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

                                    FORM 10-Q

                                   (Mark One)

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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                       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: 0-32617


                              HORIZON TELCOM, INC.
             (Exact name of Registrant as specified in its charter)


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


           68 EAST MAIN STREET
            CHILLICOTHE, OHIO                            45601-0480
(Address of principal executive offices)                 (Zip Code)

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


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

As of  November  11,  2002,  there were  90,552  shares of class A common  stock
outstanding and 271,926 shares of class B common stock outstanding.




                              HORIZON TELCOM, INC.
                                    FORM 10-Q
                              THIRD QUARTER REPORT

                                TABLE OF CONTENTS


                                                                                  
                                                                                        PAGE NO.
                                                                                        --------
PART I           FINANCIAL INFORMATION

       Item 1.   Financial Statements........................................................3

       Item 2.   Management's Discussion and Analysis of Financial Condition
                 and Results of Operations..................................................22

       Item 3.   Quantitative and Qualitative Disclosures About Market Risk.................45

       Item 4.   Controls and Procedures....................................................46

PART II       OTHER INFORMATION

       Item 1.   Legal Proceedings..........................................................47

       Item 2.   Changes in Securities and Use of Proceeds..................................47

       Item 3.   Defaults Upon Senior Securities............................................47

       Item 4.   Submission of Matters to a Vote of Security Holders........................47

       Item 5.   Other Information..........................................................47

       Item 6.   Exhibits and Reports on Form 8-K...........................................61



     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").





                                       2



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON TELCOM, INC., AND SUBSIDIARIES


                                                                                         
Consolidated Balance Sheets
As of September 30, 2002, and December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------


                                                                               September 30,       December 31,
                                                                                   2002                2001
                                                                            ------------------  ----------------
                                                                                (unaudited)
ASSETS
- ------
CURRENT ASSETS:
     Cash and cash equivalents (includes $71,000,000 on deposit in
         accordance with covenant amendment in 2002).....................  $      117,010,782  $      127,154,227
     Restricted cash......................................................          24,062,500          24,597,222
     Investments, available-for-sale, at fair value.......................             469,650           3,537,720
     Accounts receivable - subscriber, less allowance for doubtful
         accounts of approximately $2,760,000 in 2002 and $2,662,000 in
         2001.............................................................          23,134,809          15,275,708
     Accounts receivable - interexchange carriers, access charge pools
         and other, less allowance for doubtful accounts of approximately
         $422,000 in 2002 and $477,000 in 2001............................           3,948,192           5,691,105
     Inventories..........................................................           5,064,247           6,512,026
     Prepaid expenses and other...........................................           2,971,031           2,403,904
                                                                            ------------------  ------------------
              Total current assets........................................         176,661,211         185,171,912
                                                                            ------------------  ------------------

OTHER ASSETS:
     Intangibles, net.....................................................          40,996,035          42,840,534
     Goodwill.............................................................           7,191,180           7,191,180
     Restricted cash......................................................          12,032,009          24,062,500
     Debt issuance costs, net.............................................          21,401,335          20,584,960
     Deferred personal communications services ("PCS") activation expense            5,485,129           3,808,618
     Prepaid pension costs and other......................................           4,804,849           4,976,942
                                                                            ------------------  ------------------
              Total other assets..........................................          91,910,537         103,464,734
                                                                            ------------------  ------------------

PROPERTY, PLANT AND EQUIPMENT, NET........................................         319,975,041         289,277,220
                                                                            ------------------  ------------------
                    Total assets..........................................  $      588,546,789  $      577,913,866
                                                                            ==================  ==================


(Continued on next page)




                                       3


HORIZON TELCOM, INC., AND SUBSIDIARIES

Consolidated Balance Sheets (Continued)
As of September 30, 2002, and December 31, 2001
- --------------------------------------------------------------------------------


                                                                                          

                                                                              September 30,          December 31,
                                                                                  2002                   2001
                                                                          -------------------   -------------------
                                                                               (unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
CURRENT LIABILITIES:
     Line of credit.....................................................    $              --   $       19,167,338
     Current maturities of long-term debt...............................            2,000,000            2,000,000
     Accounts payable...................................................           20,683,151           28,773,270
     Payable to Sprint..................................................           14,865,582           10,244,529
     Deferred PCS revenue...............................................            4,926,404            3,712,734
     Accrued taxes......................................................            4,434,489            4,886,100
     Accrued interest, payroll and other accrued liabilities............           14,711,558           11,997,165
                                                                          -------------------   ------------------
              Total current liabilities.................................           61,621,184           80,781,136
                                                                          -------------------   ------------------

LONG-TERM DEBT AND OTHER LIABILITIES:
     Long-term debt, net of discount....................................          551,008,999          402,055,643
     Deferred federal income taxes, net.................................            3,589,013            4,632,157
     Postretirement benefit obligation..................................            6,045,912            5,490,015
     Deferred PCS activation revenue....................................            5,485,129            3,808,618
     Other long-term liabilities........................................           12,007,626           12,273,617
                                                                          -------------------   ------------------
              Total long-term debt and other liabilities................          578,136,679          428,260,050
                                                                          -------------------   ------------------
                  Total liabilities.....................................          639,757,863          509,041,186
                                                                          -------------------   ------------------

CONVERTIBLE PREFERRED STOCK OF SUBSIDIARY...............................          154,067,678          145,349,043

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY (DEFICIT):
     Common stock - class A, no par value, 200,000 shares authorized,
        99,726 shares issued and 90,552 shares outstanding, stated at
        $4.25 per share.................................................              423,836              423,836
     Common stock - class B, no par value, 500,000 shares authorized,
        299,450 shares issued and 271,926 outstanding, stated at $4.25
        per share.......................................................            1,272,662            1,272,029
     Treasury stock - 36,698 shares at cost.............................           (5,504,700)          (5,504,700)
     Accumulated other comprehensive income (loss), net.................             (552,154)           1,332,044
     Additional paid-in capital.........................................           72,197,212           72,188,904
     Deferred stock option compensation.................................             (769,943)          (1,079,610)
     Retained deficit...................................................         (272,345,665)        (145,108,866)
                                                                          -------------------   ------------------
              Total stockholders' equity (deficit)......................         (205,278,752)         (76,476,363)
                                                                          -------------------   ------------------
                  Total liabilities and stockholders' equity (deficit)..    $     588,546,789   $      577,913,866
                                                                            =================   ==================


                        The accompanying notes are an integral part of these consolidated financial statements.






                                       4




                                                                                               
HORIZON TELCOM, INC., AND SUBSIDIARIES

Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------


                                                         For the Three Months Ended           For the Nine Months Ended
                                                                 September 30,                       September 30,
                                                      ---------------------------------   ---------------------------------
                                                            2002              2001              2002              2001
                                                      ----------------  ---------------   ----------------  ---------------
OPERATING REVENUES:
     PCS subscriber and roaming.....................  $     54,212,134  $    33,149,798   $    150,069,815  $    74,515,536
     PCS equipment..................................         1,787,076        2,020,282          5,760,004        4,595,019
     Basic local and long-distance service..........         4,737,885        4,736,206         14,089,158       14,664,018
     Network access.................................         5,217,569        5,449,395         16,548,336       14,489,849
     Equipment systems sales, information services,
         Internet access and other..................         2,235,065        2,007,956          6,402,148        5,487,611
                                                      ----------------  ---------------   ----------------  ---------------
           Total operating revenues.................        68,189,729       47,363,637        192,869,461      113,752,033
                                                      ----------------  ---------------   ----------------  ---------------

OPERATING EXPENSES:
     Cost of goods sold ............................         4,138,059        4,306,689         13,066,769        9,168,124
     Cost of services (exclusive of items shown
         separately below)..........................        47,968,070       32,690,677        132,454,286       78,899,383
     Selling and marketing..........................        13,429,825       13,025,403         40,192,224       31,145,073
     General and administrative (exclusive of items
         shown separately below)....................        14,878,317       11,175,404         41,578,153       29,765,174
     Non-cash compensation..........................           120,031          101,868            309,667        1,047,312
     Depreciation and amortization..................        11,583,788        7,244,585         36,934,783       18,618,708
                                                      ----------------  ---------------   ----------------  ---------------
           Total operating expenses.................        92,118,090       68,544,626        264,535,882      168,643,774
                                                      ----------------  ---------------   ----------------  ---------------

OPERATING LOSS......................................       (23,928,361)     (21,180,989)       (71,666,421)     (54,891,741)
                                                      ----------------  ---------------   ----------------  ---------------

NONOPERATING INCOME (EXPENSE):
     Interest expense, net..........................       (17,023,096)      (6,534,196)       (46,151,847)     (20,335,066)
     Subsidiary preferred stock dividends...........        (3,005,897)      (2,816,052)        (8,718,663)      (8,169,630)
     Interest income and other, net.................           718,937          518,944          2,405,629        4,949,482
     Gain (Loss) on sale of property and equipment..             9,961               --           (631,042)              --
                                                      ----------------  ---------------   ----------------  ---------------
              Total nonoperating expense............       (19,300,095)      (8,831,304)       (53,095,923)     (23,555,214)
                                                      ----------------  ---------------   ----------------  ---------------

LOSS BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST       (43,228,456)     (30,012,293)      (124,762,344)     (78,446,955)

INCOME TAX (EXPENSE) BENEFIT........................            64,722         (458,383)        (1,115,349)      (1,482,351)

MINORITY INTEREST IN LOSS...........................                --               --                 --          983,883
                                                      ----------------  ---------------   ----------------  ---------------

NET LOSS............................................  $    (43,163,734) $   (30,470,676)  $   (125,877,693) $   (78,945,423)
                                                      ================  ===============   ================  ===============

Basic and diluted net loss per share................  $       (119.08)  $        (84.10)  $       (347.33)  $       (219.35)
                                                      ===============   ===============   ===============   ===============
Basic and diluted weighted-average common shares
   outstanding .....................................           362,478          362,320            362,413          359,904
                                                      ================  ===============   ================  ===============


                       The accompanying notes are an integral part of these consolidated financial statements.






                                       5




                                                                                                 
HORIZON TELCOM, INC., AND SUBSIDIARIES

Consolidated Statements of Other Comprehensive Income (Loss)
For the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------


                                                        For the Three Months Ended            For the Nine Months Ended
                                                               September 30,                          September 30,
                                                     --------------------------------      -------------------------------
                                                         2002               2001               2002              2001
                                                     -------------      -------------      -------------     -------------

NET LOSS.........................................    $ (43,163,734)     $ (30,470,676)     $(125,877,693)    $ (78,945,423)
                                                     ==============     ==============     ==============    ==============

OTHER COMPREHENSIVE INCOME (LOSS)................
    Net unrealized gain (loss) on hedging
       activities................................           20,686           (326,108)           140,728          (679,181)
    Net unrealized loss on securities
        available-for-sale net of taxes of $67,667
        and $1,043,144 for the three and nine
        months ended September 30, 2002,
        respectively.............................         (131,353)                --          (2,024,926)              --
                                                     --------------     --------------     ---------------   --------------

COMPREHENSIVE INCOME (LOSS)......................    $ (43,274,401)     $ (30,796,784)     $(127,761,891)    $ (79,624,604)
                                                     =============      =============      =============     ==============


                       The accompanying notes are an integral part of these consolidated financial statements.







                                       6




                                                                                             
HORIZON TELCOM, INC., AND SUBSIDIARIES

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2002 and 2001 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                     For the Nine Months Ended
                                                                                            September 30,
                                                                               ---------------------------------------
                                                                                      2002                 2001
                                                                               -----------------    ------------------

NET CASH USED IN OPERATING ACTIVITIES........................................        (51,254,563)         (55,397,622)
                                                                               -----------------    ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures....................................................        (66,084,898)        (101,502,116)
     Proceeds from sale of property, plant and equipment.....................          1,563,970                   --
     Proceeds from redemption of RTFC certificates...........................                 --            2,895,647
                                                                               -----------------    ------------------
        Net cash used in investing activities................................        (64,520,928)         (98,606,469)
                                                                               -----------------    ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings on long-term debt............................................        135,000,000            5,650,000
     Repayments on long-term debt............................................        (25,167,337)                  --
     Dividends paid..........................................................         (1,359,106)          (1,314,177)
     Deferred financing fees.................................................         (2,841,511)          (1,177,673)
     Treasury stock received as dividend.....................................                 --               (4,311)
                                                                                ----------------    -----------------
        Net cash provided by financing activities............................        105,632,046            3,153,839
                                                                               -----------------    -----------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........................        (10,143,445)        (150,850,252)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...............................        127,154,227          192,011,997
                                                                               -----------------    -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.....................................  $     117,010,782    $      41,161,745
                                                                               =================    =================




                                       7




HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------

NOTE 1 - GENERAL

     The  results  of  operations  for the  periods  shown  are not  necessarily
indicative  of the results to be expected for the fiscal year. In the opinion of
management,  the information contained herein reflects all adjustments necessary
to make a fair  statement  of the results for the  periods  presented.  All such
adjustments  are  of  a  normal  recurring  nature.  The  financial  information
presented  herein should be read in conjunction with the Company's Form 10-K for
the year ended December 31, 2001, which includes information and disclosures not
presented herein.

NOTE 2 - ORGANIZATION AND BUSINESS OPERATIONS

     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 wireless personal communications
service to a  twelve-state  region in the Midwest,  including  portions of Ohio,
Indiana, Pennsylvania,  Virginia and West Virginia, as a PCS affiliate of Sprint
Corporation ("Sprint") through its majority-owned subsidiary,  Horizon PCS, Inc.
The  Company  also  provides  landline  telephone  service,  very-high-data-rate
digital  subscriber  line  ("VDSL")  television  service and sells  equipment to
business and residential  customers to the southern Ohio region,  principally in
and surrounding  Chillicothe,  Ohio,  through its wholly-owned  subsidiary,  the
Chillicothe   Telephone   Company   ("Chillicothe   Telephone").   Through   its
wholly-owned  subsidiary,  Horizon  Technology,  Inc.,  formerly known as United
Communications,  Inc.  ("Horizon  Technology"),  the Company  offers dial-up and
broadband  Internet access services,  network services and resells long distance
services.  The  Company  also  owns 100% of  Horizon  Services,  Inc.  ("Horizon
Services"),  which  provides  administrative  services  to  other  subsidiaries.
Administrative  services  provided by Horizon  Services  generally  include such
functions as insurance,  billing and, accounting  services,  computer access and
other information technology services and human resources services.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Note 1 in the Notes to Consolidated  Financial  Statements in the Company's
Annual Report on Form 10-K for the year ended  December 31, 2001,  describes the
Company's significant accounting policies in greater detail than the disclosures
presented herein.

BASIS OF PRESENTATION

     The accompanying  unaudited  consolidated  financial statements reflect the
operations  of Horizon  Telcom and its  subsidiaries  and have been  prepared in
accordance  with the  rules  and  regulations  of the  Securities  and  Exchange
Commission  ("SEC").  Certain  information  and  footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles  in the  United  States  have been  condensed  or omitted
pursuant to such rules and regulations.  All material intercompany  transactions
and balances have been eliminated in consolidation.

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 materially from those
estimates.  See  "Critical  Accounting  Policies"  under  "Item 2.  Management's
Discussion and Analysis of Financial  Results and  Operations" of this Form 10-Q
for further information regarding estimates.




                                       8


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING FOR RATE REGULATION

     Chillicothe Telephone is subject to rate-regulation. Statement of Financial
Accounting  Standards  ("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  the  regulators  establish  rates.  As of
September 30, 2002, the Company has recorded  regulatory  assets and liabilities
of approximately $130,000 and $930,000,  respectively.  As of December 31, 2001,
regulatory  assets and  liabilities  were  approximately  $331,000 and $481,000,
respectively.

MINORITY INTEREST

     As part of the  acquisition of Bright PCS, 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   as  minority   interest  in  earnings  (loss)  in  the
accompanying  condensed  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.  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.

RESTRICTED CASH

     In connection  with Horizon PCS' December 2001 offering of  $175,000,000 of
senior notes, the first four semi-annual  interest  payments due under the terms
of the notes were placed in escrow.  Amounts to be paid toward interest payments
due within  twelve  months of the  balance  sheet date have been  classified  as
short-term.  The first interest payment on Horizon PCS' senior notes was made in
June 2002.

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:

     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 with  unrealized  gains and losses
reported in other comprehensive 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.
Trading  securities are carried at fair value with unrealized  holding gains and
losses reported in the statement of operations.

     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 and "other than temporary" declines in value.




                                       9

HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment,  including  improvements that extend useful
lives, are stated at original or acquisition cost 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  accounts  for  long-lived   assets  in  accordance  with  the
provisions  of SFAS No.  144,  "Accounting  for the  Impairment  or  Disposal of
Long-Lived  Assets."  SFAS No. 144 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 assets are  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 be disposed
of are reported at the lower of the carrying amount or fair value, less costs to
sell.

DERIVATIVE FINANCIAL INSTRUMENTS

     The  Company  has  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 require
an  entity  recognize  all  derivative  and  hedging  activities  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.
The Company uses interest rate swaps,  designated as cash flow hedges, to manage
interest  rate risk.  The net amount paid or received on interest  rate swaps is
recognized as an adjustment to interest expense. Outstanding temporary gains and
losses are netted  together  and shown as either a component  of other assets or
other long-term liabilities.

