SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

VANGUARD CELLULAR SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
2

[logo]

April 20, 1998

To the Shareholders of
Vanguard Cellular Systems, Inc.:

I am pleased to invite you to the Annual Meeting of Shareholders of
your Company to be held at 9:30 a.m. on Tuesday, May 19, 1998, at the Company's
principal executive offices, 2002 Pisgah Church Road, Greensboro, North
Carolina. The Notice of the meeting and a Proxy Statement relating to matters to
be considered at the meeting are attached and a proxy card and return envelope
are enclosed. The shareholders are being asked to consider and approve the
reelection of certain members of the Board of Directors and ratify the selection
of Arthur Andersen LLP as the Company's independent auditors. These proposals
are discussed in detail in the enclosed Proxy Statement.

Whether or not you plan to attend the Annual Meeting, please sign
and return the proxy card in the postpaid return envelope so that your vote may
be counted.

Information relating to the Company's activities and operations
during the fiscal year ended December 31, 1997, is contained in the Company's
Annual Report, which is enclosed.

Sincerely,

Haynes G. Griffin
Chairman of the Board

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
VANGUARD CELLULAR SYSTEMS, INC.

TO THE SHAREHOLDERS OF VANGUARD CELLULAR SYSTEMS, INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
VANGUARD CELLULAR SYSTEMS, INC. will be held at the Company's principal
executive offices, 2002 Pisgah Church Road, Greensboro, North Carolina on
Tuesday, May 19, 1998, at 9:30 a.m. for the following purposes:

1. To elect three Class II nominees to the Board of Directors to
serve a three-year term until the 2001 Annual Meeting of
Shareholders;

2. To ratify the appointment of Arthur Andersen LLP as auditors
for the present year; and

3. To consider and act upon any other business that may come
before the meeting or any adjournment thereof.

All shareholders are invited to attend the meeting. Only those
shareholders of record as of the close of business on April 3, 1998, shall be
entitled to notice of and to vote at the meeting. It is important that your
stock be represented at this meeting to assure the presence of a quorum.

ENCLOSED IS A PROXY CARD WHICH YOU ARE URGED TO SIGN AND RETURN IN
THE POSTPAID RETURN ENVELOPE.

By Order of the Board of Directors

Stephen R. Leeolou
Secretary
April 20, 1998

VANGUARD CELLULAR SYSTEMS, INC.

Proxy Statement

This Proxy Statement is furnished to the shareholders of Vanguard
Cellular Systems, Inc. (the "Company") in connection with the solicitation of
proxies to be used in voting at the Annual Meeting of Shareholders to be held on
May 19, 1998. The address of the Company's principal executive offices is 2002
Pisgah Church Road, Greensboro, North Carolina 27455-3314. The approximate date
on which this Proxy Statement and the enclosed proxy were first sent or given to
shareholders was April 20, 1998.

The enclosed proxy is being solicited by the Board of Directors of
the Company. A shareholder who executes the accompanying proxy may revoke it at
any time before it is voted by filing with the Secretary of the Company a
written revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. All shares represented by
valid proxies received pursuant to this solicitation prior to the meeting and
not revoked before their exercise will be voted, and, if a choice is specified
with respect to any matter to be acted upon, the shares will be voted in
accordance with such specification. If no direction is made in the proxy, the
shares will be voted for the nominees for director named in this Proxy Statement
and for the other proposals described herein.

The cost of solicitation will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone or
telegram by directors, officers and employees of the Company or by D.F. King &
Co., Inc. of New York, New York. D.F. King is being paid a fee of $4,500 for
this service. In addition, brokers and other custodians, nominees or fiduciaries
may be reimbursed for their expenses in forwarding proxy materials to principals
and obtaining their proxies.

VOTING SECURITIES OUTSTANDING

Only shareholders of record as of the close of business on April 3,
1998, will be entitled to notice of and to vote at the Annual Meeting. On such
date, the Company had 37,232,053 shares of Class A Common Stock, par value $0.01
per share ("Common Stock"), issued and outstanding. There are no other voting
securities outstanding. Each share is entitled to one vote.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following are the only persons known to the Company who
beneficially own more than five percent of the Company's outstanding Common
Stock:

Beneficial Ownership (2)(3)
-----------------------------------
Name and Address (1) Shares Percent
-------------------- ------ -------

The Equitable Companies Incorporated 3,156,625(4) 8.48%
1290 Avenues of the Americas
New York, NY 10104

Stuart S. Richardson 2,120,248(5) 5.66%
c/o Lexington Global Asset Managers, Inc.
Park 80 West, Plaza Two
Saddle Brook, NJ 07663

- ----------

(1) Does not include Peter L. Richardson, whose address is c/o Piedmont
Financial Company, 230 North Elm Street, Greensboro, NC 27401, who may
be deemed a beneficial owner of more than five percent of the Common
Stock by reason of his position as trustee of certain trusts. Mr.
Richardson serves as trustee of the H. Smith Richardson Testamentary
Trust, the Smith Richardson Foundation and the Grace Jones Richardson
Testamentary Trust. The H. Smith Richardson Testamentary Trust holds
372,882 shares of Common Stock (1.00%), the Smith Richardson Foundation
holds 1,020,292 shares of Common Stock (2.74%), and the Grace Jones
Richardson Testamentary Trust holds 395,542 shares of Common Stock
(1.06%). In addition to shares that are held by these entities and that
may be deemed beneficially owned by Mr. Richardson, Mr. Richardson also
may be deemed to beneficially own 221,530 shares of Common Stock
(0.59%). As described in footnote (5) below, Stuart S. Richardson also
serves as a trustee of the H. Smith Richardson Testamentary Trust, the
Smith Richardson Foundation and the Grace Jones Richardson Testamentary
Trust and shares held by such entities are included in his beneficial
ownership.

