10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 for the quarterly period ended September 30, 2005.

o 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 0-27416

RURAL CELLULAR CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction of incorporation or organization) 41-1693295
(I.R.S. Employer
Identification No.)

PO Box 2000
3905 Dakota Street SW
Alexandria, Minnesota 56308
(320) 762-2000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). YES þ       NO o

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o       NO þ

     Number of shares of common stock outstanding as of the close of business on November 1, 2005.

Class A	13,279,766
Class B	321,394

TABLE OF CONTENTS

	Page Number
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-As of September 30, 2005 and December 31, 2004		3
Condensed Consolidated Statements of Operations And Comprehensive Income (Loss)-Three and nine months ended September 30, 2005 and 2004		5
Condensed Consolidated Statements of Cash Flows-Nine months ended September 30, 2005 and 2004		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3. Quantitative and Qualitative Disclosures about Market Risk		40
Item 4. Controls and Procedures		40
Part II. Other Information
Item 3. Defaults upon Senior Securities		41
Item 5. Other Information		41
Item 6. Exhibits and Reports on Form 8-K		43
Signatures		44
Billing Services and License Agreement
Certification of CEO Pursuant to Rule 13a-14(a)
Certification of CFO Pursuant to Rule 13a-14(a)
Certification of CEO and CEO Pursuant to Section 906

2

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)

(In Thousands)	September 30,		December 31,
	2005		2004
CURRENT ASSETS:
Cash and cash equivalents	$	35,766	$	85,339
Accounts receivable, less allowance for doubtful accounts of $4,127 and $2,456		76,236		62,549
Inventories		8,806		7,658
Other current assets		4,766		4,175
Total current assets		125,574		159,721
PROPERTY AND EQUIPMENT, net		278,019		276,133
LICENSES AND OTHER ASSETS:
Licenses, net		548,513		548,513
Goodwill, net		348,684		348,682
Customer lists, net		33,946		47,868
Deferred debt issuance costs, net		25,882		30,228
Other assets, net		6,196		6,305
Total licenses and other assets		963,221		981,596
	$	1,366,814	$	1,417,450

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

3

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ DEFICIT
(Unaudited)

	September 30,			December 31,
(In thousands, except per share data)	2005			2004
CURRENT LIABILITIES:
Accounts payable	$	37,000		$	52,465
Current portion of long-term debt		15			81
Advance billings and customer deposits		12,062			11,076
Accrued interest		17,871			41,112
Other accrued expenses		12,368			9,679
Total current liabilities		79,316			114,413
LONG-TERM LIABILITIES		1,747,138			1,733,079
Total liabilities		1,826,454			1,847,492
REDEEMABLE PREFERRED STOCK		176,597			166,296
SHAREHOLDERS’ DEFICIT:
Class A common stock; $.01 par value; 200,000 shares authorized, 13,140 and 11,836 outstanding		131			118
Class B common stock; $.01 par value; 10,000 shares authorized, 453 and 540 outstanding		5			5
Additional paid-in capital		207,212			193,347
Accumulated deficit		(843,998	)		(791,446	)
Unearned compensation		(1,408	)		(698	)
Accumulated other comprehensive income		1,821			2,336
Total shareholders’ deficit		(636,237	)		(596,338	)
	$	1,366,814		$	1,417,450

