285*          372,171*


- -------------
* Represents options to purchase Horizon PCS class A common stock.
(1)  Based on an assumed value of $100.00 per share of Horizon  Telcom stock and
     $5.39 per share for Horizon PCS stock.


Pension Plan

     This table shows the estimated  annual benefits  payable upon retirement at
age 65 in the  September  1,  2001 plan year  under  The  Chillicothe  Telephone
Company Salaried Employees' Pension Plan and Trust Agreement, a non-contributory
qualified  defined  benefit  plan.  Benefits  from  the plan  are  payable  upon
retirement in monthly installments for the life of the participant.



                                                                                            


                        ----------------------------------------------------------------------------------------------
                                                              Years of Service
                        ----------------------------------------------------------------------------------------------
Remuneration                     15                20                  25                30                  35

       $125,000              18,750              25,000              31,250             37,500             43,750
        150,000              22,500              30,000              37,500             45,000             52,500
        175,000              25,500              34,000              42,500             51,000             59,500
        200,000              25,500              34,000              42,500             51,000             59,500
        225,000              25,500              34,000              42,500             51,000             59,500
        250,000              25,500              34,000              42,500             51,000             59,500
        300,000              25,500              34,000              42,500             51,000             59,500
        400,000              25,500              34,000              42,500             51,000             59,500
        450,000              25,500              34,000              42,500             51,000             59,500
        500,000              25,500              34,000              42,500             51,000             59,500

                                       78

     The  remuneration  shown  above is the annual  equivalent  of an average of
monthly  rates of pay.  The  benefits  shown  above  are based on the sum of the
highest five  consecutive  monthly  rates of pay in effect on each July 1 during
the final ten plan years divided by five.  The benefit  stated in the table will
not be reduced by Social  Security or other amounts  received by a  participant.
The  benefits in the table would be paid in the form of a joint and 50% survivor
annuity.

     For the  September 1, 2001 plan year,  the July 1, 2001 monthly rate of pay
is  limited  to  $14,167,  which is  equivalent  to an annual  pay of  $170,000.
Compensation in excess of this amount will not be taken into account for benefit
calculation  purposes.  Along these lines, years of benefit service in excess of
40 years will not be taken into account for benefit calculation purposes.

     The pension plan was amended on November 11, 2000. This amendment increased
the minimum  benefit  from  $32.00 per month  times years of benefit  service to
$35.00 per month times years of benefit service. This minimum does not apply for
any of the benefits listed in the table above.

     The number of years of credited  service  certain  executive  officers have
accrued under the pension plan as of the most recent fiscal year end are:


                            Name                    Years of Service
                  -----------------------    -----------------------
                  Thomas McKell                          46.6
                  William A. McKell                      11.6
                  Jack E. Thompson                       34.0
                  Phoebe McKell                          23.6


     Thomas  McKell is an  active  employee,  but he is  currently  eligible  to
retire.  Mr.  Thompson is retired and  receives  retirement  benefits  under the
pension  plan.  Horizon  PCS  employees  do not now  participate  in this  plan,
although  several  current  employees of Horizon PCS who formerly were employees
eligible to participate,  including William McKell, have vested pension benefits
under this plan.

Indemnification Of Officers and Directors

Horizon Telcom

     The regulations of Horizon Telcom provide for  indemnification  of officers
and directors, as described below:

     Actions Not by the Company.  Horizon Telcom shall  indemnify any person who
was or is a  party,  or is  threatened  to be made a party,  to any  threatened,
pending,  or completed  action,  suit, or proceeding,  whether civil,  criminal,
administrative, or investigative, other than an action by or in the right of the
Company,  by reason  of the fact  that he is or was a  director  or  officer  of
Horizon  Telcom or is or was  serving  at the  request  of  Horizon  Telcom as a
director,  officer,  partner,  or trustee of another  corporation,  domestic  or
foreign,  nonprofit or for profit,  partnership,  joint venture,  trust or other
enterprise,  against expenses,  including attorneys' fees, judgments,  fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action,  suit, or proceeding if he acted in good faith and in a manner
he  reasonably  believed  to be in or not opposed to the best  interests  of the
Company,  and  with  respect  to  any  criminal  action  or  proceeding,  had no
reasonable  cause to believe his conduct was unlawful.  The  termination  of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo  contendere  or its  equivalent,  shall  not,  of  itself  create a
presumption  that the person did not act in good faith and in a manner  which he
reasonably  believed  to be in or not  opposed  to  the  best  interests  of the
Company,  and  with  respect  to  any  criminal  action  or  proceeding,  he had
reasonable cause to believe that his conduct was unlawful.

     Actions by the Company.  Horizon Telcom shall  indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed  action or suit by or in the  right of  Horizon  Telcom  to  procure a
judgment  in its favor by reason  of the fact  that he is or was a  director  or
officer of the Company, or is or was serving at the request of Horizon Telcom as
a director,  officer,  partner, or trustee of another  corporation,  domestic or
foreign,  nonprofit or for profit,  partnership,  joint venture, trust, or other


                                       79


enterprise against expenses,  including attorneys' fees, actually and reasonably
incurred by him in  connection  with the defense or settlement of such action or
suit if he acted in good faith and in a manner he  reasonably  believed to be in
or  not  opposed  to  the  best  interests  of  the  Company,   except  that  no
indemnification  shall be made in respect of any claim,  issue,  or matter as to
which such  person  shall have been  adjudged  to be liable  for  negligence  or
misconduct in the performance of his duty to Horizon Telcom unless,  and only to
the extent that, the court of common pleas, or the court in which such action or
suit  was  brought,   shall  determine  upon  application   that,   despite  the
adjudication  of liability,  but in view of all the  circumstances  of the case,
such person is fairly and reasonably  entitled to indemnity for such expenses as
the court of common pleas or such other court shall deem proper.

     Indemnification  for Expenses.  To the extent that a person  indemnified by
right or at the option of Horizon  Telcom under the above bylaw  provisions  has
been  successful  on the merits or otherwise  in defense of any action,  suit or
proceeding  referred to in said sections,  or in defense of any claim,  issue or
matter therein, he shall be indemnified against expenses,  including  attorneys'
fees, actually and reasonably incurred by him in connection therewith.

     Determination of  Indemnification.  Any  indemnification  under these bylaw
provisions,  unless ordered by a court,  shall be made by Horizon Telcom only as
authorized in the specific case upon a determination that indemnification of the
indemnified  person  is  proper  in the  circumstances  because  he has  met the
applicable standard of conduct set forth in the bylaws. Such determination shall
be made (a) by a majority  vote of a quorum  consisting  of directors of Horizon
Telcom who were not and are not parties to or  threatened  with any such action,
suit, or proceeding,  or (b) if such a quorum is not obtainable or if a majority
vote of a quorum of disinterested  directors so directs, in a written opinion by
independent  legal counsel,  other than an attorney or a firm having  associated
with it an attorney who has been retained by or who has  performed  services for
Horizon Telcom or any person to be  indemnified,  within the past five years, or
(c) by the  shareholders,  or (d) by the court of  common  pleas or the court in
which such action,  suit, or proceeding was brought.  Any determination  made by
the  disinterested  directors  under clause (a) or by independent  legal counsel
under clause (b) shall be promptly  communicated to the person who threatened or
brought  the  action or suit by or in the right of the  Company,  and within ten
days after  receipt of such  notification,  such person  shall have the right to
petition the court of common pleas or the court in which such action or suit was
brought to review the reasonableness of such determination.

     Advances of Expenses.  Expenses,  including  attorneys'  fees,  incurred in
defending  any  action,  suit,  or  proceeding  referred  to in the above  bylaw
provisions may be paid by Horizon Telcom in advance of the final  disposition of
such action,  suit, or proceeding as authorized by the board of directors in the
specific case upon receipt of an undertaking by or on behalf of the  indemnified
person to repay such amount, unless it shall ultimately be determined that he is
entitled to be  indemnified  by Horizon  Telcom as authorized in the above bylaw
provisions.  No holder shall have the right to question  such  expenses  paid so
long  as  the  board  of  directors   has   authorized   such  payment  and  the
aforementioned  undertaking has been received by the Company;  provided that the
restriction  contained  in this  sentence  shall not be  construed to restrict a
shareholder's right to question the reasonableness of the ultimate determination
of indemnification as described above under "Determination of Indemnification."

     Indemnification Not Exclusive.  The indemnification  provided by the bylaws
shall  not be  deemed  exclusive  of any other  rights  to which  those  seeking
indemnification  may be entitled under the articles,  or any agreement,  vote of
shareholders  or  disinterested  directors,  statute  (as  now  existing  or  as
hereafter enacted or amended),  or otherwise,  both as to action in his official
capacity  and as to action in another  capacity  while  holding  such office and
shall continue as to a person who has ceased to be a director, officer, partner,
trustee,  or other  indemnified  capacity  and shall inure to the benefit of the
heirs, executors, and administrators of such a person.

     Insurance.  Horizon  Telcom is authorized  under the bylaws to purchase and
maintain  insurance  on behalf of any person who is or was a director,  officer,
trustee,  employee, or agent of the Company, or is or was serving at the request
of Horizon Telcom as a director,  officer, partner, trustee,  employee, or agent
of  another  corporation,   domestic  or  foreign,   nonprofit  or  for  profit,
partnership,  joint venture,  trust, or other  enterprise  against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not Horizon Telcom has the obligation or power to
indemnify  him  against  such  liability  under the bylaws.  Horizon  Telcom has
purchased such insurance covering the officers and directors.

     Definitions.  As used in the bylaws,  references to "Company"  includes all
constituent  corporations in a consolidation  or merger and the new or surviving
corporation,  so that any person  who is or was a director  or officer of such a


                                       80


constituent corporation, or is or was serving at the request of such constituent
corporation  as a director,  officer,  partner,  trustee,  or other  indemnified
capacity of another corporation,  domestic or foreign,  nonprofit or for profit,
partnership,  joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving  corporation as
he would if he had served the new or surviving corporation in the same capacity.

Horizon PCS

     Horizon PCS' certificate of  incorporation  limits the liability of Horizon
PCS  directors to the maximum  extent  permitted by Delaware  law.  Horizon PCS'
certificate  of  incorporation  provides  that Horizon PCS shall  indemnify  our
directors  and  executive  officers  and may  indemnify  its other  officers and
employees  and agents and other agents to the fullest  extent  permitted by law.
Horizon PCS' certificate of incorporation also permits it to secure insurance on
behalf of any  officer,  director,  employee  or other  agent for any  liability
arising out of actions in his or her official capacity.

     Horizon PCS intends to enter into agreements to indemnify its directors and
officers in addition  to  indemnification  provided  for in its  certificate  of
incorporation.  These  agreements  will indemnify its directors and officers for
certain expenses,  including  attorneys' fees,  judgments,  fines and settlement
amounts incurred by any of these persons in any action or proceeding,  including
any action by Horizon PCS or in its right, arising out of that person's services
as a director or officers of Horizon PCS, any  subsidiary of Horizon PCS, or any
other  company or enterprise  to which the person  provides  services at Horizon
PCS' request.  In addition,  Horizon PCS has directors' and officers'  insurance
providing  indemnification for certain of its directors,  officers and employees
for these types of  liabilities.  Horizon PCS  believes  that these  provisions,
agreements and insurance are necessary to attract and retain qualified directors
and officers.

     At present,  there is no pending  litigation  or  proceeding  involving any
director,  officer,  employee or agent of Horizon PCS where indemnification will
be required  or  permitted.  We are not aware of any  threatened  litigation  or
proceeding that might result in a claim for indemnification.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Exchange  Act requires  Horizon  Telcom's  executive
officers,  directors and persons who  beneficially  own more than 10% of Horizon
Telcom's stock  ("reporting  persons") to file initial  reports of ownership and
reports of changes in ownership with the SEC. Executive officers,  directors and
greater than 10%  beneficial  owners are required by SEC  regulations to furnish
Horizon Telcom with copies of all Section 16(a) forms they file.

     Based  solely on its review of copes of forms  received  by it  pursuant to
Section  16(a) of the Exchange  Act or written  representations  from  reporting
persons,  Horizon  Telcom  believes that with respect to 2001, all Section 16(a)
filing requirements applicable to its executive officers,  directors and greater
than 10% beneficial  owners were complied with, except that Mr. Whited filed one
late Form 3 and Mr. Gates failed to file a Form 3 prior to his  resignation as a
director.

     The  following  table  sets  forth  information  regarding  the  beneficial
ownership of our voting securities, as of December 31, 2001 by:

     o    each person who, to our knowledge,  is the  beneficial  owner of 5% or
          more of a class of our outstanding common stock;

     o    each of our directors;

     o    each of the executive officers; and

     o    all executive officers and directors as a group.



                                       81


     Beneficial  ownership is determined  in  accordance  with Rule 13d-3 of the
Exchange  Act.  A person is deemed to be the  beneficial  owner of any shares of
common stock if that person has or shares voting power or investment  power with
respect to the common stock, or has the right to acquire beneficial ownership at
any time within 60 days of the date of the table. "Voting power" is the power to
vote or  direct  the  voting of shares  and  "investment  power" is the power to
dispose or direct the disposition of shares.



                                                                                            

                                             Class A Common Stock (1)                  Class B Common Stock (1)
                                       -------------------------------------     -------------------------------------
Name and Address (2)                         Number             Percent               Number             Percent
- --------------------                         ------             -------               ------             -------

Robert McKell                                 2,079             2.32%                  4,463              1.6%
Thomas McKell (3)                             7,638              8.4%                 20,620              7.6%
Peter M. Holland (4)                            290                *                     875                *
Jack E. Thompson (5)                            423                *                   1,368                *
William A. McKell (6)                         1,274              1.4%                  3,800              1.4%
Phoebe H. McKell (7)                          2,625              2.9%                  7,969              2.9%
Joseph S. McKell (8)                          8,993              9.9%                 26,979              9.9%
David McKell (9)                              9,294             10.3%                 27,882             10.3%
Helen M. Sproat (10)                          6,165              6.8%                 17,735              6.5%
John E. Herrnstein (11)                         105                *                     343                *
Joseph G. Kear (12)                             230                *                     784                *
Larry A. Gates                                   --               --                      --               --
Jerry B. Whited                                  --               --                      --               --

All Executive Officers and Directors         39,116             43.2%                112,818              41.5%
as a Group (13 persons) (13)


- ---------------------
* Less than one percent.

(1)  Holders of class A common stock are entitled to one vote per share. Holders
     of class B common  stock do not have  voting  rights,  except as  otherwise
     required by law.
(2)  The  address  for  Horizon  Telcom,  Inc.  and each  executive  officer and
     director is 68 E. Main Street, Chillicothe, Ohio 45601-0480.
(3)  Includes  6,623 shares of class A common stock and 17,575 shares of class B
     common stock held by a trust. Mr. McKell shares voting and investment power
     over these  shares.  A separate  trust owns 1,015  shares of class A common
     stock and 3,045 shares of class B common  stock.  Mr.  McKell's wife shares
     voting and  investment  power  over  these  shares.  Mr.  McKell  disclaims
     beneficial ownership of the shares owned by his wife.
(4)  Includes 290 shares of class A stock and 870 shares of class B common stock
     received as a bonus during 2001.
(5)  Includes  213  shares  of class A common  stock  and 639  shares of class B
     common  stock  owned  by Mr.  Thompson's  spouse.  Mr.  Thompson  disclaims
     beneficial ownership of these shares.  Includes 57 shares of class B common
     stock   issuable   upon  exercise  of  stock  options  that  are  presently
     exercisable or exercisable within 60 days of the date hereof.
(6)  Includes  400  shares of class A common  stock and 1,200  shares of class B
     common stock held by Mr.  McKell's  spouse and their  children.  Mr. McKell
     disclaims  beneficial  ownership  of those  shares.  Includes 259 shares of
     class A stock and 750 shares of class B common  stock  received  as a bonus
     during 2001.
(7)  Includes 80 shares of class A common stock and 240 shares of class B common
     stock  held  by  Ms.  McKell's  spouse.  Ms.  McKell  disclaims  beneficial
     ownership  of these  shares.  Includes  57 shares  of class B common  stock
     issuable upon exercise of stock options that are presently  exercisable  or
     exercisable within 60 days of the date hereof.
(8)  Includes  415  shares of class A common  stock and 1,245  shares of class B
     common stock owned by Dr. McKell's spouse. Dr. McKell disclaims  beneficial
     ownership of these shares.
(9)  These shares are owned by a Trust.  Dr. McKell shares voting and investment
     powers over these shares.  Dr.  McKell  disclaims  beneficial  ownership of
     these shares.
(10) Includes  385  shares  of class A common  stock  and 115  shares of class B
     common stock held by Ms. Sproat's spouse.  Ms. Sproat disclaims  beneficial
     ownership of these shares.
(11) Includes 94 shares of class B common stock  issuable upon exercise of stock
     options that are presently exercisable or exercisable within 60 days of the
     date hereof.
(12) Includes 57 shares of class B common stock  issuable upon exercise of stock
     options that are presently exercisable or exercisable within 60 days of the
     date hereof.
(13) Includes 264 shares of class B common stock issuable upon exercise of stock
     options that are presently exercisable or exercisable within 60 days of the
     date hereof.


                                       82


ITEM 13.  Certain Relationships and Related Transactions

Service Agreements With Horizon Telcom Subsidiaries

     HPC  and  Bright  PCS,  wholly-owned  subsidiaries  of  our  majority-owned
subsidiary  Horizon  PCS,  have entered  into  service  agreements  with Horizon
Services, Inc. and a separate services agreement with Horizon Technology,  Inc.,
Horizon Services and Horizon Technology,  Inc. (formerly United  Communications,
Inc.).   Horizon   Services  and  Horizon   Technology  are  both   wholly-owned
subsidiaries of Horizon Telcom.

     Under the  agreement  with  Horizon  Services,  Horizon  Services  provides
services to HPC and Bright PCS including insurance functions,  billing services,
accounting  services,  computer  access  and  other  customer  relations,  human
resources,  and other  administrative  services  that HPC and  Bright  PCS would
otherwise be required to undertake on their own. These agreements have a term of
three years, with the right to renew the agreement for additional one-year terms
each year  thereafter.  Horizon PCS has the right to  terminate  each  agreement
during its term by providing 90 days written notice to Horizon Services. Horizon
Services may terminate the agreement  prior to its  expiration  date only in the
event that Horizon PCS breaches its obligations under the services agreement and
the breach is not cured within 90 days after Horizon PCS receives written notice
of breach from Horizon  Services.  Horizon Services is entitled to the following
compensation from HPC for services provided:

     o    direct labor charges at cost; and

     o    expenses and costs which are directly  attributable  to the activities
          covered by the agreement on a direct allocation basis.