REVENUE RECOGNITION

     Horizon PCS sells handsets and  accessories  which are recorded at the time
of the sale as  equipment  revenue.  After the handset has been  purchased,  the
subscriber  purchases a service package,  which is recognized monthly as service
is provided and is included as subscriber  revenue.  The Company  defers monthly
service  revenue billed in advance.  Roaming revenue is recorded when Sprint PCS
subscribers,  not  based in the  Company's  network  area,  and  non-Sprint  PCS
subscribers roam onto Horizon PCS' network.  The roaming rate with Sprint PCS is
determined  between the Company and Sprint,  while the roaming  rate  charged to
other wireless carriers is negotiated by Sprint on the Company's behalf.

     Horizon PCS  accounts  for the  recognition  of  activation  fee revenue 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  activation-related  expense are deferred and
will be  recorded  over  the  average  life  for  those  customers  assessed  an
activation  fee,  currently  30 months,  as  subscriber  revenue and selling and
marketing, respectively.

     Horizon PCS records 100% of PCS  subscriber  revenues  from its  customers,
roaming  revenues  from  Sprint PCS  subscribers  based  outside its markets and
non-Sprint  PCS roaming  revenues.  Sprint  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,  roaming  charges  billed to Horizon PCS  customers for roaming onto a
non-Sprint PCS network and revenues from sales of equipment. Horizon PCS reports
the amounts retained by Sprint as general and administrative expense.



                                       10


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

     Intra-LATA,  (Local Access and Transport Area) (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.

     Other revenues include Internet access  services,  equipment  systems sales
and information services.  Internet access revenues are monthly service fees and
other charges  billed to customers of Horizon  Technology's  bright.net  dial-up
Internet  service.  Equipment  systems sales and information  services  revenues
consist of sales made by  Chillicothe  Telephone to various  businesses or other
residential customers for equipment used on the telephone system.

     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 Public Utilities  Commission of Ohio
("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.

     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.




                                       11



HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------



NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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.

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 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 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 is 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
common stock options,  stock purchase warrants and convertible  preferred stock.
These items will be included in the diluted earnings per share  calculation when
dilutive.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2002 the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 146,  "Accounting for Costs  Associated  with Exit or Disposal  Activities."
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal  activities by requiring that expenses related to the exit
of an  activity  or disposal  of  long-lived  assets be  recorded  when they are
incurred and  measurable.  Prior to SFAS No. 146,  these charges were accrued at
the time of commitment to exit or dispose of an activity. The Company will adopt
SFAS 146 on January 1, 2003, and it is not expected to have a material effect on
the Company's financial position, results of operations or cash flows.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No.  4,  44  and  64,   Amendment  of  FASB  Statement  No.  13,  and  Technical
Corrections."  SFAS No. 145 addresses the  accounting  for gains and losses from
the  extinguishments  of debt,  economic  effects and  accounting  practices  of
sale-leaseback   transactions  and  makes  technical   corrections  to  existing
pronouncements. The Company adopted SFAS No. 145 on July 1, 2002, and it has not
had 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  under SFAS No. 142.
The Company  adopted SFAS No. 144 on January 1, 2002.  See Note 6 for discussion
on the impact of the adoption of this statement.

     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  the  normal  operation  of a
long-lived  asset.  The Company will adopt this statement  effective  January 1,
2003,  and  it is not  expected  to  have a  material  effect  on the  Company's
financial position, results of operations or cash flows.



                                       12



HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     The Company adopted SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill  and Other  Intangible  Assets" on  January 1, 2002.  As result of the
adoption,  goodwill amortization ceased as of December 31, 2001, and the Company
is required to complete an  impairment  test of its remaining  goodwill  balance
annually (or more frequently if impairment  indicators  arise).  As of September
30, 2002, Horizon PCS has goodwill of approximately  $7,191,000,  related to the
acquisition of Bright PCS. See Note 9 herein for additional information.

RECLASSIFICATIONS

     Certain prior year amounts have been  reclassified to conform with the 2002
presentation.  Management  believes  the  reclassifications  are  immaterial  to
previously reported financial statements.

NOTE 4 - 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." These segments are wireless
personal  communications  services and landline telephone services. The wireless
personal  communications  services segment includes three major revenue streams:
PCS  subscriber  revenues,  PCS roaming  revenues and PCS equipment  sales.  The
landline telephone  services segment includes four major revenue streams:  basic
local service, long-distance service, network access and other related telephone
service.

     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  below  under  the  heading  "All  other."
Unallocated   administrative   expenses  represent  general  and  administrative
expenses incurred at a corporate level. All other assets represent common assets
not identified to an operating segment.

     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.




                                       13


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------

NOTE 4 - SEGMENT INFORMATION (CONTINUED)

     The following table includes net revenues, intercompany revenues, operating
earnings (loss),  depreciation and amortization expense and capital expenditures
for the three and nine months ended  September 30, 2002 and 2001,  and assets as
of September 30, 2002, and December 31, 2001,  for each segment and  reconciling
items  necessary  to total to amounts  reported  in the  condensed  consolidated
financial statements:



                                                                                                
                                                                                 Net Revenues
                                                          Three Months Ended                     Nine Months Ended
                                                             September 30,                          September 30,
                                                 -----------------------------------     -----------------------------------
                                                      2002                2001                2002                2001
                                                 ---------------     ---------------     --------------      ---------------
Wireless personal communications services...      $  55,999,210       $  35,170,080       $ 155,829,819       $  79,110,555
Landline telephone services.................          9,955,454          10,185,601          30,637,494          29,153,867
All other...................................          2,235,065           2,007,956           6,402,148           5,487,611
                                                 ---------------     ---------------     ---------------     ---------------
    Total net revenues......................      $  68,189,729       $  47,363,637       $ 192,869,461       $ 113,752,033
                                                 ===============     ===============     ===============     ===============


                                                                             Intercompany Revenues
                                                          Three Months Ended                     Nine Months Ended
                                                             September 30,                          September 30,
                                                 -----------------------------------     -----------------------------------
                                                      2002                2001                2002                2001
                                                 ---------------     ---------------     ---------------    ----------------
Wireless personal communications services...      $      61,770       $      34,024       $     254,862       $     118,616
Landline telephone services.................            280,886             222,560           1,086,141             669,471
All other...................................             99,738             151,816             318,477             204,308
                                                 ------------------  ---------------     ---------------    ----------------
    Total intercompany revenues.............      $     442,394       $     408,400       $   1,659,480       $     992,395
                                                 ==================  ===============     ===============    ================


                                                                           Operating Earnings (Loss)
                                                          Three Months Ended                     Nine Months Ended
                                                             September 30,                          September 30,
                                                 -----------------------------------     -----------------------------------
                                                      2002                2001                2002                2001
                                                 ---------------     ---------------     --------------      ---------------
Wireless personal communications services...      $ (23,701,465)      $ (21,518,608)      $ (72,803,783)      $ (55,789,754)
Landline telephone services.................          3,450,326           4,459,350          12,415,167          12,219,811
All other...................................         (1,024,235)           (999,155)         (2,808,180)         (2,060,806)
Unallocated administrative expense..........         (2,652,987)         (3,122,576)         (8,469,625)        (9,260,992)
                                                 ------------------  ---------------     ---------------     ---------------
    Total operating loss....................      $ (23,928,361)      $ (21,180,989)      $ (71,666,421)      $ (54,891,741)
                                                 ==================  ===============     ===============     ===============


                                                                     Depreciation and Amortization Expense
                                                          Three Months Ended                     Nine Months Ended
                                                             September 30,                          September 30,
                                                 -----------------------------------     -----------------------------------
                                                      2002                2001                2002                2001
                                                 ---------------     ---------------     --------------      ---------------
Wireless personal communications services...      $   9,302,721       $   5,158,646       $  30,232,128       $  12,980,232
Landline telephone services.................          1,711,465           1,589,397           5,114,793           4,628,805
All other...................................            569,602             496,542           1,587,862           1,009,671
                                                 ------------------  ---------------     --------------      ---------------
    Total depreciation and amortization.....      $  11,583,788       $   7,244,585       $  36,934,783       $  18,618,708
                                                 ==================  ===============     ==============      ===============






                                       14


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 4 - SEGMENT INFORMATION (CONTINUED)


                                                                                                

                                                                             Capital Expenditures
                                                          Three Months Ended                     Nine Months Ended
                                                             September 30,                          September 30,
                                                 -----------------------------------     -----------------------------------
                                                      2002                2001                2002                2001
                                                 ---------------     ---------------     --------------      ---------------
Wireless personal communications services..      $    8,507,660      $   24,331,396      $   57,620,672      $   90,350,650
Landline telephone services.................          2,014,624           3,005,081           5,868,406           6,508,718
All other...................................            928,340           1,014,080           2,595,820           4,642,748
                                                 ---------------     ---------------     --------------      ---------------
    Total capital expenditures..............     $   11,450,624      $   28,350,557      $   66,084,898      $  101,502,116
                                                 ===============     ===============     ==============      ==============



                                                                                   Assets
                                                                   ------------------------------------
                                                                     September 30,      December 31,
                                                                          2002                2001
                                                                   ----------------     ---------------
Wireless personal communications services................           $   490,572,467     $   480,754,022
Landline telephone services..............................                92,163,661          90,951,437
All other................................................                 5,810,661           6,208,407
                                                                   ----------------     ---------------
    Total assets.........................................           $   588,546,789     $   577,913,866
                                                                   ================     ===============






                                       15


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------

NOTE 4 - SEGMENT INFORMATION (CONTINUED)

     Net  operating  revenues by product and  service for each  segment  were as
follows:


                                                                                            
                                                        Three Months Ended                   Nine Months Ended
                                                           September 30,                       September 30,
                                                  ------------------------------      -------------------------------
                                                      2002              2001              2002              2001
                                                  -------------     ------------      ------------      -------------
Wireless personal communications services:
PCS subscriber revenues......................     $  39,219,056     $ 21,356,842      $111,141,497      $  48,870,231
PCS roaming revenues.........................        14,993,078       11,792,956        38,928,318         25,645,305
PCS equipment sales..........................         1,787,076        2,020,282         5,760,004          4,595,019
                                                  -------------     ------------      ------------      -------------
  Total wireless personal communication services
                                                     55,999,210       35,170,080       155,829,819         79,110,555
                                                  -------------     ------------      ------------      -------------

Landline telephone services:
Basic local service..........................         3,641,695        3,618,523        10,905,384         10,857,809
Long-distance service........................           300,115          297,906           878,529          1,147,635
Network access...............................         5,217,569        5,449,395        16,548,336         14,489,849
Other related telephone service..............           796,075          819,777         2,305,245          2,658,574
                                                  -------------     ------------      ------------      -------------
  Total landline telephone services..........         9,955,454       10,185,601        30,637,494         29,153,867
                                                  -------------     ------------      ------------      -------------

Other:
Internet access services.....................           760,057          800,356         2,385,462          2,390,087
Equipment system sales.......................           315,667          372,911           936,620          1,081,657
Other miscellaneous revenues.................         1,159,341          834,689         3,080,066          2,015,867
                                                  -------------     ------------      ------------      -------------
  Total other................................         2,235,065        2,007,956         6,402,148          5,487,611
                                                  -------------     ------------      ------------      -------------
      Total operating revenues...............     $  68,189,729     $ 47,363,637      $192,869,461      $ 113,752,033
                                                  =============     ============      ============      =============



NOTE 5 - INVESTMENTS

     The following  summarizes  unrealized  gains and losses on  investments  at
September 30, 2002, and December 31, 2001:


                                                                   
           2002:
                                                       Unrealized   Unrealized      Fair
                                             Cost         Gain         Loss         Value
                                        -----------  ------------ ------------ ------------
Equity securities available-for-sale    $   250,000  $    219,650 $         -- $    469,650
                                        ===========  ============ ============ ============

           2001:
                                                       Unrealized   Unrealized      Fair
                                              Cost         Gain         Loss        Value
                                        -----------  ------------ ------------ ------------
Equity securities available-for-sale    $   250,000  $  3,287,720 $         -- $  3,537,720
                                        ===========  ============ ============ ============






                                       16



HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment consists of the following:


                                                                              

                                                                      September 30,    December 31,
                                                                          2002             2001
                                                                    ---------------  ----------------
       Network assets..........................................     $   281,552,694  $   220,849,771
       Switching equipment.....................................          67,151,493       35,253,986
       Land and buildings......................................          15,861,621       15,223,363
       Computer and telecommunications equipment...............          15,779,287       14,292,341
       Furniture, vehicles and office equipment................          11,914,695       12,477,119
                                                                    ---------------  ---------------
         Property, plant and equipment in service, at cost.....         392,259,790      298,096,580
       Accumulated depreciation................................         (94,298,737)     (68,604,457)
                                                                    ---------------  ---------------
            Property, plant and equipment in service, net......         297,961,053      229,492,123
       Construction work in progress...........................          22,013,988       59,785,097
                                                                    ---------------  ---------------
              Total property, plant and equipment, net.........     $   319,975,041  $   289,277,220
                                                                    ===============  ===============


     Applicable  interest  charges  incurred  during  the  construction  of  new
facilities and network assets are capitalized as one of the elements of cost and
are amortized over the assets'  estimated  useful lives, in accordance with SFAS
No.  34.  The  Company  capitalized  interest  and  labor-related   expenses  of
approximately  $6,373,000 and $7,730,000 for the nine months ended September 30,
2002 and 2001, respectively.

     During 2002,  Horizon PCS launched  switches in Tennessee and  Pennsylvania
and decommissioned some switching  equipment in Chillicothe,  Ohio. As a result,
the Ohio switching  equipment is considered an impaired asset as defined by SFAS
No. 144. Accordingly,  depreciation and amortization expense for the nine months
ended  September  30,  2002,  includes  approximately  $3.5  million  related to
accelerated depreciation on the impaired asset. The total amount of depreciation
recorded to date on this equipment is approximately  $5.8 million.  The residual
book value of $400,000  approximates  fair market value at  September  30, 2002,
based on quoted market prices.

NOTE 7 - LONG-TERM DEBT

     The components of long-term debt outstanding are as follows:


                                                                                   

                                                      Interest Rate at       September 30,    December, 31,
                                                     September 30, 2002          2002             2001
                                                   ----------------------  ---------------  ----------------
          Horizon PCS:
          Discount notes..........................         14.00%          $   295,000,000  $    295,000,000
          Senior notes............................         13.75%              175,000,000       175,000,000
          Secured credit facility-term loan A.....         5.80%               105,000,000                --
          Secured credit facility-term loan B.....         6.32%                50,000,000        50,000,000
          Chillicothe Telephone:
          2002 Senior Notes.......................         6.64%                30,000,000                --
          1998 Senior Notes.......................         6.62%                12,000,000        12,000,000
          1993 Senior Notes.......................         6.72%                 2,000,000         8,000,000
                                                                           ---------------  ----------------
             Long-term debt, par value............                             669,000,000       540,000,000
          Less: Unaccreted interest portion of
               Horizon PCS discount notes.........                            (115,991,001)     (135,944,357)
          Less: Current maturities................                              (2,000,000)       (2,000,000)
                                                                           ---------------  ----------------
               Total long-term debt, net..........                         $   551,008,999  $    402,055,643
                                                                           ===============  ================





                                       17


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 7 - LONG-TERM DEBT (CONTINUED)

     As of September 30, 2002, Horizon PCS had $95.0 million committed under its
secured credit  facility in the form of a line of credit at a variable  interest
rate equal to the London Interbank  Offered Rate ("LIBOR") plus 400 basis points
with restrictions on its availability.

     Horizon PCS' secured credit facility includes financial covenants that must
be met each quarter.  Horizon PCS did not meet the covenant for earnings  before
interest,  taxes, depreciation and amortization ("EBITDA") for the first quarter
of 2002. As a result of higher than expected  gross and net additions to Horizon
PCS subscribers for that quarter,  it incurred  additional expenses to add those
customers.  Although Horizon PCS ultimately benefits from the revenues generated
by new subscribers, it 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
EBITDA in the short-term  during the period of the addition of new  subscribers,
which led to  non-compliance  with the EBITDA  covenant for the first quarter of
2002.

     On June 27, 2002, Horizon PCS obtained a waiver of the non-compliance  with
the EBITDA  covenant for the first quarter of 2002 and entered into an amendment
of the secured credit facility.  The amended facility  primarily adjusts certain
financial  covenants  and  increases the margin on the base interest by 25 basis
points,  while also providing for the payment of fees to the banking  group,  an
increase in  post-default  interest  rates, a new financial  covenant  regarding
minimum  available cash,  additional  prepayment  requirements,  restrictions on
Horizon PCS' borrowings  committed  under the remaining $95.0 million  revolving
credit facility and deposit  requirements  on the $105.0 million  borrowed under
its secured credit facility in March 2002.  This amendment and its  requirements
are  described  in detail in the Form 8-K filed by Horizon  PCS on June 27, 2002
(See  also  "Liquidity  and  Capital  Resources"  under  "Item  2.  Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included in this Form 10-Q).