(2) The descendants of Lunsford Richardson, Sr., their spouses, trusts and
corporations in which they have interests and charitable organizations
established by such descendants (collectively referred to as the
"Richardson Family") beneficially own approximately 9,516,202 shares or
24.96% of the Company's Common Stock and consequently may, if they act
in concert, be in a position to control the management and the affairs
of the Company. Such number of shares includes 890,250 shares which
members of the Richardson Family have the right to acquire under
presently exercisable options granted to them under Company stock
option plans. The individuals and institutions constituting the
Richardson Family have differing interests and may not necessarily vote
their shares in the same manner. Furthermore, trustees and directors
have fiduciary obligations (either individually or jointly with other
fiduciaries) that may dictate positions that differ from their personal
interests.

(3) Unless otherwise indicated, all shares are owned of record by the
persons named and the beneficial ownership consists of sole voting
power and sole investment power.

(4) Ownership as of December 31, 1997 as reported to the Company on a
Schedule 13G dated February 10, 1998. According to the Schedule 13G,
Equitable may be deemed to exercise sole voting power as to 2,883,425
shares and sole dispositive power as to 3,150,625 shares. AXA-UAP and a
group consisting of four French mutual insurance companies, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Alpha
Assurances Vie Mutuelle and AXA Courtage Assurance Mutuelle, may be
deemed to exercise sole voting and dispositive power over all of the
foregoing shares attributed to Equitable.

2
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(5) Ownership as of April 3, 1998. Includes 200,750 shares that Mr.
Richardson has the right to acquire under presently exercisable stock
options granted to him under Company stock option plans; 17,900 shares
owned by Mr. Richardson's spouse; 372,882 shares held by the H. Smith
Richardson Testamentary Trust, 1,020,292 shares held by the Smith
Richardson Foundation and 395,542 shares held by the Grace Jones
Richardson Testamentary Trust, of which Mr. Richardson is a trustee;
and 81,843 shares held by various other trusts of which Mr. Richardson
is also a trustee. The shares shown as beneficially owned do not
include 66,296 shares held in trusts for the benefit of Mr.
Richardson's children. Mr. Richardson denies beneficial ownership of
the shares held by such trusts. The shares shown also do not include
135,911 shares held by trusts of which Mr. Richardson may be deemed to
share investment power, but exercise no voting power. Mr. Richardson
denies beneficial ownership of the shares directly owned by his spouse.

3
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SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock, as of April 3, 1998, by its
directors, nominees for election as directors, the executive officers named in
the Summary Compensation Table and by all directors, nominees and executive
officers as a group.

Amount and Nature
Name of Beneficial Owner of Beneficial Ownership (1) Percent
- ------------------------ --------------------------- -------

Stuart S. Richardson.................................. 2,120,248 (2) 5.66%
Haynes G. Griffin..................................... 1,561,156 (3) 4.12%
Stephen R. Leeolou.................................... 1,621,428 (4) 4.28%
L. Richardson Preyer, Jr.............................. 1,758,571 (5) 4.64%
Timothy G. Biltz...................................... 139,022 (6) *
Stephen L. Holcombe................................... 202,909 (7) *
Richard C. Rowlenson ................................. 212,252 (8) *
F. Cooper Brantley.................................... 25,198 (9) *
Doris R. Bray......................................... 10,800 (10) *
Robert M. DeMichele................................... 1,037,542 (11) 2.79%
L. Richardson Preyer, Sr.............................. 71,673 (12) *
Robert A. Silverberg.................................. 169,000 (13) *
All Directors, Nominees and Executive Officers
as a group (14 persons)......................... 8,175,294 (14) 20.34%

- ----------

* Represents less than 1%

(1) Unless otherwise indicated, all shares are owned of record by the
persons named and the beneficial ownership consists of sole voting
power and sole investment power.

(2) For a detailed description of the nature of Mr. Richardson's beneficial
ownership, see "Security Ownership of Certain Beneficial Owners."

(3) Includes 681,000 shares that Mr. Griffin has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Also includes 5,271 shares owned by Mr. Griffin's spouse
as to which he shares voting and investment power. Does not include
26,742 shares held by trusts, the sole beneficiaries of which are Mr.
Griffin's sons and the trustee of which is Mr. Griffin's brother. Mr.
Griffin denies beneficial ownership of the foregoing shares owned by
his spouse and held by such trusts. The shares shown also do not
include 173,555 shares held by a trust of which Mr. Griffin may be
deemed to share investment power but over which he has no voting power.

(4) Includes 681,000 shares that Mr. Leeolou has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Does not include 36,954 shares held by trusts, the sole
beneficiaries of which are Mr. Leeolou's children and the trustee of
which is Mr. Leeolou's brother. Mr. Leeolou denies beneficial ownership
of the shares held by these trusts. The shares shown also do not
include 150,000 shares held by a trust of which Mr. Leeolou may be
deemed to share investment power but over which he has no voting power.

(5) Includes 681,000 shares that Mr. Preyer has the right to acquire under
presently exercisable stock options granted to him under Company stock
option plans. Also includes 12,061 shares owned by Mr. Preyer's spouse
as to which he shares voting and investment power. Does not include
63,279 shares held by trusts, the sole beneficiaries of which are Mr.
Preyer's children and the trustee of which is Mr. Preyer's sister. Mr.
Preyer denies beneficial ownership of the foregoing shares owned by his
spouse and held by such trusts.

(6) Includes 137,866 shares that Mr. Biltz has the right to acquire under
presently exercisable options granted to him under Company stock option
plans.