     The agreement  provides that Horizon  Services'  obligations do not relieve
HPC of any of its rights and  obligations  to their  customers and to regulatory
authorities having jurisdiction over them. Additionally,  Horizon Services, upon
request,  is required to provide  HPC with access to Horizon  Services'  records
with respect to the provision of services, and Horizon Services is also required
to  provide  regular  reports  to  Horizon  Personal  Communications,  as it may
request.  Horizon Services received  compensation from HPC of approximately $6.2
million,  $4.4 million and $815,000 in the years ending  December 31, 2001, 2000
and 1999,  respectively.  As of December 31, 2001,  Horizon PCS had a receivable
from  Horizon  Services of  approximately  $101,000.  As of December  31,  2001,
Horizon PCS had a receivable  from  Horizon  Telcom of  approximately  $484,000.
Horizon Services also provides administrative services to Bright PCS.

     HPC, a subsidiary of Horizon PCS,  entered into a services  agreement  with
Horizon Technology, Inc., a wholly-owned subsidiary of Horizon Telcom. Under the
services  agreement,  HPC  provided  services  to Horizon  Technology  including
customer   activation  and   deactivation,   customer  care  support  and  other
administrative  services  that  Horizon  Technology  would  otherwise  have been
required to undertake on its own. Under the agreement,  Horizon  Technology paid
HPC $4,000 each month of the term of the services agreement.  This agreement was
terminated  in August 2001.  Horizon  Technology  paid a total of $32,000 to HPC
during 2001.

Sale of Assets to Affiliate

     On April 1, 2000, Horizon PCS transferred the assets and contractual rights
that made up its Internet,  long distance and other businesses  unrelated to the
PCS wireless operations to Horizon  Technology,  a subsidiary of Horizon Telcom,
for a purchase price of  approximately  $708,000.  Horizon  Technology  paid the
purchase  price by  delivering a promissory  note with an interest rate equal to
the applicable federal rate, which was 6.0%. The note was repaid in 2001.

                                       83


Office Lease

     Horizon PCS leases its  principal  office  space,  the space for one of its
retail  locations  and the  space for  certain  equipment  from The  Chillicothe
Telephone  Company,  a wholly owned  subsidiary of Horizon  Telcom.  The monthly
rental  payments  under  the  lease  are  $10,000.  Prior to  signing  the lease
agreement in May 2000,  Horizon PCS rented the office space from The Chillicothe
Telephone Company under a month-to-month  rental arrangement.  Under this lease,
Horizon PCS paid The Chillicothe Telephone Company $120,000, $97,500 and $22,300
in 2001,  2000,  and 1999,  respectively.  We believe that the lease was made on
terms no less  favorable  to Horizon  PCS than would have been  obtained  from a
non-affiliated  third party. The lease term expires in May 2005. Horizon PCS has
the  option  to renew the lease for an  additional  two year  period.  It is the
expectation of management that the lease will be renewed.

Stock Grant

     In 2001,  Horizon PCS  distributed  the remaining 2% of the Horizon  Telcom
stock that it owned to a group of its officers and key  employees in the form of
a bonus.  Recipients  included  William A.  McKell,  who  received 259 shares of
Horizon Telcom's class A common stock and 750 shares of Horizon Telcom's class B
common stock,  Peter M. Holland,  Monesa S. Skocik and Joseph E. Corbin who each
received 290 shares of Horizon  Telcom's  class A common stock and 870 shares of
Horizon Telcom's class B common stock.

Tax-Sharing Agreement

     In 1997,  Horizon  Telcom  entered into a  tax-sharing  agreement  with its
subsidiaries,  including  Horizon Personal  Communications  (now a subsidiary of
Horizon PCS). This agreement  provides that Horizon Telcom and its  subsidiaries
will file a  consolidated  tax return as long as they are  eligible to do so and
that  subsidiaries  will be paid for the amount of their  taxable net  operating
losses used by Horizon Telcom to offset taxable income. During 1999, Horizon PCS
had taxable net  operating  losses of $16.5 million and received an aggregate of
$5.2 million from Horizon Telcom under the agreement.  During 2000,  Horizon PCS
had taxable net income of $18.6  milion and paid an aggregate of $2.2 million to
Horizon  Telcom  under  the  agreement.  Due  to  the  sale  by  Horizon  PCS of
convertible preferred stock in September 2000, Horizon PCS is no longer included
in the consolidated  tax return of Horizon Telcom.  This change in tax status is
referred to as a tax  deconsolidation.  The tax-sharing  agreement provides that
Horizon  Telcom will  indemnify  Horizon PCS to the extent of any  aggregate tax
liability in excess of $11.5 million related to the tax  deconsolidation and the
dividend of the Horizon Telcom stock. As of December 31, 2001, Horizon PCS had a
receivable  from Horizon Telcom of  approximately  $484,000.  As of December 31,
2000, Horizon PCS had a payable to Horizon Telcom of approximately $338,000.


                                     PART IV

ITEM 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  The  following  documents  are filed as part of this annual  report on Form
     10-K:

     1.   Financial Statements

     Report of Independent Public Accountants, Consolidated Balance Sheets as of
     December 31, 2001 and 2000,  Consolidated  Statements of Operations for the
     Years Ended December 31, 2001,  2000 and 1999,  Consolidated  Statements of
     Changes in Stockholders'  Equity (Deficit) for the Years Ended December 31,
     2001,  2000 and 1999,  Consolidated  Statements of Cash Flows for the Years
     Ended December 31, 2001, 2000 and 1999, and Notes to Consolidated Financial
     Statements.

     2.   Financial Statement Schedules

     Schedule II - Valuation and Qualifying Accounts

                                       84


     3. Exhibits

     See the Index to Exhibits  immediately  preceding  the exhibits  filed with
this Report.

(b)  Reports on Form 8-K:

     There were no Reports on Form 8-K filed by the Registrant during the fourth
quarter of 2001.



                                       85




                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

HORIZON TELCOM, INC.


By:/s/ THOMAS MCKELL                                 March 20, 2002
   -----------------------
Thomas McKell
President, Director; President of
Chillicothe Telephone


Date:  March 20, 2002


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.



                                                                     

              NAME                             TITLE                              DATE


/s/ THOMAS MCKELL                   President, Director; President of      March 20, 2002
- -------------------------------     Chillicothe Telephone
Thomas McKell
(Principal Executive Officer)


/s/ PETER M. HOLLAND                Vice President of Finance and ,        March 20, 2002
- -------------------------------     Treasurer, Director
Peter M. Holland


                                    Chairman of the Board, Director        March 20, 2002
- -------------------------------
Robert McKell


/s/ JACK E. THOMPSON                Secretary, Director                    March 20, 2002
- -------------------------------
Jack E. Thompson


/s/ PHOEBE H. MCKELL                Director                               March 20, 2002
- -------------------------------
Phoebe H. McKell


                                    Director                               March 20, 2002
- -------------------------------
Joseph S. McKell


                                    Director                               March 20, 2002
- -------------------------------
David McKell


                                    Director                               March 20, 2002
- -------------------------------
Helen M. Sproat


                                    Director                               March 20, 2002
- -------------------------------
John E. Herrnstein


/s/ JOSEPH G. KEAR                  Director                               March 20, 2002
- -------------------------------
Joseph G. Kear


s/ JERRY B. WHITED                  Director                               March 20, 2002
- -------------------------------
Jerry B. Whited





                                       86





                                INDEX TO EXHIBITS

EXHIBIT NO.  DESCRIPTION

3.1**        Articles of Incorporation of Horizon Telcom, Inc.

3.2**        Bylaws of Incorporation of Horizon Telcom, Inc.

4.1**        Form of Stock Certificate.

4.2*         Indenture dated as of September 26, 2000 between Horizon PCS, Inc.,
             Horizon   Personal    Communications,    Inc.,    Bright   Personal
             Communications  Services,  LLC  and  Wells  Fargo  Bank  Minnesota,
             National Association.

4.3*         A/B Exchange Registration Rights Agreement made as of September 26,
             2000 by and  among  Horizon  PCS,  Inc.  and  Donaldson,  Lufkin  &
             Jenrette Securities Corporation and First Union Securities, Inc.

4.4*         Form of Registered Note (included in Exhibit 4.2).

4.5*         Note Guarantee of Horizon Personal Communications, Inc.

4.6*         Note Guarantee of Bright Personal Communications Services, LLC.

4.7          Indenture dated December 7, 2001 by and among Horizon PCS, Inc., as
             Issuer, Horizon Personal Communications,  Inc., and Bright Personal
             Communications  Services, LLC, as Guarantors,  and Wells Fargo Bank
             Minnesota,   National  Association,  as  Trustee  (incorporated  by
             reference  to  Exhibit  No.  10.45  filed  with  the   Registration
             Statement on Form S-1 of Horizon PCS, Inc. (File No. 333-51240)).

10.1*        Form of  Employment  Agreement,  dated  September  26, 2000, by and
             between Horizon PCS, Inc. and William A. McKell.

10.2*        Form of  Employment  Agreement,  dated  September  26, 2000, by and
             between Horizon PCS, Inc. and Peter M. Holland.

10.3*+       Sprint PCS  Management  Agreement  between Sprint  Spectrum,  L.P.,
             SprintCom,  Inc. and Horizon Personal  Communications,  Inc., dated
             June 8, 1998.

10.3.1*      Letter  Agreement  dated July 3, 2000 between Sprint Spectrum L.P.,
             and Horizon Personal Communications, Inc.

10.3.2       Addendum  VI  to  Sprint  PCS  Management   Agreement  between  the
             Registrant and Sprint PCS, Inc.  (incorporated  herein by reference
             to the Registrant's  Current Report on Form 8-K filed on August 24,
             2001).

10.3.3+      Addendum  V  to  Sprint  PCS  Management   Agreement   between  the
             Registrant and Sprint PCS, Inc.  (incorporated  herein by reference
             to Exhibit  10.3.1 to the  Registration  Statement  on Form 10/A of
             Horizon Telcom, Inc. (File No. 000-32617)).

10.4*+       Sprint PCS Services  Agreement  between  Sprint  Spectrum  L.P. and
             Horizon Personal Communications, Inc., dated June 8, 1998.

10.5*        Sprint Trademark and Service Mark License  Agreement between Sprint
             Communications  Company, L.P. and Horizon Personal  Communications,
             Inc., dated June 8, 1998.




                                       87




EXHIBIT NO.  DESCRIPTION

10.6*        Sprint  Spectrum  Trademark  and  Service  Mark  License  Agreement
             between Sprint Spectrum L.P. and Horizon  Personal  Communications,
             Inc., dated June 8, 1998.

10.7*+       Sprint  PCS  Management   Agreement   between   Wirelessco,   L.P.,
             SprintCom,   Inc.,  Sprint  Spectrum,   L.P.  and  Bright  Personal
             Communications Services, LLC, dated October 13, 1999.

10.8*        Sprint PCS Services  Agreement  between Sprint  Spectrum,  L.P. and
             Bright  Personal  Communications  Services,  LLC, dated October 13,
             1999.

10.9*        Sprint Trademark and Service Mark License  Agreement between Sprint
             Communications  Company,  L.P. and Bright  Personal  Communications
             Services, LLC, dated October 13, 1999.

10.10*       Sprint  Spectrum  Trademark  and  Service  Mark  License  Agreement
             between Sprint  Spectrum,  L.P. and Bright Personal  Communications
             Services, LLC, dated October 13, 1999.

10.19*+      Network  Services  Agreement  by  and  between  West  Virginia  PCS
             Alliance,  L.C.,  Virginia PCS Alliance,  L.C. and Horizon Personal
             Communications, Inc., dated August 12, 1999.

10.19.1**    First Amendment to Network  Services  Agreement by and between West
             Virginia  PCS  Alliance,  L.C.,  Virginia  PCS  Alliance,  L.C. and
             Horizon Personal Communications, Inc., dated as of June 18, 2000.

10.19.2      Amendment   to  Network   Services   Agreement  by  and  among  the
             Registrant,  West  Virginia  PCS  Alliance,  L.C.  and Virginia PCS
             Alliance,   L.C.   (incorporated   herein  by   reference   to  the
             Registrant's Current Report on Form 8-K filed on August 24, 2001).

10.21*+      PCS CDMA Product Supply Contract by and between Motorola,  Inc. and
             Horizon Personal Communications, Inc.

10.25*       Horizon PCS, Inc. 2000 Stock Option Plan.

10.25.1**    Horizon Telcom, Inc. 1999 Stock Option Plan.

10.26*+      Site   Development   Agreement  by  and  between  Horizon  Personal
             Communications, Inc. and SBA Towers, Inc., dated August 17, 1999.

10.27*+      Master Site  Agreement by and between SBA Towers,  Inc. and Horizon
             Personal Communications, Inc., dated July 1999.

10.28*+      Master  Design  Build  Agreement  by and between  Horizon  Personal
             Communications, Inc. and SBA Towers, Inc., dated August 17, 1999.

10.29*+      Master Site  Agreement  by and between SBA Towers,  Inc. and Bright
             Personal Communications Services, LLC, dated October 1, 1999.

10.30*+      Master  Design  Build  Agreement  by and  between  Bright  Personal
             Communications Services, LLC and SBA Towers, Inc., dated October 1,
             1999.

10.31*       Services  Agreement,  dated May 1, 2000,  between Horizon  Personal
             Communications, Inc. and Horizon Services, Inc.

10.32*       Lease  Agreement,   dated  May  1,  2000  between  The  Chillicothe
             Telephone Company and Horizon Personal Communications, Inc.




                                       88




EXHIBIT NO.  DESCRIPTION

10.33*       Services  Agreement,  dated May 1, 2000  between  Horizon  Personal
             Communications, Inc. and United Communications, Inc.

10.34*       Form of Horizon PCS, Inc. Indemnification Agreement.

10.35*       Amended and Restated Tax Allocation  Agreement dated May 1, 2000 by
             and among Horizon Telcom, Inc., The Chillicothe  Telephone Company,
             Horizon Personal Communications, Inc., United Communications, Inc.,
             Horizon Services, Inc., and Horizon PCS, Inc.

10.35.1*     First   Amendment  to  the  Amended  and  Restated  Tax  Allocation
             Agreement  dated as of  September  26,  2000 by and  among  Horizon
             Telcom, Inc., The Chillicothe  Telephone Company,  Horizon Personal
             Communications,   Inc.,  United   Communications,   Inc.,   Horizon
             Services, Inc., and Horizon PCS, Inc.

10.37*       Securities Purchase Agreement dated September 26, 2000 by and among
             Horizon PCS, Inc., Apollo Investment Fund IV, L.P., Apollo Overseas
             Partners IV, L.P.,  Ares  Leveraged  Investment  Fund,  L.P.,  Ares
             Leveraged  Investment  Fund,  II,  L.P.  and  First  Union  Capital
             Partners, LLC.

10.38*       Investors  Rights and Voting  Agreement dated September 26, 2000 by
             and among  Horizon  PCS,  Inc.,  Apollo  Investment  Fund IV, L.P.,
             Apollo Overseas Partners IV, L.P., Ares Leveraged  Investment Fund,
             L.P.,  Ares  Leveraged  Investment  Fund II,  L.P.  and First Union
             Capital Partners, LLC.

10.39*       Registration Rights Agreement dated September 26, 2000 by and among
             Horizon PCS, Inc., Apollo Investment Fund IV, L.P., Apollo Overseas
             Partners IV, L.P.,  Ares  Leveraged  Investment  Fund,  L.P.,  Ares
             Leveraged   Investment  Fund  II,  L.P.  and  First  Union  Capital
             Partners, LLC.

10.40*       Credit  Agreement,  dated as of September  26,  2000,  by and among
             Horizon   Personal   Communications,   Inc.,  and  Bright  Personal
             Communications  Services, LLC, Horizon PCS, Inc. (the "Parent") and
             certain  Subsidiaries  of the Parent,  the several  banks and other
             financial  institutions  as may from time to time become parties to
             this Agreement, First Union National Bank, as Administrative Agent,
             Westdeutsche  Landesbank  Girozentrale,  as  Syndication  Agent and
             Arranger and Fortis Capital Corp., as Documentation Agent.

10.40.1*     First Amendment to Credit Agreement and Assignment,  dated November
             20, 2000, by and among Horizon  Personal  Communications,  Inc. and
             Bright Personal  Communications  Services,  LLC,  Horizon PCS, Inc.
             (the  "Parent") and certain  Subsidiaries  of the Parent,  Existing
             Lenders, New Lenders,  First Union National Bank, as Administrative
             Agent,  Westdeutsche Landesbank Girozentrale,  as Syndication Agent
             and Arranger, and Fortis Capital Corp., as Documentation Agent.

10.40.2      Second Amendment to Credit Agreement and Assignment, dated June 29,
             2001, by and among Horizon Personal Communications, Inc. and Bright
             Personal  Communications  Services,  LLC,  Horizon PCS,  Inc.  (the
             "Parent") and certain Subsidiaries of the Parent, Existing Lenders,
             New Lenders,  First Union National Bank, as  Administrative  Agent,
             Westdeutsche  Landesbank  Girozentrale,  as  Syndication  Agent and
             Arranger,   and  Fortis  Capital  Corp.,  as  Documentation  Agent.
             (Incorporated  by reference to the same exhibit  number in the Form
             8-K filed by Horizon PCS, Inc. on July 3, 2001).


                                       89




EXHIBIT NO.  DESCRIPTION

10.40.3      Third Amendment to Credit Agreement and Waiver dated as of November
             26, 2001 by and among Horizon  Personal  Communications,  Inc., and
             Bright Personal  Communications  Services,  LLC,  Horizon PCS, Inc.
             (the "Parent") and certain  Subsidiaries of the Parent, the several
             banks and  other  financial  institutions  as may from time to time
             become  parties to the  Agreement,  First Union  National  Bank, as
             Administrative  Agent,  Westdeutsche  Landesbank  Girozentrale,  as
             Syndication  Agent  and  Arranger  and  Fortis  Capital  Corp.,  as
             Documentation  Agent  (incorporated by reference to Exhibit 10.40.3
             filed  with the  Registrant's  Current  Report on Form 8-K filed on
             November 28, 2001).

10.41*       Warrant  Agreement  dated as of September 26, 2000 between  Horizon
             PCS, Inc. and Wells Fargo Bank Minnesota, National Association.

10.42*       Warrant Registration Rights Agreement made as of September 26, 2000
             by and among Horizon PCS, Inc.,  and  Donaldson,  Lufkin & Jenrette
             Securities Corporation and First Union Securities, Inc.

10.43**      Note  Purchase  Agreement  dated  November 1, 1993 by and among The
             Chillicothe Telephone Company,  Northern Life Insurance Company and
             Northwestern National Life Insurance Company.