     The Note  Purchase  Agreement  for the  1998  Senior  Notes of  Chillicothe
Telephone  contains a covenant  that  restricts the amount of  investments  that
Chillicothe  Telephone may make in loans,  stock or other  securities of another
company.  For the quarter ended June 30, 2002,  Chillicothe  Telephone failed to
comply  with  the  covenant  related  to  these  restricted  investments,  which
constitutes an event of default under the note purchase  agreement.  Chillicothe
Telephone  entered into a waiver  agreement  with the  noteholders to remedy the
non-compliance.  The waiver was signed by both  parties on August 8, 2002.  This
waiver was extended on September 12, 2002.

     The 1998 Senior  Notes and the 1993 Senior Notes of  Chillicothe  Telephone
contain a covenant that restricts the amount of Chillicothe  Telephone's  funded
debt.  Due to the issuance of the 2002 Senior Notes,  coupled with the fact that
the last  payment  due on the 1993 Senior  Notes was not made until  November 1,
2002, Chillicothe Telephone failed to comply with this covenant at September 30,
2002. A waiver of  non-compliance  was obtained in anticipation of the violation
of the 1998 Senior  Notes and signed by both  parties on August 14,  2002.  This
waiver was extended on September 12, 2002.  Also,  on August 14, 2002,  the 1993
Senior Notes were amended to provide for the issuance of the 2002 Senior Notes.

     In August 2002,  Chillicothe  Telephone issued  $30,000,000 of 6.64% senior
notes  ("2002  Senior  Notes")  due in full July 1, 2012.  The  proceeds  of the
offering were used to retire both the short-term  line of credit with Huntington
National Bank and the non-current  portion of the 1993 Senior Notes. The current
portion of the 1993 Senior Notes was repaid on November 1, 2002.  The  remaining
funds will be used for general corporate purposes.

     On November 12, 2002,  Chillicothe  Telephone amended and restated its 1998
$12,000,000  senior notes due 2018.  The interest rate on the amended notes will
be 6.72%,  an increase of 10 basis  points,  with the same  maturity date as the
1998 Senior Notes.  Chillicothe  Telephone  refinanced  its 1998 Senior Notes in
order to align the debt  covenants of those notes with the covenants of the 2002
Senior Notes, which are less restrictive then the covenants of the original 1998
Senior Notes.



                                       18




HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 8 - COMMITMENTS AND CONTINGENCIES

SPRINT 3G DEVELOPMENT FEES

     Recently,  Sprint has sought to increase  service fees during the remainder
of 2002 and beyond in connection with its development of 3G-related  back-office
systems and  platforms.  Horizon  PCS,  along with the other PCS  affiliates  of
Sprint,  are currently  disputing the validity of Sprint's right to pass through
this fee to Horizon PCS. If this dispute is resolved unfavorably to Horizon PCS,
then Horizon PCS will incur additional expenses.

OPERATING LEASES

     The  Company  leases  office  space and  various  equipment  under  several
operating leases. In addition, Horizon PCS has tower lease agreements with third
parties whereby it leases towers for substantially all its cell sites. The tower
leases  are  operating  leases  with a term  of  five to ten  years  with  three
consecutive five-year renewal option periods.

     Horizon PCS also leases space for its retail stores. At September 30, 2002,
Horizon PCS leased 39 of its 40 retail stores.

     The following table summarizes the annual lease payments required under the
Company's existing lease agreements at September 30, 2002:

                              Year                      Amount
             ------------------------------------   --------------
             Fourth quarter of 2002..............   $    3,560,000
             2003................................       18,082,000
             2004................................       16,249,000
             2005................................       13,022,000
             2006................................        7,976,000
             Thereafter..........................       10,136,000
                                                     -------------

             Future operating lease obligations..   $   69,025,000
                                                    ==============

CONSTRUCTION EXPENDITURES

     Construction  expenditures  for the  year  ended  December  31,  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  and  upgrade 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, cash flows or financial condition.



                                       19



HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------



NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTIUED)

ALLIANCES NETWORK AGREEMENT

     The Alliances are two independent PCS providers  offering service under the
NTELOS brand name. In August 1999,  Horizon PCS entered into a network  services
agreement  with  the  Alliances  for 13 of its  markets  in  Virginia  and  West
Virginia. The initial term is through June 8, 2008, with four automatic ten-year
renewals.  This  agreement was amended in the third  quarter of 2001.  Under the
amended  agreement,  Horizon PCS is obligated to pay fixed minimum  monthly fees
until December 2003, at a lower rate per minute than the prior agreement.  Usage
in excess of the monthly minute allowance is charged at a set rate per minute.

     The following  table  summarizes  the minimum  amounts  required to be paid
under the network services agreement.

                                              Period ending
           Year                                December 31,
           ----                              ---------------
           Fourth quarter of 2002..........  $   7,900,000
           2003............................     38,600,000
                                                ----------
           Future obligation...............  $  46,500,000
                                             =============

LONG-TERM DEBT COVENANTS

     As discussed in Note 7 above, Horizon PCS entered into a covenant amendment
under its  secured  credit  facility  in June 2002.  In  addition to a number of
changes to its secured credit  facility,  including an increase in the margin on
the base interest  rate,  this  amendment  placed  restrictions  on Horizon PCS'
ability to draw on the $95.0 million line of credit and deposit  requirements on
the $105.0  million term loan A borrowed  under the secured  credit  facility in
March 2002.

     The following table details the maximum amount  available to be borrowed on
the line of credit under  Horizon PCS'  secured  credit  facility for the period
then ended:

                                              Maximum amount
                                              available to be
                                                 borrowed
                                              ----------------
            September 30, 2002.............   $          --
            December 31, 2002..............              --
            March 31, 2003.................              --
            June 30, 2003..................      16,000,000
            September 30, 2003.............      26,000,000
            December 31, 2003..............      33,000,000
            March 31, 2004.................      52,000,000
            April 1, 2004..................      95,000,000




                                       20


HORIZON TELCOM, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
As of September 30, 2002, and December 31, 2001,
And for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited)
- --------------------------------------------------------------------------------


NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

     The following table details the minimum balance requirements placed on cash
and cash equivalents under the amended terms of the secured credit facility:


                                                                Deposit balance
                                                                  requirement
                                                             -------------------
At September 30, 2002.................................       $      71,000,000
October 1, 2002, through November 15, 2002............              63,000,000
November 16, 2002, through December 31, 2002..........              55,000,000
January 1, 2003, through February 15, 2003............              33,000,000
February 16, 2003, through March 31, 2003.............              11,000,000
April 1, 2003, through May 15, 2003...................               5,500,000

NOTE 9 - GOODWILL AND INTANGIBLE ASSETS

     During 1999 Horizon PCS entered into a joint venture  agreement through the
purchase of 25.6% of Bright  PCS. On June 27,  2000,  the Company  acquired  the
remaining  74.4% of Bright  PCS.  The  total  purchase  price was  approximately
$49,300,000  and was treated as a purchase  method  acquisition  for  accounting
purposes.  The purchase  price  exceeded the fair market value of the net assets
acquired by approximately $7,778,000.  The resulting goodwill was amortized on a
straight-line  basis over 20 years until  December  31, 2001.  At September  30,
2002,  the  remaining   unamortized   balance  of  goodwill  was   approximately
$7,191,000.

     The  Company  adopted  SFAS No.  142 on  January 1, 2002 (See Note 3). As a
result of the adoption,  goodwill  amortization  ceased as of December 31, 2001,
and the Company was  required to complete an  impairment  test on its  remaining
goodwill  balance as of the date of adoption.  The Company  completed  the first
step required by SFAS No. 142 and determined  the goodwill  remaining at January
1, 2002, was not impaired.  The Company will complete an impairment  test of the
remaining goodwill balance annually, or more frequently if impairment indicators
arise.

     The following pro forma disclosure  reconciles net loss available to common
stockholders,  as  presented  on the  accompanying  consolidated  statements  of
operations, excluding the effect of goodwill amortization:



                                                                                      
                                              Three Months Ended                        Nine Months Ended
                                                 September 30,                             September 30,
                                   ---------------------------------------   --------------------------------------
                                          2002                 2001                 2002                 2001
                                   ------------------   ------------------   ------------------   -----------------
Reported net loss..............    $     (43,163,734)     $   (30,470,676)     $  (125,877,693)    $ (78,945,423)
Goodwill amortization..........                   --               97,222                   --           291,666
                                   ------------------   ------------------   ------------------   -----------------
   Adjusted net loss...........          (43,163,734)         (30,373,454)        (125,877,693)      (78,653,757)
                                   ==================   ==================   ==================   =================

Basic and diluted net loss per
   share.......................    $         (119.08)     $        (84.10)     $       (347.33)    $      (219.35)
Goodwill amortization..........                   --                 0.27                   --               0.81
                                   ------------------   ------------------   ------------------   -----------------
   Adjusted basic and diluted
     net loss per share........    $         (119.08)     $        (83.83)     $       (347.33)    $      (218.54)
                                   ==================   ==================   ==================   =================






                                       21


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

     The following  discussion and analysis  should be read in conjunction  with
the consolidated financial statements and the related notes.

                           FORWARD-LOOKING STATEMENTS

     This  quarterly  report on Form 10-Q  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 quarterly report on Form 10-Q,  including  without  limitation,
the statements under "Item 2. Management's  Discussion and Analysis of Financial
Condition and Results of Operations" and under "Item 5. Other  Information"  and
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    our future compliance with debt covenants under our credit facilities;

     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;

     o    estimates for churn and ARPU (defined below);

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

     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 EBITDA and operating
          cash flow; and

     o    the anticipated impact of recent accounting pronouncements.

     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 quarterly report on Form 10-Q, including,  without limitation,
in conjunction with the  forward-looking  statements  included in this quarterly
report on Form 10-Q. 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 and our dependence on
          Sprint's back office services;



                                       22


     o    our future compliance with debt covenants;

     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 and the acceptance of new technology
          in the marketplace;

     o    competition  in the  industry  and markets in which we operate and the
          creditworthiness of new customers;

     o    changes in government regulation; and

     o    general political 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 "Item 5. Other  Information," which is incorporated
herein by reference,  for further  information  regarding several of these risks
and uncertainties.

OVERVIEW

     Horizon Telcom is a holding company, which, in addition to its common stock
ownership  of  Horizon  PCS,  owns  100% of 1)  Chillicothe  Telephone,  a local
telephone company, 2) Horizon Services,  which provides  administrative services
to other Horizon Telcom affiliates,  and 3) Horizon Technology,  a long-distance
and Internet services business.

     Horizon Telcom provides a variety of voice and data services to commercial,
residential/small  business and local market  segments.  Horizon Telcom provides
landline telephone service, VDSL television service and Internet access services
to the southern Ohio region,  principally in and surrounding Chillicothe,  Ohio.
Horizon  Telcom also  provides PCS  operations to a  twelve-state  region in the
Midwest, including Ohio, Indiana, Virginia and West Virginia, as an affiliate of
Sprint PCS.

     At September 30, 2002,  Chillicothe Telephone serviced approximately 38,300
access lines in Chillicothe,  Ohio and the surrounding area.  Horizon Technology
provided  Internet  service  to  approximately   13,300  customers  through  its
bright.net  Internet  service.  At September 30, 2002,  Horizon PCS had launched
service covering  approximately 7.4 million  residents,  or approximately 73% of
the  total  population  in its  territory,  and  serving  approximately  241,900
customers.

CRITICAL ACCOUNTING POLICIES

     Allowance  for Doubtful  Accounts.  Estimates are used in  determining  our
allowance for doubtful accounts  receivable,  which are based on a percentage of
our  accounts  receivables  by aging  category.  The  percentage  is  derived by
considering our historical  collections and write-off experience,  current aging
of our accounts receivable and credit quality trends, as well as Sprint's credit
policy.  However,  our  historical  write-off  and  receivables  trends  for our
wireless  customers  are  limited  due to our strong  subscriber  growth and the
recent launch of new markets.

     Under Sprint's  service plans,  wireless  customers who do not meet certain
credit  criteria  can select  any plan  offered  subject to an account  spending
limit,  referred to as ASL, to control  credit risk exposure.  Account  spending
limits range from $125 to $200  depending on the credit quality of the customer.
Prior to May 2001,  all of these  customers were required to make a deposit that
could be credited against future billings.  In May 2001, the deposit requirement
was  eliminated  on certain,  but not all,  credit  classes ("No Deposit ASL" or
"NDASL").  As a  result,  a  significant  amount  of our new  wireless  customer
additions (approximately 59% between May 1, 2001, and March 31, 2002) were under
the NDASL program.



                                       23


     This increase in sub-prime credit customers under the NDASL program has led
to higher  churn rates  (defined  below) and an increase in account  write-offs.
While the average  balance  written-off  for an NDASL customer is lower than the
average write-off balances of non-account  spending limit customers,  the number
of NDASL write-offs has caused an increase in the total amount  written-off each
quarter, resulting in the need for a higher allowance and provision for doubtful
accounts receivable.

     Beginning in November  2001, the NDASL program was replaced by "Clear Pay",
which had tightened credit  criteria.  In April 2002, we replaced Clear Pay with
"Clear  Pay II," which  re-instated  the  deposit  requirement  for most  credit
classes with account spending limits and featured increased back-office controls
with respect to credit qualification and account collections.  We anticipate the
implementation  of the Clear Pay II  program  will  reduce  our  future bad debt
exposure. If the deposit requirement is later removed or if these allowances for
doubtful  accounts  receivable  estimates are insufficient  for any reason,  our
operating income,  EBITDA and available cash could be reduced.  At September 30,
2002,  the  allowance for doubtful  accounts was  $2,760,000,  which  represents
approximately 11% of accounts receivable.  At September 30, 2002,  approximately
33% of the subscribers in our markets were account spending limit customers with
no deposit paid.

     Our  landline  segment  accounts  receivable  consist  primarily of amounts
billed to  interexchange  carriers (like AT&T) for allowing  their  customers to
access our network when their customers place a call.  Accounts  receivable also
include  charges  for  advertising  in  Chillicothe   Telephone's  yellow  pages
directory and amounts billed to customers for monthly  services.  Our collection
history  with  interexchange  carriers has been good.  However,  we do have some
exposure to WorldCom and WorldCom's MCI division,  which declared  bankruptcy on
July 21,  2002.  We estimate  amounts  billed to  WorldCom  to be  approximately
$600,000 at September 30, 2002, of which  approximately  $300,000 was related to
pre-petition  bankruptcy  balances.  The allowance for doubtful landline segment
accounts  receivable  is  approximately  10% of amounts  billed at September 30,
2002.

     Revenue  Recognition.  Horizon PCS sells wireless handsets and accessories,
which  are  recorded  at the time of the sale as  equipment  revenue.  After the
handset has been purchased,  the subscriber  purchases a service package that is
recognized monthly as service is provided and is included as subscriber revenue.
Horizon PCS defers a portion of the monthly  service  revenue  that is billed in
advance.

     Service revenues consist of PCS subscriber  revenues and roaming  revenues.
PCS  subscriber  revenues  consist  primarily of monthly  service fees and other
charges  billed to  customers  for Sprint PCS service in our  territory  under a
variety of service plans.  Roaming revenues consist of Sprint PCS and non-Sprint
PCS roaming.  We receive  Sprint PCS roaming  revenues at a per minute rate when
Sprint PCS  subscribers  based  outside of our  territory use our portion of the
Sprint PCS network.  Non-Sprint PCS roaming revenues include charges to wireless
service providers, other than Sprint PCS, when those providers' subscribers roam
on our network.  The Sprint PCS roaming rate is  negotiated  between the Company
and Sprint. The roaming rate charged to other wireless carriers for their use of
our network is negotiated by Sprint with the carrier on our behalf.

     We record 100% of PCS  subscriber  revenues  from our  wireless  customers,
Sprint PCS roaming revenues and non-Sprint PCS roaming revenues.  Sprint 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, roaming charges billed to our customers
for roaming onto a non-Sprint  PCS network and revenues from sales of equipment.
We report the amounts retained by Sprint as general and administrative expense.

     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 SAB No. 101, "Revenue Recognition
in  Financial  Statements."  Accordingly,  activation  fee  revenue  and  direct
customer  activation  expense are deferred and will be recorded over the average
life for those customers, currently estimated to be 30 months, that are assessed
an activation  fee. Prior to January 1, 2002, we estimated the average life of a
customer to be 36 months. We reduced this estimate to 30 months in consideration
of an  increase  in churn  (defined  below)  resulting  from the  NDASL  program
discussed earlier.

     The landline  telephone  services operating segment consists of basic local
and  long-distance  toll,  network access  services and other related  telephone
service revenue.  Intra-LATA,  (Local Access and Transport Area) (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


                                       24


and measured  services  billed to customers  utilizing  Chillicothe  Telephone's
landline 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 by
our landline  telephone  services  segment from the provision of exchange access
services  to an  interexchange  carrier or to an end user  beyond  the  exchange
carrier's  network.  Other related telephone service revenue includes  directory
advertising related to a telephone directory published annually.

     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.

     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.

     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  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.