4
8

(7) Includes 175,800 shares that Mr. Holcombe has the right to acquire
under presently exercisable options granted to him under Company stock
option plans.

(8) Includes 168,300 shares that Mr. Rowlenson has the right to acquire
under presently exercisable options granted to him under Company stock
option plans. Also includes 18,237 shares owned by Mr. Rowlenson's
spouse as to which he shares voting and investment power. Does not
include 13,550 shares held by trusts, the sole beneficiaries of which
are Mr. Rowlenson's children and the trustee of which is Mr.
Rowlenson's brother-in-law. Mr. Rowlenson denies beneficial ownership
of the foregoing shares owned by his spouse and held by such trusts.

(9) Includes 4,000 shares that Mr. Brantley has the right to acquire under
presently exercisable options granted to him under Company stock option
plans.

(10) Includes 8,500 shares that Mrs. Bray has the right to acquire under
presently exercisable options granted to her under Company stock option
plans.

(11) Includes 8,500 shares that Mr. DeMichele has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 1,020,292 shares held by the Smith Richardson Foundation, of
which Mr. DeMichele serves as one of eight trustees. The shares held by
the Smith Richardson Foundation are also reported as beneficially owned
by Stuart S. Richardson. Mr. DeMichele denies beneficial ownership of
the shares held by such foundation.

(12) Includes 8,500 shares that Mr. Preyer has the right to acquire under
presently exercisable options granted to him under Company stock option
plans and 28,245 shares held by Mr. Preyer's spouse. Mr. Preyer denies
beneficial ownership of the foregoing shares owned by his spouse. The
shares shown do not include 6,559 shares held by a trust of which Mr.
Preyer may be deemed to share investment power but over which he has no
voting power.

(13) Includes 4,000 shares that Mr. Silverberg has the right to acquire
under presently exercisable options granted to him under Company stock
option plans and 45,486 shares that represent Mr. Silverberg's pro rata
ownership of Common Stock owned by a corporation of which he is an
officer, director and principal shareholder.

(14) Includes 2,963,915 shares that directors and executive officers have
the right to purchase under presently exercisable options granted to
them under Company stock option plans.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under federal securities laws, the Company's directors, its
executive officers, and any persons holding more than 10 percent of the
Company's stock are required to report their ownership of the Company's stock
and any changes in that ownership to the Securities and Exchange Commission.
Specific due dates for these reports have been established and the Company is
required to report in this proxy statement any failure to file by these dates.
During fiscal 1997, all of these filing requirements were satisfied by the
Company's directors, officers and 10 percent holders. In making these
statements, the Company has relied on the written representations of its
directors, officers and 10 percent holders and copies of the reports that they
have filed with the Commission.

5
9

ELECTION OF DIRECTORS

It is intended that the persons named in the accompanying proxy will
vote for the three nominees listed below for directors, unless the authority to
do so is withheld. A plurality of the votes cast is required to elect each
director, and, as a result, broker nonvotes will not affect the election results
if a quorum is present. In the event that any nominee should not be available to
serve for any reason, the proxy holders may vote for substitute nominees
designated by the Board of Directors. The Board of Directors has no reason to
believe any of the nominees named below will be unavailable to serve as a member
of the Board of Directors. All three nominees are presently members of the Board
of Directors of the Company.

The Board of Directors of the Company is divided into three classes:
Class I, Class II and Class III. In accordance with this classification, the
members of Class II of the Board of Directors are to be elected at this Annual
Meeting. If elected, the nominees will serve until the 2001 Annual Meeting of
Shareholders. The directors designated as Class III have been previously elected
to serve until the 1999 Annual Meeting of Shareholders and the directors
designated as Class I have been previously elected to serve until the 2000
Annual Meeting of Shareholders.

Director
Name, Age and Principal Occupation for Last Five Years Since
- ------------------------------------------------------ -----

Nominees for Three-Year Term (Class II)

F. Cooper Brantley, 50, Member, Adams Kleemeier Hagan Hannah & Fouts,
P.L.L.C. (Attorneys-at-Law), 1971-present; formerly President of
Brantley Communications, Inc., a cellular system owner and operator. 1995

Haynes G. Griffin, 51, Chairman of the Board and Co-Chief Executive
Officer of the Company, 1996-present; President and Chief Executive
Officer of the Company, 1984-1996; Chairman of the Board of
International Wireless Communications Holdings, Inc.; director,
Lexington Global Asset Managers, Inc., a diversified financial services
company, Geotek Communications, Inc. and Inter--Act Systems,
Incorporated. 1984

L. Richardson Preyer, Sr., 79, Private Investor; Distinguished Fellow
in Public Policy, University of North Carolina at Greensboro,
1981-1992; director, Lexington Global Asset Managers, Inc. 1985

Continuing Directors (Class III)

Robert M. DeMichele, 53, President, Chief Executive Officer and
Director of Lexington Global Asset Managers, Inc., 1995-present;
President, Chief Executive Officer and Director of Piedmont
Management Company, Inc., 1981-1995; director, The Navigators Group,
Inc., Chartwell Reinsurance Co. and Inter--Act Systems, Incorporated. 1987

Stephen R. Leeolou, 42, President, Co-Chief Executive Officer and
Secretary of the Company, 1996-present; Executive Vice President, Chief
Operating Officer and Secretary of the Company, 1984-1996; Chairman of
the Board of Inter--Act Systems, Incorporated; director, International
Wireless Communications Holdings, Inc. 1984

L. Richardson Preyer, Jr., 50, Vice Chairman of the Board, Executive
Vice President, Treasurer and Assistant Secretary of the Company,
1984-present; director, Inter--Act Systems, Incorporated. 1984

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Continuing Directors (Class I)