10.43.1**    Amendment  dated as of January 1, 1997 by and among The Chillicothe
             Telephone Company, Northern Life Insurance Company and Northwestern
             National Life Insurance Company.

10.44**      Note Purchase  Agreement  dated as of June 1, 1998 by and among The
             Chillicothe Telephone Company, American Life Insurance Company, and
             the State Life Insurance Company.

10.44.1**    First  Amendment to Note  Purchase  Agreement  dated as of April 1,
             1999 by and  among  The  Chillicothe  Telephone  Company,  American
             United  Life  Insurance  Company,  and  the  State  Life  Insurance
             Company.

10.45**      Business  Loan  Agreement  dated as of March 16,  2001  between The
             Chillicothe Telephone Company and the Huntington National Bank.

10.46        Pledge and Escrow  Agreement  dated  December  7, 2001 by and among
             Horizon PCS, Inc., Bright Personal  Communications  Services,  LLC,
             Wells Fargo and Minnesota,  National  Association,  as Escrow Agent
             (incorporated  by  reference  to Exhibit  No.  10.43 filed with the
             Registration  Statement on Form S-1 of Horizon PCS, Inc.  (File No.
             333-51240)).

10.47        Registration  Rights  Agreement dated December 7, 2001 by and among
             Horizon PCS, Inc.,  Horizon Personal  Communications,  Inc., Bright
             Personal  Communications  Services,  LLC,  and Credit  Suisse First
             Boston Corporation,  First Union Securities,  Inc., Bear, Stearns &
             Co., Inc. and Lehman Brothers,  Inc.  (incorporated by reference to
             Exhibit No. 10.44 filed with the Registration Statement on Form S-1
             of Horizon PCS, Inc. (File No. 333-51240))

21***        Subsidiaries of the Company.

99.1***      Letter re: Arthur Andersen.

- ---------------------
*    Incorporated  by reference to the Exhibit of the same number filed with the
     Registration  Statement  on  Form  S-4  of  Horizon  PCS,  Inc.  (File  No.
     333-51238).
**   Incorporated  by reference to the Exhibit of the same number filed with the
     Registrant's Registration Statement on Form 10 (File No. 000-32617).
***  Filed herewith.
+    The Registrant  requested  confidential  treatment for certain  portions of
     this  exhibit  pursuant  to Rule  406 of the  Securities  Act of  1933,  as
     amended, in connection with the previously filed Registration  Statement on
     Form S-1 of Horizon PCS, Inc. (File No.  333-37516),  except Exhibit 10.3.3
     for which confidential treatment has been requested under Rule 24b-2 of the
     Securities Exchange Act of 1934 in connection with this filing.


                                       90




                              HORIZON TELCOM, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                                                 
                                                                                                    Page

          Report of Independent Public Accountants............................................       F-2

          Consolidated Balance Sheets as of December 31, 2001 and 2000........................       F-3

          Consolidated Statements of Operations for the Years Ended
            December 31, 2001, 2000 and 1999..................................................       F-5

          Consolidated Statements of Changes in Stockholders' Equity (Deficit)
            for the Years Ended December 31, 2001, 2000 and 1999..............................       F-6

          Consolidated Statements of Cash Flows for the Years Ended
            December 31, 2001, 2000 and 1999..................................................       F-7

          Notes to Consolidated Financial Statements, as of December 31, 2001 and 2000,
            and for the Years Ended December 31, 2001, 2000 and 1999..........................       F-9


          Financial Statement Schedule - Valuation and Qualifying Accounts....................      F-35





                                       F-1




Report of Independent Public Accountants


To the  Board  of  Directors  and  Stockholders  of  Horizon  Telcom,  INC.  AND
SUBSIDIARIES:

     We have audited the  accompanying  consolidated  balance  sheets of HORIZON
TELCOM,  INC. (an Ohio corporation) AND SUBSIDIARIES as of December 31, 2001 and
2000,  and  the  related  consolidated  statements  of  operations,  changes  in
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 2001. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Horizon
Telcom,  INC. and Subsidiaries as of December 31, 2001 and 2000, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December  31,  2001  in  conformity  with  accounting  principles
generally accepted in the United States.

     Our audit was made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
consolidated  financial  statements is presented for purposes of complying  with
the  Securities  and  Exchange  Commission's  rules and is not part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audit of the basic  financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.


                                                /s/ ARTHUR ANDERSEN LLP



Columbus, Ohio,
February 12, 2002 (except with respect to the matter discussed
in Note 20, as to which the date is March 27, 2002)



                                      F-2


HORIZON TELCOM, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
As of December 31, 2001 and 2000
- -------------------------------------------------------------------------------


                                                                                              

                                                                                         2001              2000
                                                                                      -----------      ------------
ASSETS
- ------
CURRENT ASSETS:
   Cash and cash equivalents..................................................     $   127,154,227   $   192,011,997
   Restricted cash............................................................          24,597,222                --
   Accounts receivable - subscriber, less allowance for doubtful accounts of
     $2,662,000 in 2001 and $1,801,000 in 2000................................          15,275,708         4,527,098
   Accounts receivable - interexchange carriers, access charge pools and other,
     less allowance for doubtful accounts of $478,000 in 2001 and $90,000 in 2000        5,691,105         6,802,530
   Inventories................................................................           6,512,026         6,756,789
   Taxes applicable to future years, prepayments, investments and other.......           2,322,646         8,025,451
                                                                                   ---------------   ---------------
         Total current assets.................................................         181,552,934       218,123,865
                                                                                   ---------------   ---------------

INVESTMENTS:
   Securities available-for-sale..............................................           3,537,720                --
   Other investments..........................................................             227,852           387,169
                                                                                   ---------------   ---------------
         Total investments....................................................           3,765,572           387,169
                                                                                   ---------------   ---------------

OTHER ASSETS:
   Intangibles, net...........................................................          42,840,534        45,299,867
   Goodwill, net..............................................................           7,191,180         7,580,067
   Restricted cash............................................................          24,062,500                --
   Unamortized debt issuance costs, prepaid pension costs and other...........          29,223,926        19,367,136
                                                                                   ---------------   ---------------
         Total other assets...................................................         103,318,140        72,247,070
                                                                                   ---------------   ---------------

PROPERTY, PLANT AND EQUIPMENT, NET ...........................................         289,277,220       175,541,739
                                                                                   ---------------   ---------------

              Total assets....................................................     $   577,913,866   $   466,299,843
                                                                                   ===============   ===============






(Continued on next page)


                                      F-3






HORIZON TELCOM, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)
As of December 31, 2001 and 2000
- --------------------------------------------------------------------------------



                                                                                              
                                                                                         2001              2000
                                                                                   ---------------   -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
   Lines of credit............................................................     $    19,167,338   $     12,767,338
   Current maturities of long-term debt.......................................           2,000,000          2,000,000
   Accounts payable...........................................................           9,933,862         13,323,743
   Accounts payable - interexchange carriers and access charge pools..........           1,895,452          1,763,271
   Payable to Sprint PCS......................................................          10,244,529          4,959,128
   Deferred PCS service revenue...............................................           3,712,734          1,015,701
   Accrued taxes..............................................................           4,842,912          2,960,489
   Accrued vacation and payroll...............................................           2,441,434          1,788,137
   Other accrued liabilities..................................................          26,542,875         24,277,001
                                                                                   ---------------   ----------------
         Total current liabilities............................................          80,781,136         64,854,808
                                                                                   ---------------   ----------------

LONG-TERM DEBT AND OTHER LIABILITIES:
   Deferred Federal income taxes, net.........................................           4,632,157          3,295,462
   Deferred income............................................................          13,678,270         10,844,378
   Postretirement benefit obligation..........................................           5,756,305          4,717,774
   Long-term debt.............................................................         402,055,643        205,283,104
   Other long-term liabilities................................................           2,137,675            264,138
                                                                                   ---------------   ----------------
         Total long-term debt and other liabilities...........................         428,260,050        224,404,856
                                                                                   ---------------   ----------------
           Total liabilities..................................................         509,041,186        289,259,664
                                                                                   ---------------   ----------------

MINORITY INTEREST.............................................................                  --            983,883

CONVERTIBLE PREFERRED STOCK OF SUBSIDIARY.....................................         145,349,043        134,421,881

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY (DEFICIT):
   Common stock - class A, no par value, 200,000 shares authorized, 99,726
     shares issued, stated at $4.25 per share.................................             423,836            423,836
   Common stock - class B, no par value, 500,000 shares authorized, 299,301
     shares issued, stated at $4.25 per share.................................           1,272,029          1,272,029
   Treasury stock - 36,698 and 43,938 shares in 2001 and 2000, respectively, at
     cost.....................................................................          (5,504,700)        (6,624,962)
   Accumulated other comprehensive income, net................................           1,332,044                 --
   Additional paid-in capital.................................................          72,188,904         72,588,577
   Deferred compensation......................................................          (1,079,610)        (1,503,889)
   Retained deficit...........................................................        (145,108,866)       (24,521,176)
                                                                                   ---------------   ----------------
           Total stockholders' equity (deficit)...............................         (76,476,363)        41,634,415
                                                                                   ---------------   ----------------
              Total liabilities and stockholders' equity (deficit)............     $   577,913,866   $    466,299,843
                                                                                   ===============   ================





     The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-4



HORIZON TELCOM, INC. AND SUBSIDIARIES

Consolidated Statements of Operations
For the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------



                                                                                           

                                                                    2001               2000               1999
                                                              ----------------   -----------------  ----------------
OPERATING REVENUES:
   Wireless Personal Communications Services (PCS) revenue     $   115,905,619   $     26,110,404   $      4,295,433
   PCS equipment sales...................................            7,105,457          3,061,021            600,451
   Basic local, long-distance and other landline.........           19,586,373         20,320,299         19,800,224

   Network access........................................           20,198,336         17,275,754         17,508,729
   Internet access services..............................            3,130,885          3,625,452          3,136,098
   Equipment systems sales, information services, and other
     revenues............................................            4,213,346          3,606,712          4,065,545
                                                              ----------------   ----------------   ----------------
       Total operating revenues..........................          170,140,016         73,999,642         49,406,480
                                                              ----------------   ----------------   ----------------
OPERATING EXPENSES:
   Cost of goods sold....................................           15,559,164         10,497,130          3,472,649
   Cost of services (exclusive of items shown separately
     below)..............................................          115,168,420         41,471,586         18,472,935
   Selling and marketing.................................           50,545,921         19,626,803          5,568,712
   General and administrative (exclusive of items shown
     separately below)...................................           42,961,821         25,636,741         16,804,566
   Non-cash compensation expense.........................            1,149,179            852,718              2,671
   Depreciation and amortization.........................           26,148,564         13,057,587          9,589,410
                                                              ----------------   ----------------   ----------------
       Total operating expenses..........................          251,533,069        111,142,565         53,910,943
                                                              ----------------   ----------------   ----------------
OPERATING LOSS...........................................          (81,393,053)       (37,142,923)        (4,504,463)
                                                              ----------------   ----------------   ----------------
NONOPERATING INCOME (EXPENSE):
   Interest expense, net.................................          (29,565,953)       (12,193,821)        (3,598,275)
   Subsidiary preferred stock dividends..................          (10,929,852)        (2,782,048)                --
   Interest income and other, net........................            3,867,539          4,734,949          1,462,809
                                                              ----------------   ----------------   ----------------
       Total nonoperating income (expense)...............          (36,628,266)       (10,240,920)        (2,135,466)
                                                              ----------------   ----------------   ----------------
LOSS BEFORE INCOME TAX (EXPENSE) BENEFIT
  AND MINORITY INTEREST..................................         (118,021,319)       (47,383,843)        (6,639,929)

INCOME TAX (EXPENSE) BENEFIT.............................           (1,783,166)           895,576          2,158,831

MINORITY INTEREST IN LOSS................................              983,883          2,301,344                 --
                                                              ----------------   ----------------   ----------------
LOSS BEFORE EXTRAORDINARY ITEM...........................         (118,820,602)       (44,186,923)        (4,481,098)

EXTRAORDINARY LOSS, NET OF TAX BENEFIT
  OF $261,863............................................                   --           (486,323)                --
                                                              ----------------   ----------------   ----------------

NET LOSS.................................................      $  (118,820,602)  $    (44,673,246)  $     (4,481,098)
                                                               ===============   ================   ================


Basic and diluted loss per share before extraordinary item     $       (329.59)  $        (127.62)  $         (11.23)
Basic and diluted loss per share from extraordinary item.                   --              (1.41)                --
                                                               ----------------   ----------------   ----------------
Basic and diluted net loss per share.....................      $       (329.59)  $        (129.03)  $         (11.23)
                                                               ===============   ================   ================
Weighted-average common shares outstanding ..............              360,508            346,237            398,904
                                                              ================   ================   ================



     The accompanying notes are an integral part of these consolidated financial
statements.



                                      F-5



HORIZON TELCOM, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
For the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------



                                                                                              

                                                                   Accumulated
                                                                   Other                                              Total
                                class A   class B                  Comprehen-  Additional  Deferred      Retained     Stockholders'
                                Common    Common      Treasury     sive        Paid-in     Stock Option  Earnings     Equity
                                Stock     Stock       Stock        Income      Capital     Compensation  (Deficit)    (Deficit)
                                --------- ----------- -----------  ----------- ----------  ------------  ---------    --------------

Balance, December 31, 1998....  $423,836  $1,271,506  $        --  $       --  $  131,233 $         --   $32,160,618  $   33,987,193

   Dividends..................         --         --           --          --          --           --   (1,815,014)     (1,815,014)
   Deferred stock compensation         --         --           --          --   2,180,568  (2,180,568)            --              --
   Stock option compensation
     expense..................         --         --           --          --          --        2,671            --           2,671
   Net loss...................         --         --           --          --          --           --   (4,481,098)     (4,481,098)
                                ---------  ---------  -----------   ---------  ---------- ------------  ------------    ------------
Balance, December 31, 1999....  $423,836   1,271,506           --          --   2,311,801  (2,177,897)    25,864,506      27,693,752
                                ---------  ---------- -----------   ---------  ---------- ------------  ------------    ------------
   Acquisition of treasury
     stock....................        --          --  (11,835,000)         --          --           --            --    (11,835,000)
   Acquisition of Bright PCS..        --          --    4,786,800          --  44,512,732           --            --      49,299,532
   Issuance of warrants.......        --          --           --          --  33,600,647           --            --      33,600,647
   Stock option compensation
     expense..................        --          --           --          --     178,710      674,008            --         852,718
   Exercise of stock options..        --         523           --          --       6,857           --            --           7,380
   Stock dividends paid.......        --          --      473,100          --   1,037,666           --   (1,529,072)        (18,306)
   Tax on exchange of stock...        --          --           --          --  (3,696,000)          --            --     (3,696,000)
   Tax on dividend............        --          --           --          --    (363,183)          --   (4,256,817)     (4,620,000)
   Dividends paid.............        --          --           --          --          --           --   (1,793,038)     (1,793,038)
   Stock dividends received...        --          --     (49,862)          --          --           --            --        (49,862)
   Minority interest
     adjustment...............        --          --           --          --  (5,000,653)          --     1,866,491     (3,134,162)
   Net loss...................        --          --           --          --          --           --  (44,673,246)    (44,673,246)
                                ---------  ---------  -----------   ---------  ---------- ------------  ------------  --------------
Balance, December 31, 2000....   423,836   1,272,029  (6,624,962)          --  72,588,577  (1,503,889)  (24,521,176)      41,634,415
                                ---------  ---------  -----------   ---------  ---------- ------------  ------------  --------------

   Stock option compensation
     expense..................         --         --           --          --          --      424,279            --         424,279
   Stock distribution to
     employees................         --         --    1,124,573          --    (399,673)          --            --         724,900
   Treasury stock received
     as a dividend............         --         --      (4,311)          --          --           --             --        (4,311)
   Dividends paid.............         --         --           --          --          --           --   (1,767,088)     (1,767,088)
   Comprehensive Income (Loss):
     Net loss.................         --         --           --          --          --           -- (118,820,602)   (118,820,602)
     Unrealized gain on
       securities available-
       for-sale, net of taxes
       of $1,117,825.........          --         --           --   2,169,895          --           --            --       2,169,895
     Unrealized loss on
     hedging activities,
     net of tax...............         --         --           --   (837,851)          --           --             --      (837,851)
                                  ------- ----------  -----------   ----------  ---------- ------------  -----------   -------------
          Total comprehensive
          income (loss).......         --         --           --   1,332,044          --           --  (118,820,602)  (117,488,558)
                                  ------- ----------  -----------   -----------  ---------- ------------  ----------   -------------
Balance, December 31, 2001....   $423,836 $1,272,029  $(5,504,700) $1,332,044   $72,188,904 $(1,079,610) $(145,108,866)$(76,476,363)
                                  ======= ==========  ===========   =========== =========== ============ ============= =============



The accompanying notes are an integral part of these
consolidated financial statements



                                      F-6





HORIZON TELCOM, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


                                                                                        
                                                                     2001              2000             1999
                                                               ---------------   ---------------  ---------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................     $  (118,820,602)  $   (44,673,246) $    (4,481,098)
                                                               ---------------   ---------------  ---------------
Adjustments to reconcile net loss to net cash provided by
   (used in) operating activities, net of effect of
   acquisition:
   Depreciation and amortization..........................          26,148,564        13,057,587        9,589,410
   Extraordinary loss, net................................                  --           486,323               --
   Deferred Federal income taxes..........................             218,870          (261,786)      (1,216,364)
   Deferred investment tax credits........................             (55,527)          (69,635)         (82,036)
   Non-cash compensation expense..........................           1,149,179           852,718            2,671
   Non-cash interest expense..............................          19,363,149         5,635,498               --
   Loss (Gain) on disposal of property, plant and equipment          1,296,834            21,277       (5,206,286)
   Non-cash preferred stock dividend of subsidiary........          10,929,852         2,782,048               --
   Minority interest in subsidiary........................            (983,883)       (2,301,344)              --
   Provision for doubtful accounts........................           7,344,007         2,487,170        1,136,099
   Loss on hedging activities.............................             176,322                --               --
   Decrease (Increase) in certain assets:
     Accounts receivable..................................         (16,981,192)       (8,387,769)        (261,645)
     Inventories..........................................             244,763        (2,707,991)        (271,432)
     Taxes applicable to future years, prepayments,
       investments and other..............................           2,807,159        (2,864,492)        (154,586)
   Increase (Decrease) in certain liabilities:
     Accounts payable.....................................           2,027,701        10,529,126         (605,579)
     Deferred income......................................           2,833,892         6,911,554        3,721,837
     Accrued liabilities..................................           4,801,594        18,086,085        3,934,096
     Postretirement benefit obligation....................           1,041,531           495,872          737,838
   Change in other assets and liabilities, net............            (324,829)         (558,907)        (741,996)
                                                               ---------------   ---------------  ---------------
       Total adjustments..................................          62,037,986        44,193,334       10,582,027
                                                               ---------------   ---------------  ---------------
         Net cash provided by (used in) operating
           activities.....................................         (56,782,616)         (479,912)       6,100,929
                                                               ---------------   ---------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net.................................        (132,506,210)     (101,491,729)     (17,799,773)
Increase in restricted cash...............................         (48,659,722)               --               --
Proceeds from sale of fixed assets........................                  --           834,000       20,450,000
Proceeds from redemption of RTFC certificates.............           2,895,646                --               --
Net cash acquired in acquisition of Bright PCS............                  --         4,926,803               --
Investment in joint venture...............................                  --        (1,032,000)      (2,068,000)
                                                               ---------------   ---------------  ---------------
         Net cash provided by (used in) investing
             activities...................................     $  (178,270,286)  $   (96,762,926) $       582,227
                                                               ---------------   ---------------  ---------------




(Continued on next page)

                                      F-7



HORIZON TELCOM, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


                                                                                         

                                                                     2001              2000             1999
                                                               ---------------   ---------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Notes and term loans payable - borrowings, net of
     repayments...........................................     $   179,400,000   $   185,321,607  $    (5,641,354)
   Exercise of stock options..............................                  --             7,380               --
   Issuance of preferred stock............................                  --       126,500,000               --
   Deferred financing fees................................          (7,433,469)      (15,410,327)              --
   Stock issuance costs...................................                  --        (9,161,242)              --
   Treasury stock received as dividend....................              (4,311)               --               --
   Dividends paid.........................................          (1,767,088)       (1,793,038)      (1,815,014)
                                                               ---------------   ---------------  ---------------
         Net cash provided by (used in) financing activities       170,195,132       285,464,380       (7,456,368)
                                                               ---------------   ---------------  ---------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......         (64,857,770)      188,221,542         (773,212)
CASH AND CASH EQUIVALENTS, beginning of year..............         192,011,997         3,790,455        4,563,667
                                                               ---------------   ---------------  ---------------
CASH AND CASH EQUIVALENTS, end of year....................     $   127,154,227   $   192,011,997  $     3,790,455
                                                               ===============   ===============  ===============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash paid during the year for:
   Interest, net of amounts capitalized...................     $     8,705,947   $     4,330,600  $     3,569,284
   Income taxes...........................................           2,125,000         9,078,515        3,278,100



SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

     During 2001,  Horizon PCS paid  $11,775,917  of  dividends  on  convertible
preferred  stock.  The dividends  were paid in additional  shares of convertible
preferred  stock of Horizon  PCS.  During  2001 and 2000,  Horizon  PCS  accrued
$1,935,983  and  $2,782,048,   respectively,  to  be  paid  in  2002  and  2001,
respectively.