                                       25



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED  SEPTEMBER 30, 2002 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2001

OVERVIEW OF THE THIRD QUARTER

     We have focused a significant  amount of our  operational  efforts over the
past twelve months on upgrading  our wireless  network to be able to provide the
first  level of third  generation  ("3G")  network  services  marketed by Sprint
nationally as "PCS Vision." In conjunction  with Sprint's  nationwide  launch of
PCS  Vision,  Horizon  PCS began  providing  3G  services  across our network in
mid-August 2002. This upgrade provides users of 3G service a new experience with
wireless  devices.  Subscribers  are now able to surf the  Internet  with  their
handsets, PDAs, and laptops at speeds of up to 144 kilobits per second ("kbps").
The average user will experience peak rates of 75-80 kbps, which is two to three
times  faster than  historical  dial-up  speeds.  We can now offer a host of new
products and services to our  subscribers  and we believe PCS Vision will entice
subscribers of other wireless carriers to move to our robust offerings.

     However,  the positive momentum generated by 3G was offset by a larger than
anticipated number of NDASL customers being involuntarily  disconnected.  During
the second  half of 2001 and first  half of 2002,  a  significant  number of our
customer  additions  were under the NDASL  program.  These lower credit  quality
customers  activated  under the NDASL  program led to higher  churn rates and an
increased  amount of bad debt during the third  quarter of 2002 as a significant
number of these customers were disconnected and written-off.

     Sprint has  discontinued  the NDASL program and replaced it with Clear Pay,
which  tightened  credit  restrictions,  and Clear Pay II,  which  re-instituted
deposit  requirements  for most lower credit  quality  customers and  introduces
additional controls on loss exposure. In addition, we have focused our marketing
efforts into recruiting higher quality customers. As a result, our percentage of
prime credit customers in our subscriber portfolio increased to 70% at September
30, 2002,  from 65% at March 31, 2002. We expect our churn rate to be consistent
to slightly  lower in the fourth quarter of 2002 than the 3.9% we experienced in
the third quarter.

     In response to  increased  competition  from other  carriers and to improve
focus on penetrating our markets with PCS Vision,  Horizon PCS implemented on an
operational  reorganization  on October  1,  2002.  We  realigned  our  internal
geographic  markets  and added a vice  president  to oversee our  marketing  and
retail   operations  teams.  We  look  forward  to  the  benefits  of  this  new
organizational  alignment  and believe it will result in higher gross  additions
and a better retention effort.

     Chillicothe  Telephone continued to upgrade its landline network with fiber
optic cabling.  This upgrade will expand  bandwidth  capacity,  improve  network
efficiency  and  extend  the reach of our  network.  Through  this  upgrade,  we
expanded  the  availability  of our VDSL  product  and saw steady  growth in the
number of new VDSL  subscribers.  Our VDSL  subscribers can currently enjoy over
100  digital  cable  channels,  high-speed  Internet  access and basic  landline
telephone service.

     This  discussion  and analysis is presented on an operating  segment basis.
The following table details the  consolidated  statements of income by operating
segment for the three months ended September 30, 2002 and 2001:




                                       26




                                                                                         
                                                             For the Three Months Ended, September 30,
                                              Wireless Personal
                                                Communications          Landline Telephone
                                                    Services                  Services                 All Other
(Dollars in thousands)                     ------------------------   -----------------------  -----------------------
OPERATING REVENUES:                            2002         2001          2002        2001         2002        2001
                                           -----------  -----------   ----------- -----------  ----------- -----------
   PCS subscriber and roaming..............$    54,212  $    33,150   $        -- $        --  $        -- $        --
   PCS equipment...........................      1,787        2,020            --          --           --          --
   Basic local and long-distance service...         --           --         4,738       4,736           --          --
   Network access..........................         --           --         5,218       5,450           --          --
   Equipment systems sales, information
     services, Internet access and other...         --           --            --          --        2,235       2,008
                                           -----------  -----------   ----------- -----------  ----------- -----------
     Total operating revenues.............      55,999       35,170         9,956      10,186        2,235       2,008
                                           -----------  -----------   ----------- -----------  ----------- -----------

OPERATING EXPENSES:
   Cost of goods sold ....................       3,974        4,126            --          --          164         181
   Cost of services.......................      43,807       29,187         2,379       2,297        1,782       1,207
   Selling and marketing..................      13,027       12,636           150         108          252         281
   General and administrative.............       9,491        5,475         2,263       1,731        3,125       3,969
   Non-cash compensation..................          99          106             1           1           19          (5)
   Depreciation and amortization..........       9,303        5,159         1,712       1,589          570         497
                                           -----------  -----------   ----------- -----------  ----------- -----------
     Total operating expenses.............      79,701       56,689         6,505       5,726        5,912       6,130
                                           -----------  -----------   ----------- -----------  ----------- -----------

OPERATING INCOME (LOSS)...................     (23,702)     (21,519)        3,451       4,460       (3,677)     (4,122)
                                           -----------  -----------   ----------- -----------  ----------- -----------

NONOPERATING INCOME (EXPENSE):
   Interest expense, net..................     (15,890)      (5,997)       (1,133)       (537)          --          --
   Subsidiary preferred stock dividends...      (3,006)      (2,816)           --          --           --          --
   Interest income and other, net.........         720          581             5         (67)          (6)          5
   Gain (Loss) on disposal of assets......          10           --            --          --           --          --
                                           -----------  ----------- - ----------- -----------  ----------- -----------
     Total nonoperating expense...........     (18,166)      (8,232)       (1,128)       (604)          (6)          5
                                           -----------  -----------   ----------- -----------  ----------- -----------

LOSS BEFORE INCOME TAX EXPENSE AND
   MINORITY INTEREST......................     (41,868)     (29,751)        2,323       3,856       (3,683)   (4,117)

INCOME TAX (EXPENSE) BENEFIT..............          --           --          (161)       (744)         225         285
                                           -----------  -----------   ----------- -----------  ----------- -----------

NET INCOME (LOSS)......................... $   (41,868) $   (29,751)  $     2,162 $     3,112  $    (3,458)$    (3,832)
                                           ===========  ===========   =========== ===========  =========== ===========

OTHER COMPREHENSIVE INCOME (LOSS)
   Net unrealized gain (loss) on hedging
      activities..........................          21         (326)           --          --           --          --
   Net unrealized loss on securities
      available-for-sale, net of taxes of
      approximately $68 for the three
      months ended September 30, 2002.....          --           --          (131)         --           --          --
                                           -----------  -----------   ----------- -----------  ----------- -----------

COMPREHENSIVE INCOME (LOSS)...............     (41,847)     (30,077)        2,031       3,112       (3,458)     (3,832)
                                           ===========  ===========   =========== ===========  =========== ===========





                                       27



WIRELESS PERSONAL COMMUNICATIONS SERVICES SEGMENT

     The following  discussion  details key operating metrics and the results of
operations for our wireless personal communications segment over the last fiscal
quarter. Our wireless personal  communications  segment consists entirely of the
operations of Horizon PCS.

KEY METRICS - HORIZON PCS

     Customer  Additions.  As  of  September  30,  2002,  we  provided  personal
communication service directly to approximately 241,900 customers. For the three
months ended September 30, 2002 and 2001, Horizon PCS net subscribers  increased
by approximately  6,800 and 40,300  customers,  respectively.  Gross activations
during the third quarter of 2002 were 21% lower than the same period in 2001 due
in  part  to  changes  in  deposit  requirements  for  new  low  credit  quality
subscribers.  Additionally,  an  increase  in the  churn of NDASL  and Clear Pay
subscribers  resulted  in overall  lower net  customer  additions  for the three
months ended  September 30, 2002,  compared to the three months ended  September
30, 2001.

     Cost Per Gross  Addition.  CPGA  summarizes the average cost to acquire new
customers  during the period.  CPGA is  computed by adding the income  statement
components  of selling and  marketing,  cost of equipment and  activation  costs
(which are included as a component of cost of service) and reducing  that amount
by the equipment revenue recorded.  That net amount is then divided by the total
new  customers  acquired  during the period.  CPGA was $365 for the three months
ended September 30, 2002,  compared to $307 for the three months ended September
30, 2001.  This increase is primarily the result of lower gross  activations  in
2002 compared to 2001.

     Churn. Churn is the monthly rate of customer turnover that both voluntarily
and involuntarily  discontinued  service during the month.  Churn is computed by
dividing the number of customers that discontinued service during the month, net
of 30-day  returns,  by the beginning  customer  base for the period.  Quarterly
churn is an  average  of the three  months in the  quarter.  Churn for the three
months ended September 30, 2002, was 3.9 % compared to 2.1% for the three months
ended  September 30, 2001.  This increase in churn is a result of an increase in
the amount of sub-prime credit quality customers Horizon PCS added whose service
was involuntarily discontinued during the period.

     Average  Revenue Per Unit.  ARPU summarizes the average monthly revenue per
customer.  ARPU is computed by dividing service revenue and roaming revenues for
the period by the average subscribers for the period.

    The following summarizes ARPU for the three months ended September 30:

                                                   2002            2001
                                               -------------   --------------
          Service revenues
             Recurring......................   $          40   $          45
             Minute sensitive...............              12              14
             Features and other.............               3              (2)
                                               -------------   -------------
               Total service revenues.......              55              57
                                               -------------   -------------

          Roaming revenues..................              21              31
                                               -------------   -------------
                 ARPU.......................   $          76   $          88
                                               -------------   -------------

     Recurring service ARPU has declined as more customers activated or migrated
to  service  plans in the  $29.99  to $39.99  monthly  recurring  charge  range.
Additionally,  recent  service  plans are offering more  available  minutes at a
lower  monthly  charge due to increased  competition  in the wireless  industry.
These  additional  minutes have driven down the ARPU received when customers use
more  minutes than their plan allows.  We  anticipate  this trend to continue on
voice-only service plans, but we anticipate higher service ARPU in the future as
subscribers activate on data and voice plans which offer more features, but at a
higher  monthly  charge.  ARPU from  features and other has  increased as we are
offering fewer  promotional  credits and have charged more contract  termination
fees in 2002 as a result of higher deactivation and churn rates.



                                       28


     On April 27, 2001,  Sprint 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 changed to $0.10 per minute on January 1, 2002.  After 2002,  the rate will
be changed to "a fair and reasonable  return" which has not yet been determined.
However,  based  on  preliminary   discussions  with  Sprint,  we  anticipate  a
significant  additional  reduction in the rate.  The  decreases in the rate will
reduce our revenue and expense per minute, but we anticipate this rate reduction
will be offset by volume  increases from the continued  build-out of our network
and subscriber growth,  resulting in greater overall roaming revenue and expense
in the future.  Somewhat  offsetting  that rate  reduction in Sprint PCS roaming
revenue  was an  increase in  non-Sprint  PCS  revenue as a result of  expanding
roaming agreements with other wireless carriers.

RESULTS OF OPERATIONS

     Revenues.  Subscriber  revenues for the three months  ended  September  30,
2002, were approximately $39.2 million,  compared to approximately $21.4 million
for the three months ended  September  30,  2001,  an increase of  approximately
$17.8 million.  The growth in subscriber revenues is primarily the result of the
growth in our  customer  base.  We managed  approximately  241,900  customers at
September 30, 2002, compared to approximately 146,600 at September 30, 2001. Our
customer  base  has  grown  because  we have  launched  additional  markets  and
increased our sales force.

     Roaming  revenues  increased  from  approximately  $11.8 million during the
three months ended  September 30, 2001, to  approximately  $15.0 million for the
three  months  ended  September  30,  2002,  an increase of  approximately  $3.2
million.  This increase resulted from expanding roaming agreements with wireless
carriers and from  launching  additional  markets over the past year,  including
markets covering major interstate highways. This increase was offset somewhat by
the decrease in the Sprint PCS roaming rate discussed above.

     PCS equipment  revenues for the three months ended September 30, 2002, were
approximately $1.8 million, compared to approximately $2.0 million for the three
months  ended  September  30,  2001,  representing  a decrease of  approximately
$200,000.  This decrease is  attributable to a decline in the sales price of the
handset as the average sales price,  net of discounts and rebates,  decreased to
$85 for the three months ended September 30, 2002, from $114 for the same period
in 2001.

     Cost of goods sold.  Cost of  equipment  includes  the cost of handsets and
accessories sold by our stores and direct sales force to our customers.  Cost of
equipment for the three months ended September 30, 2002, was approximately  $4.0
million,  compared to  approximately  $4.1  million for the three  months  ended
September 30, 2001, a decrease of  approximately  $100,000.  The decrease in the
cost of equipment  is the result of the lower growth in our wireless  customers.
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. Additionally,  we expect to incur additional expense
as existing  customers  upgrade their handsets to newer models to take advantage
of new  services  that may be  available  with  3G,  including  high-speed  data
applications.

     Cost of service.  Cost of service  includes costs associated with operating
our network,  including site rent,  utilities,  engineering  personnel and other
expenses  related to operations.  Cost of service also includes  interconnection
expenses,  customer  care,  Sprint back office and customer  care  charges,  and
roaming  fees.  We pay roaming fees to Sprint when our customers use Sprint PCS'
network  outside of our  territory.  We pay 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 our  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 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.

     Sprint provides  back-office  and other services to Horizon PCS.  Recently,
Sprint has sought to  increase  service  fees during the  remainder  of 2002 and
beyond in connection with its development of 3G-related  back-office systems and
platforms.  Horizon PCS,  along with the other Sprint  affiliates,  is currently
disputing  the  validity  of  Sprint's  right  to pass  through  this fee to the


                                       29


affiliates. If this dispute is resolved unfavorably to Horizon PCS, then Horizon
PCS will incur additional expenses which could have a material adverse impact on
our liquidity and financial results.

     Horizon PCS' cost of service for the three months ended September 30, 2002,
was approximately $43.8 million, compared to approximately $29.2 million for the
three  months  ended  September  30, 2001,  an increase of  approximately  $14.6
million. This increase reflects an increase in roaming expense and long distance
charges of  approximately  $3.7 million and the increase in costs incurred under
our network services agreement with the Alliances of approximately $3.8 million,
both as a result of our subscriber growth during 2001 and 2002. Additionally, at
September 30, 2002, our network covered  approximately 7.4 million people versus
approximately 6.6 million residents at September 30, 2001. As a result,  cost of
service in 2002 was higher than 2001 due to the  increase in network  operations
expense,  including tower lease expense,  circuit costs and payroll expense,  of
approximately  $5.2  million.  Growth in our customer base resulted in increased
customer care,  activations,  and billing expense of approximately  $1.7 million
and other variable  expenses,  including  interconnection  and national platform
expenses,  of  approximately  $200,000.  Overall,  the average cost of providing
service per the average  subscriber on our network decreased from $77 to $61 for
the three months ended  September  30, 2001 and 2002,  respectively,  as we have
increased our subscriber base.

     Selling and marketing  expenses.  Selling and marketing expenses consist of
costs  associated  with  operating  our  retail  stores,   including  marketing,
advertising,  payroll and sales commissions.  Selling and marketing expense also
includes  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.  Selling and  marketing  expenses rose to  approximately  $13.0
million for the three months ended September 30, 2002, compared to approximately
$12.6  million for the three months  ended  September  30, 2001,  an increase of
approximately  $400,000.  This includes a decrease in commissions  paid to third
parties of approximately  $300,000,  a decrease in subsidies on handsets sold by
third  parties of  approximately  $1.2 million and an increase in marketing  and
advertising  in our sales  territory of  approximately  $1.9 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 Sprint  management fee (which is 8% of "collected  revenues" defined
above),  a provision  for  doubtful  accounts  receivable  and costs  related to
corporate support functions  including costs associated with functions performed
for us by Horizon Services under our services agreement.  These services include
finance  and  accounting   functions,   computer   access  and   administration,
consulting, human resources and other administrative services. Horizon Services'
costs for these functions are charged to us using a standard FCC cost allocation
methodology.  Under  this  methodology,  all  costs  that  can  be  specifically
identified to us are directly charged to us, and all costs that are specifically
identified to other  subsidiaries  of Horizon Telcom are charged to them.  Costs
incurred by Horizon Services that cannot be specifically identified to a company
for which Horizon Services  provides  service are apportioned  among the Horizon
Telcom subsidiaries based on appropriate  measures.  Because of the economies of
scale  inherent  in a  centralized  service  company,  we believe we are able to
receive these  services less  expensively  through this  arrangement  than if we
provided them ourselves.

     General and  administrative  expenses for the three months ended  September
30, 2002, were approximately $9.5 million compared to approximately $5.5 million
in 2001, an increase of  approximately  $4.0 million.  The increase  reflects an
increase in the provision for doubtful  accounts of approximately  $2.8 million,
primarily due to the write-off of NDASL and ClearPay customers,  and an increase
in the Sprint  management  fee of  approximately  $1.4  million,  as a result of
higher  subscriber  revenues  in 2002,  offset by a  decrease  in other  general
expenses of approximately $200,000.