Doris R. Bray, 60, Partner, Schell Bray Aycock Abel & Livingston
P.L.L.C. (Attorneys-at-Law), 1987-present; director, Cone Mills
Corporation 1994

Stuart S. Richardson, 51, Vice Chairman of the Board of the Company,
1996-present; Chairman of the Board of the Company, 1985-1996; Chairman
of the Board of Lexington Global Asset Managers, Inc., 1995-present;
executive of Piedmont Management Company, Inc., 1985-1995, Vice
Chairman, 1986-1995; director, Chartwell Reinsurance Co. and Inter--Act
Systems, Incorporated. 1985

Robert A. Silverberg, 63, Executive Vice President and Director of
Vectra Banking Corporation,1995-present; Chairman of the Board and
President of First Denver Corporation and Chairman of the Board of its
subsidiary, First National Bank of Denver, 1981-1995; President and
Chairman of the Board of 181 Realty Company, Inc., a commercial real
estate holding company, 1968-present; director, Inter--Act Systems,
Incorporated. 1985

During 1997, there were four meetings of the Board of Directors of the
Company. Each of the directors attended more than 75% of the total number of
meetings of the Board of Directors and of committees of which he or she is a
member.

The Board of Directors has a Compensation Committee that met three
times during 1997. See "Executive Compensation" -- "Compensation Committee
Report on Executive Compensation" and "Compensation Committee Interlocks and
Insider Participation."

The Board of Directors has an Audit Committee that confers with the
Company's independent auditors and reviews the scope of auditing of the
Company's books and accounts and reports submitted by the officers. The
Committee also reviews, with the independent auditors and appropriate Company
personnel, procedures and methods employed in connection with the Company's
internal audit program and management policies relating to such program. The
Audit Committee met twice during 1997. Members of the Audit Committee are Robert
A. Silverberg, Chairman, Robert M. DeMichele, and F. Cooper Brantley.

The Company has no standing Nominating Committee.

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11

EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

The following table sets forth cash and certain other compensation
paid or accrued by the Company for its six most highly compensated executive
officers (the "Named Executive Officers") for the years ended December 31, 1997,
1996 and 1995, respectively:

Summary Compensation Table

Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
---------------------------------- ------------------------ -------
Other Restricted Securities All Other
Annual Stock Underlying LTIP Compen-
Compen- Award(s) Options Payouts sation
Name and Principal Position Year Salary ($) Bonus ($) sation ($) ($) (1)(#) ($) ($)(2)
--------------------------- ---- ---------- --------- ---------- --- ------ --- ------

Haynes G. Griffin 1997 410,670 197,000 -- -- 390,000 -- 4,750
Chairman of the Board and 1996 410,670 198,445 -- -- 150,000 -- 4,500
Co-Chief Executive Officer 1995 398,385 204,582 -- -- 150,000 -- 4,500
Stephen R. Leeolou 1997 410,670 197,000 -- -- 390,000 -- 4,750
President and Co-Chief 1996 370,413 199,099 -- -- 150,000 -- 4,500
Executive Officer 1995 359,357 205,164 -- -- 150,000 -- 4,500
L. Richardson Preyer, Jr. 1997 366,911 172,000 -- -- 390,000 -- 4,750
Executive Vice President 1996 358,911 179,762 -- -- 150,000 -- 4,500
and Treasurer 1995 348,205 185,322 -- -- 150,000 -- 4,500
Timothy G. Biltz 1997 194,000 78,400 -- -- 76,500 -- 4,750
Executive Vice President and 1996 152,000 62,130 -- -- 90,000 -- 4,500
President, US Wireless Operations 1995 145,000 64,050 -- -- 45,000 -- 4,500
Stephen L. Holcombe 1997 200,000 68,600 -- -- 76,500 -- 4,750
Executive Vice President and 1996 181,000 68,938 -- -- 90,000 -- 4,500
Chief Financial Officer 1995 172,530 71,070 -- -- 45,000 -- 4,500
Richard C. Rowlenson 1997 200,000 68,600 -- -- 76,500 -- 4,750
Executive Vice President and 1996 181,000 68,938 -- -- 90,000 -- 4,500
General Counsel 1995 172,530 71,070 -- -- 45,000 -- 4,500

- ----------

(1) Options were granted under Company stock option plans. There were no
new options granted in 1997. Options reported for 1997 reflect
repricing of options granted in prior fiscal years. See "Compensation
Committee Report on Executive Compensation" -- "Option Repricings in
Last Fiscal Year."

(2) Amounts shown represent the Company's contribution to its 401(k) Plan,
except that amounts shown for 1996 includes payments made in lieu of
Company contributions not allowed by I.R.S. limitations in the
following amounts: Mr. Griffin - $630; Mr. Leeolou - $630; Mr. Preyer -
$630; Mr. Biltz - $750; Mr. Holcombe - $380; and Mr. Rowlenson - $880.

Stock Options

There were no new stock options granted to the Named Executive Officers
during 1997. See "Compensation Committee Report on Executive Compensation" --
"Executive Officer Compensation" - "Stock Options."

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12

Option Exercises and Holdings

The following table shows stock options exercised by the Named
Executive Officers during 1997, including the aggregate value of gains on the
date of exercise (the "Value Realized"). In addition, this table includes the
number of shares covered by both exercisable and unexercisable stock options
owned by the Named Executive Officers as of December 31, 1997. Also reported are
the values for "in-the-money" options which represent the positive spread
between the exercise price of any such existing stock options and the year-end
price of the Common Stock.

Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values

Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options at Year-End
Options at Year-End (#) ($)(1)
Shares Acquired --------------------------- ---------------------------
Name On Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------------ ----------- ------------- ----------- -------------

Haynes G. Griffin -- -- 558,000 312,000 503,250 569,250
Stephen R. Leeolou -- -- 558,000 312,000 503,250 569,250
L. Richardson Preyer, Jr -- -- 558,000 312,000 503,250 569,250
Timothy G. Biltz -- -- 116,583 136,933 61,875 148,500
Stephen L. Holcombe 15,000 131,700 142,500 16,999 61,875 148,500
Richard C. Rowlenson -- -- 135,000 16,999 61,875 148,500

- ----------

(1) The closing sales price of the Common Stock on December 31, 1997, the
last trading day of 1997, was $12.75 as reported on NASDAQ.

Directors' Fees

Five of the nine present directors are not salaried employees of the
Company. For their services, those directors are paid a retainer at an annual
rate of $12,000 plus $1,000 for the first in-person Board or Board Committee
meeting in any one day, and $500 for each telephonic meeting or for each
additional meeting on the same day that they attend. Salaried employees receive
no additional compensation for their services as directors.

Employment and Other Related Agreements

As of March 1, 1995, the Company entered into three-year employment
agreements with Messrs. Griffin, Preyer, Jr., and Leeolou effectively extending
existing agreements that expired on February 28, 1995. Following the initial
three-year term, the agreements continue from year to year until terminated by
either party on one year's notice. Each agreement provides for continuation of
salary and benefits for the remaining term of the agreement if employment is
terminated by the Company "other than for cause" as defined in the agreement. If
the executive's employment is terminated "other than for cause" following a
"change in control" of the Company or if the executive terminates his employment
following a "change in control" because (i) his authority and/or responsibility
are substantially reduced, or (ii) he is required to move his residence from
Greensboro, North Carolina or (iii) his travel obligations are materially
increased without his consent, the executive is entitled to receive a payment
equal to his average annual cash compensation for the immediately preceding five
fiscal years, multiplied by 2.99. However, if necessary, such payment will be
reduced to an amount that would cause the payment not to be disqualified from
deductibility for federal income tax purposes by reason of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), as an
"excess parachute payment." Each employment agreement also provides that the
executive will not compete with the Company for the term of the agreement or for
one year following his termination of employment, whichever is later.

9
13

As of October 1, 1990, the Company implemented an Executive Officer
Long-Term Compensation Plan in which four executive officers participate. Under
this plan, Haynes G. Griffin, Stephen R. Leeolou and L. Richardson Preyer, Jr.
each would earn two cash bonuses of $500,000 each and Stuart S. Richardson would
earn two cash bonuses of $94,000 each if and when the consolidated net profits
of the Company for four profitable consecutive quarters equal or exceed $20
million and $40 million, respectively. In order to be entitled to his bonuses,
the participating executive officer must be employed by the Company at the end
of the applicable period or his employment must have been previously terminated
"other than for cause" prior to a "change of control" or by reason of his death
or permanent disability. If there is a "change of control," the bonuses will
become immediately payable.

On March 8, 1995, the Board of Directors of the Company adopted the
Senior Management Severance Plan. The Plan is available to certain senior
management employees designated as participants by the Board of Directors of the
Company or its Compensation Committee. The Plan provides that if the employment
of a participant is terminated "other than for cause" following a "change in
control" or if he terminates his employment following a "change in control"
because (i) his authority and/or responsibility are substantially reduced, or
(ii) he is required to move his residence, or (iii) his travel obligations are
materially increased without his consent, he is entitled to receive a payment
equal to his average annual cash compensation for the immediately preceding five
fiscal years, multiplied by 2.99. However, if necessary, such payment will be
reduced to an amount that would cause the payment not to be disqualified from
deductibility for federal income tax purposes by reason of Section 280G of the
Internal Revenue Code as an "excess parachute payment." The plan requires each
Plan participant, as a condition to his participation, to agree not to compete
with the Company for a period of one year following termination of his
employment with the Company. Messrs. Biltz, Holcombe and Rowlenson and three
other executive officers of the Company have been designated participants in the
Plan.

Messrs. Richardson, Griffin, Leeolou, Preyer, Jr., and Holcombe own
shares of stock that were granted to them pursuant to certain restricted stock
agreements. The restrictions on such shares have expired. The Company has agreed
that in the event there is a "change in control" (as defined in the agreements)
of the Company at any time prior to December 31, 1998, the executives will be
reimbursed for the income taxes they pay with respect to the restricted stock up
to an amount that would not be deemed an "excess parachute payment" for federal
income tax purposes (the executive's average compensation for the preceding five
years, multiplied by three). Both the value of the stock bonuses and the amount
of the tax reimbursements should be deductible items to the Company or an
acquiror, as the case may be, for tax purposes.

Compensation Committee Report on Executive Compensation

Decisions on compensation of the Chairman and the President, who are
members of the Office of the Chief Executive, and of the other Named Executive
Officers are made by the Company's Compensation Committee (the "Committee"). Two
nonemployee directors currently serve as members of the Committee: Robert M.
DeMichele, Chairman, and Robert A. Silverberg. In addition, compensation
decisions regarding the Chief Executive Officer and the other Named Executive
Officers are generally reviewed and ratified by the full Board of Directors.

Since 1986, the Company has employed independent consultants in
connection with compensation matters to compile for review and analysis
objective survey information from other companies both within and outside of the
industry to establish a range of benchmarks for salary, bonus, and other
incentives for executive officers with similar positions and responsibilities.