     The purchase of the  Company's  common stock in 2000 (Note 14) was financed
through a $13,000,000,  one-year,  unsecured 13% senior subordinated  promissory
note to a third  party  lender.  The lender  converted  100% of the  outstanding
principal and interest into Horizon PCS'  convertible  preferred stock valued at
$14,066,611 (Note 13).

     The proceeds from the issuance of Horizon PCS' discount  notes in 2000 have
been allocated to long-term debt and the value of the warrants  ($20,245,000  or
$5.32 per share) have been allocated to additional paid-in capital (Note 8).

     During 2000  Horizon PCS agreed to grant to Sprint PCS  warrants to acquire
2,510,460 shares of Horizon PCS' class A common stock, valued at $13,356,000, in
exchange for the right to service PCS markets in additional  areas. The warrants
will be issued to Sprint at the earlier of an initial public offering of Horizon
PCS' common stock or July 31, 2003 (Note 15).

     During 1999, Horizon PCS had outstanding notes payable totaling  $1,032,000
related to the investment in joint venture.


     The accompanying notes are an integral part of these consolidated financial
statements.





                                      F-8



HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------

NOTE 1 - Summary of Significant Accounting Policies

Business Organization and Principles of Consolidation

     The accompanying  consolidated  financial statements reflect the operations
of Horizon Telcom,  Inc. (the "Company") and its  subsidiaries,  the Chillicothe
Telephone Company ("Chillicothe Telephone"),  Horizon PCS, Inc. ("Horizon PCS"),
Horizon Services,  Inc.  ("Services"),  and Horizon  Technology,  Inc. ("Horizon
Technology,"  formerly United  Communications,  Inc.). All material intercompany
transactions and balances have been eliminated in consolidation.

     On April 26, 2000,  Horizon Telcom,  Inc., formed Horizon PCS, Inc. On June
27, 2000, Horizon Telcom,  Inc.,  transferred 100% ownership of Horizon Personal
Communications,  Inc. (HPC) to Horizon PCS in exchange for 53,806,200  shares of
stock of Horizon PCS. This transfer was  accounted  for as a  reorganization  of
companies under common control in a manner similar to a pooling-of-interests  in
the consolidated  financial  statements.  HPC will continue to exist and conduct
business as a wholly-owned subsidiary of Horizon PCS.

     The Company is a facilities-based  telecommunications carrier that provides
a variety of voice and data services to commercial,  residential/small  business
and local market segments. The Company provides landline telephone service, VDSL
television  service and Internet  access  services to the southern  Ohio region,
principally in and surrounding Chillicothe,  Ohio. The Company also provides PCS
operations to a twelve-state  region in the Midwest,  including  Ohio,  Indiana,
Pennsylvania,  Virginia and West  Virginia,  as an affiliate of Sprint PCS (Note
2).

Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting  principles in the United States requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

     Cash and cash  equivalents  include cash on hand,  demand  deposits,  money
market accounts and investments in commercial paper with original  maturities of
three months or less.

Restricted Cash

     In connection  with Horizon PCS' December 2001 offering of  $175,000,000 of
senior notes due in 2011 (Note 9),  approximately  $48,660,000 of the offering's
proceeds  were  placed in an escrow  account  to be used  toward  the first four
semi-annual  interest  payments due under the terms of the notes.  The first two
payments  have been  classified  as  short-term.  The funds  are  invested  in a
government  security money market  account.  Interest earned on the escrow funds
totaled approximately $69,000 in 2001.

Inventories

     Inventories  consist of equipment  held for resale,  materials and supplies
and  installation-related  work in progress  held by  Chillicothe  Telephone and
Horizon PCS. Chillicothe  Telephone  inventories include the cost (determined by
the first-in,  first-out  method) of equipment to be used in the installation of
telephone  systems,  as well as costs related to direct sales orders in process.
Horizon PCS inventories  consist of handsets and related  accessories  which are
carried  at the lower of cost  (determined  by the  weighted-average  method) or
market (replacement cost).



                                      F-9


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------

NOTE 1 - Summary of Significant Accounting Policies (Continued)

     Inventories consist of the following at December 31, 2001 and 2000:

                                                      2001           2000
                                                ------------   --------------
   Equipment held for resale.................   $  3,964,383   $  3,968,704
   Materials, supplies and work in progress..      2,547,643      2,788,085
                                                ------------   ------------
        Total inventories....................   $  6,512,026   $  6,756,789
                                                ============   ============

Investments

     The  classification  of  investments  in  debt  and  equity  securities  is
determined by management at the date individual  investments  are acquired.  The
classification  of those securities and the related  accounting  policies are as
follows:

     Held-to-maturity  securities are debt  securities for which the Company has
both the intent and ability to hold to maturity, regardless of changes in market
conditions,  liquidity needs or changes in general economic conditions. They are
carried at amortized  historical cost. The Company had no securities  classified
as held-to-maturity securities at December 31, 2001 or 2000.

     Available-for-sale  securities  are debt and  equity  securities  which the
Company intends to hold for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available-for-sale would
be based on various factors,  including changes in market conditions,  liquidity
needs and similar  criteria.  Available-for-sale  securities are carried at fair
value as  determined by quoted market  prices.  Unrealized  gains and losses are
reportable as increases and decreases in other comprehensive income, net of tax.
Realized gains and losses determined on the basis of the cost of specific assets
sold are included in net income.

     Trading securities are debt and equity securities which the Company intends
to purchase and sell frequently and has the intent to sell in the near future at
the time the security is purchased. Trading securities are carried at fair value
with  unrealized   holding  gains  and  losses  reported  in  the  statement  of
operations.  The Company has no securities  classified as trading  securities at
December 31, 2001 or 2000.

     Other  investments  in  which  the  Company  does  not  have a  significant
ownership  and  for  which  there  is no  ready  market  are  carried  at  cost.
Information  regarding these and all other investments is reviewed  periodically
for evidence of impairment in value.

Property, Plant and Equipment

     Property,  plant and equipment,  including  improvements that extend useful
lives, are stated at original or acquisition cost (Note 6) while maintenance and
repairs are charged to  operations  as incurred.  Construction  work in progress
includes  expenditures for the purchase of capital  equipment,  construction and
items such as direct  payroll-related  benefits and interest  capitalized during
construction.   The  Company  capitalizes  interest  pursuant  to  Statement  of
Financial  Accounting  Standards  ("SFAS")  No. 34  "Capitalization  of Interest
Cost." The Company capitalized interest of approximately $6,813,000,  $1,731,000
and $213,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

     The  Company  accounts  for  long-lived   assets  in  accordance  with  the
provisions of SFAS No. 121,  "Accounting for the Impairment of Long-Lived Assets
and Long-Lived  Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable  intangibles be reviewed for impairment whenever
events or changes in circumstances  indicate the carrying amount of an asset may
not be recoverable.  Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future  undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to



                                      F-10


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------

NOTE 1 - Summary of Significant Accounting Policies (Continued)


be disposed of are reported at the lower of the  carrying  amount or fair value,
less costs to sell.  At December 31, 2001 and 2000,  the Company had no impaired
assets.

Accounting for Rate Regulation

     Chillicothe   Telephone  is  subject  to  rate  regulation.   SFAS  No.  71
"Accounting for the Effects of Certain Types of Rate  Regulation"  provides that
rate-regulated  public  utilities  account for  revenues and expenses and report
assets and  liabilities  consistent with the economic effect of the way in which
regulators  establish rates.  Chillicothe  Telephone  follows the accounting and
reporting  requirements of SFAS No. 71. As of December 31, 2001, the Company has
recorded  regulatory  assets  and  liabilities  of  approximately  $331,000  and
$302,000,   respectively.  As  of  December  31,  2000,  regulatory  assets  and
liabilities were approximately $600,000 and $475,000, respectively.

Depreciation

     Chillicothe  Telephone  provides for depreciation  under the  straight-line
method using rates based on the estimated  service lives of the various  classes
of property.  The provisions were equivalent to an annual rate of  approximately
7.1% of the average depreciable property cost for both 2001 and 2000.

     In  1996,  the  Public  Utilities  Commission  of  Ohio  ("PUCO")  approved
Chillicothe Telephone's application to increase annual depreciation rates and to
amortize  an  estimated   depreciation   reserve   deficiency  of  approximately
$4,600,000 over a five-year period beginning  January 1, 1996.  Amortization and
recovery of the depreciation  reserve deficiency was approximately  $740,000 and
$798,000 during 2000 and 1999, respectively. This deficiency was fully amortized
and recovered as of December 31, 2000.

     In 2001, the PUCO approved Chillicothe  Telephone's application to increase
annual  depreciation  rates and to amortize an  estimated  depreciation  reserve
deficiency of approximately $1,029,000 over a five-year period beginning January
1, 2001.  Amortization and recovery of the depreciation  reserve  deficiency was
approximately $206,000 in 2001.

     In 1998,  Chillicothe  Telephone  retired  its  1210  digital  switch  upon
completion of the conversion to a new EWSD digital switch. The PUCO approved the
Company's  application to amortize the remaining  undepreciated cost of the 1210
digital switch of  approximately  $1,344,000 over a five-year  period  beginning
April 1,  1998.  Amortization  and  recovery  of the  switch  was  approximately
$268,000,  $269,000  and  $267,000  in 2001,  2000 and 1999,  respectively.  The
remaining  unamortized  balance was  approximately  $330,000  and $598,000 as of
December 31, 2001 and 2000, respectively, and is included in other assets on the
accompanying consolidated balance sheets.

     Horizon PCS, Services and Horizon  Technology  provide for depreciation and
amortization under the straight-line method based on the estimated service lives
of the various classes of property. Estimated useful lives are as follows:

                                                                Years
                                                                -----
Network assets...................................................5-15
Switching equipment...............................................5-8
Computer and telecommunications equipment.........................3-5
Furniture, vehicles and office equipment..........................3-5

     Amounts  included as  depreciation  expense that relate to cost of services
were approximately  $19,803,000,  $10,100,000 and $8,000,000 for the years ended
December 31, 2001, 2000 and 1999, respectively.



                                      F-11




HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 1 - Summary of Significant Accounting Policies (Continued)

Debt Issuance Costs

     In connection  with the issuance of long-term debt (Note 9) the Company has
incurred debt issuance costs.  These debt issuance costs are amortized using the
effective  interest method over the term of the underlying  obligation,  ranging
from eight to ten years.  For the years ended December 31, 2001,  2000 and 1999,
approximately $1,139,000,  $726,000 and $23,000 of amortization of debt issuance
costs,  including  subsequently  retired  financings,  was  included in interest
expense.  At December 31, 2001,  the Company had  approximately  $20,585,000  of
unamortized debt issuance costs.

Derivative Financial Instruments

     The  Company's  policies  do not  permit  the use of  derivative  financial
instruments  for speculative  purposes.  The Company uses interest rate swaps to
manage  interest  rate risk.  The net amount paid or  received on interest  rate
swaps is recognized as an adjustment to interest expense (Note 18).

     On January 1, 2001,  the  Company  adopted  SFAS No. 133,  "Accounting  for
Derivative  Instruments  and  Hedging  Activities,"  as amended by SFAS No. 138,
"Accounting for Derivative  Instruments and Certain Hedging  Activities."  These
statements   established  accounting  and  reporting  standards  for  derivative
instruments  and hedging  activities  that  require an entity to  recognize  all
derivatives  as an asset or liability  measured at fair value.  Depending on the
intended  use of the  derivative,  changes in its fair value will be reported in
the period of change as either a component  of earnings or a component  of other
comprehensive  income.  Pursuant to the derivative criteria  established by SFAS
No. 133, an item with exposure to variability in expected future cash flows that
is  attributable  to a  particular  risk is  considered  a cash flow hedge.  The
exposure may be associated with an existing  recognized  asset or liability such
as future interest payments on variable-rate debt.

Revenue Recognition

     Chillicothe  Telephone  is  an  independent  local  exchange  carrier  that
provides  local  telephone  service  within  ten  local  exchanges.  Chillicothe
Telephone   follows  an  access   charge   system  as  ordered  by  the  Federal
Communications  Commission  ("FCC")  and the PUCO in  1984.  The  access  charge
methodology  provides  a  means  whereby  local  exchange  carriers,   including
Chillicothe  Telephone,  provide their customers access to the facilities of the
long-distance  carriers and charge long-distance carriers for interconnection to
local facilities.

     The PUCO  issued an  Opinion  and Order  effective  January  1,  1988,  for
reporting  intra-LATA  (Local Access and  Transport  Area) toll  revenues.  This
methodology is defined as the Originating  Responsibility  Plan with a Secondary
Carrier Option  (ORP-SCO).  This plan calls for one or more primary  carriers in
each LATA with other local exchange carriers acting as secondary  carriers.  The
secondary  carriers  provide the primary carrier with access to local facilities
and are  compensated  based upon  applicable  intra-LATA  access charge tariffs.
Chillicothe Telephone is a primary carrier. Intra-LATA toll revenue is reflected
in basic and  long-distance  service  revenue on the  accompanying  consolidated
statements  of  operations,  and is  recognized  as such  services are provided.
Estimated unbilled amounts are accrued at the end of each month.

     Chillicothe   Telephone  recognizes  revenue  for  billing  and  collection
services  performed  on behalf of certain  interexchange  carriers.  Chillicothe
Telephone is reimbursed for this service based on the number of messages  billed
on behalf of the  interexchange  carrier.  The  revenues  from this  service are
recognized in the same period the services are provided.  Chillicothe  Telephone
also recognizes  advertising  revenues from its telephone  directory.  Telephone
directory  customers  sign an annual  contract  which is billed in twelve  equal
installments.  The revenue  derived from  directory  advertising  is  recognized
equally  over the  twelve-month  period of the  directory,  consistent  with the
ratemaking  treatment.  These  items  are  recorded  in  other  revenues  on the
accompanying consolidated statements of operations.


                                      F-12


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 1 - Summary of Significant Accounting Policies (Continued)

     Chillicothe  Telephone  recognizes revenues on the completed contract basis
for the installation of  telecommunication  and other related  equipment.  These
revenues are reported as equipment system sales on the accompanying consolidated
statements of operations.  Maintenance  revenues are recognized over the life of
the contract,  and recorded as other revenues on the  accompanying  consolidated
statements of operations.

     Horizon PCS sells handsets and  accessories  which are recorded at the time
of the sale as PCS equipment  sales.  After the handset has been purchased,  the
subscriber purchases a service package which is recognized monthly as service is
provided  and is included as PCS  revenue.  Horizon PCS defers  monthly  service
revenue  billed  in  advance.  Roaming  revenue  is  recorded  when  Sprint  PCS
subscribers,   other  Sprint  PCS  affiliate   subscribers  and  non-Sprint  PCS
subscribers roam onto Horizon PCS' network.

     Horizon  PCS'  accounting  policy for the  recognition  of  activation  fee
revenue is to record the  revenue  over the  periods  such  revenue is earned in
accordance with the current  interpretations  of SEC Staff  Accounting  Bulletin
("SAB") No. 101,  "Revenue  Recognition in Financial  Statements."  Accordingly,
activation fee revenue and direct  customer  activation  expense is deferred and
recorded over the average life for those customers (36 months) that are assessed
an activation fee. Horizon PCS recognized  approximately $695,000 and $47,000 of
both  activation  fee revenue and customer  activation  expense  during 2001 and
2000,  respectively,  and had deferred approximately  $3,809,000 and $393,000 of
activation fee revenue and direct  customer  activation  expense at December 31,
2001 and 2000,  respectively,  which is shown as a component of deferred  income
and other assets on the accompanying consolidated balance sheets.

     A  management  fee  of  8%  of  collected  PCS  revenues  from  Sprint  PCS
subscribers  based in the Horizon  PCS'  territory,  is accrued as services  are
provided and  remitted to Sprint PCS and  recorded as cost of service.  Revenues
generated from the sale of handsets and accessories, inbound and outbound Sprint
PCS roaming fees and roaming  services  provided to Sprint PCS customers who are
not based in the Horizon  PCS'  territory  are not subject to the 8%  management
fee.  Expense  related to the  management  fees charged  under the agreement was
approximately  $5,923,000,  $1,302,000 and $130,000 for the years ended December
31, 2001, 2000 and 1999, respectively.