     Non-cash  compensation  expense.  For both the three months ended September
30, 2002 and 2001,  Horizon PCS  recorded  stock-based  compensation  expense of
approximately  $100,000  for  each  of  the  three  month  periods.  Stock-based
compensation  expense will continue to be recognized  through the  conclusion of
the vesting period for these options in 2005. The annual  non-cash  compensation
expense  expected  to be  recognized  for these stock  options is  approximately
$681,000 in 2002, $622,000 in 2003, $193,000 in 2004, and $71,000 in 2005.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expenses  increased by  approximately  $4.1 million to a total of  approximately
$9.3  million  during the three months ended  September  30, 2002.  The increase
reflects  the  continuing  construction  of our  wireless  network  as we funded
approximately $57.6 million of capital expenditures during the nine months ended
September 30, 2002.



                                       30


     Since  our  acquisition  of  Bright  PCS was  accounted  for as a  purchase
transaction, we recorded purchase method goodwill and recorded intangible assets
related  to the  acquisition  of Bright  PCS'  license  agreement  with  Sprint.
Amortization  expense of the intangible asset was approximately  $400,000 during
the three months ended September 30, 2002 and 2001.  Goodwill  amortization  was
approximately  $100,000  during  the three  months  ended  September  30,  2001.
Goodwill  amortization ceased as of December 31, 2001, with the adoption of SFAS
No. 142.

     Amortization  expense also includes  amortization  of an  intangible  asset
recorded in  September  2000 related to the grant of new markets to us by Sprint
in  September  2000.  We agreed to grant  warrants to Sprint in exchange for the
right to provide  service in these  additional  markets.  The  warrants  will be
issued to Sprint at the earlier of an initial  public  offering of the Company's
common stock or July 31, 2003. The intangible  asset is being amortized over the
remaining term of the Sprint  management  agreement,  resulting in approximately
$800,000 of amortization  expense per year.  Accordingly,  amortization  expense
related to this intangible asset was approximately $200,000 for the three months
ended September 30, 2002 and 2001.

     Gain on sale of  property  and  equipment.  During the three  months  ended
September 30, 2002, we realized a gain of  approximately  $10,000 related to the
sale of miscellaneous  equipment. The sale resulted in proceeds of approximately
$20,000.

     Interest  expense,  net.  Interest  expense  for  the  three  months  ended
September 30, 2002, was approximately  $15.9 million,  compared to approximately
$6.0  million in 2001.  The  increase  in  interest  expense was a result of our
additional  indebtedness.  Interest  on the  outstanding  balance of our secured
credit facility accrues at LIBOR plus a specified  margin.  On June 29, 2001, we
agreed to several  changes in the secured credit  facility  including a 25 basis
point increase in the margin on the annual interest rate. At September 30, 2002,
the interest rate on the $105.0  million term loan A borrowed  under our secured
credit  facility was 5.80%,  while the interest  rate on the $50.0  million term
loan  B  was  6.32%.  Interest  expense  on  the  secured  credit  facility  was
approximately  $2.7  million  and $1.1  million  during the three  months  ended
September 30, 2002 and 2001, respectively.

     Horizon PCS accrues  interest at a rate of 14.00%  annually on its discount
notes issued in September 2000 and will begin paying interest  semi-annually  in
cash  beginning in October  2005.  Unaccreted  interest  expense on the discount
notes was approximately  $116.0 million at September 30, 2002.  Interest expense
on the discount notes was approximately $6.8 million and $5.9 million during the
three months ended September 30, 2002 and 2001, respectively.

     On June 15, 2002, Horizon PCS began making semi-annual interest payments on
its senior notes issued in December 2001, at an annual rate of 13.75%.  Interest
expense  accrued on the senior notes was  approximately  $6.0 million during the
three months ended September 30, 2002. Under the terms of the senior notes, cash
to cover the first four  semi-annual  interest  payments was placed in an escrow
account.

     Interest expense also includes  approximately  $800,000 and $200,000 during
the  three  months  ended  September  30,  2002  and  2001,   respectively,   of
amortization  from the deferred  financing  fees related to Horizon PCS' secured
credit facility, its discount notes and its senior notes. Additionally, interest
expense includes approximately $300,000 and $800,000, in commitment fees Horizon
PCS paid on the unused portion of its secured credit  facility  during the three
months ended September 30, 2002 and 2001, respectively.

     Capitalized interest reduced interest expense during the three months ended
September  30,  2002 and  2001,  by  approximately  $700,000  and $2.0  million,
respectively.  We expect Horizon PCS' interest expense to increase in the future
as we borrow  under its secured  credit  facility to fund our  wireless  network
build-out and operating losses.

     Preferred stock dividend.  Horizon PCS' convertible  preferred stock pays a
stock dividend at the rate of 7.5% per annum, payable semi-annually,  commencing
May 1,  2001.  The  dividends  are paid with  additional  shares of  convertible
preferred  stock.  Through  September  30,  2002,  we have issued an  additional
3,245,134  shares  of  convertible  preferred  stock in  payment  of  dividends,
including  1,060,201 shares on May 1, 2002. An additional  1,099,958 were issued
on November 1, 2002, and are not included in the total above.

     Interest  income and other,  net.  Interest income and other income for the
three months ended  September 30, 2002,  was  approximately  $700,000 of income,
compared to approximately  $600,000 in 2001 and consisted  primarily of interest
income.



                                       31


     Income taxes.  Until  September  26, 2000,  Horizon PCS was included in the
consolidated  Federal  income tax  return of Horizon  Telcom.  We  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 is not able to  participate  in the
tax-sharing  agreement.  Additionally,  Horizon PCS is not able to recognize any
net operating loss benefits until it generates  taxable income.  Horizon PCS did
not record any income tax benefit for the three months ended  September 30, 2002
or 2001,  because of the  uncertainty of generating  future taxable income to be
able to recognize current net operating loss carryforwards.

     Net loss.  Horizon PCS' net loss for the three months ended  September  30,
2002, was  approximately  $41.9 million compared to approximately  $29.8 million
for the three months ended September 30, 2001. The increase in Horizon PCS' loss
reflects the continued  expenses  related to launching its wireless  markets and
building its wireless  customer base. We expect Horizon PCS to incur significant
operating losses and to generate  significant  negative cash flow from operating
activities while it continues to construct its wireless network and increase its
customer base.

     Other  comprehensive  income  (loss).  During  2001,  we entered  into two,
two-year  interest rate swaps which effectively fix $50.0 million of term loan B
borrowed under the secured credit facility. We do not expect the effect of these
swaps to have a material  impact to interest  expense for the remainder of their
lives. We recorded an unrealized gain of $21,000 in other  comprehensive  income
during the second  quarter of 2002  related to the change in market value of the
derivate instrument.

LANDLINE TELEPHONE SERVICES SEGMENT AND ALL OTHER SERVICES

     The following  discussion details the results of operations of our landline
telephone  services segment and all other services not assigned to a segment for
the last fiscal quarter.

RESULTS OF OPERATIONS

     Revenues.  Network access revenue  decreased by approximately  $200,000 for
the three months ended September 30, 2002, to approximately 5.9 million,  as the
Company saw lower revenue from pooled interexchange carriers.  Basic local, long
distance and other landline services  revenues was essentially flat,  increasing
by only  several  thousand  dollars  due to an  increase in basic local and long
distance  revenues,  partially  offset by a decrease in other related  telephone
services.

     Other revenues increased by approximately  $200,000 to $2.2 million for the
three months ended September 30, 2002. Other revenues were impacted by increased
VDSL  revenue as we  continue to build our  customer  base,  which was  somewhat
offset by lower bright.net  dial-up Internet service  subscribers.  We believe a
number of these lost dial-up customers have switched to high-speed VDSL service.

     Cost of goods  sold.  Cost of  goods  sold for  Chillicothe  Telephone  and
Horizon  Technology  primarily  consists of business  system  sales and customer
maintenance  expenses.  Cost of goods  sold for  landline  telephone  and  other
services was  essentially  flat at  approximately  $200,000 for the three months
ended September 30, 2002 and 2001.

     Cost of services.  Cost of services  include  customer  care  support,  and
network-related costs, including switching, access and circuit expenses. Cost of
services also  includes  expenses  related to the  installation  of  Chillicothe
Telephone's VDSL service.

     Cost of  services  for the three  months  ended  September  30,  2002,  was
approximately $4.2 million, compared to approximately $3.5 million for the three
months ended  September 30, 2001,  an increase of  approximately  $700,000.  The
majority  of  the  increase  was  related  to  the  continued  installation  and
programming   expenses   associated   with  our  VDSL  service,   while  Horizon
Technology's  long distance service saw an increase in cost of services due to a
higher numbers of subscribers.

     Selling and marketing  expenses.  Selling and marketing expenses consist of
costs  associated  with local marketing and  advertising  programs.  Selling and
marketing  expenses  for  landline  telephone  and other  related  services  was


                                       32


approximately  $400,000,  for each of the three months ending September 30, 2002
and 2001.  We  continue  to market  our VDSL  product  extensively  through  our
landline market.

     General and administrative  expenses.  General and administrative  expenses
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. General and administrative expenses
decreased by approximately  $300,000 to approximately $5.4 million for the three
months ended September 30, 2002, primarily due to a decrease in legal fees, rent
expense and other general expenses.

     Non-cash  compensation  expense.   Non-cash  compensation  expense  is  the
amortization of the value of stock options granted in November 1999. Stock-based
compensation  expense will continue to be recognized  through the  conclusion of
the vesting period for these options in 2005.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expenses for landline  telephone and other services  increased by  approximately
$200,000 to a total of approximately  $2.3 million during the three months ended
September 30, 2002.  The increase  reflects the continuing  construction  of our
VDSL network.

     Interest  expense,  net.  Interest  expense  for  the  three  months  ended
September 30, 2002, was  approximately  $1.1 million,  compared to approximately
$537,000 for the three months ended September 30, 2001. The increase in interest
expense was a result of our additional debt outstanding  during the three months
ended September 30, 2002, compared to the same period in 2001.

     In August 2002,  Chillicothe  Telephone issued  $30,000,000 of 6.64% Senior
Notes.  A  portion  of the  proceeds  was used to  retire  the line of credit on
September 28, 2002.  Interest expense on the 2002 Senior Notes was approximately
$262,000 during the third quarter of 2002.  Interest expense on the retired line
of credit and the  retired  1993 Senior  Notes was  approximately  $675,000  and
$391,000  during  the third  quarter  of 2002 and 2001,  respectively.  Interest
expense on Chillicothe  Telephone's 1998 Senior Notes was approximately $200,000
in 2002 and 2001.  Capitalized  construction  interest was approximately $24,000
and $54,000. Amortization of debt issuance costs associated with the 2002 Senior
Notes was approximately $20,000 in 2002.

     Interest income and other, net. The landline  telephone service segment had
essentially  no interest  income or other expenses in the third quarter of 2002.
In 2001, an expense was recorded related to non-operating corporate charges.

     Income tax expense. Income tax expense for the three months ended September
30,  2002,  was a benefit of  approximately  $100,000  compared to an expense of
approximately  $500,000 in 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 Horizon
PCS convertible  preferred  stock in September 2000,  Horizon PCS is not able to
participate  in the tax sharing  agreement with its parent nor is Horizon Telcom
able to recognize any net operating loss benefits from Horizon PCS. We expect to
continue to record income tax expense as a result of this tax deconsolidation.

     Other  comprehensive  income (loss).  During the third quarter of 2002, the
landline  telephone  segment recorded an unrealized loss, net of associated tax,
of approximately $131,000, on its investment in marketable securities classified
as  available-for-sale.  The decline in fair value of the security is reflective
of the  volatility  in the general  market for  technology  stocks over the past
twelve months.




                                       33



RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED  SEPTEMBER 30, 2002 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2001

     The  following  table  details  the  consolidated  statements  of income by
operating segment for the nine months ended September 30, 2002 and 2001.



                                                                                       

                                                              For the Nine Months Ended, September 30,
                                           ----------------------------------------------------------------------------
                                                 Wireless PCS           Landline Telephone
                                                    Services                  Services                 All Other
(Dollars in thousands)                     ------------------------   -----------------------  ------------------------
OPERATING REVENUES:                            2002         2001          2002        2001         2002        2001
                                           -----------  -----------   ----------- -----------  ----------- ------------
   PCS subscriber and roaming..............$   150,070  $    74,516   $        -- $        --  $        -- $        --
   PCS equipment...........................      5,760        4,595            --          --           --          --
   Basic local and long-distance service...         --           --        14,089      14,664           --          --
   Network access..........................         --           --        16,548      14,490           --          --
   Equipment systems sales, information
     services, Internet access and other...         --           --            --          --        6,402       5,487
                                           -----------  -----------   ----------- -----------  ----------- ------------
     Total operating revenues.............     155,830       79,111        30,637      29,154        6,402       5,487
                                           -----------  -----------   ----------- -----------  ----------- ------------

OPERATING EXPENSES:
   Cost of goods sold ....................      12,635        8,628            --          --          432         540
   Cost of services.......................     120,648       68,263         7,058       7,114        4,748       3,523
   Selling and marketing..................      38,959       30,039           411         375          822         731
   General and administrative.............      25,862       14,053         5,634       4,812       10,082      10,900
   Non-cash compensation..................         298          937             4           4            8         106
   Depreciation and amortization..........      30,232       12,980         5,115       4,629        1,588       1,010
                                           -----------  -----------   ----------- -----------  ----------- ------------
     Total operating expenses.............     228,634      134,900        18,222      16,934       17,680      16,810
                                           -----------  -----------   ----------- -----------  ----------- ------------

OPERATING INCOME (LOSS)...................     (72,804)     (55,789)       12,415      12,220      (11,278)    (11,323)
                                           -----------  -----------   ----------- -----------  ----------- ------------

NONOPERATING INCOME (EXPENSE):
   Interest expense, net..................     (44,084)     (18,674)       (2,067)     (1,642)          (1)        (19)
   Subsidiary preferred stock dividends...      (8,719)      (8,170)           --          --           --          --
   Interest income and other, net.........       2,464        4,838           (65)         23            7          89
   Gain (Loss) on disposal of assets......        (631)          --            --          --           --          --
                                           ------------ -----------   ----------- -----------  ----------- ------------
     Total nonoperating expense...........     (50,970)     (22,006)       (2,132)     (1,619)           6          70
                                           -----------  -----------   ----------- -----------  ----------- ------------

LOSS BEFORE INCOME TAX EXPENSE and
   minority interest......................    (123,774)     (77,795)       10,283      10,601      (11,272)    (11,253)

INCOME TAX (EXPENSE) BENEFIT..............          --           --        (1,707)     (1,977)         592         495

MINORITY INTEREST IN LOSS.................          --           --            --          --           --         984
                                           -----------  -----------   ----------- -----------  ----------- -------------
NET INCOME (LOSS)......................... $  (123,774) $   (77,795)  $     8,576 $     8,624  $   (10,680) $    (9,774)
                                           ============ ============  =========== ===========  ============ ============

OTHER COMPREHENSIVE INCOME (LOSS)
   Net unrealized gain (loss) on hedging
      activities..........................         141         (679)           --          --           --          --
   Net unrealized loss on securities
      available-for-sale..................          --           --        (2,025)         --           --          --
                                           -----------  -----------   ----------- -----------  ----------- ------------

COMPREHENSIVE INCOME (LOSS)...............    (123,633)     (78,474)        6,551       8,624      (10,680)     (9,774)
                                           ============ ============  =========== ===========  =========== ============





                                       34




WIRELESS PERSONAL COMMUNICATIONS SERVICES SEGMENT

     The following  discussion  details key operating metrics and the results of
operations for our wireless  personal  communications  service  segment over the
past nine months. Our wireless personal communications segment consists entirely
of the operations of Horizon PCS.

KEY METRICS - HORIZON PCS

     Customer  Additions.  During the nine months ended  September  30, 2002 and
2001, Horizon PCS net subscribers  increased by approximately  47,800 and 80,200
customers,  respectively. Gross activations during the first nine months of 2002
and  2001  were  132,900  and  108,800,  respectively.  The  increase  in  gross
activations  was  offset  by an  increase  in the  churn of NDASL  and Clear Pay
subscribers during the first nine months of 2002 resulting in lower net customer
additions for the nine months ended  September  30, 2002,  compared to the prior
year period.

     Cost Per Gross Addition.  Cost per gross addition for the nine months ended
September  30,  2002,  was  $356,  compared  to $337 for the nine  months  ended
September 30, 2001.  This increase  reflects  slightly higher costs offset by an
increase in the number of activations.

     Churn.  Churn  for the nine  months  ended  September  30,  2002,  was 3.5%
compared to 2.1% for the nine months ended  September 30, 2001. This increase is
due to an increase in the churn of NDASL and Clear Pay customers.

     Average Revenue Per Unit. The following summarizes ARPU for the nine months
ended September 30:

                                                     2002            2001
                                               -------------   ---------------
      Service revenues
         Recurring.........................     $       40      $      44
         Minute sensitive..................             12             15
         Features and other*...............              4             (4)
                                               --------------  ---------------
           Total service revenues..........             56             55
                                               --------------  ---------------

      Roaming revenues.....................             19             29
                                               --------------  ---------------
             ARPU..........................     $      75       $      84
                                               --------------  ---------------

     ---------------------
     * Excludes impact of a non-recurring adjustment to access revenue.