10
14

Compensation Philosophy

The Company's compensation policies are designed to attract and retain
competent management. The Board's goal is to provide competitive salaries to its
executive officers and to give them performance incentives to motivate superior
performance on behalf of the Company and its shareholders. The Company has
generally used two types of incentive compensation: annual bonuses, payable in
cash or in stock, and long-term compensation in the form of stock options and
restricted stock bonuses and, in the case of its officer-directors, cash bonuses
linked to specific performance goals. The Committee believes that linking
long-term compensation to the value of the Company's Common Stock is especially
effective because it aligns the interests of management with those of the
Company's shareholders.

Executive Officer Compensation

Annual Compensation. The Board approved increases of up to 27.6% in the
salaries of the Named Executive Officers during 1997. The percentage salary
increases were based upon industry salary levels, economic factors such as
inflation and base salary as it relates to the value of the total compensation
package established for the Named Executive Officers. The Committee considers
annual cash and stock bonus awards as an integral part of the Company's
financial incentive package to achieve the Company's goals. Bonuses for the
Chairman, the President and other Named Executive Officers are based upon the
Company's performance during the year in a number of measurable areas.

In making decisions with regard to annual bonuses to Named Executive
Officers, the Committee examines three key areas:

1. Performance of the Company against the operating and financial
targets established by the Board of Directors each year by
adoption of the annual operating plan;

2. The specific actions of Named Executive Officers to respond
effectively to outside factors such as economic trends and
industry competitive factors that can impact the Company's
operating performance; and

3. The ability of Named Executive Officers to initiate and manage
the Company's joint venture investments and expansion
opportunities.

Annual bonuses for 1997 were determined in early 1998 based upon the
Named Executive Officers' contributions to the Company's achievements in the
following performance areas: net gain in subscribers; reduction of marketing
costs per new subscriber; maintenance of revenue per subscriber; increase in
service revenue; control of operating expenses and increase in operating cash
flow; and achievement of net profitability. The Named Executive Officers'
performance also was evaluated as to their ability to manage and achieve
specific and quantitative targets for the subsidiary equity investments, while
maintaining the competitive thrust of the Company's core wireless
telecommunications business. The Committee's determination of annual bonuses is
within its discretion, and it uses the Company's performance relative to target
performance contained in the Company's operating plan as a standard in assessing
the performance of the Named Executive Officers. However, no quantifiable weight
was given to any particular performance area in the consideration of 1997
bonuses; rather, the Committee considered the aggregate results, which, in the
Committee's opinion, were outstanding.

11
15

The Committee approved in early 1998 cash bonuses for the Named
Executive Officers ranging from 25.54% to 32.42% of their total cash
compensation based on the Company's performance for the past year. The Committee
and the Board considered these bonuses appropriate in view of their overall
assessment that the performance of each Named Executive Officer had been
outstanding.

Long-Term Compensation. The Company's long-term incentive compensation
awards are designed to encourage the retention of key executives. Long-term
compensation for Messrs. Griffin and Leeolou, members of the Office of the Chief
Executive, and for other officer-directors, including Mr. Preyer, Jr., consists
of two elements, both of which have been in place for some time: (i) stock
options and other forms of stock compensation and (ii) a long-term cash
incentive bonus.

Stock Options. The Company currently has an Amended and Restated Stock
Compensation Plan and a 1989 Stock Option Plan under which incentive and
nonqualified stock options have been granted in the past, some of which remain
outstanding. However, no further grants may be made under these plans. At the
1994 Annual Meeting of Shareholders, the 1994 Long-Term Incentive Plan (the
"1994 Plan"), which provides for the grant of incentive and nonqualified
options, stock bonuses and restricted stock, was approved. The 1994 Plan was
amended and restated by the Board of Directors in 1997 and was approved at the
1997 Annual Meeting of Shareholders. The Company believes that stock options
granted under all of these plans are performance-based and, therefore,
deductible by the Company under Section 162(m) of the Internal Revenue Code. The
1994 Plan provides for other types of compensation, such as stock bonuses and
restricted stock, which will be performance-based only if performance goals are
established by the Committee in compliance with Section 162(m). The Committee
administers these plans and determines, in its discretion, what grants will be
made thereunder. Under these plans, stock options were granted to Named
Executive Officers in 1987, 1990, 1993, 1994, 1995 and 1996. In January 1997,
the Committee considered the fact that many of the previously granted options
had exercise prices at substantially above the prevailing market value because
of the depressed market value of the Company's Common Stock and that this
circumstance was having a detrimental effect on management's morale. In the
Committee's opinion, the depressed market value of the Company's stock was
attributable not to the Company's performance but to general market conditions
that were beyond the control of the Company and its employees. Therefore, the
Committee decided during 1997, it would offer no new options to employees, but
would instead offer to employees, including the Named Executive Officers, the
opportunity to surrender certain options in exchange for a reduced number of
options at an exercise price of $15.69, which was equal to the then fair market
value of the stock. The market price for the shares continued to decline and,
therefore, in April 1997, the Committee reduced the prices at which these
options could be exercised to $10.00, the market value of the Company's Common
Stock at the time. For further information regarding the options repriced in
1997, see "Option Repricings in Last Fiscal Year" below. The Committee believes
that all grants to Named Executive Officers under these Plans are
performance-based for purposes of Section 162(m).

Long-Term Cash Incentives. A long-term cash bonus opportunity was
established in 1990 under the Company's Executive Officer Long-term Incentive
Compensation Plan, which was adopted in conjunction with employment agreements
between the Company and its officer-directors. It is a bonus opportunity
pursuant to which Messrs. Griffin, Leeolou and Preyer, Jr. can earn two bonuses
of $500,000 each at any time prior to September 30, 1998 if the Company achieves
certain profitability levels. The Company believes that its deduction of this
compensation, if paid, will not be limited by Section 162(m) of the Internal
Revenue Code because it is payable under a written binding contract that was in
effect on February 17, 1993. See "Employment and Other Related Agreements."