     Horizon  Technology is an FCC-licensed  radio common carrier that primarily
provides Internet access services and resells long-distance service. Revenues on
equipment sales were  recognized at the time of sale.  Revenues for the Internet
and long distance services are recognized monthly as service is rendered.  Prior
to December 2000,  Horizon  Technology also provided  digital paging services in
the state of Ohio.  Horizon Technology sold the assets of its paging business to
an  unrelated  third party and  recognized a loss of  approximately  $230,000 in
December 2000.

Minority Interest

     As part of the acquisition of Bright Personal  Communication  Services, LLC
("Bright PCS") (Note 4), the former members of Bright PCS have  approximately an
8%  ownership  in Horizon  PCS.  The  Company  accounts  for this  ownership  by
recording  the  portion  of net  income  (loss)  attributable  to  the  minority
shareholders  (a  loss  of  $983,883  and  $2,301,344   during  2001  and  2000,
respectively)  as  minority  interest  in  earnings  (loss) in the  accompanying
consolidated  statements of  operations.  The minority  interest's  share in the
Company's losses during 2001 reduced the minority interest's accounting basis to
zero at December  31,  2001.  There will be no further  allocations  to minority
interest until such time as Horizon PCS becomes  profitable and any  unallocated
losses to minority interest are offset with income in future periods.

Advertising Costs

     Costs  related  to  advertising  and  other  promotional  expenditures  are
expensed as  incurred.  Advertising  costs  totaled  approximately  $10,780,000,
$4,645,000 and $1,207,000 for the years ended December 31, 2001,  2000 and 1999,
respectively.



                                      F-13


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 1 - Summary of Significant Accounting Policies (Continued)

Stock-Based Compensation

     The Company accounts for compensation  cost associated with its stock-based
compensation plans for employees in accordance with Accounting  Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees".  The Company
applies  SFAS No. 123  "Accounting  for Stock Based  Compensation,"  and related
interpretations, for options granted to non-employees.

Deferred Income

     During  2001 and 2000,  Horizon PCS  received  approximately  $740,000  and
$7,220,000,  respectively,  of site bonuses from SBA,  which  constructs  towers
leased by Horizon PCS. The Company  defers and  amortizes  the site bonuses over
the life of the respective lease. At December 31, 2001 and 2000, the Company had
approximately $6,911,000 and $7,111,000, respectively, in deferred site bonuses.
During 2001 and 2000, Horizon PCS recorded  approximately $916,000 and $320,000,
respectively,  as a reduction to lease  expense.  Additionally,  the Company had
approximately  $3,809,000  and  $393,000 of deferred  activation  fee revenue at
December 31, 2001 and 2000, respectively.

     In October  1999,  the  Company  sold  towers,  including  both  in-service
property and  construction  work in progress,  to an external  third party.  The
towers were then leased back by Horizon  PCS. The gain on the sale of the towers
was  approximately  $3,817,000.  Since  this  transaction  was  classified  as a
sale-leaseback,  the gain was deferred and is being recognized over the ten-year
term of the operating lease.  Amortization of the gain recognized as a reduction
of the related lease expense was  approximately  $382,000 for both 2001 and 2000
and  $95,000  during  1999.  The  remaining  unamortized  gain on the  sale  was
approximately   $2,958,000  and  $3,340,000  at  December  31,  2001  and  2000,
respectively.

Federal Income Taxes

     The Company  accounts for income taxes pursuant to the requirements of SFAS
No. 109,  "Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets
and  liabilities  are  determined  based on  differences  between the  financial
reporting  and tax basis of assets and  liabilities  and are measured  using the
enacted  tax rates and laws that  will be in  effect  when the  differences  are
expected to reverse. Deferred tax assets and liabilities are adjusted for future
changes in tax rates.  Investment  tax credits have been  deferred and are being
amortized over the estimated service lives of the related property.

Concentration of Credit Risk

     The  Company  maintains  cash and cash  equivalents  in an  account  with a
financial  institution  in excess of the amount  insured by the Federal  Deposit
Insurance Corporation.  The financial institution is one of the largest banks in
the United States and management  does not believe there is  significant  credit
risk associated with deposits in excess of federally insured amounts.

     Restricted  cash is invested in short-term  government  money market funds.
The Company does not believe there is significant  credit risk  associated  with
the  funds  as  the  underlying  securities  are  issued  by the  U.S.  Treasury
Department.

     The  Company  maintains  accounts  with  nationally  recognized  investment
managers.  Such  deposits  are not  insured  by the  Federal  Deposit  Insurance
Corporation.  Management  does not  believe  there is  significant  credit  risk
associated with these uninsured deposits.

     Other  financial  instruments  that  potentially  subject  the  Company  to
concentrations  of  credit  risk  consist  primarily  of  accounts   receivable.
Management  believes  the risk is limited due to the large  number of  customers
comprising the



                                      F-14


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 1 - Summary of Significant Accounting Policies (Continued)


customer base and its geographic diversity.

Net Loss per Share

     The Company  computes net loss per common share in accordance with SFAS No.
128,  "Earnings  per  Share" and SAB No. 98.  Basic and  diluted  loss per share
before  extraordinary  item is computed by  dividing  loss before  extraordinary
item, for each period, by the weighted-average  outstanding common shares. Basic
and  diluted  net loss per share is  computed  by  dividing  net loss,  for each
period,  by the  weighted-average  outstanding  common shares.  No conversion of
common stock equivalents (options,  warrants or convertible securities) has been
assumed in the calculations since the effect would be antidilutive. As a result,
the number of  weighted-average  outstanding common shares as well as the amount
of net loss per  share are the same for  basic  and  diluted  net loss per share
calculations  for all  periods  presented.  There are  three  items  that  could
potentially  dilute basic earnings per share in the future.  These items include
the common stock options (Note 16), the stock purchase warrants (Notes 9 and 15)
and the  convertible  preferred stock (Note 13). These items will be included in
the diluted earnings per share calculation when dilutive.

Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  141,  "Business  Combinations"  and  SFAS  No.  142,  "Goodwill  and  Other
Intangible  Assets." SFAS No. 141 addresses  financial  accounting and reporting
for all  business  combinations  and  requires  that all  business  combinations
entered into subsequent to June 2001 be recorded under the purchase method. This
statement  also  addresses  financial  accounting and reporting for goodwill and
other intangible assets acquired in a business combination at acquisition.  SFAS
No. 142 addresses  financial  accounting  and reporting  for  intangible  assets
acquired  individually  or with a group of other  assets  at  acquisition.  This
statement  also  addresses  financial  accounting and reporting for goodwill and
other intangible assets subsequent to their  acquisition.  These statements will
be adopted by the Company on January 1, 2002.

     Goodwill  amortization  will cease as of December 31, 2001, and the Company
will be  required  to  complete an  impairment  test of the  remaining  goodwill
balance  annually (or more  frequently  if  impairment  indicators  arise).  The
Company  has not yet  determined  the  financial  impact the  adoption  of these
pronouncements will have on its financial position or results of operations.  As
of December 31, 2001, Horizon PCS has goodwill of approximately $7,191,000,  net
of  accumulated  amortization,  related  to the  acquisition  of Bright  PCS and
recognized  approximately $389,000 of amortization expense during 2001 (Note 4).
The  valuation of this goodwill  would be subject to an  impairment  test at the
date of  adoption.  The Company will  complete the first step of the  impairment
test by June 30,  2002 and,  if  necessary,  will  complete  the second  step by
December 31, 2002.

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations".  This  statement  addresses  financial  accounting and
reporting for obligations associated with the retirements of tangible long-lived
assets  and  the  associated  asset  retirement   costs.  It  applies  to  legal
obligations associated with the retirement of long-lived assets that result from
the  acquisition,  construction,  development and (or) the normal operation of a
long-lived  asset.  The Company will adopt this statement  effective  January 1,
2003.  The adoption is not expected to have a material  effect on the  Company's
financial position, results of operations or cash flows.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets".  SFAS No. 144 addresses financial
accounting and reporting for the impairment of long-lived  assets. The statement
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for  Long-Lived  Assets to Be Disposed  Of," and the  accounting  and  reporting
provisions of APB Opinion No. 30. SFAS No. 144 removes  goodwill from its scope,
as goodwill is addressed in the impairment  test described  above under SFAS No.
142. The Company will adopt SFAS No. 144 on January 1, 2002. The adoption is not
expected to have a material effect on the Company's financial position,  results
of operations or cash flows.



                                      F-15

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------

NOTE 1 - Summary of Significant Accounting Policies (Continued)

Reclassifications

     Certain prior year amounts have been  reclassified to conform with the 2001
presentation.

NOTE 2 - Wireless Personal Communications Services

     In October  1996,  the FCC  conditionally  granted  Horizon PCS licenses to
provide wireless personal communications services in various parts of Ohio, West
Virginia and Kentucky (a total of five licenses). The FCC financed the licenses.
According to FCC rules,  the licenses were  conditional upon the full and timely
payment of the licenses'  cost. The licenses were subject to a requirement  that
Horizon PCS constructs and operates  facilities that offer coverage to a defined
population  within the relevant  license areas within a defined period.  Horizon
PCS began the engineering and design phase in 1996 and began the construction of
the personal  communications  network in early 1997. Horizon PCS began providing
digital, wireless personal communications services in August 1997.

     In 1997,  the FCC offered  four  options to certain PCS license  holders to
change  the  payment  terms  of the  FCC  financed  debt.  These  options  were:
continuing with the current  installment  plan (status quo);  return half of the
spectrum  from  any or  all of the  licenses  in  exchange  for a  proportionate
reduction  in debt  (disaggregation);  turning in all  licenses in exchange  for
total debt forgiveness (amnesty);  or prepay for as many licenses as Horizon PCS
can afford at face value while  returning  other  licenses in exchange  for debt
forgiveness (prepayment).

     During 1998,  the Company  elected to return all of the spectrum  from four
licenses and half of the spectrum from the fifth license. In connection with the
return of the spectrum,  the Company  entered into  management  agreements  with
Sprint PCS, the PCS group of Sprint  Corporation,  during 1998. These agreements
provide the Company with the exclusive right to build, own and manage a wireless
voice and data  services  network  in  certain  markets  located  in Ohio,  West
Virginia, Kentucky, Virginia, Tennessee and Maryland under the Sprint PCS brand.
Horizon PCS is required to build-out  the wireless  network  according to Sprint
PCS specifications. The term of the agreements is 20 years with three successive
10-year  renewal  periods  unless  terminated  by either party under  provisions
outlined in the management  agreements.  The management  agreements commenced in
June 1998,  but payments of the  management  fee (Note 1) did not commence until
Horizon PCS converted to a fully  branded  Sprint PCS affiliate in October 1999.
The management agreements included  indemnification  clauses between the Company
and Sprint PCS to indemnify each party against claims arising from violations of
laws  or the  management  agreements,  other  than  liabilities  resulting  from
negligence or willful misconduct of the party seeking to be indemnified.

     In May 2000, Horizon PCS expanded its management agreement with Sprint PCS.
This allows Horizon PCS to have the exclusive  right to build,  own and manage a
wireless voice and data services network in markets located in Pennsylvania, New
York, Ohio and New Jersey.



                                      F-16


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------

NOTE 2 - Wireless Personal Communications Services (Continued)

     The Sprint PCS agreements  require Horizon PCS to interface with the Sprint
PCS  wireless  network  by  building  Horizon  PCS'  network  to  operate on PCS
frequencies  licensed to Sprint PCS in the 1900 MHz range.  Under the Sprint PCS
agreements, Horizon PCS has agreed to:

     o    construct and manage a network in Horizon PCS' territory in compliance
          with  Sprint  PCS'  PCS  licenses  and  the  terms  of the  management
          agreement;

     o    distribute,  during the term of the management agreement,  Sprint PCS'
          products and services;

     o    conduct   advertising   and  promotion   activities  in  Horizon  PCS'
          territory; and

     o    manage that portion of Sprint PCS'  customer  base assigned to Horizon
          PCS' territory.

     The management agreement specifies the terms of the Sprint PCS affiliation,
including the required network build-out plan. Horizon PCS has agreed to operate
its  network  to  provide  for a seamless  handoff  of a call  initiated  in its
territory  to a  neighboring  Sprint PCS  network.  The  Sprint  PCS  management
agreements  require Horizon PCS to complete specified portions of its markets by
specified dates.

     Horizon PCS must comply with Sprint PCS' program requirements for technical
standards,  customer service standards,  national and regional  distribution and
national   accounts   programs  to  the  extent  that  Sprint  PCS  meets  these
requirements.

     A  failure  to meet the  build-out  requirements  for any of  Horizon  PCS'
markets,  or to meet Sprint PCS'  technical  requirements,  would  constitute  a
breach of the Sprint PCS agreements that could lead to their  termination if not
cured  within a cure  period of 30 to 180 days,  depending  on the nature of the
breach. If Sprint PCS terminates these agreements, Horizon PCS will no longer be
able to offer  Sprint PCS products and  services.  Additionally,  Sprint PCS may
purchase  Horizon PCS' operating  assets or capital stock for 72% of the "entire
business  value," as defined in the  management  agreements.  As of December 31,
2001,  Horizon PCS is in  compliance  with these  requirements  or has  obtained
appropriate waivers from Sprint PCS.

NOTE 3 - Segment Information

     The Company is organized around the differences in products and services it
offers.  Under  this  organizational  structure,  the  Company  operates  in two
reportable  business  segments  as defined by SFAS No. 131,  "Disclosures  about
Segments of an Enterprise and Related Information:"  landline telephone services
and wireless personal  communications  services. The landline telephone services
segment includes four major revenue streams: basic local service,  long-distance
toll, network access services and other related telephone services. The wireless
personal  communications  services segment includes three major revenue streams:
PCS subscriber revenues, PCS roaming revenues and PCS equipment sales.

     The Company  evaluates the  performance  of the segments based on operating
earnings before the allocation of  administrative  expenses.  Information  about
interest income and expense and income taxes is not provided on a segment level.
The accounting policies of the segments are the same as described in the summary
of significant accounting policies (Note 1).


                                      F-17


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 3 - Segment Information (Continued)

     The following  table includes  revenue,  intercompany  revenues,  operating
earnings (loss),  depreciation and amortization expense and capital expenditures
for the years ended December 31, 2001,  2000 and 1999, and assets as of December
31, 2001 and 2000, for each segment and reconciling  items necessary to total to
amounts reported in the financial statements:



                                                                                     
                                                                              Net Revenue
                                                             2001                2000                1999
                                                       ---------------     ---------------     ---------------
   Landline telephone services..................       $    39,784,709     $    37,596,053     $    37,308,953
   Wireless personal communications services....           123,011,076          29,171,425           4,895,884
   All other....................................             7,344,231           7,232,164           7,201,643
                                                       ---------------     ---------------     ---------------
     Total net revenue..........................       $   170,140,016     $    73,999,642     $    49,406,480
                                                       ===============     ===============     ===============

                                                                         Intercompany Revenue
                                                             2001                2000                1999
                                                       ---------------     ---------------     ---------------
   Landline telephone services..................       $     1,331,912     $       644,321     $       545,813
   Wireless personal communications services....               292,628              22,514              11,059
   All other....................................               165,615              15,261              11,670
                                                       ---------------     ---------------     ---------------
     Total intercompany revenue.................       $     1,790,155     $       682,096     $       568,542
                                                       ===============     ===============     ===============

                                                                       Operating Earnings (Loss)
                                                             2001                2000                1999
                                                       ---------------     ---------------     ----------------
   Landline telephone services..................       $    16,120,785     $    15,113,485     $    10,346,853
   Wireless personal communications services....           (82,178,169)        (40,308,311)        (12,696,469)
   All other....................................            (2,931,280)         (1,536,540)         (1,037,384)
   Unallocated administrative expenses..........           (12,404,389)        (10,411,557)         (1,117,463)
                                                       ----------------    ----------------     ----------------
     Total operating loss.......................       $   (81,393,053)    $   (37,142,923)    $    (4,504,463)
                                                       ===============     ==+=============     ================

                                                                     Depreciation and Amortization
                                                             2001                2000                1999
                                                       ---------------     ---------------     ----------------
   Landline telephone services..................       $     6,294,037     $     6,313,846     $     6,046,874
   Wireless personal communications services....            18,518,948           6,134,458           2,532,982
   All other....................................             1,335,579             609,283           1,009,554
                                                       ---------------     ---------------     ---------------
     Total depreciation and amortization........       $    26,148,564     $    13,057,587     $     9,589,410
                                                       ===============     ===============     ===============

                                                                         Capital Expenditures
                                                             2001                2000                1999
                                                       ---------------     ---------------     ---------------
   Landline telephone services..................       $     9,364,038     $    11,202,539     $     8,755,937
   Wireless personal communications services....           116,574,323          83,562,958           8,640,456
   All other....................................             6,567,849           6,726,232             403,380
                                                       ---------------     ---------------     ---------------
     Total capital expenditures, net............       $   132,506,210     $   101,491,729     $    17,799,773
                                                       ===============     ===============     ===============


                                                                     Assets
                                                             2001                2000
                                                       ---------------     ---------------
   Landline telephone services..................       $    90,951,437     $    74,160,504
   Wireless personal communications services....           480,754,022         383,433,298
   All other....................................             6,208,407           8,706,041
                                                       ---------------     ---------------
     Total assets...............................       $   577,913,866     $   466,299,843
                                                       ===============     ===============




                                      F-18

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 3 - Segment Information (Continued)

     Other business  activities of the Company include Internet access services,
equipment systems sales, and other miscellaneous revenues, which do not meet the
definition of a reportable  segment under SFAS No. 131. Amounts related to these
business   activities  are  included   above  under  "All  other."   Unallocated
administrative expenses represent general and administrative expenses, which are
incurred at a corporate  level.  All other assets  represent  common  assets not
identified to an operating segment.