     Recurring service ARPU has declined as more customers activated or migrated
to  service  plans in the  $29.99  to $39.99  monthly  recurring  charge  range.
Additionally,  recent service plans are offering more minutes at a lower monthly
charge due to increased  competition in the wireless industry.  These additional
minutes have driven down the ARPU received when  customers use more minutes than
their plan allows.  We anticipate  this trend to continue on voice-only  service
plans,  but we  anticipate  higher  service  ARPU in the  future as  subscribers
activate  on data and voice plans  which  offer more  features,  but at a higher
monthly  charge.  ARPU from  features and other has increased as we are offering
fewer  promotional  credits and have charged more contract  termination  fees in
2002 as a result of higher deactivation and churn rates.

     On April 27, 2001,  Sprint 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 changed to $0.10 per minute on January 1, 2002.  After 2002,  the rate will
be changed to "a fair and reasonable  return" which has not yet been determined.
However,  based  on  preliminary   discussions  with  Sprint,  we  anticipate  a
significant  additional  reduction in the rate.  The  decreases in the rate will
reduce our revenue and expense per minute, but we anticipate this rate reduction
will be offset by volume  increases from the continued  build-out of our network
and subscriber growth,  resulting in greater overall roaming revenue and expense
in the future.  Somewhat  offsetting  that rate  reduction in Sprint PCS roaming
revenue  was an  increase in  non-Sprint  PCS  revenue as a result of  expanding
roaming agreements with other wireless carriers.




                                       35



RESULTS OF OPERATIONS

     Revenues. Subscriber revenues for the nine months ended September 30, 2002,
were approximately  $111.1 million,  compared to approximately $48.9 million for
the nine months ended  September  30, 2001, an increase of  approximately  $62.2
million. The growth in subscriber revenues is primarily the result of the growth
in our wireless  customer base. We managed  approximately  241,900  customers at
September 30, 2002, compared to approximately 146,600 at September 30, 2001. Our
wireless customer base has grown because we have launched additional markets and
increased our sales force.

     Sprint  assesses  access charges to long distance  carriers on Horizon PCS'
behalf for the termination of landline-originated  calls in our markets.  Though
regulations  generally entitle a carrier that terminates a call on the behalf of
another to be compensated  for providing that service,  these  regulations  were
developed in a period where services of this nature were provided exclusively by
local exchange carriers.  Certain long distance  carriers,  including AT&T, have
disputed Sprint's  assessment of these charges as well as the corresponding rate
at which the charges were determined.  In July 2002, the FCC ruled that AT&T was
not  required  to pay  these  charges  unless  AT&T had  agreed  to do so in its
contract with Sprint and remanded the case to a U.S.  District Court for further
proceedings.  Because  the  case  is  still  pending  we  cannot  predict,  with
certainty,  the final  outcome  of this  action.  As a  result,  we  recorded  a
reduction in revenue in the second quarter of 2002 of approximately $1.3 million
representing  previously billed and recognized access revenue. The Company plans
to cease recognition of this type of revenue in future quarters, unless there is
ultimately a favorable ruling by the courts or the FCC on this issue. Sprint has
asserted  the right to recover from us amounts  previously  billed on our behalf
and remitted to us by Sprint.  We will  continue to assess the ability of Sprint
or other carriers to recover these charges. We are also continuing to review the
availability  of defenses we may have against  Sprint's  claim to recover  these
revenues from us.

     Roaming revenues  increased from  approximately  $25.6 million for the nine
months ended  September  30, 2001, to  approximately  $38.9 million for the nine
months ended  September 30, 2002, an increase of  approximately  $13.3  million.
This increase  resulted from expanding  roaming  agreements  with other wireless
carriers and from  launching  additional  markets over the past year,  including
markets covering major interstate highways. This increase was offset somewhat by
the decrease in the Sprint PCS roaming rate discussed above.

     Equipment  revenues for the nine months  ended  September  30,  2002,  were
approximately $5.8 million,  compared to approximately $4.6 million for the nine
months ended September 30, 2001, an increase of approximately $1.2 million.  The
increase  in  equipment  revenues  is the result of an increase in the number of
handsets  sold,  somewhat  offset by a lower  sales  price of the handset as the
average sales price, net of discounts and rebates, decreased to $99 for the nine
months ended September 30, 2002, from $119 for the same period in 2001.

     Cost of service.  Cost of service for the nine months ended  September  30,
2002, was approximately $120.6 million,  compared to approximately $68.3 million
for the nine months ended September 30, 2001, an increase of approximately $52.3
million. This increase reflects the increase in roaming expense,  including long
distance charges, of approximately $15.4 million; the increase in costs incurred
under  our  wireless   network   services   agreement   with  the  Alliances  of
approximately  $9.8  million;  the  increase  in  wireless  network  operations,
including  tower  lease  expense,   circuit  costs  and  payroll   expense,   of
approximately $16.7 million;  increased customer care, activations,  and billing
expense of  approximately  $8.9  million;  and the  increase  in other  variable
expenses,   including   interconnection  and  national  platform  expenses,   of
approximately $1.5 million.  Overall,  the average cost of providing service per
the average  subscriber  on our network  decreased  from $77 to $60 for the nine
months ended September 30, 2001 and 2002, respectively, as we have increased our
subscriber base.

     Cost of equipment.  Cost of equipment  for the nine months ended  September
30, 2002,  was  approximately  $12.6  million,  compared to  approximately  $8.6
million  for  the  nine  months  ended   September  30,  2001,  an  increase  of
approximately $4.0 million.  The increase in the cost of equipment 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. Additionally, we expect to
incur additional  expense as existing  customers upgrade their handsets to newer
models and to take  advantage  of new services  that may be  available  with 3G,
including high-speed data applications.



                                       36


     Selling and  marketing  expenses.  Selling and  marketing  expenses rose to
approximately  $39.0  million  for the nine months  ended  September  30,  2002,
compared to approximately $30.0 million for the same period in 2001, an increase
of approximately $9.0 million.  This increase reflects the increase in the costs
of operating our 40 retail stores,  including  marketing and  advertising in our
sales  territory,  of approximately  $6.6 million,  the increase in subsidies on
handsets sold by third parties of  approximately  $900,000,  and the increase in
commissions paid to third parties of approximately $1.5 million.

     General and administrative  expenses.  General and administrative  expenses
for the nine months ended  September 30, 2002 were  approximately  $25.9 million
compared to  approximately  $14.1 million in 2001, an increase of  approximately
$11.8 million.  The increase  reflects an increase in the provision for doubtful
accounts receivable of approximately $8.2 million primarily due to the write-off
of NDASL and Clear Pay customers and an increase in the Sprint management fee of
approximately  $4.6 million as a result of higher  subscriber  revenues in 2002,
offset by a decrease in other general  expenses of  approximately  $1.0 million.
During the nine months ended  September 30, 2001,  we  recognized  approximately
$1.3 million of legal and  consulting  expenses  related to the  exploration  of
strategic business alternatives.

     Non-cash compensation expense. For the nine months ended September 30, 2002
and 2001, Horizon PCS recorded stock-based compensation expense of approximately
$300,000  and  $900,000  respectively.  The expense  recorded  in 2001  includes
approximately  $700,000  related to the  distribution of 7,249 shares of Horizon
Telcom stock to employees of Horizon PCS and $200,000 for stock options granted.
The expense in 2002 relates to the  amortization  of the value of stock  options
granted in 1999 and 2000.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expenses  increased by  approximately  $17.2 million to a total of approximately
$30.2 million in 2002. The increase reflects the continuing  construction of our
wireless   network  as  we  funded   approximately   $57.6  million  of  capital
expenditures during the nine months ended September 30, 2002.

     During 2002,  Horizon PCS launched  switches in Tennessee and  Pennsylvania
and disconnected some wireless  switching  equipment in Chillicothe,  Ohio. As a
result, the Ohio switching  equipment is considered an impaired asset as defined
by SFAS No. 144.  Accordingly,  depreciation  and  amortization  expense for the
three and nine months ended  September  30, 2002,  includes  approximately  $3.5
million of expense related to accelerated depreciation on the impaired assets.

     Amortization  expense  of the  intangible  asset  related to the Bright PCS
acquisition  was  approximately  $1.3  million  during  the  nine  months  ended
September 30, 2002 and 2001.  Goodwill  amortization was approximately  $300,000
during the nine months ended September 30, 2001. Goodwill amortization ceased as
of December 31, 2001, with the adoption of SFAS No. 142.

     Amortization  expense also includes  amortization  of an  intangible  asset
recorded in September 2000 related to the grant of new markets to Horizon PCS by
Sprint in September 2000.  Amortization expense related to this intangible asset
was  approximately  $600,000  for the nine months ended  September  30, 2002 and
2001.

     Loss on sale of  property  and  equipment.  During  the nine  months  ended
September  30,  2002,  Horizon  PCS  incurred a loss of  approximately  $600,000
related to the sale of network equipment and corporate-owned  vehicles. The sale
resulted  in  proceeds  of  approximately   $1.5  million.   The  vehicles  were
subsequently leased back from the purchaser.

     Interest expense, net. Interest expense for the nine months ended September
30, 2002, was  approximately  $44.1  million,  compared to  approximately  $18.7
million in 2001.  The increase in interest  expense was a result of Horizon PCS'
additional  indebtedness.  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 margin on the annual  interest rate.
At September  30, 2002,  the interest  rate on Horizon PCS' $105.0  million term
loan A borrowed under its secured credit facility was 5.80%,  while the interest
rate on the $50.0 million term loan B was 6.32%. Interest expense on the secured
credit  facility was $6.6 million and $3.6 million  during the nine months ended
September 30, 2002 and 2001, respectively.



                                       37


     Horizon PCS accrues  interest at a rate of 14.00%  annually on its discount
notes  issued in  September  2000 and will pay  interest  semi-annually  in cash
beginning in October 2005. Unaccreted interest expense on the discount notes was
approximately  $116.0 million at September 30, 2002. Interest expense on Horizon
PCS' discount  notes were  approximately  $20.0 million and $17.4 million during
the nine months ended September 30, 2002 and 2001, respectively.

     On June 15, 2002, Horizon PCS began making semi-annual interest payments on
its senior notes issued in December  2001 at an annual rate of 13.75%.  Interest
expense accrued on the senior notes was  approximately  $18.0 million during the
nine months ended September 30, 2002. Under the terms of the senior notes,  cash
to cover the first four  semi-annual  interest  payments was placed in an escrow
account.

     Interest  expense  also  includes  approximately  $2.0 million and $600,000
during the nine  months  ended  September  30, 2002 and 2001,  respectively,  of
amortization  from the deferred  financing  fees related to Horizon PCS' secured
credit facility,  discount notes and senior notes.  Also contributing to Horizon
PCS' interest expense during the nine months ended 2002 was  approximately  $1.3
million in commitment fees Horizon PCS paid on the unused portion of its secured
credit facility.

     Capitalized  interest  during the nine months ended  September 30, 2002 and
2001, was approximately $3.8 million and $5.1 million, respectively.

     Preferred stock dividend.  Horizon PCS' convertible  preferred stock pays a
stock dividend at the rate of 7.5% per annum, payable  semi-annually  commencing
May 1,  2001.  The  dividends  are paid with  additional  shares of  convertible
preferred  stock.  Through  September  30,  2002,  Horizon  PCS  has  issued  an
additional  3,245,134  shares  of  convertible  preferred  stock in  payment  of
dividends,  including  1,060,201 shares on May 1, 2002. An additional  1,099,958
were issued on November 1, 2002, and are not included in the total above.

     Interest  income and other,  net.  Interest income and other income for the
nine months ended September 30, 2002, was approximately $2.5 million compared to
approximately  $4.8 million in 2001 and consisted  primarily of interest income.
This decrease was due primarily to a lower average  balance of cash  investments
during  2002,  as  compared  to the  same  period  in  2001  and  due to a lower
short-term interest rate environment in 2002.

     Income taxes.  Until  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  Horizon  PCS'  convertible
preferred  stock  on  September  26,  2000,  Horizon  PCS  will  not be  able to
participate  in the tax sharing  agreement  nor will they be able to utilize any
net operating loss benefits until they start to generate taxable income. Horizon
PCS did not record any income tax benefit for the nine  months  ended  September
30, 2002 because of the  uncertainty  of generating  future taxable income to be
able to recognize current net operating losses.

     Net loss.  Horizon  PCS' net loss for the nine months ended  September  30,
2002, was approximately  $123.8 million compared to approximately  $77.8 million
for the nine months ended  September 30, 2001. The increase in Horizon PCS' loss
reflects the  continued  expenses  related to launching its markets and building
its customer base. Horizon PCS is expected to incur significant operating losses
and to generate  significant  negative cash flow from operating activities while
it continues to construct its wireless network and increase its customer base.

     Other  comprehensive  income (loss).  During 2001, Horizon PCS entered into
two, two-year interest rate swaps,  effectively fixing $50.0 million of the term
loan B borrowed under the secured credit  facility.  We do not expect the effect
of these swaps to have a material  impact to interest  expense for the remainder
of their  lives.  Horizon PCS  recovered  approximately  $141,000 of  previously
unrealized losses in other comprehensive  income during the first nine months of
2002.

LANDLINE TELEPHONE SERVICES SEGMENT AND ALL OTHER SERVICES

     The following  discussion details the results of operations of our landline
telephone  services segment and all other services not assigned to a segment for
the nine months ended September 30, 2002 and 2001.



                                       38


RESULTS OF OPERATIONS

     Revenues. Long-distance service revenue decreased for the nine months ended
September  30,  2002,   as  the  Company   continues  to  see  lower  usage  for
long-distance  service.  We expect  this trend to continue  for the  foreseeable
future,  as more customers use wireless  devices where long distance is included
for one monthly fee. The increase in network access is due to a recent ruling by
the  United  States  Court  of  Appeals  that  deals  with  a  similar  landline
telecommunications  company and its related carrier access rates. As a result of
this ruling, the Company recognized an additional $2.1 million of revenue during
the second  quarter  that had  previously  been set aside to settle  future over
earnings claims by other carriers.

     Other  revenues were  impacted by increased  VDSL revenue as we continue to
build our customer base, offset somewhat by lower sales of business systems.

     Cost of goods sold.  Cost of goods sold for the nine months ended September
30, 2002, was approximately $400,000, compared to approximately $500,000 for the
nine months ended September 30, 2001, a decrease of  approximately  $100,000 due
to lower sales of business systems.

     Cost of services.  Cost of services for the nine months ended September 30,
2002, was approximately  $11.8 million,  compared to approximately $10.6 million
for the nine months ended September 30, 2001, an increase of approximately  $1.2
million. Of the increase,  $300,000 was related to additional  personnel charges
and  approximately  $900,000,  was  related to the  continued  installation  and
programming  expenses  associated  with our  VDSL  service  as we build  out the
network and increase the subscriber base.

     Selling and  marketing  expenses.  Selling and  marketing  expenses rose to
approximately $1.2 million for the nine months ended September 30, 2002 compared
to  approximately  $1.1  million  for the same  period in 2001,  an  increase of
approximately $100,000, which was mostly related to additional payroll expenses.

     General and administrative  expenses.  General and administrative  expenses
were essentially  flat at approximately  $15.7 million for the nine months ended
September 30.

     Non-cash   compensation   expense.   This   compensation   expense  is  the
amortization of the value of stock options granted in November 1999.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expenses  increased by approximately  $1.1 million to a total of $6.7 million in
2002. The increase  reflects the continuing  upgrade of our landline  network to
optical fiber cabling.

     Interest expense, net. Interest expense for the nine months ended September
30, 2002, was approximately $2.1 million, compared to approximately $1.7 million
for the nine months ended  September 30, 2001. The increase in interest  expense
was a result of our  additional  debt  outstanding  during the nine months ended
September 30, 2002, compared to the same period in 2001.

     In August 2002,  Chillicothe  Telephone issued  $30,000,000 of 6.64% Senior
Notes.  A  portion  of the  proceeds  was used to  retire  the line of credit on
September 28, 2002.  Interest expense on the 2002 Senior Notes was approximately
$262,000 for the nine months ended September 30, 2002.  Interest  expense on the
retired line of credit and the retired 1993 Senior Notes was approximately  $1.3
million and $1.3 million for the nine months ended  September 30, 2002 and 2001,
respectively.  Interest expense on Chillicothe Telephone's 1998 Senior Notes was
approximately $600,000 in 2002 and 2001.  Capitalized  construction interest was
approximately  $83,000 and $170,000.  Amortization  of debt  issuance  costs was
approximately $29,000 in 2002 and approximately $14,000 in 2001.

     Interest income and other, net. The landline  telephone service segment had
approximately  $58,000 of expense for the nine months ended  September  30, 2002
compared to approximately $100,000 of income for the same period in 2001.

     Income tax expense.  Income tax expense for the nine months ended September
30, 2002, was approximately  $1.1 million compared to approximately $1.5 million
in 2001,  reflecting  lower net income before taxes.  Before September 26, 2000,


                                       39


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 Horizon PCS convertible  preferred stock in September 2000,  Horizon PCS
is not able to participate  in the tax sharing  agreement with its parent nor is
Horizon Telcom able to utilize any net operating loss benefits from Horizon PCS.
We expect to  continue  to record  income  tax  expense  as a result of this tax
deconsolidation.  Horizon PCS is unable to recognize  any tax benefits  from its
net operating losses until it generates taxable income.  Thus, Horizon PCS filed
a  separate   Federal   income  tax  return  for  the  short  period  after  the
deconsolidation  through  December 31, 2000 and will file a separate  return for
all subsequent periods.