12
16

Compensation of the Members of the Office of the Chief Executive

Haynes G. Griffin and Stephen R. Leeolou are, and were for all of 1997, members
of the office of the Chief Executive.

Annual Compensation. Based on information available to it, the
Committee believes that the salaries of Messrs. Griffin and Leeolou are
generally competitive with those of others holding comparable positions in the
industry. Historically, executive salaries have been reviewed in mid-year.
However, in response to a suggestion by management, the Committee has
established January 1 as the normal review date for the Company's executive
officers, and reviews of the salaries of Messrs. Griffin and Leeolou were
deferred to January 1, 1997. The Committee approved in early 1998 cash bonuses
in the amount of $197,000 each for Messrs. Griffin and Leeolou. These bonuses
represented 32.42% of the total 1997 cash compensation of Messrs. Griffin and
Leeolou from the Company. In determining the amount of these bonuses, the
Committee recognized the achievements detailed under "Executive Officer
Compensation" -- "Annual Compensation" above. Mr. Griffin serves as Chairman of
the Board of Directors of International Wireless Communications Holdings, Inc.
("IWCH") and has principal oversight over the Company's 36.1% equity interest in
that company. Mr. Leeolou serves as Chairman of the Board of Directors and Chief
Executive Officer of Inter--Act Systems, Incorporated ("Inter--Act ") and has
principal oversight over the Company's 24.3% equity interest in that company.
Messrs. Griffin and Leeolou receive from IWCH and Inter--Act, respectively,
salaries of $50,000 each, which are considered by the Compensation Committee in
establishing their annual compensation.

Long-Term Compensation. Neither Mr. Griffin nor Mr. Leeolou were
granted new stock options in 1997.

13
17

Option Repricings in Last Fiscal Year

The following table sets forth the Option repricing described above,
see "Executive Officer Compensation"-- "Stock Options" above.

Length of
Original
Term
Number of Securities Market Price Exercise Price Remaining at
Underlying Options at Time of at Time of New Exercise Date of
Name Date (1) Repriced (#) Repricing ($) Repricing ($) Price ($) Repricing
- ---- -------- ------------ ------------- ------------- --------- ---------

Haynes G. Griffin 4/29/97 390,000(2) 10.00 21.50 -25.125 10.00 7-9 Years
Stephen L. Leeolou 4/29/97 390,000(2) 10.00 21.50 -25.125 10.00 7-9 Years
L. Richardson Preyer, Jr 4/29/97 390,000(2) 10.00 21.50 -25.125 10.00 7-9 Years
Timothy G. Biltz 4/29/97 76,500(3) 10.00 21.625-25.125 10.00 7-9 Years
Stephen L. Holcombe 4/29/97 76,500(3) 10.00 21.625-25.125 10.00 7-9 Years
Richard C. Rowlenson 4/29/97 76,500(3) 10.00 21.625-25.125 10.00 7-9 Years

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

(1) Although there were no new options granted in 1997, on January 17,
1997, the Board of Directors authorized the reissuance of options with
exercise prices above $20.00 that had been granted under the Company's
1994 Long-Term Incentive Plan. Optionees surrendering options with an
exercise price of $24.75 or above received 20% fewer options and
optionees surrendering options with an exercise price above $20.00 but
below $24.75 received 10% fewer options. The replacement options were
initially priced to an exercise price of $15.69 and subsequently on
April 29, 1997, to an exercise price of $10.00 and are exercisable
until 1/17/07.

(2) Replaced options to purchase 450,000 shares and includes 202,500
options issued in place of 225,000 options granted 5/31/94 at an
exercise price of $21.50; 120,000 options issued in place of 150,000
options granted 3/6/95 at an exercise price of $25.125; and 67,500
options issued in place of 75,000 options granted 10/21/96 at an
exercise price of $21.625.

(3) Replaced options to purchase 90,000 shares and includes 36,000 options
issued in place of 45,000 options granted 3/6/95 at an exercise price
of $25.125; and 40,500 options issued in place of 45,000 options
granted 10/21/96 at an exercise price of $21.625.

Robert M. DeMichele Robert A. Silverberg

Compensation Committee Interlocks and Insider Participation

Robert M. DeMichele, a member of the Company's Compensation Committee,
is a director and executive officer of Lexington Global Asset Managers, Inc.
Haynes G. Griffin, Co-Chief Executive Officer of the Company, and Stuart S.
Richardson, Vice Chairman of the Board of the Company, serve on the Board of
Directors of Lexington Global Asset Managers, Inc.

14
18

Performance Graph

The graph shown below compares the Company's cumulative, five-year
shareholder return on an indexed basis with the S&P 500 Stock Index and the CRSP
Index of NASDAQ Telecommunications Stocks.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN

12/92 12/93 12/94 12/95 12/96 12/97
----- ----- ----- ----- ----- -----

Vanguard Cellular Systems, Inc. 100 110 144 114 88 71
S&P 500 100 109 112 153 189 254
NASDAQ Telecommunications 100 154 129 169 172 252

15
19

CERTAIN TRANSACTIONS

As of December 31, 1997, the Company had approximately a 36%
ownership interest in International Wireless Communications Holdings, Inc.
("IWCH"), which interest represented an investment of approximately $13.8
million. IWCH is a development stage company that secures, builds and operates
wireless businesses primarily in Asia and Latin America. During 1997, the
Company loaned $966,000 to IWCH as a participating lender under IWCH's $7
million Senior Exchangeable Debt Facility

In 1997, the Company acquired a 7% equity ownership interest in
Star Digitel Limited ("SDL"). IWCH owns 40% of SDL, a Hong Kong company whose
principal business activities relate to the provision and development of
cellular telecommunications services in the People's Republic of China. Haynes
G. Griffin is a director of SDL. As of December 31, 1997, the Company had
invested $5.1 million of a total commitment of $8.4 million for its interest in
SDL. The remaining amount of $3.3 million is to be paid by June 30, 1998. In
addition to the foregoing investment, the Company has also guaranteed
obligations of SDL totaling $14.1 million, which include guarantees of $7.2
million made by the Company on behalf of IWCH.