     Net  operating  revenues  by product and  services  were as follows for the
years ended December 31:



                                                                                    
                                                            2001                2000                1999
                                                      ---------------     ---------------     ---------------
   Landline telephone services:

     Basic local service.......................       $    14,510,003     $    14,413,686     $    13,807,521
     Long-distance toll........................             1,476,034           2,512,901           2,763,920
     Network access services...................            20,198,336          17,275,754          17,508,729
     Other related telephone services..........             3,600,336           3,393,712           3,228,783
                                                      ---------------     ---------------     ---------------
      Total landline telephone services........            39,784,709          37,596,053          37,308,953
                                                      ---------------     ---------------     ---------------

   Wireless personal communications services:
     PCS subscriber revenues...................            77,365,343          17,702,302           3,653,471
     PCS roaming revenues......................            38,540,276           8,408,102             641,962
     PCS equipment sales.......................             7,105,457           3,061,021             600,451
                                                      ---------------     ---------------     ---------------
      Total wireless personal communications
        services...............................           123,011,076          29,171,425           4,895,884
                                                      ---------------     ---------------     ---------------

   Other:

     Internet access services..................             3,130,885           3,625,452           3,136,098
     Equipment systems sales...................             1,393,413           1,503,094           1,963,944
     Other miscellaneous revenues..............             2,819,933           2,103,618           2,101,601
                                                      ---------------     ---------------     ---------------
      Total other..............................             7,344,231           7,232,164           7,201,643
                                                      ---------------     ---------------     ---------------
      Total operating revenues.................       $   170,140,016     $    73,999,642     $    49,406,480
                                                      ===============     ===============     ===============



NOTE 4 - Acquisitions

     During 1999 Horizon PCS entered into a joint venture  agreement through the
purchase of 25.6% of Bright PCS.  The  investment  was  accounted  for under the
equity  method.  The joint  venture was  established  in October 1999 to provide
wireless personal communications services in Ohio, Indiana and Michigan.

     On June 27, 2000, Horizon PCS acquired the remaining 74.4% of Bright PCS in
exchange for  approximately  8% of Horizon PCS' class B common stock  (4,678,800
shares valued at approximately $34,000,000) and approximately 40% of the Horizon
Telcom,  Inc.  common  stock  owned by  Horizon  PCS  (31,912  shares  valued at
approximately $15,300,000) (Note 14). This acquisition was treated as a purchase
for accounting purposes.  The consolidated  statements of operations include the
results of Bright PCS from June 28, 2000.

     In conjunction with this transaction,  Horizon PCS also acquired the Bright
PCS  management  agreement  with  Sprint PCS and,  with it, the right to operate
using Sprint PCS licenses in the Bright PCS markets.  Horizon PCS has recognized
an intangible  asset totaling  $33,000,000  related to this licensing  agreement
which  will be  amortized  over 20 years,  the  initial  term of the  underlying
management agreement.  Amortization commenced in June 2000. Amortization expense
for the years ended  December 31, 2001 and 2000,  was  $1,707,000  and $868,000,
respectively. Accumulated amortization on the intangible asset was approximately
$2,575,000 and $868,000 at December 31, 2001 and 2000, respectively.


                                      F-19


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 4 - Acquisitions (Continued)

     The  purchase  price  exceeded  the fair  market  value  of the net  assets
acquired by approximately $7,778,000.  The resulting goodwill is being amortized
on a  straight-line  basis over 20 years.  Amortization  commenced in June 2000.
Amortization  expense  for the years  ended  December  31,  2001 and  2000,  was
$389,000 and $198,000,  respectively.  Accumulated  amortization of goodwill was
approximately $587,000 and $198,000 at December 31, 2001 and 2000, respectively.
The  Company  will adopt  SFAS No.  142 on  January 1, 2002.  As a result of the
adoption,  goodwill  amortization  will cease as of December 31,  2001,  and the
Company  will be  required  to  complete  an  impairment  test of the  remaining
goodwill balance annually (or more frequently if impairment indicators arise).

     The  purchase  price  allocation  of the fair value of assets  acquired and
liabilities assumed is summarized below:

                                                        Fair Value at
                                                        June 27, 2000
                                                        -------------
         Working capital...............................$    2,072,000
         Property and equipment........................     6,328,000
         Sprint PCS licenses...........................    33,000,000
         Goodwill......................................     7,778,000
         Other assets..................................       122,000

     The following  unaudited pro forma summary  presents the net revenues,  net
loss and loss per share from the  combination  of the Company and Bright PCS, as
if the acquisition had occurred on January 1, 1999. The pro forma information is
provided for  information  purposes only. It is based on historical  information
and does not necessarily reflect the actual results that would have occurred nor
is it necessarily indicative of the future results of operations of the combined
enterprise:

                                                       Year Ended December 31,
                                                           2000        1999
                                                     ------------  -------------
           Net revenue.........................      $ 73,492,525   $ 49,333,479
           Net loss............................      (44,774,980)    (4,603,448)
           Basic and diluted net loss per share          (123.32)        (11.54)


     Prior  to  acquisition,  Bright  PCS had not  commenced  revenue-generating
operations  and was paying a management  fee to its  investor,  Horizon PCS. The
management fee recognized by Horizon PCS in the periods prior to the acquisition
date is  included  in net  revenue  during  2000  and  1999.  In the  pro  forma
disclosure above, this management fee revenue is fully eliminated.

NOTE 5 - Investments

     The Company  holds  93,000  shares of common stock in  Verisign,  Inc.,  as
marketable equity securities  classified as  available-for-sale  at December 31,
2001.  The fair value of the shares at December 31, 2001,  was  $3,537,720.  The
cost of the investment was $250,000. An unrecognized gain of $2,169,895,  net of
tax of $1,117,825,  has been recorded in other comprehensive  income at December
31, 2001.

     As part of the term loan  facility  for the  construction  of the  personal
communications  network  (Note 9),  Horizon PCS was  required to purchase  Rural
Telephone  Finance   Cooperative's   (RTFC,  the  lender)  subordinated  capital
certificates  with each draw on the loan. The balance of these  certificates  at
December 31, 2000, was approximately $2,896,000.  The certificates were redeemed
in March 2001 for  approximately  $2,896,000  with no recognized gain or loss on
the redemption.



                                      F-20

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------



NOTE 6 - Property, Plant and Equipment


   Property, plant and equipment consists of the following at December 31:


                                                                                   
                                                                               2001             2000
                                                                         ---------------  ---------------
     Network assets..................................................... $   220,849,771  $   127,415,818
     Switching equipment................................................      35,253,986       14,053,810
     Land and buildings.................................................      15,223,363       11,324,343
     Computer and telecommunications equipment..........................      14,292,341        9,321,052
     Furniture, vehicles and office equipment...........................      12,477,119        8,845,181
                                                                         ---------------  ---------------
       Property, plant and equipment in-service, at cost................     298,096,580      170,960,204
     Accumulated depreciation...........................................     (68,604,457)     (49,027,055)
                                                                         ---------------  ---------------
          Property, plant and equipment in-service, net.................     229,492,123      121,933,149
     Construction work in progress......................................      59,785,097       53,608,590
                                                                         ---------------  ---------------
               Total property, plant and equipment, net................. $   289,277,220  $   175,541,739
                                                                         ===============  ===============


     During 2001,  Horizon PCS retired  certain network assets and replaced them
with  equipment  required  to  upgrade  the  network.   As  a  result  of  these
retirements,   the  Company   recorded  a  loss  on  disposal  of  approximately
$1,297,000.

     During 1999,  Horizon PCS sold certain PCS equipment,  including  ancillary
equipment and base stations, to an unrelated third party. The sale resulted in a
gain  of   approximately   $1,388,000,   which  is  included  in  the  Company's
consolidated statement of operations, and represents the excess of cash proceeds
over the historical net book value of the assets sold.

NOTE 7 - Lines of Credit

     During 2000,  Chillicothe  Telephone  entered into an agreement with a bank
for a line of credit that provides maximum borrowings of $15,000,000, payable on
demand. On March 16, 2001,  Chillicothe  Telephone increased this line of credit
to $30,000,000.  Interest  accrues on the  outstanding  balance at a fluctuating
rate tied to the LIBOR and is due and payable monthly. At December 31, 2001, the
interest  rate on the line of credit  was  3.625%.  The  outstanding  balance at
December 31, 2001 was approximately  $19,167,000.  The line of credit contains a
covenant  requiring  minimum  tangible  net  worth.  As of  December  31,  2001,
Chillicothe Telephone was in compliance with the covenant.

     On September  26,  2000,  Horizon PCS entered  into a  $95,000,000  line of
credit  that  expires on  September  30,  2008,  as part of its  secured  credit
facility  agreement  (Note 9). As of  December  31,  2001,  Horizon  PCS had not
borrowed on this line of credit.  The Company pays an annual  commitment  fee of
1.375% of the  unused  line at the end of each  quarter.  The  Company  incurred
approximately  $1,324,000 and $306,000 for the line of credit commitment fee for
the years ended December 31, 2001 and 2000,  respectively.  The interest rate on
the line of credit is variable,  based on LIBOR plus 375 basis  points,  and was
5.66% at December 31, 2001.

     In May 2000,  Horizon PCS entered into a $5,000,000  general corporate line
of  credit  with a bank,  the  proceeds  of which  were  used for  financing  of
construction  expenditures.  Interest was at the bank's  standard line of credit
rate plus 100 basis  points and was  payable  quarterly  beginning  in the first
quarter after the initial  advance.  In September  2000, this line of credit was
fully repaid and  terminated  with the proceeds from the financing  described in
Note 9 below.

     In March 2000, Horizon PCS entered into a $5,000,000 interim revolving line
of credit  with a bank,  the  proceeds  of which were used for  general  working
capital  purposes.  Interest  was at the bank's  prevailing  prime rate plus 150
basis points and was payable quarterly, beginning in the first quarter after the
initial  advance.  In September  2000,  this line of credit was fully repaid and
terminated with the proceeds from the financing described in Note 9 below.



                                      F-21

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 8 - Short-Term Note Payable

     In February 2000,  Horizon PCS purchased  78,900 shares of Horizon  Telcom,
Inc.  common stock from an external  shareholder  (Note 14).  This  purchase was
financed  through a  $13,000,000,  one year,  unsecured 13% senior  subordinated
promissory  note to a third  party  lender.  The  lender  converted  100% of the
outstanding   principal  and  unpaid  interest  into  Horizon  PCS'  convertible
preferred  stock on  September  26,  2000,  as part of  Horizon  PCS'  financing
activities  (Note 9). The value converted into  convertible  preferred stock was
$14,066,611 (Note 13).

NOTE 9 - Long-Term Debt

     On December 7, 2001, Horizon PCS received $175,000,000 from the issuance of
unsecured  senior notes (the "senior  notes") due on June 15, 2011.  Interest is
paid semi-annually on June 15 and December 15 at an annual rate of 13.75%,  with
interest  payments  commencing June 15, 2002.  Approximately  $48,660,000 of the
offering's  proceeds  were  placed in an escrow  account  to fund the first four
semi-annual interest payments.  The senior notes may be redeemed at Horizon PCS'
election on or after  December 15, 2006,  at  redemption  prices  defined in the
senior note agreement. Additionally, on or before December 15, 2004, Horizon PCS
may  redeem up to 35% of the  aggregate  principal  amount of the  senior  notes
originally  issued at a  redemption  price of 113.75%,  plus  accrued and unpaid
interest  to the  date of  redemption,  with  the  proceeds  of  certain  equity
offerings as long as 65% of the aggregate  principal  amount  originally  issued
remains outstanding after that redemption.

     On September 26, 2000, Horizon PCS received  $149,680,050 from the issuance
of $295,000,000  of unsecured  senior discount notes due on October 1, 2010 (the
"discount notes"). The discount notes accrete in value until October 1, 2005, at
a rate of 14% compounded  semi-annually.  Cash interest on the notes will become
payable on April 1 and October 1 of each year,  beginning on April 1, 2006.  The
discount  notes may be redeemed at Horizon PCS'  election on or after October 1,
2005, at redemption prices defined in the discount note agreement. Additionally,
on or before October 1, 2003,  Horizon PCS may redeem up to 35% of the aggregate
principal amount of the discount notes  originally  issued at a redemption price
of 114%,  plus accrued and unpaid  interest to the date of redemption,  with the
proceeds of certain equity  offerings as long as 65% of the aggregate  principal
amount originally issued remains outstanding after that redemption. The discount
notes  include  warrants to purchase  3,805,500  shares of Horizon  PCS' class A
common stock at $5.88 per share. The warrants represent the right to purchase an
aggregate of  approximately  4.0% of the issued and outstanding  common stock of
Horizon PCS on a fully diluted basis,  assuming the exercise of all  outstanding
options  and  warrants  to  purchase  common  stock  and the  conversion  of the
convertible  preferred  stock into shares of Horizon  PCS' class A common  stock
(Note 13). The proceeds from the issuance of the discount notes was allocated to
long-term  debt and the value of the warrants  ($20,245,000  or $5.32 per share)
was allocated to additional paid-in capital.  The fair value of the warrants was
estimated on the date of the grant using the Black-Scholes  option-pricing model
with the following  weighted  average  assumptions:  expected  dividend yield of
0.0%, a risk-free interest rate of 6.5%, expected life of 10 years (equal to the
term of the warrants) and a volatility of 95%.

     On September  26, 2000,  and  concurrent  with the sale of the  convertible
preferred  stock (Note 13) and the discount notes described  above,  Horizon PCS
entered into a senior secured credit  facility (the "secured  credit  facility")
with a financial  institution  to provide an  aggregate  commitment,  subject to
certain  conditions,  of up to  $250,000,000  (including a  $95,000,000  line of
credit  described in Note 7, a  $50,000,000  term note and a  $105,000,000  term
note) expiring on September 30, 2008. The secured credit facility bears interest
at various floating rates,  which  approximate one to six month LIBOR rates plus
375 to 425 basis  points  (5.66% to 6.16% at  December  31,  2001).  The secured
credit  facility  is  collateralized   by  a  perfected   security  interest  in
substantially  all of Horizon PCS'  tangible and  intangible  current and future
assets,  including an assignment  of Horizon PCS'  affiliation  agreements  with
Sprint  PCS and a pledge  of all of the  capital  stock of  Horizon  PCS and its
subsidiaries.  At December  31,  2001,  the  outstanding  balance on the secured
credit facility was $50,000,000.  Horizon PCS pays a commitment fee of 1.375% on
the unused  portion of the  $250,000,000  note.  Horizon PCS incurred a total of
approximately  $2,788,000  and $680,000 of commitment  fee expense for the years
ended December 31, 2001 and 2000,  respectively.  Additionally,  Horizon PCS was
required  to, and did,  draw on the  $105,000,000  term note in March  2002.  At
December 31, 2001, the rate on the undrawn term note was 5.66%.


                                      F-22

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 9 - Long-Term Debt (Continued)

     The senior  notes,  discount  notes and  secured  credit  facility  contain
various  financial  covenants.  Among other  restrictions,  the most restrictive
covenants  relate to maximum  capital  expenditures,  minimum EBITDA  ("earnings
before interest,  taxes, depreciation and amortization")  requirements,  maximum
financial  leverage ratios and minimum  revenues.  There are also limitations on
restricted payments,  asset sales, additional debt issuance and equity issuance.
In June 2001 and December 2001,  Horizon PCS amended its secured credit facility
with the bank group. These modifications  amended and restated certain financial
covenants.  The June 2001  amendment also increased the base interest rate by 25
basis  points to LIBOR plus 375 to 425 basis  points.  As of December  31, 2001,
Horizon PCS was in compliance with the amended covenants under each agreement.

     In connection  with the  acquisition  of Bright PCS,  Horizon PCS assumed a
ten-year secured term loan totaling $35,400,000.  The note was collateralized by
the  equipment  acquired.  In  September  2000,  this note was fully  repaid and
terminated with the proceeds from the financing described above.

     In May 2000, Horizon PCS entered into a $40,500,000 term loan facility with
a financial  institution to purchase certain PCS equipment to construct  Horizon
PCS'  personal  communications  network.  Maximum  advances on the note  totaled
$38,475,000.  This loan was  secured by  equipment,  collateral  assignments  of
Horizon  PCS'  tower  lease  (Note  12) and  pledges  of  Horizon  PCS stock and
ownership interests in Bright PCS. In September 2000, this note was fully repaid
and terminated with the proceeds from the financing described above.

     In June 1998,  Chillicothe  Telephone  issued  senior notes  ("1998  Senior
Notes") of $11,000,000 and $1,000,000 to insurance  companies.  Annual principal
payments of $1,200,000  begin in 2009 and continue until 2018. The interest rate
on the  outstanding  balance at December  31, 2001,  was 6.62%.  The 1998 Senior
Notes contain various financial covenants,  the most restrictive covenants being
the minimum net worth requirement, the limitation of funded debt requirement and
the restricted intercompany payments and investment requirements. As of December
31, 2001, Chillicothe Telephone was in compliance with such covenants.

     In November 1993,  Chillicothe  Telephone issued senior notes ("1993 Senior
Notes") of $6,000,000 and $4,000,000 to insurance  companies.  Annual  principal
payments of $2,000,000  began in 2001 and continue until 2005. The interest rate
on the  outstanding  balance at December  31, 2001,  was 6.72%.  The 1993 Senior
Notes contain various financial covenants,  the most restrictive covenants being
the minimum net worth  requirement,  the limitations on funded debt requirement,
and the  restricted  intercompany  payments and investment  requirements.  As of
December 31, 2001, Chillicothe Telephone was in compliance with such covenants.

     In August  1997,  Horizon  PCS  entered  into a term loan  facility  with a
financial  institution to purchase certain  equipment to construct  Horizon PCS'
personal  communications  network.  The  note  was  collateralized  by the  same
equipment. The Company had unconditionally guaranteed the debt and had pledged a
security interest in all of the outstanding  shares of Horizon PCS. In addition,
certain obligations under this loan had been guaranteed by a third party vendor.
In September  2000,  this note was fully repaid and terminated with the proceeds
from the financings described above.