     Minority  interest in loss. As part of the  acquisition  of 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 loss  attributable to the minority  shareholders
as  minority  interest  in  loss  in  the  accompanying  condensed  consolidated
statements of operations.  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.

     Other comprehensive  income (loss). For the nine months ended September 30,
2002,  the  landline  telephone  segment  recorded an  unrealized  loss,  net of
associated tax, of approximately  $2.0 million,  on its investment in marketable
securities  classified as  available-for-sale.  The decline in fair value of the
security is reflective of the  volatility in the general  market for  technology
stocks over the past twelve months.

LIQUIDITY AND CAPITAL RESOURCES

     For our debt outstanding at September 30,2002, 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  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.......................     $   155.0     $   155.0     $   146.7     $   126.5    $    99.7     $    99.7
     Variable interest rate (1) .           5.97%         5.97%         5.97%         5.97%        5.97%         5.97%
     Principal payments..........     $      -      $      -      $     8.3     $    20.2    $    26.8     $    99.7
Discount notes, due 2010 (2).....     $   186.3     $   217.5     $   253.1     $   283.7    $   286.1     $   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 (4)..     $    12.0     $    12.0     $    12.0     $    12.0    $    12.0     $    12.0
     Fixed interest rate.........           6.62%         6.72%         6.72%         6.72%        6.72%         6.72%
     Principal payments..........     $      -      $      -      $      -      $      -     $      -      $    12.0
2002 Senior notes, due 2012 (3)..     $    30.0     $    30.0     $    30.0     $    30.0    $    30.0     $    30.0
     Fixed interest rate.........           6.64%         6.64%         6.64%         6.64%        6.64%         6.64%
     Principal payments..........     $      -      $      -      $      -      $      -     $      -      $    30.0



- --------------------------
     (1)  Interest rate on the secured credit  facility  equals the LIBOR plus a
          margin that  varies from 400 to 450 basis  points.  At  September  30,
          2002,  $50.0  million  was  effectively  fixed  at 8.53%  through  two
          interest rate swaps discussed in "Item 3. Quantitative and Qualitative
          Disclosures  About Market Risk." The nominal  interest rate is assumed
          to equal  5.97% for all  periods  ($50.0  million  at 6.32% and $105.0
          million at 5.80%).

     (2)  Face  value of the  discount  notes  is  $295.0  million.  End of year
          balances  presented here are net of the discount and assume  accretion
          of the discount as interest expense at an annual rate of 14.00%.



                                       40


     (3)  In August 2002,  Chillicothe  Telephone  issued  $30,000,000 of 6.64%,
          10-year  Senior  notes due in full July 1, 2012.  The  proceeds of the
          offering  were used to retire both the  short-term  line of credit and
          the non-current portion of the 1993 Senior Notes.

     (4)  On November 12, 2002,  Chillicothe  Telephone amended and restated its
          1998  $12,000,000  senior  notes due 2018.  The  interest  rate on the
          amended notes will be 6.72%, an increase of 10 basis points,  with the
          same maturity date as the 1998 Senior Notes.

Statement of Cash Flows

     At September 30, 2002, we had cash and cash  equivalents  of  approximately
$117.0 million, including Horizon PCS' deposit requirements discussed below, and
working capital of  approximately  $115.0 million.  At December 31, 2001, we had
cash and cash equivalents of approximately $127.2 million and working capital of
approximately  $104.4  million.  Horizon PCS was also  required to escrow  funds
sufficient to cover the first four interest payments on the senior notes.  These
funds are presented as restricted cash on the  consolidated  balance sheet.  The
decrease  in cash  and  cash  equivalents  of  approximately  $10.1  million  is
primarily  attributable to the funding of our loss from continuing operations of
approximately  $125.9 million (this loss also includes certain non-cash charges)
and funding our capital  expenditures of approximately  $66.1 million during the
first nine months ended September 30, 2002, offset by the $105.0 million draw on
Horizon PCS' secured credit facility.

     Net cash used in operating  activities for the nine months ended  September
30, 2002, was approximately  $51.3 million.  This reflects the continuing use of
cash for our operations to build our customer base, including but not limited to
providing  service in our markets and the costs of acquiring new customers.  The
net loss of  approximately  $125.9 million was partially  offset by increases to
depreciation,  non-cash interest expense and the provision for doubtful accounts
receivable, offset by increases to accounts receivable. We expect to continue to
see negative  cash flows from  operations  for the remainder of 2002 and through
2003. We expect to be EBITDA positive in 2004.

     Net cash used in investing  activities was approximately  $64.5 million for
the nine months ended September 30, 2002, reflecting the continuing build-out of
the Horizon PCS network as well as the deployment of capital  necessary to offer
VDSL service. At September 30, 2002, we operated approximately 791 cell sites in
our PCS network (an  additional 507 cell sites were operated by the Alliances in
our territories).  This represents an addition of approximately 187 sites during
the nine months  ended  September  30, 2002.  In addition to the sites,  we have
increased  the  number  of PCS  switching  stations  in our  territory  and have
increased  our number of PCS retail  stores from 38 at the end of 2001, to 40 at
September 30, 2002. We will incur additional capital expenditures as we complete
the  build-out of our network,  including  the launch of  additional  PCS retail
stores,  completing  additional  cell sites for 3G  compatibility  and expanding
capacity at our switches as needed but anticipate future expenditures to be less
than historical levels.

     Net  cash  provided  by  financing  activities  for the nine  months  ended
September 30, 2002, was  approximately  $105.6 million  consisting  primarily of
$105.0  million draw Horizon PCS' term loan A required  under the secured credit
facility.  We incurred  approximately  $2.8 million of deferred  financing  fees
related to the  amendment of Horizon  PCS'  covenants  under its secured  credit
facility. In August 2002,  Chillicothe Telephone issued $30,000,000 of 6.64%, 10
year Senior notes due in full July 1, 2012 ("2002 Senior  Notes").  The proceeds
of the  offering  were used to retire  both the  short-term  line of credit with
Huntington  National Bank ($18,400,000 at repayment) and the non-current portion
of the 1993 Senior Notes ($6,000,000 at repayment).  The remaining funds will be
used for general corporate purposes.

     On November 12, 2002,  Chillicothe  Telephone amended and restated its 1998
$12,000,000  senior notes due 2008.  The interest rate on the amended notes will
be 6.72%,  an increase of 10 basis points,  with the same maturity  dates as the
1998 Senior Notes.  Chillicothe  Telephone  refinanced  its 1998 Senior Notes in
order to align the debt  covenants of those notes with the covenants of the 2002
Senior Notes, which are less restrictive than the covenants of the original 1998
Senior Notes.

Debt Covenants

     Horizon PCS' secured credit facility includes financial covenants that must
be met each  quarter.  Horizon PCS did not meet the  covenant for EBITDA for the
first  quarter  of 2002.  As a result  of  higher  than  expected  gross and net
additions  to Horizon PCS  subscribers  for the  quarter,  Horizon PCS  incurred
additional  expenses to add those  customers.  Although  Horizon PCS believes it
will ultimately benefit 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  affected EBITDA


                                       41


during  the  period  of  the   addition  of  new   subscribers,   which  led  to
non-compliance with the EBITDA covenant for the first quarter of 2002.

     On June 27,  2002,  Horizon  PCS  entered  into a fourth  amendment  to its
secured  credit  facility  with its bank group.  The amendment  adjusts  certain
financial  covenants  and  increases  the margin on the base interest rate by 25
basis points to LIBOR plus 400 to 450 basis points, while also providing for the
payment of fees to the  banking  group,  an increase  in  post-default  interest
rates, a new financial  covenant  regarding minimum  available cash,  additional
prepayment  requirements,  restrictions  on Horizon  PCS'  borrowings  under the
remaining  $95.0 million line of credit and deposit  requirements  on the $105.0
million  borrowed under the secured credit facility in March 2002. The amendment
and details on the requirements  and restrictions  were filed with the Company's
Form 8-K on June 27, 2002.

     The following table details the maximum amount  available to be borrowed on
the line of credit under  Horizon PCS'  secured  credit  facility for the period
then ended:


                                                        Maximum amount
                                                        available to be
                                                            borrowed
                                                      ------------------
September 30, 2002..................................   $              --
December 31, 2002...................................                  --
March 31, 2003......................................                  --
June 30, 2003.......................................          16,000,000
September 30, 2003..................................          26,000,000
December 31, 2003...................................          33,000,000
March 31, 2004......................................          52,000,000
April 1, 2004.......................................          95,000,000

     The following table details the minimum balance requirements placed on cash
and cash  equivalents  under the amended  terms of Horizon PCS'  secured  credit
facility:

                                                          Deposit balance
                                                            requirement
                                                       -------------------
At September 30, 2002.................................  $       71,000,000
October 1, 2002, through November 15, 2002............          63,000,000
November 16, 2002, through December 31, 2002..........          55,000,000
January 1, 2003, through February 15, 2003............          33,000,000
February 16, 2003, through March 31, 2003.............          11,000,000
April 1, 2003, through May 15, 2003...................           5,500,000

     As of September  30, 2002,  Horizon PCS was in  compliance  with all of the
applicable covenants, as amended.

     Chillicothe Telephone's 1998 Senior Notes contain a covenant that restricts
the amount of investments that Chillicothe Telephone may make in loans, stock or
other securities of another company.  For the covenant  reporting  quarter ended
June 30, 2002,  Chillicothe Telephone failed to comply with the covenant related
to these restricted investments, which constitutes an event of default under the
note purchase  agreement.  Additionally the 1993 Senior Notes contain a covenant
that  restricts the amount of  Chillicothe  Telephone's  funded debt. Due to the
issuance of the 2002 Senior Notes, the proceeds of which were used to retire the
non-current  portion of the 1993 Senior Notes,  coupled with the current portion
of the 1993  Senior  Notes,  Chillicothe  Telephone  failed to comply  with this
covenant at September 30, 2002. A waiver of  non-compliance  on the intercompany
investment  covenant violation on the 1998 Senior Notes on the 1998 Senior Notes
was  obtained on August 8, 2002,  and a waiver of  non-compliance  on the funded
debt  covenant  violation  ont he 1998 Senior  Notes was  obtained on August 14,
2002.  Both waivers were  extended on September  12, 2002.  Also,  on August 14,
2002, the 1993 Senior Notes were amended to provide for the issuance fo the 2002
Senior Notes.

Credit Ratings

     On  September  26,  2000,  Horizon PCS  received  $149.7  million  from the
issuance of $295.0  million of discount  notes.  The discount  notes  accrete in
value at a rate of 14%  compounded  semi-annually.  The  Company is  required to
begin making semi-annual cash interest payments on the discount notes on October
1, 2005. The discount notes were subject to an exchange offer that was completed
in 2001.  At September 30, 2002,  the discount  notes were rated by Standard and
Poors  ("S&P") as "B-",  which means a company's  obligation  is  vulnerable  to
non-payment under adverse business,  financial or economic  conditions,  but the
obligor of an issue


                                       42


currently has the capacity to meet its financial  commitment on its  obligation.
On October 29, 2002,  S&P  downgraded our corporate debt rating to "CCC+" with a
negative  outlook,  which  means  an  obligation  "is  currently  vulnerable  to
nonpayment  and is dependent upon favorable  business,  financial,  and economic
conditions for the obligor to meet its financial  commitment on the  obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not  likely to have the  capacity  to meet its  financial  commitment  on the
obligation." At September 30, 2002, Moody's Investors Services ("Moody's") rated
the notes as "Caa1",  which means an issue is in "poor standing." On October 28,
2002,  Moody's  downgraded  it's rating on our  discount  notes to "C," which is
Moody's lowest bond rating. The CUSIP on the discount notes is 44043UAC4.

     On December 7, 2001,  Horizon PCS received $175.0 million from the issuance
of unsecured senior notes.  Cash interest  payments on the senior notes are made
semi-annually  at an annual rate of 13.75%.  A portion of the offering  proceeds
was  placed in an escrow  account to fund the first  four  semi-annual  interest
payments and is classified as restricted  cash. The first  interest  payment was
made on June 15, 2002.  The senior notes were subject to an exchange  offer that
was completed in 2002. At September 30, 2002, the senior notes were rated by S&P
as "B-." On October 29, 2002, S&P downgraded our corporate debt rating to "CCC+"
with a negative  outlook.  Moody's rated the senior notes as "Caa1",  which is a
bond in "poor standing." On October 28, 2002,  Moody's  downgraded its rating on
our senior notes to "C," which is Moody's  lowest bond rating.  The CUSIP on the
senior notes is 44043UAH3.

Funding Requirements

     At  September  30,  2002,  Horizon PCS had a $95.0  million  line of credit
committed  under its secured credit facility with  restrictions.  We believe the
available borrowings under Horizon PCS' secured credit facility will be adequate
to fund the PCS  network  build-out,  anticipated  operating  losses and working
capital  requirements  until Horizon PCS achieves positive EBITDA,  which we now
expect to occur in first  quarter of 2004.  We believe the increase in churn and
subsequent  write-offs of involuntary NDASL  deactivations  combined with a slow
down in  activation  growth  during the second  and third  quarters  of 2002 has
extended the time it will take to reach positive EBITDA.

     For the year ended  December 31, 2002,  we  anticipate  our annual  funding
needs will be approximately $165.0 million, of which approximately $70.0 million
to $85.0 million will be used for capital  expenditures;  the remainder  will be
used to fund working capital and operating losses. The terms of their respective
credit  agreements  prohibit or  severely  restrict  the ability of  Chillicothe
Telephone and Horizon PCS to provide funds to their  affiliates in the event the
affiliate  experiences a shortfall.  The actual funds  required to build-out and
upgrade our wireless network and to fund operating losses, working capital needs
and other capital needs may vary  materially  from our 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.  Additionally,  Sprint is
planning to  continually  upgrade their  nationwide  wireless  network to deploy
higher  data-rate  speeds,  which may  require us to outlay  additional  capital
expenditures in future years that have not been determined at this point. Should
the Company be required to upgrade its network to provide 3G services  that meet
Sprint's  standards,  we may need to obtain  additional  financing to fund those
capital expenditures.

     Other  future  cash  expenditures  that may require  additional  borrowings
include:

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

     O    opening  additional  retail  stores,  beyond  our  current  plan of 51
          stores;

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

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



                                       43


     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 any  necessary  additional  financing,  or if we
incur further  restrictions  on the  availability of our current funding to meet
the covenants  imposed  under our credit  facilities or Horizon PCS is unable to
complete  its network  upgrades  and  build-out  as  required by the  management
agreements,  Sprint may terminate our  agreements;  we will no longer be able to
offer Sprint PCS products and services.  In this event,  Sprint may purchase our
operating  assets or capital  stock under terms defined in our  agreements  with
Sprint.  Also,  any delays in our  build-out  may result in penalties  under our
Sprint agreements, as amended. ` Other factors that would impact liquidity are:

     O    we may not be able to sustain our growth or obtain sufficient  revenue
          to  achieve  and  sustain   positive  cash  flow  from  operations  or
          profitability;

     O    we may  experience  a higher  churn rate,  which could result in lower
          revenue;

     O    new  customers  may be of lower  credit  quality,  which may require a
          higher provision for doubtful accounts;

     O    increased competition causing declines in ARPU;

     O    our  failure to comply  with  restrictive  financial  and  operational
          covenants under the secured credit facility; and

     O    our upgrade to 3G services,  due to which we have incurred significant
          capital expenditures, may not be successful in the marketplace and may
          not result in incremental revenue.

     Income from  ongoing  operations  and EBITDA are not  measures of financial
performance  under generally  accepted  accounting  principles and should not be
considered  alternatives  to net income (loss) as measures of  performance or to
cash flows as a measure of liquidity.

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  has been
historically  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.

INFLATION

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

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2002 the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement addresses financial accounting
and  reporting  for  costs  associated  with  exit  or  disposal  activities  by
requesting  that  expenses  related to the exit of an  activity  or  disposal of
long-lived  assets be recorded when they are incurred and  measurable.  Prior to
SFAS No. 146,  these  charges were accrued at the time of  commitment to exit or


                                       44


dispose of an  activity.  The Company will adopt SFAS No. 146 on January 1, 2003
and  has  not  yet  determined  the  financial   impact  the  adoption  of  this
pronouncement will have on its financial position or results of operations.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No.  4,  44  and  64,   Amendment  of  FASB  Statement  No.  13,  and  Technical
Corrections."  SFAS No. 145 addresses the  accounting  for gains and losses from
the  extinguishments  of debt,  economic  effects and  accounting  practices  of
sale-leaseback   transactions  and  makes  technical   corrections  to  existing
pronouncements. The Company adopted SFAS No. 145 on July 1, 2002, and it has not
had 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  adopted  SFAS No. 144 on January 1, 2002.  See Note 6 in the
"Notes to  Consolidated  Financial  Statements"  for discussion on the impact of
adoption of this statement.

     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 and is not expected to have a material  effect on the  Company's  financial
position, results of operations or cash flows.