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

4

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

(In thousands,	For the Three Months Ended						For the Nine Months Ended
except per share data)	September 30,						September 30,
	2005			2004			2005			2004
REVENUE:
Service	$	98,287		$	97,093		$	291,847		$	280,657
Roaming		41,785			29,739			86,519			81,745
Equipment		8,220			5,589			26,694			16,450
Total revenue		148,292			132,421			405,060			378,852
OPERATING EXPENSES:
Network costs, excluding depreciation		32,885			27,768			88,377			77,073
Cost of equipment sales		13,738			10,035			42,747			30,627
Selling, general and administrative		40,868			34,988			114,234			98,485
Depreciation and amortization		24,549			19,474			71,475			55,389
Stock based compensation		321			—			429			—
Impairment of assets		—			—			7,020			—
Total operating expenses		112,361			92,265			324,282			261,574
OPERATING INCOME		35,931			40,156			80,778			117,278
OTHER INCOME (EXPENSE):
Interest expense		(43,776	)		(35,129	)		(124,104	)		(121,884	)
Interest and dividend income		249			424			911			1,370
Other		(125	)		(14	)		(149	)		(78	)
Other expense, net		(43,652	)		(34,719	)		(123,342	)		(120,592	)
INCOME (LOSS) BEFORE INCOME TAX BENEFIT		(7,721	)		5,437			(42,564	)		(3,314	)
INCOME TAX BENEFIT		(104	)		—			(313	)		—
NET INCOME (LOSS)		(7,617	)		5,437			(42,251	)		(3,314	)
PREFERRED STOCK DIVIDEND		(3,534	)		(3,253	)		(10,301	)		(9,581	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	(11,151	)	$	2,184		$	(52,552	)	$	(12,895	)
NET INCOME (LOSS) PER BASIC SHARE	$	(0.89	)	$	0.18		$	(4.24	)	$	(1.05	)
NET INCOME (LOSS) PER DILUTED SHARE	$	(0.89	)	$	0.17		$	(4.24	)	$	(1.05	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE INCOME (LOSS) PER SHARE:
Basic		12,517			12,251			12,388			12,234
Diluted		12,517			12,795			12,388			12,234
COMPREHENSIVE LOSS:
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	(11,151	)	$	2,184		$	(52,552	)	$	(12,895	)
Adjustments — derivative financial instruments		(172	)		(172	)		(515	)		2,291
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(11,323	)	$	2,012		$	(53,067	)	$	(10,604	)

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

5

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine months ended
(In Thousands)	September 30,
	2005			2004
OPERATING ACTIVITIES:
Net loss	$	(42,251	)	$	(3,314	)
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization		71,475			55,389
Loss on write-off of debt and preferred securities issuance costs		243			12,605
Mark-to-market adjustments — financial instruments		—			4,339
Gain on repurchase of preferred stock		(5,685	)		(22,573	)
Non-cash preferred stock dividends		3,797			21,144
Impairment of assets		7,020			—
Stock based compensation		429			—
Deferred income taxes		(313	)		—
Other		3,528			5,931
Change in other operating elements:
Accounts receivable		(13,893	)		2,088
Inventories		(1,148	)		846
Other current assets		(432	)		(361	)
Accounts payable		(3,936	)		(8,827	)
Advance billings and customer deposits		986			1,120
Accrued preferred stock dividends		37,842			20,967
Accrued interest		(19,443	)		(13,024	)
Other accrued expenses		2,591			(1,857	)
Net cash provided by operating activities		40,810			74,473
INVESTING ACTIVITIES:
Purchases of property and equipment		(77,521	)		(61,602	)
Net proceeds from property exchange		—			13,573
Proceeds from sale of property and equipment		118			54
Other		(125	)		4
Net cash used in investing activities		(77,528	)		(47,971	)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock related to employee stock purchase plan and stock options		587			187
Repayments of long-term debt under the credit agreement		—			(525,724	)
Proceeds from issuance of 8 ¼% senior secured notes		—			350,000
Proceeds from issuance of senior secured floating rate notes		—			160,000
Repurchase of preferred stock		(13,355	)		(68,351	)
Payments to settle interest rate swaps		—			(7,645	)
Payments of debt issuance costs		—			(13,928	)
Other		(87	)		(161	)
Net cash used in financing activities		(12,855	)		(105,622	)
NET DECREASE IN CASH		(49,573	)		(79,120	)
CASH AND CASH EQUIVALENTS, at beginning of year		85,339			142,547
CASH AND CASH EQUIVALENTS, at end of period	$	35,766		$	63,427

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

6

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1) BASIS OF PRESENTATION:

Throughout this document, Rural Cellular Corporation and its subsidiaries are referred to as “RCC,” “we,” “our,” or “us.”

The accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2005 and 2004 have been prepared by management. In the opinion of management, only normal recurring adjustments necessary to fairly present the financial position, results of operations, and cash flows for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2004. The results of operations for the three and nine months ended September 30, 2005 are not necessarily indicative of the operating results for the full fiscal year or for any other interim periods.