                                      F-23

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 9 - Long-Term Debt (Continued)

     The components of long-term debt outstanding at December 31, 2001 and 2000,
are as follows:



                                                                                   
                                                      Interest Rate at
                                                     December 31, 2001           2001             2000
                                                     -----------------     ---------------  ---------------
          Senior notes.............................        13.75%          $   175,000,000  $            --
          Discount notes...........................        14.00%              159,055,643      135,283,104
          Secured credit facility..................         6.16%               50,000,000       50,000,000
          1998 Senior Notes........................         6.62%               12,000,000       12,000,000
          1993 Senior Notes........................         6.72%                6,000,000        8,000,000
                                                                           ---------------  ---------------
              Total long-term debt.................                        $   402,055,643  $   205,283,104
                                                                           ===============  ===============


     Scheduled  maturities of long-term  debt  outstanding at December 31, 2001,
are as follows:

                      Year                                    Amount
                                                         ---------------
             2002........................................$     2,000,000
             2003........................................      2,000,000
             2004........................................      2,375,000
             2005........................................      2,500,000
             2006........................................        500,000
             Thereafter..................................    530,625,000
                                                             -----------
               Total maturities of long-term debt........    540,000,000
             Less: Current maturities....................     (2,000,000)
             Less: Unaccreted interest portion of
               long-term debt............................   (135,944,357)
                                                            -------------
                 Total long-term debt....................$   402,055,643
                                                         ================


NOTE 10 - Federal Income Taxes

   The Company's Federal income tax expense (benefit) consists of the following
for the years ended December 31:



                                                                                 
                                                             2001              2000             1999
                                                       ---------------   ---------------  ---------------
   Current payable................................     $     1,433,572   $      (564,155) $    (1,593,268)
   Deferred taxes.................................             405,121          (261,786)        (483,527)
   Investment tax credit..........................             (55,527)          (69,635)         (82,036)
                                                       ---------------   ---------------  ---------------
     Income tax expense (benefit) before
       extraordinary item.........................           1,783,166          (895,576)      (2,158,831)

   Extraordinary loss:
     Current payable..............................                  --          (261,863)              --
                                                       ---------------   ---------------  ---------------
         Total tax expense (benefit)..............     $     1,783,166   $    (1,157,439) $    (2,158,831)
                                                       ===============   ===============  ===============



                                      F-24

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 10 - Federal Income Taxes (Continued)

   The income tax expense from continuing operations varies from the statutory
rate as follows for the years ended December 31:



                                                                                   
                                                              2001               2000              1999
                                                        ---------------   ----------------  ----------------
   Tax at statutory rate applied to pretax book loss    $    (40,127,248) $   (16,110,507)  $    (2,356,633)
   Increase (decrease) in tax from:
     Investment tax credit..........................             (55,527)         (69,635)          (82,036)
     Change in valuation allowance..................          37,163,536        2,385,097           237,519
     Non-deductible goodwill amortization...........             444,227          302,968                --
     Tax on interest on warrants....................             695,627          177,210                --
     Stock option compensation......................             241,044          171,571                --
     Tax on excess loss account.....................                  --       11,463,395                --
     Non-deductible subsidiary dividend.............           3,716,150          945,896                --
     Other, net.....................................            (294,643)        (161,571)           42,319
                                                        ----------------  ---------------   ---------------
       Total tax expense (benefit)..................    $      1,783,166  $      (895,576)  $    (2,158,831)
                                                        ================  ===============   ===============



     Deferred  income  taxes  result  from  temporary  differences  between  the
financial  reporting and tax basis amounts of existing  assets and  liabilities.
The  source  of these  differences  and tax  effect  of each are as  follows  at
December 31:



                                                                                   
                                                              2001              2000              1999
                                                        ---------------   ---------------   ---------------
   Deferred income tax assets:
     Uncollectible accounts........................     $     1,030,600   $       601,944   $       332,577
     Vacation......................................             472,708           416,915           280,670
     Pensions and other retirement benefits........           1,106,912           895,820           712,061
     Personal Communication Services Licenses
       and start-up costs..........................                  --           654,293           381,276
     Net operating loss carryforward...............          36,089,387                --           903,292
     Deferred gain on sale of fixed assets.........           1,274,886         1,415,488         1,016,036
     Deferred income...............................           2,285,961         2,479,716                --
     Interest expense on senior discount notes.....           9,523,013         1,880,148                --
     Unrealized loss on hedging activity...........             284,869                --                --
                                                        ---------------   ---------------   ---------------
       Total deferred income tax assets............          52,068,336         8,344,324         3,625,912
                                                        ---------------   ---------------   ---------------

   Deferred income tax liabilities:
     Property differences..........................         (14,498,936)       (8,821,255)       (6,826,487)
     Unrealized gain on securities.................          (1,117,825)               --                --
     Other, net....................................          (1,496,497)         (195,915)         (119,154)
                                                        ---------------   ---------------   ---------------
       Total deferred income tax liabilities.......         (17,113,258)       (9,017,170)       (6,945,641)
                                                        ---------------   ---------------   ---------------

         Deferred income taxes, net................          34,955,078          (672,846)       (3,319,729)
         Less: valuation allowance.................         (39,587,235)       (2,622,616)         (237,519)
                                                        ---------------   ---------------   ---------------

           Total deferred income taxes, net........     $    (4,632,157)  $    (3,295,462)  $    (3,557,248)
                                                        ===============   ===============   ===============




                                      F-25



HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 10 - Federal Income Taxes (Continued)

     Until  September  26, 2000,  Horizon PCS was  included in the  consolidated
Federal income tax return of the Horizon Telcom  affiliated  group.  Horizon PCS
provided  for  Federal  income  taxes on a  pro-rata  basis,  consistent  with a
consolidated tax sharing  agreement.  As a result of the sale of the convertible
preferred  stock,  Horizon  PCS is not able to  participate  in the tax  sharing
agreement nor the filing of a  consolidated  Federal  income tax return with the
Horizon Telcom  affiliated  group.  Thus,  Horizon PCS filed a separate  Federal
income tax return for the period  after  deconsolidation  through  December  31,
2000, and will file a separate return for all subsequent periods.

     In  assessing  the  Company's  ability  to  realize  deferred  tax  assets,
management  considers whether it is more likely than not that some or all of the
assets will not be  realized.  Management  considers,  among other  things,  the
scheduled  reversal of deferred  tax assets and  liabilities  and  estimates  of
future  taxable  income in making this  assessment.  The Company has  provided a
valuation  allowance of  $39,587,235  and $2,622,616 as of December 31, 2001 and
2000, respectively, against the deferred tax assets of Horizon PCS.

     Horizon PCS has generated net operating  losses ("NOL") that may be used to
offset future taxable income. Each year's NOL has a maximum  carryforward period
of twenty years.  Horizon PCS' ability to use its NOL carryforwards is dependent
on the future taxable  income of Horizon PCS. At December 31, 2001,  Horizon PCS
has NOL carryforwards of $106,145,256,  expiring in 2021. The future tax benefit
of these NOL  carryforwards  of $36,089,387  has been recorded as a deferred tax
asset. As a result of Horizon PCS' operating losses and its deconsolidation from
the  Horizon  Telcom  affiliated  group for tax  purposes,  Horizon PCS does not
expect to record future tax benefits of operating  losses until such time as its
operations  become  profitable.  Accordingly,  Horizon PCS has recognized a full
valuation allowance related to its net deferred tax assets.

     The Company's  consolidated  income tax benefit for the year ended December
31, 2000, was  $1,157,439.  This benefit was primarily a result of the Company's
net loss offset by the  recognition  by Horizon PCS of an excess loss account on
the tax  deconsolidation  from the Horizon Telcom affiliated group and valuation
reserves established against deferred tax assets of Horizon PCS.

     In connection  with Horizon PCS'  acquisition of Bright PCS (Note 2), a tax
of  $3,696,000  was  generated  based on the  excess  of the  fair  value of the
Company's  stock  over  Horizon  PCS' cost  basis in the  stock.  The tax on the
exchange of the stock was charged  directly to equity and not recorded as income
tax expense.

     Horizon PCS generated a tax of  $4,256,818 on the stock  dividend of 10% of
the Horizon  Telcom stock held by Horizon PCS. The tax on the stock dividend was
charged  directly to equity and not  recorded  as an income tax  expense  during
2000.

NOTE 11 - Pension Plans and Other Retirement Benefits

     The Company has two trusteed  pension plans covering  certain  salaried and
hourly  employees.  The Company's funding policy is to be in compliance with the
Employee  Retirement  Income Security Act guidelines.  The plan's assets consist
primarily of investments in common stocks,  bonds,  notes,  cash equivalents and
life insurance  policies.  The Company  applies the  accounting and  measurement
practices  prescribed by SFAS No. 87, "Employers'  Accounting For Pensions," and
the  disclosure  requirements  of SFAS No. 132,  "Employers'  Disclosures  about
Pensions and Other Postretirement Benefits."

     In  addition,  the Company  provides  coverage of  postretirement  medical,
prescription  drug,  telephone  service and life insurance  benefits to eligible
retirees  whose  status at  retirement  from  active  employment  qualifies  for
postretirement benefits. Coverage of postretirement benefits is also provided to
totally and permanently  disabled  active  employees whose status at disablement
qualifies for postretirement  benefits as a retiree from active employment.  The
Company also provides coverage of  postretirement  dental and vision benefits to
certain  enhanced  retirees.   No  future  retirees  will  receive  coverage  of
postretirement dental and vision benefits. Certain eligible retirees



                                      F-26

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 11 - Pension Plans and Other Retirement Benefits (Continued)

are required to contribute toward the cost of coverage under the  postretirement
health care and  telephone  service  plans.  No  contribution  is  required  for
coverage under the postretirement life insurance benefits plan.

     The Company applies the accounting and measurement  practices prescribed by
SFAS No. 106,  "Employers'  Accounting  for  Postretirement  Benefits Other Than
Pensions," and the disclosure requirements of SFAS No. 132. As permitted by SFAS
No. 106,  the Company has  elected to amortize  the  accumulated  postretirement
benefit obligations existing at the date of adoption (the transition obligation)
over a twenty-year  period.  The  unrecognized  prior service cost is also being
amortized over a twenty-year period.

     The pension and  postretirement  plans  discussed  above are  maintained by
Horizon  Telcom,  Inc.  Each  subsidiary  is charged  for each plan based on its
employee  participation  in the  respective  plans.  The  funding  status of the
consolidated plans as of December 31, 2001 and 2000, is as follows:



                                                                                     
                                                              Pension Benefits            Other Benefits
                                                         -------------------------  --------------------
                                                             2001         2000          2001         2000
                                                         -----------  ------------  -----------  --------
                                                                            (in thousands)
   Change in benefit obligation

   Benefit obligation, beginning of year.............    $    14,235  $     11,783  $     5,624  $     7,747
     Service cost....................................            390           343          359          163
     Interest cost...................................          1,044         1,015          609          399
     Actuarial (gain) or loss........................             34         1,426        4,111       (2,495)
     Benefits paid...................................           (570)         (620)        (293)        (190)
     Change in plan provisions.......................             --           288           --           --
                                                         -----------  ------------  -----------  -----------
   Benefit obligation, end of year...................         15,133        14,235       10,410        5,624
                                                         -----------  ------------  -----------  -----------

   Change in plan assets

   Fair value of plan assets, beginning of year......         19,380        18,146           --           --
     Actual return on plan assets....................           (229)        1,839           --           --
     Employer contributions..........................             18            15          293          190
     Benefits paid...................................           (570)         (620)        (293)        (190)
                                                         -----------  ------------  -----------  -----------
   Fair value of plan assets, end of year............         18,599        19,380           --           --
                                                         -----------  ------------  -----------  -----------
   Funded status.....................................          3,466         5,145      (10,410)      (5,624)
     Unrecognized transition obligation..............            (35)          (35)       2,994        3,224
     Unrecognized prior service cost.................          1,043         1,136        2,154           --
     Unrecognized actuarial (gain) or loss...........            (20)       (2,213)        (494)      (2,318)
                                                         -----------  ------------  -----------  -----------
   Prepaid (accrued) benefit cost....................    $     4,454  $      4,033  $    (5,756) $    (4,718)
                                                         ===========  ============  ===========  ===========

   Weighted average assumption at December 31:

   Discount rate.....................................          7.25%        7.50%                       7.75%
   Expected return on plan assets....................         10.00%       10.00%             --           --
   Rate of compensation increase.....................          4.00%        4.00%             --           --



     The  assumed  medical  benefit  cost  trend  rate  used  in  measuring  the
accumulated postretirement benefit obligation was 8.0% in 2001, and 7.0% in 2000
and 1999,  respectively,  declining gradually to 5.0% for all periods presented.
For the over 65 retirees and their  spouses,  the assumed  medical  benefit cost
trend rate was 7.0% in 2001 and 6.5% in 2000 and 1999,  declining  gradually  to
5.0% for all periods presented. The assumed dental and vision benefit cost trend
rates used in measuring the accumulated  postretirement  benefit obligation were
6.0% in 2001, 2000 and 1999,  declining gradually to 5.0% for retirees and their
spouses.  The telephone  service  benefit cost trend rate for retirees and their
spouses in 2001, 2000 and 1999 was estimated at 5.0% for all future years.



                                      F-27


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 11 - Pension Plans and Other Retirement Benefits (Continued)



                                                                                   

                                                      Pension Benefits                  Other Benefits
                                              -------------------------------  -------------------------------
                                                 2001       2000       1999       2001       2000       1999
                                              ---------  ---------  ---------  ---------  ---------  ---------
                                                                       (in thousands)
   Components of net periodic benefit cost:
     Service cost.........................     $    390   $    343   $    346   $    359   $    163   $    234
     Interest cost........................        1,044      1,015        898        608        399        480
     Expected return on plan assets.......       (1,907)    (1,785)    (1,812)        --         --         --
     Amortization of transition obligation           --         --         --        230        230        230
     Amortization of prior service cost...           93         73         73        212         --         --
     Recognized net actuarial loss........          (22)       (50)      (154)      (100)      (128)        --
                                              ---------  ---------  ---------  ---------  ---------  ---------
       Net periodic benefit cost..........     $   (402)  $   (404)  $   (649)  $  1,309   $    664   $    944
                                               ========   ========   ========   ========   ========   ========



     Assumed  health  care cost  trend  rates have a  significant  effect on the
amounts  reported for the health care plans.  A  one-percentage-point  change in
assumed  health  care cost trend  rates  would have the  following  effects  (in
thousands):



                                                                                      
                                                                          1-Percentage-     1-Percentage-
                                                                          Point Increase   Point Decrease
                                                                          --------------   --------------
                                                                                  (in thousands)
    Effect on total of service and interest cost components.............    $     194         $   (154)
    Effect on postretirement benefit obligation.........................        1,869           (1,504)



     Horizon  Telcom,  Inc.,  also had two defined  contribution  plans covering
eligible  Chillicothe  Telephone  and  Horizon  Services'  salaried  and  hourly
employees.  These plans  provided for  participants  to defer up to 19% of their
annual compensation as contributions to the plans.  Horizon Telcom, Inc. matched
a participant's contributions equal to 25% of each participant's salary deferral
up  to a  maximum  of  1%  of a  participant's  compensation.  Horizon  Telcom's
contributions to these plans were approximately $87,900 and $82,400 for 2000 and
1999,  respectively,  and are included in the general and administrative expense
of the Company.

     In May 1999,  Horizon  PCS  adopted a defined  contribution  plan  covering
certain eligible employees of Horizon PCS. The plan provided for participants to
defer  up to  15%  of  annual  compensation,  as  defined  under  the  plan,  as
contributions to the plan.  Horizon PCS had the option,  at the direction of the
Board of Directors,  to make a matching contribution to the plan of up to 50% of
an employee's contribution, limited to a maximum of 3% of the employee's salary.
A matching  contribution  of  approximately  $115,000 and $61,000 was recognized
during 2000 and 1999, respectively.

     Effective   January  1,  2001,   the  Company   merged  all  three  defined
contribution  plans into a new defined  contribution  plan covering all eligible
employees  of  the  Company  and  its   subsidiaries.   The  plan  provides  for
participants  to defer up to 19% of annual  compensation,  as defined  under the
plan,  as  contributions  to the  plan.  The  Company  matches  a  participant's
contribution  based on the subsidiary that employs the participant.  Horizon PCS
matches  50% of each  participant's  salary  deferral up to a maximum of 6% of a
participant's   compensation.   All  other   subsidiaries   match  25%  of  each
participant's  salary  deferral  up  to a  maximum  of  4%  of  a  participant's
compensation. The Company's contribution to this plan was approximately $425,000
for  2001  and  is  included  in  general  and  administrative  expenses  in the
consolidated statements of operations.


                                      F-28

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 12 - Commitments and Contingencies

Operating Leases

   The Company leases office space and various equipment under several operating
leases. In October 1999, Horizon PCS signed a tower lease agreement with a third
party whereby it will lease the towers for substantially all of Horizon PCS'
cell sites. The leases are operating leases with a term of five to ten years
with three consecutive five-year renewal option periods. In addition, Horizon
PCS receives a site development fee from the tower lessor for certain tower
sites which the lessor constructs on behalf of Horizon PCS.

   Horizon PCS also leases space for its retail stores. At December 31, 2001,
Horizon PCS leased 38 stores operating throughout its territories.

   Future minimum operating lease payments are as follows:


Year                                          Amount
- ----                                     ---------------
2002.....................................$    15,031,000
2003.....................................     14,177,000
2004.....................................     12,689,000
2005.....................................      9,389,000
2006.....................................      4,891,000
Thereafter...............................      9,102,000
                                         ---------------
  Future operating lease obligation......$    65,279,000
                                         ===============

     Rental expenses for all operating  leases were  approximately  $11,347,000,
$5,539,500 and $2,525,500 for the years ended December 31, 2001, 2000, and 1999,
respectively.

Construction Expenditures

     Construction expenditures in 2002 are estimated to be between approximately
$70,000,000 and $85,000,000.  The majority of the estimated expenditures are for
the build-out of the PCS network.

Legal Matters

     The  Company  is party to legal  claims  arising  in the  normal  course of
business.  Although the ultimate  outcome of the claims cannot be ascertained at
this time,  it is the opinion of  management  that none of these  matters,  when
resolved,  will have a  material  adverse  impact on the  Company's  results  of
operations or financial condition.

NTELOS Network Agreement

     In August  1999,  the Company  entered  into a wholesale  network  services
agreement  with West  Virginia PCS  Alliance  and  Virginia  PCS  Alliance  (the
"Alliances"), two related, independent PCS providers whose network is managed by
NTELOS. Under the network services agreement,  the Alliances provide the Company
with the use of and access to key components of their network in most of Horizon
PCS' markets in Virginia and West Virginia. The initial term was through June 8,
2008, with four automatic ten-year renewals.



                                      F-29

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 12 - Commitments and Contingencies (Continued)

     This  agreement  was amended in the third  quarter of 2001 to provide for a
minimum  monthly fee to be paid by the Company  through  December 31, 2003.  The
minimum  monthly  fee  includes  a fixed  number  of  minutes  to be used by the
Company's  subscribers.  The Company  incurs  additional  per minute charges for
minutes used in excess of the fixed number of minutes  allotted each month.  The
aggregate amount of future minimum payments is as follows:


              Year                                          Amount
              ----                                          ------
              2002......................................$   27,400,000
              2003.......................................   38,600,000
                                                            ----------

                Total...................................$   66,000,000
                                                        ==============

NOTE 13 - Convertible Preferred Stock

     Horizon PCS has  authorized  175,000,000  shares of  convertible  preferred
stock at $0.0001 par value.  On  September  26, 2000,  an investor  group led by
Apollo Management purchased 23,476,683 shares of convertible preferred stock for
approximately $126,500,000 in a private placement offering.  Concurrent with the
closing,  holders of the $14,100,000  short-term  convertible note converted the
principal and unpaid  interest  into  2,610,554  shares of the same  convertible
preferred  stock  purchased by the investor  group.  Holders of the  convertible
preferred  stock have the option to convert  their  shares (on a share for share
basis)  into class A common  stock at any time.  In  addition,  the  convertible
preferred stock converts  automatically upon the completion of a public offering
of class A common stock  meeting  specified  criteria or upon the  occurrence of
certain business combination transactions.  The convertible preferred stock pays
a 7.5% stock dividend  semi-annually,  commencing  April 30, 2001. The dividends
are  payable in  additional  preferred  stock.  During  2001,  Horizon  PCS paid
$11,775,917 of dividends in additional shares of convertible preferred stock. At
December 31, 2001, there were 28,272,170  shares of convertible  preferred stock
outstanding.