     The Company adopted SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other  Intangible  Assets." on January 1, 2002. As a result of the
adoption,  goodwill amortization ceased as of December 31, 2001, and the Company
is required to complete an  impairment  test of its remaining  goodwill  balance
annually (more frequently if impairment  indicators  arise). As of September 30,
2002, Horizon PCS has goodwill of approximately  $7,191,000,  net of accumulated
amortization, related to the acquisition of Bright PCS. See Note 9 in the "Notes
to Consolidated Financial Statements" for additional information.

ITEM 3.  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 or other speculative purposes.
We also do not engage in transactions in foreign currencies that would expose us
to market risk.

     In the normal course of business,  our  operations  are exposed to interest
rate risk. Our primary  interest rate risk exposure  relates to (i) Horizon PCS'
variable-rate  secured  credit  facility,  (ii) our  ability  to  refinance  our
fixed-rate  notes at maturity at market rates,  and (iii) 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 term loan B borrowed  under Horizon
PCS' secured  credit  facility.  In the third  quarter of 2001,  we entered into
another  two-year  interest rate swap  effectively  fixing the  remaining  $25.0
million of term loan B. The following table compares the current market rates on
the balances subject to the swap agreements:

(Dollars in millions)                     At September 30, 2002
                                ------------------------------------------
                                   Balance     Market rate      Swap rate
                                ------------  --------------  ------------
Swap 1.....................           $25.0         6.32%           9.40%
Swap 2.....................           $25.0         6.32%           7.65%

     Since  our swap  interest  rates  are  currently  greater  than the  market
interest rates on our underlying  debt,  our results from  operations  currently
reflect a higher  interest  expense than had we not hedged our  position.  Since
inception  and through  September  30, 2002,  we have  recognized  approximately


                                       45


$200,000 in losses due to the ineffectiveness of these swaps in the consolidated
statements  of  operations.  At  September  30,  2002,  the  Company  recognized
approximately $700,000 in other comprehensive losses on the balance sheet.

     While we cannot predict our ability to refinance existing debt, we continue
to evaluate our interest rate risk on an ongoing  basis.  If we do not renew our
swaps,  or, if we do not hedge  incremental  variable-rate  borrowings under our
secured credit  facility,  we will increase our interest rate risk,  which could
have a  material  impact on our  future  earnings.  As of  September  30,  2002,
approximately  84% of our long-term debt is fixed-rate or is variable-rate  that
has been swapped under fixed-rate hedges, thus reducing our exposure to interest
rate risk.  Currently,  a 100 basis  point  increase  in  interest  rates  would
increase our interest expense approximately $1.1 million.

ITEM 4. CONTROLS AND PROCEDURES

     With the participation of management, the Company's chief executive officer
and chief  financial  officer  evaluated the Company's  disclosure  controls and
procedures  within  the 90 days  preceding  the  filing  date of this  quarterly
report.  Based  upon this  evaluation,  the chief  executive  officer  and chief
financial  officer  concluded  that  the  Company's   disclosure   controls  and
procedures  are effective in ensuring that material  information  required to be
disclosed  is  included  in the reports  that it files with the  Securities  and
Exchange Commission.

     There were no significant changes in the Company's internal controls or, to
the  knowledge of the  management  of the Company,  in other  factors that could
significantly affect these controls subsequent to the evaluation date.



                                       46



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

    None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     The Note  Purchase  Agreement  for the  1998  Senior  Notes of  Chillicothe
Telephone  contains a covenant  that  restricts the amount of  investments  that
Chillicothe  Telephone may make in loans,  stock or other  securities of another
company.  For the quarter ended June 30, 2002,  Chillicothe  Telephone failed to
comply  with  the  covenant  related  to  these  restricted  investments,  which
constitutes an event of default under the note purchase  agreement.  Chillicothe
Telephone  entered into a waiver  agreement  with the  noteholders to remedy the
non-compliance.  The waiver was signed by both  parties on August 8, 2002.  This
waiver was extended on September  12,  2002.  Also on August 14, 2002,  the 1993
Senior Notes were amended to provide for the issuance of the 2002 Senior Notes.

     The 1998 Senior  Notes and the 1993 Senior Notes of  Chillicothe  Telephone
contain a covenant that restricts the amount of Chillicothe  Telephone's  funded
debt.  Due to the issuance of the 2002 Senior Notes,  coupled with the fact that
the last  payment  due on the 1993 Senior  Notes was not made until  November 1,
2002, Chillicothe Telephone failed to comply with this covenant at September 30,
2002. A waiver of  non-compliance  was obtained in anticipation of the violation
of the 1998 Senior  Notes and signed by both  parties on August 14,  2002.  This
waiver was extended on September 12, 2002.  Also,  on August 14, 2002,  the 1993
Senior Notes were amended to provide for the issuance of the 2002 Senior Notes.

     In August 2002,  Chillicothe  Telephone issued  $30,000,000 of 6.64% senior
notes  ("2002  Senior  Notes")  due in full July 1, 2012.  The  proceeds  of the
offering were used to retire both the short-term  line of credit with Huntington
National Bank and the non-current  portion of the 1993 Senior Notes. The current
portion of the 1993 Senior Notes was repaid on November 1, 2002.  The  remaining
funds will be used for general corporate purposes.

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

    None.

ITEM 5. OTHER INFORMATION

                                  RISK FACTORS

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;



                                       47


     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.

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.



                                       48


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 for the year ended December 31, 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 competitive advantage,
     which  could,   however,   be  removed  by  regulators  at  any  time.  The
     Telecommunications   Act  of  1996  (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.

     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 more
     burdensome  requirements  in  the  Telecom  Act  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.



                                       49


     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

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.

     We expect to incur significant operating losses and to generate significant
negative  cash flow from  operating  activities  until 2004 while we continue to
construct our network and grow our customer  base.  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.

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 that make up our territory by specified dates.

     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 extended  contract dates. The amounts of
the penalties  depends on the market and length of delay 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 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 launched
service in portions of each of these  markets,  we did not  complete  all of the
build-out requirements.  We notified Sprint PCS in November 2001 that it was our
position that the reasons for the delay constitutes events of "force majeure" as
described  in the Sprint PCS  agreements  and that,  consequently,  no  monetary
penalties or other remedies were applicable.  The delay was 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 agreed to use  commercially  reasonable  efforts  to
complete the  build-out by June 30, 2002. We have not been able to complete some
of the sites in some markets due to continuing force majeure issues.

     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.



                                       50


OUR SUBSTANTIAL  INDEBTEDNESS  COULD ADVERSELY  AFFECT OUR FINANCIAL  HEALTH AND
PREVENT US FROM FULFILLING OUR LONG-TERM DEBT OBLIGATIONS.

     As of September 30, 2002, our total debt  outstanding  was $625.0  million,
comprised of $155.0 million borrowed under our secured credit  facility,  $175.0
million due under our senior  notes issued in December  2001 and $295.0  million
represented  by our discount  notes (which are reported on our balance  sheet at
September 30, 2002, net of a discount of approximately $116.0 million).

     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 positive  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.

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.



                                       51


     Provisions  of the Sprint PCS  agreements  could affect our  valuation  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"  as  defined  by  the  agreement.  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 our  company or our  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 the
Company and may operate to reduce the Entire Business Value of the Company.

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 that 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,  in varying degrees, to the economic,
administrative,  logistical,  regulatory  and  other  risks  described  in  this
document.  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.  PROBLEMS WITH THESE  SYSTEMS,  OR TERMINATION OF
THESE ARRANGEMENTS, COULD DISRUPT OUR BUSINESS AND POSSIBLY INCREASE OUR COSTS.

     Because  Sprint PCS  provides  our back  office  systems  such as  billing,
customer care and  collections,  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.

WE DEPEND ON OTHER  TELECOMMUNICATIONS  COMPANIES  FOR SOME  SERVICES  THAT,  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,


                                       52


Verizon and Sprint (long  distance) 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  some  of  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  and capacity  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 OUR 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  $155.0  million  was  borrowed  as of  September  30,  2002.
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  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 senior secured credit facility.

     Horizon PCS' secured credit facility includes financial covenants that must
be met each  quarter.  We did not meet the  covenant  for  EBITDA  for the first
quarter of 2002. As a result of higher than expected  gross and net additions to
Horizon PCS subscribers for the quarter,  we incurred additional expenses to add
those customers.  Although we ultimately  benefit from the revenues generated by
new  subscribers,  we incur 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
EBITDA in the  short-term  during the period of the addition of new  subscribers
which led to  non-compliance  with the EBITDA  covenant for the first quarter of
2002.

     On June 27, 2002, Horizon PCS obtained a waiver of the non-compliance  with
the EBITDA  covenant for the first quarter of 2002 and entered into an amendment
of the secured credit facility.  The amended facility  primarily adjusts certain
financial  covenants  and  increases the margin on the base interest by 25 basis
points,  while also providing for the payment of fees to the banking  group,  an
increase in  post-default  interest  rates, a new financial  covenant  regarding
minimum  available cash,  additional  prepayment  requirements,  restrictions on
Horizon PCS'  borrowings  under the  remaining  $95.0 million  revolving  credit
facility  and deposit  requirements  on the $105.0  million  borrowed  under the
secured credit facility in March 2002.

     There can be no assurance that Horizon PCS' financial or operating  results
will  not  be  lower  than  expected  in  future   quarters,   causing   another
non-compliance  to occur,  which could have a material adverse effect on Horizon
PCS' financial condition and results of operations.

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 contains  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:



                                       53


     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;

     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;

     o    minimum total revenues; and

     o    minimum EBITDA.

     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. An event of default under the secured credit facility may
prevent the  Company and the  guarantors  of the senior  notes and the  discount
notes from paying those notes or the guarantees of those notes.

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


                                       54


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.

WE MAY HAVE DIFFICULTY 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 or upgrade 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.  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  manufacturers  of specific  types
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 OR
UPGRADE 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,


                                       55


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 levels 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.

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  may have  significantly  greater  financial  and
technical  resources than we do, they could offer attractive pricing options and
they may have a wider variety of handset  options.  We expect existing  cellular
providers  will continue to upgrade their systems and provide  expanded  digital
services to compete with the Sprint PCS products and services 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 may experience could also harm our competitive position
and success.

     We anticipate  that market prices for two-way  wireless  voice services and
products   generally   will  continue  to  decline  as  a  result  of  increased
competition.  Consequently we may be forced to increase spending for advertising
and promotions.  Increased  competition also may lead to continued  increases in
customer churn. Those trends could cause further delays in our expected dates to
achieve positive EBITDA.

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 engineering 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 code division  multiple  access (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


                                       56


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
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.  However,  based
on preliminary  discussions with Sprint, we anticipated a significant additional
reduction  in the rate.  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.

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 MHz 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.



                                       57


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 the FCC will agree with us. If the FCC determines
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.

WE MAY NEED MORE CAPITAL THAN WE CURRENTLY  ANTICIPATE TO COMPLETE THE BUILD-OUT
AND UPGRADE 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  generations," or
"3G", technology. Sprint PCS has selected a version of 3G technology (1XRTT) for
its own  networks  and  required  us to upgrade  our  network  to provide  those
services.  We  currently  estimate  the  network  upgrade  to  1XRTT  will  cost
approximately $35 million,  but actual costs could exceed this estimate.  Sprint
PCS launched the new 3G technology  in August 2002 under the brand,  PCS Vision.
We participated in that launch along with other Sprint PCS affiliates.  We still
have additional  expenditures  pending to complete the full implementation of 3G
in all of our markets. 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.

     Recently,  Sprint has sought to increase  service fees during the remainder
of 2002 and beyond in connection with its development of 3G-related  back-office
systems and  platforms.  Horizon  PCS,  along with the other PCS  affiliates  of
Sprint,  are currently  disputing the validity of Sprint's right to pass through
this fee to Horizon PCS. If this dispute is resolved unfavorably to Horizon PCS,
then Horizon PCS will incur additional expenses.

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


                                       58


Sprint has  implemented  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;

     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 and
incur additional debt.

THE SPRINT PCS AGREEMENTS AND OUR RESTATED CERTIFICATE OF INCORPORATION  INCLUDE
PROVISIONS  THAT MAY  DISCOURAGE,  DELAY OR RESTRICT  ANY SALE OF OUR  OPERATING
ASSETS OR COMMON STOCK TO THE POSSIBLE DETRIMENT OF OUR NOTEHOLDERS.

     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 our
company. For example, our 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
restated certificate of incorporation could discourage any sale of our operating
assets or common stock.

     WE MAY  EXPERIENCE A HIGH RATE OF CUSTOMER  TURNOVER,  WHICH WOULD INCREASE
OUR COSTS OF OPERATIONS AND REDUCE OUR REVENUE AND POTENTIALLY CAUSE A VIOLATION
OF THE COVENANTS UNDER HPCS' SECURED CREDIT FACILITY.

     Our 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. We have experienced
an increase in churn during 2002, primarily caused by NDASL customers' inability
to pay for services  billed.  Current and future  strategies to reduce  customer
churn may not be successful.




                                       59


     The rate of customer turnover is affected by the following factors, several
of which are not within our ability to address:

     o    credit worthiness of customers;

     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    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.

OUR ALLOWANCE FOR DOUBTFUL ACCOUNTS MAY NOT BE SUFFICIENT TO COVER UNCOLLECTIBLE
ACCOUNTS.

     On an ongoing basis, we estimate the amount of customer receivables that we
may not collect to reflect  the  expected  loss on such  accounts in the current
period.  However,  our allowance for doubtful accounts may underestimate  actual
unpaid receivables for various reasons, including:

     o    adverse changes in our churn rate exceeding our estimates;

     o    adverse changes in the economy  generally  exceeding our expectations;
          or

     o    unanticipated changes in Sprint PCS' products and services.

     If our allowance for doubtful  accounts is  insufficient to cover losses on
our receivables, our business, financial position or results of operations could
be materially adversely affected.

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;



                                       60


     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.

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 Federal Aviation  Administration  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 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (A)  Exhibits

              3.1*            Articles of Incorporation of Horizon Telcom, Inc.

              3.2*            Bylaws of Incorporation of Horizon Telcom, Inc.

              4.1*            Form of Stock Certificate

              10.48**         Waiver Agreement between The Chillicothe Telephone
                              Company,  American  United Life Insurance  Company
                              and The State Life  Insurance  Company dated as of
                              August 8, 2002.

              10.49**         Senior Note Purchase  agreement for $30,000,000 at
                              6.64%, between The Chillicothe  Telephone Company,
                              The Variable Annuity Life Insurance  Company,  AIG
                              Annuity Insurance  Company,  and Modern Woodmen of
                              America, dated as of August 1, 2002.

              10.50**         Amended and Restated Note  Purchase  Agreement for
                              $12,000,000  at  6.72%,  between  The  Chillicothe
                              Telephone Company,  American United Life Insurance
                              Company  and The  State  Life  Insurance  Company,
                              dated as of November 1, 2002.

              10.51**         Waiver Agreement between The Chillicothe Telephone
                              Company,  American  United Life Insurance  Company
                              and The State Life  Insurance  Company dated as of
                              August 14, 2002.

              10.52**         Amendment   Agreement   between  The   Chillicothe
                              Telephone Company, Northern Life Insurance Company
                              and Reliastar Life  Insurance  Company dated as of
                              August 14, 2002.

              10.53**         Waiver Extension Agreement between The Chillicothe
                              Telephone   Company,   The  American  United  Life
                              Insurance  Company  and The State  Life  Insurance
                              Company dated as of September 12, 2002.

          *         Incorporated  by  reference  to the  exhibit  with  the same
                    number  previously  filed by the Registrant on Form 10 (Reg.
                    No.  0-32617)
          **        Filed herewith.

          (B)       Reports on Form 8-K

                    None.


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      Horizon Telcom, Inc., Certification for Quarterly Report on Form 10-Q


I, Thomas McKell, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Horizon Telcom, Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrants  other  certifying  officers  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) designed  such  disclosure  controls and  procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c)  presented  in this  quarterly  report  our  conclusions  about the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud,  whether or not material,  that  involves  management or
     other employees who have a significant  role in the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: November 13, 2002                 /s/  Thomas McKell
                                        -------------------------------------
                                        Thomas McKell
                                        President and Chief Executive Officer



                                       62




Horizon Telcom, Inc., Certification for Quarterly Report on Form 10-Q


I, Peter M. Holland, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Horizon Telcom, Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrants  other  certifying  officers  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) designed  such  disclosure  controls and  procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c)  presented  in this  quarterly  report  our  conclusions  about the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud,  whether or not material,  that  involves  management or
     other employees who have a significant  role in the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: November 13, 2002                      /s/  Peter M. Holland
                                             --------------------------
                                             Peter M. Holland
                                             Chief Financial Officer



                                       63




                                   SIGNATURES

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

                                  HORIZON TELCOM, INC.
                                  (Registrant)

Date:  November 13, 2002          By: /s/ Thomas McKell
                                      ----------------------------------
                                          Thomas McKell
                                          Chief Executive Officer


Date:  November 13, 2002          By: /s/ Peter M. Holland
                                      ----------------------------------
                                          Peter M. Holland
                                          Chief Financial Officer
                                          (Principal Financial and
                                          Chief Accounting Officer)







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