In 1997 the Company acquired a 12% equity ownership interest in
International Wireless Communications Pakistan ("IWCP") which is a 51% owner of
the company that owns and operates the cellular license in Pakistan. IWCH owns
39% of IWCP. As of December 31, 1997, the Company had invested approximately $7
million for its interest in IWCP and an additional $1.7 million in capital calls
and fees for a total capital investment of $8.8 million in 1997. In addition,
the Company provided approximately $3 million to IWCH as part of IWCH's purchase
of its 39% interest in IWCP.

In return for the foregoing loans and guarantees on behalf of
IWCH, the Company received warrants to purchase IWCH common stock valued at
$486,000 on August 18, 1997. Haynes G. Griffin, Chairman of the Board and
Co-Chief Executive Officer of the Company, serves as Chairman of the Board of
IWCH and holds options to purchase 400,000 shares of IWCH common stock. In
addition, the other executive officers of the Company hold options to purchase
an aggregate amount of 67,500 shares of IWCH common stock, and employees of the
Company who are not also executive officers hold options to purchase an
aggregate amount of 87,250 shares.

As of December 31, 1997, the Company owned 24.3% of the
outstanding common stock of Inter--Act Systems, Incorporated
("Inter--Act"), a development stage company that provides targeted
promotions to retail customers at the point of entry at a retail-outlet,
primarily supermarkets, through a computer-equipped kiosk. Stephen R. Leeolou
serves as Chairman and Chief Executive Officer of Inter--Act and Messrs.
Richardson, Griffin, Preyer, Jr., DeMichele and Silverberg serve as directors of
Inter--Act. Michael Leeolou, an Executive Officer of Inter--Act, is the
brother of Stephen R. Leeolou. By agreement with certain shareholders of
Inter--Act, the Company has the right to designate six members of
Inter--Act's Board until Inter--Act effects an underwritten public
offering of common stock.

During 1997, the Company provided certain management services to
Inter--Act under the terms of a management services agreement and received
approximately $218,000 and 10,000 shares of Inter--Act common stock. Under
this agreement, the Company provided services to Inter--Act, including
developing accounting, human resources, information management, legal
compliance, sales training, research and development, business development and
operation procedures, systems and programs.

16
20

The Company's investments in IWCH and Inter--Act have been approved by
the disinterested nonemployee directors of the Company after a determination
that each was in the best interests of the Company.

Doris R. Bray is a partner of Schell, Bray, Aycock, Abel & Livingston
P.L.L.C., a law firm that provided legal services to the Company in 1997, and F.
Cooper Brantley is a member and partner of Adams Kleemeier Hagan Hannah & Fouts
P.L.L.C., a law firm that also provided legal services to the Company in 1997.

INDEPENDENT AUDITORS

The accounting firm of Arthur Andersen LLP has been selected by the
Board of Directors as independent auditors of the Company for the fiscal year
ending December 31, 1998. Arthur Andersen LLP has conducted the audit of the
Company's year-end financial statements since its inception.

A representative of Arthur Andersen LLP is expected to be present at
the Annual Meeting and will be given the opportunity to make a statement if he
or she desires to do so. Such representative will be available to respond to
questions relating to the audit of the Company's 1997 financial statements.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.

PROPOSAL OF SECURITIES HOLDERS

A proposal of a security holder of the Company intended to be presented
at the next Annual Meeting of Shareholders must be received at the Company's
principal executive offices on or before December 21, 1998 in order to be
considered for inclusion in the Company's Proxy Statement and form of proxy
relating to that meeting.

OTHER MATTERS

Management is not aware of any matter to be brought before the Annual
Meeting other than the matters described herein. However, if other matters do
come before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote said proxy in accordance with their judgement
on such matters.

By Order of the Board of Directors

April 20, 1998

APPENDIX A

VANGUARD CELLULAR SYSTEMS, INC.

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Stuart S. Richardson, Haynes G. Griffin and
Stephen R. Leeolou, or any of them, proxies with full power of substitution to
vote all shares of Class A Common Stock of Vanguard Cellular Systems, Inc.
standing in the name of the undersigned at the Annual Meeting of Shareholders
of the Company to be held on May 19, 1998, and any adjournment thereof.

(TO BE SIGNED ON REVERSE SIDE.)

PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!

ANNUAL MEETING OF SHAREHOLDERS
VANGUARD CELLULAR SYSTEMS, INC.

MAY 19, 1998

PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- -----------------------------------------------------------------------------

A [X] Please mark your votes as in this example.

1. Election of Directors (Class II):

[ ] FOR all nominees listed at right (except as indicated to the contrary
below)

[ ] WITHHOLD AUTHORITY to vote for all nominees listed at right

NOMINEES: F. Cooper Brantley
Haynes G. Griffin
L. Richardson Preyer, Sr.

To withhold authority to vote for any nominee or nominees, write the
nominee's name in the space provided below.

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

2. To ratify the appointment of Arthur Andersen LLP as the Company's auditors
for 1998.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE NOMINEES NAMED IN THE PROXY STATEMENT AND FOR
PROPOSAL 2.

Signature
-------------------------------

Signature
-------------------------------
SIGNATURE IF HELD JOINTLY

Dated , 1998
--------------------

IMPORTANT: Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.