     If Horizon PCS has not completed  either (i) a public offering of its class
A common  stock in which  Horizon PCS  receives at least  $50,000,000  or (ii) a
merger  or  consolidation  with a  publicly-listed  company  that  has a  market
capitalization  of at least  $100,000,000  by the fifth  anniversary of the date
Horizon PCS issued the  convertible  preferred  stock,  the  investor  group may
request  Horizon PCS  repurchase  all of their shares of  convertible  preferred
stock  at  fair  market  value,  as  determined  by  three  investment   banking
institutions.  If the  investor  group  requests  Horizon PCS  repurchase  their
convertible  preferred  stock and  Horizon  PCS  declines,  Horizon  PCS will be
required to auction  itself.  If no bona fide offer is received upon an auction,
the repurchase  right of the investor group expires.  If,  however,  a bona fide
offer is received upon the auction, Horizon PCS must sell itself or the dividend
rate on the  convertible  preferred  stock will  increase from 7.5% to 18.0% and
Horizon PCS will be required to re-auction itself annually until the convertible
preferred  stock is  repurchased.  Horizon PCS' secured credit  facility and the
discount notes, both described in Note 9, prohibit Horizon PCS from repurchasing
any convertible  preferred stock.  Due to a mandatory  redemption  clause,  this
stock  is  considered  a  mezzanine   financing  and  is  recorded   outside  of
stockholders' equity (deficit).

     Holders of Horizon PCS' convertible preferred stock are entitled to vote on
all  matters  on an  as-converted  basis.  In  addition,  the vote of at least a
majority of the outstanding shares of convertible  preferred stock,  voting as a
single  class,  shall be  necessary  for  effecting  or  validating  significant
corporate actions specified in the certificate of incorporation.

     Horizon PCS has agreed that until the conversion of the preferred stock, it
will adhere to certain restrictive covenants. Among other restrictions, the most
significant  covenants relate to capital expenditures,  asset sales,  restricted
payments,  additional debt incurrence,  and equity issuance.  As of December 31,
2001, Horizon PCS was in compliance with the covenants under the agreement.



                                      F-30


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 14 - Common Stock and Treasury Stock

     In October 1999,  the Company  converted all of the issued and  outstanding
shares of its  common  stock  into  class A common  stock,  without  par  value.
Additionally,  the Company authorized a new class B common stock,  consisting of
500,000  authorized shares, at no par value. Each holder of class A common stock
is  entitled  to one vote per share and each  holder of class B common  stock is
entitled  to ten votes per  share.  Both  classes  of common  stock  have  equal
dividend rights.

     In  December  1999,  the Company  declared a stock split which  distributed
three  shares  of class B common  stock for each  share of class A common  stock
issued and outstanding at the time of declaration. This resulted in the issuance
of 299,178 shares of class B common stock.

     In February  2000,  Horizon PCS purchased  78,900 shares of common stock of
the Company from the Company's largest unaffiliated shareholder for $11,835,000.
This  represented  approximately a 19.78%  interest in the Company.  Horizon PCS
exchanged  40% of the shares  owned  (31,912  shares) as  consideration  for the
acquisition of Bright PCS (Note 4). This transaction  reduced the treasury stock
to 11.78%.

     On September 26, 2000,  Horizon PCS distributed 10% of its 11.78% ownership
of the Company in the form of a dividend,  payable pro rata to the  shareholders
of  record  on  September  26,  2000.  This  transaction  resulted  in a gain of
approximately  $1,038,000,  as part of the stock was distributed to owners other
than the Company.

     During 2001,  Horizon PCS distributed its remaining 7,249 shares of Horizon
Telcom to members of  Horizon  PCS'  management  as an award.  As a result,  the
Horizon PCS recorded non-cash compensation expense of approximately  $725,000 in
the accompanying consolidated statements of operations.

NOTE 15 - Sprint PCS Warrants

     Horizon  PCS agreed to grant to Sprint PCS  warrants  to acquire  2,510,460
shares of Horizon PCS' class A common stock in exchange for the right to service
PCS  markets  in  additional  areas.  By  September  30,  2000,  Sprint  PCS had
substantially  completed  its  obligations  under the  agreement and Horizon PCS
completed the required purchase of certain Sprint PCS assets. Horizon PCS valued
the warrants  and  recorded an  intangible  asset of  approximately  $13,356,000
(based on a price of $5.88 per share,  valued  using the  Black-Scholes  pricing
model using an expected  dividend  yield of 0.0%, a risk-free  interest  rate of
6.5%,  expected life of 10 years and a volatility of 95%). The intangible  asset
is  being  amortized  over  the  remaining  term of the  Sprint  PCS  management
agreement resulting in approximately  $752,000 of amortization expense per year.
Amortization  expense  for the years  ended  December  31,  2001 and  2000,  was
approximately  $752,000 and $188,000 respectively.  Accumulated  amortization on
the intangible asset was approximately $940,000, and $188,000 as of December 31,
2001 and 2000,  respectively.  The warrants  will be issued to Sprint PCS at the
earlier of an initial  public  offering of Horizon PCS' common stock or July 31,
2003.


                                      F-31

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 16 - Stock Option Plans

     In November 1999,  Horizon Telcom adopted the 1999 Stock Option Plan,  (the
"Plan"). The Plan is intended to provide directors, officers and other employees
of, and service  providers  to, the Company and any of its related  corporations
with  opportunities  to purchase  stock  pursuant to the grant of  incentive  or
nonqualified options.

     The  Company may grant  options  for up to 10,000  shares of class B common
stock.  The maximum term of the options is ten years.  Options vest based on the
terms of each individual  agreement,  currently over four years from the date of
the grant.

     In November 1999,  Horizon PCS adopted the 1999 Stock Option Plan which was
amended in June 2000 and renamed the 2000 Stock Option Plan (Horizon PCS' Plan).
Horizon PCS may grant  options for up to 7,500,000  shares of its class A common
stock and 4,196,884  shares of its class B common stock. The maximum term of the
options  is ten  years.  Options  vest  based on the  terms  of each  individual
agreement, currently over four or six years from the date of the grant.

     A summary of the status of the Company's plans for the years ended December
31, 2001, 2000 and 1999, follows:



                                                                                


                               Horizon Telcom                                      Horizon PCS
                       ------------------------------  ----------------------------------------------------------------
                               Weighted     Options            Weighted     Options             Weighted      Options
                                Average   Exercisable           Average   Exercisable            Average    Exercisable
                       class B Exercise       At       class A Exercise       At       class B  Exercise        At
                        Shares    Price    Year End    Shares     Price    Year End    Shares      Price     Year End
                        ------    -----    --------    ------     -----    --------    ------      -----     --------
December 31, 1998           --    $   --                   --  $      --                    --  $      --
  Granted                  950     60.00                   --         --              4,196,884      0.12
  Exercised                 --        --                   --         --                    --         --
  Forfeited                 --        --                              --                    --         --
                        ------    ------              ------------------              --------  ---------

December 31, 1999          950     60.00        238       --         --          --  4,196,884       0.12      500,398
  Granted                   --        --              116,971      5.88                     --         --
  Exercised               (123)    60.00                  --         --                     --         --
  Forfeited                 --        --                             --                     --
                        -------    -----              -------  ---------              --------

December 31, 2000          827     60.00        293  116,971        5.88         --  4,196,884      0.12     1,116,249
  Granted                   --        --                   --         --                    --        --
  Exercised                 --        --                   --         --                    --        --
  Forfeited                 --        --                   --         --                    --        --
                         ------   ------             -------  ----------             --------- ----------
December 31, 2001          827    $60.00        471  116,971  $     5.88     29,243  4,196,884 $    0.12     2,017,733
                         =======  ======             =======  ==========             ========= ==========



     The  Company  applies  APB  Opinion  25  and  related   interpretations  in
accounting for the plans with respect to employees. The Company applies SFAS No.
123 and related  interpretations  in  accounting  for stock  options  granted to
non-employees.  Pursuant  to this,  the  Company  will  recognize  approximately
$2,180,000  in  compensation  expense  over the period of the  options  (through
2005). The accompanying  consolidated  financial  statements  reflect a non-cash
compensation  charge,  related  to the  stock  option  plans,  of  approximately
$424,000,  $674,000 and $2,700 for the years ended  December 31, 2001,  2000 and
1999, respectively.

     For the  purpose  of the SFAS No.  123  disclosure,  the fair value of each
option  grant  is  estimated  on the  date  of  grant  using  the  Black-Scholes
option-pricing model with an assumption of a risk-free interest rate of 6.5% and
5.5% for the 2000 and 1999  options,  respectively,  for the Company and Horizon
PCS and a dividend  yield of 3.1% for the  Company.  Horizon  PCS  options  also
include a 95%  volatility  factor.  The fair  values  at the date of grant  were
$88.34 for Horizon Telcom's 1999 grant and $0.60 and $4.75 for Horizon PCS' 1999
and 2000 grants, respectively.


                                      F-32

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 16 - Stock Option Plans (Continued)

     Had  compensation  cost for both  plans been  determined  based on the fair
value at the  grant  dates  consistent  with the  method  of SFAS No.  123,  the
Company's net loss available to common  shareholders and losses per common share
would have been increased to the pro forma amounts indicated below for the years
ended December 31:



                                                                                      
                                                                2001               2000              1999
                                                         ------------------  ----------------  ----------------
      Net Loss

        As reported..................................    $    (118,820,602)  $   (44,673,246)  $    (4,481,098)
        Pro forma....................................         (119,485,362)      (45,407,163)       (4,519,366)

      Basic and diluted loss per share

        As reported..................................    $         (329.59)  $       (129.03)  $        (11.23)
        Pro forma....................................              (331.44)          (131.14)           (11.33)



NOTE 17 - Extraordinary Loss

     As a result of the September 26, 2000,  financings  described earlier,  the
Company retired long-term debt payable to financial institutions. As a result of
this debt  extinguishment,  the Company expensed the unamortized  portion of the
related   financing   costs   as  well  as  fees   associated   with   the  debt
extinguishments.  These fees and  expenses  amounted to  approximately  $748,000
during 2000 and are shown on the consolidated  statements of operations net of a
tax benefit of approximately $262,000.

NOTE 18 - Disclosures About Fair Value of Financial Instruments

     SFAS  No.  107  requires  disclosure  of the fair  value  of all  financial
instruments.  For  purposes  of this  disclosure,  the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Fair  value  may be based  on  quoted  market  prices  for the  same or  similar
financial  instruments or on valuation  techniques  such as the present value of
estimated  future cash flows using a discount rate  commensurate  with the risks
involved.

     The  estimates  of fair  value  required  under SFAS No.  107  require  the
application of broad assumptions and estimates. Accordingly, any actual exchange
of such financial instruments could occur at values significantly different from
the  amounts  disclosed.  As cash and  cash  equivalents,  current  receivables,
current  payables and certain other  short-term  financial  instruments  are all
short term in  nature,  their  carrying  amounts  approximate  fair  value.  The
carrying  value of restricted  cash  approximates  fair value as the  investment
funds  are  short-term.  Investments  in  marketable  securities  classified  as
available-for-sale  are  recorded at fair value based on the market price of the
security at December 31, 2001.

     The secured  credit  facility is based on  variable,  market-driven  rates;
therefore,  its carrying value  approximates  fair value.  The senior notes were
issued in December 2001 and approximate  fair value as of December 31, 2001. The
fair values of the fixed-rate  1993 Senior Notes,  the 1998 Senior Notes and the
discount  notes,  set forth below,  were estimated  using  discounted  cash flow
analyses  based on current  incremental  borrowing  rates for  similar  types of
borrowing arrangements and current market prices.

                              Fair Value       Recorded Value
                             -------------   -----------------
December 31, 2001.........   $ 161,968,000   $     179,055,643
December 31, 2000.........     156,470,000         157,283,104


                                      F-33

HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


NOTE 18 - Disclosures About Fair Value of Financial Instruments (Continued)

     In the first quarter of 2001,  Horizon PCS entered into a two-year interest
rate swap,  effectively  fixing  $25,000,000  of a term loan  under the  secured
credit  facility  (Note  9) at a rate of 9.4%.  In the  third  quarter  of 2001,
Horizon PCS entered into another two-year interest rate swap, effectively fixing
the remaining  $25,000,000  borrowed under the secured credit facility at 7.65%.
The swaps have been  designated  as a hedge of a portion of the future  variable
interest  cash flows  expected  to be paid  under the  secured  credit  facility
borrowings. A loss of approximately $838,000 was recorded in other comprehensive
income  (loss)  during  the year ended  December  31,  2001.  The  Company  also
recognized a loss in the consolidated  statements of operations of approximately
$176,000  during  2001  related  to  the  ineffectiveness  of the  hedge.  Other
comprehensive  income  may  fluctuate  based on changes in the fair value of the
swap  instrument.  The  Company  has  recorded a  liability  in other  long-term
liabilities in the  accompanying  consolidated  balance sheets of  approximately
$1,014,000 at December 31, 2001, related to the swaps.

NOTE 19 - Supplementary Financial Information (Unaudited)

   The quarterly results of operations for the years ended December 31, 2001 and
2000:



                                                                                           

                                                                       For the three months ended
                                                 --------------------------------------------------------------------
                                                     March 31           June 30       September 30      December 31
                                                 ----------------  ---------------  ---------------  ----------------
                                                             (Dollars in thousands except per share data)
Fiscal Year 2001:
- ----------------
Total revenues.............................          $     30,633      $    35,755      $    47,364     $      56,388
Operating loss.............................               (13,660)         (20,051)         (21,181)          (26,501)
Net loss...................................               (19,751)         (28,724)         (30,471)          (39,875)
Basic and diluted net loss per share ......                (55.62)          (79.28)          (84.10)          (110.61)

Fiscal Year 2000:
- ----------------
Total revenues.............................          $     15,304      $    16,245      $    18,791     $      23,660
Operating loss.............................                (3,181)          (5,521)         (10,502)          (17,939)
Loss before extraordinary item.............                (3,917)          (6,813)         (10,772)          (22,685)
Extraordinary loss, net of taxes...........                    --               --             (486)               --
Net loss...................................                (3,917)          (6,813)         (11,258)          (22,685)
Basic and diluted loss per share before
    extraordinary item.....................                (11.31)          (20.61)          (30.52)           (63.89)
Basic and diluted loss per share from
    extraordinary item.....................                    --               --            (1.38)               --
Diluted net loss per share available to common
    shareholders...........................                (11.31)          (20.61)          (31.90)           (63.89)




NOTE 20 - Subsequent Events

     Horizon PCS' secured credit facility includes financial covenants that must
be met each quarter.  Horizon PCS complied with these  covenants at December 31,
2001.  There is a  likelihood,  however,  that it will not meet the covenant for
EBITDA for the first quarter of 2002.  Although financial results for the end of
the first  quarter  are not  final,  subscriber  information  to date  indicates
significantly  higher  than  expected  gross and net  additions  to Horizon  PCS
subscribers for the quarter.  Although Horizon PCS ultimately  benefits from the
revenues  generated by new  subscribers,  Horizon PCS incurs  one-time  expenses
associated with new subscribers,  including commissions,  handset subsidies, set
up costs  for the  network  and  marketing  expenses.  As a  result,  these  new
subscriber costs negatively  affect Horizon PCS' EBITDA in the short-term during
the period of the addition of new subscribers which could lead to non-compliance
with the EBITDA covenant for the first quarter of 2002.

     We have  initiated  discussions  with the lead  bank in our  lending  group
concerning a possible  non-compliance with the covenant.  After quarter-end,  if
the financial  statements show a non-compliance,  we intend to immediately enter
into negotiations  with the bank group to obtain a waiver of the  non-compliance
and amendments to the covenants.


                                      F-34


HORIZON TELCOM, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of December 31, 2001 and 2000,
And for the Years Ended December 31, 2001, 2000 and 1999
- --------------------------------------------------------------------------------


     The failure to comply with the covenant  would be an event of default under
our  secured  credit  facility,  and would give the  lenders the right to pursue
remedies.  These  remedies could include  acceleration  of amounts due under the
facility.  If the  lender  elected  to  accelerate  the  indebtedness  under the
facility,  this would also  represent  a default  under the  indentures  for our
senior notes and discount  notes.  If we fail to comply with the  covenant,  one
option  available  to us would be to prepay the  indebtedness  under the secured
credit facility, together with prepayment fees. If we prepaid the facility prior
to  acceleration,  we would avoid  default under the  indentures  for our senior
notes and discount notes. In the event of such a prepayment,  we believe that we
could obtain replacement  financing to the extent necessary to fund our business
plan.  There can be no  assurance,  however,  that we could  obtain  adequate or
timely replacement financing on acceptable terms or at all.


                                      F-35



HORIZON TELCOM, INC. AND SUBSIDIARIES

Financial Statement Schedule
Valuation and Qualifying Accounts



                                                                                      
- ------------------------------------------------------------------------------------------------------------------------------------

                                              Balance at
                                             Beginning of       Charged to        Deductions        Balance at
               Description                      Period            Expense             (1)          End of Period
- ------------------------------------------   --------------    --------------    --------------    --------------
                                                                   (dollars in thousands)
Allowance for Doubtful Accounts
  Receivable-Subscribers
Year Ended December 31, 1999............     $         663     $         781     $        (533)    $         911
                                             =============     =============     =============     =============
Year Ended December 31, 2000............     $         911     $       1,891     $      (1,001)    $       1,801
                                             =============     =============     =============     =============
Year Ended December 31, 2001............     $       1,801     $       6,936     $      (6,075)    $       2,662
                                             =============     =============     =============     =============


Allowance for Doubtful Accounts
  Receivable-Interexchange Carriers and
  Other

Year Ended December 31, 1999............     $          50     $          20     $          (3)    $          67
                                             =============     =============     =============     =============
Year Ended December 31, 2000............     $          67     $          25     $          (2)    $          90
                                             =============     =============     =============     =============
Year Ended December 31, 2001............     $          90     $         408     $         (20)    $         478
                                             =============     =============     =============     =============
- -----------------


(1)  Represents  amounts  written  off during the  period,  less  recoveries  of
     amounts previously written off.




                                      F-36





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