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

For a detailed discussion of our significant accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2004. There have been no material changes in the application of our significant accounting policies. Applications of these policies in preparing the third quarter 10-Q require that estimates be made by management to fairly present the financial position of RCC.

Impairment of Long Lived Assets

Fixed assets and definite life intangibles are evaluated for impairment whenever indicators of impairment exist. Accounting standards require that if an impairment indicator is present, RCC must assess whether the carrying amount of the asset is unrecoverable by estimating the sum of the future cash flows expected to result from the asset, undiscounted and without interest charges. If the carrying amount is more than the recoverable amount, an impairment charge must be recognized, based on the fair value of the asset.

Impairment of Assets. Effective on June 28, 2005, the Customer Relationship Management and Billing Managed Services Agreement between Rural Cellular Corporation and Amdocs Software Systems Limited (“Amdocs”) was mutually terminated. The termination was based upon RCC’s decision that the proposed systems would not meet its requirements given that Amdocs’s focus has become more orientated to national wireless providers. Under these circumstances, it was determined that the systems would not have been cost-effective to adapt and maintain over the long term.

Reflecting the termination of the Agreement, we recorded a charge to operations in June 2005 of approximately $7.0 million, reflecting the write-down of certain development costs previously capitalized.

7

3) ACCOUNTING FOR STOCK OPTIONS:

We account for stock option plans under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” under which no compensation expense is recognized. The following schedule shows our net income (loss) and net income (loss) per share for the three and nine months ended September 30, 2005 and 2004, had compensation expense been determined consistent with the Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” The pro forma information presented below is based on several assumptions and should not be viewed as indicative of future periods.

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands, except for per share data)	2005			2004			2005			2004
Net income (loss) applicable to common shares:
As reported	$	(11,151	)	$	2,184		$	(52,552	)	$	(12,895	)
Fair value compensation expense		(607	)		(727	)		(1,821	)		(2,181	)
Pro forma	$	(11,758	)	$	1,457		$	(54,373	)	$	(15,076	)
Net income (loss) per basic share:
As reported	$	(0.89	)	$	0.18		$	(4.24	)	$	(1.05	)
Fair value compensation expense		(0.05	)		(0.06	)		(0.15	)		(0.18	)
Pro forma	$	(0.94	)	$	0.12		$	(4.39	)	$	(1.23	)
Net income (loss) per diluted share:
As reported	$	(0.89	)	$	0.17		$	(4.24	)	$	(1.05	)
Fair value compensation expense		(0.05	)		(0.06	)		(0.15	)		(0.18	)
Pro forma	$	(0.94	)	$	0.11		$	(4.39	)	$	(1.23	)

4) LICENSES AND OTHER INTANGIBLE ASSETS:

Licenses consist of the value assigned to our personal communications services (“PCS”) licenses and cellular licenses. Other intangibles, resulting primarily from acquisitions, include the value assigned to customer lists and goodwill. Amortization is computed using the straight-line method based on the estimated useful life of the asset. Customer lists are the only intangible asset with a definitive useful life; all others are considered to have indefinite useful lives.

Customer list amortization expense for the three and nine months ended September 30, 2005 was approximately $4.6 million and $13.9 million, respectively. Customer list amortization expense for the three and nine months ended September 30, 2004 was approximately $4.6 million and $13.8 million, respectively. Annual customer list amortization expense is estimated to be approximately $18.5 million for each of the years ending December 31, 2005 and 2006, $8.2 million in 2007 and $2.5 million in 2008.

We review goodwill and other indefinite-lived intangible assets for impairment based on the requirements of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). In accordance with this statement, goodwill is tested for impairment at the reporting unit level on an annual basis as of October 1st or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. These events or circumstances would include a significant change in the business climate, legal developments, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. In analyzing goodwill for potential impairment, we use projections of future cash flows from the reporting units. These projections are based on our view of growth rates, anticipated future economic conditions, the appropriate discount rates relative to risk, and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. If changes in growth rates, future economic conditions, discount rates, or estimates of residual values were to occur, goodwill may become impaired.

8

In accordance with Emerging Issues Task Force (“EITF”) No. 02-7 (“EITF 02-7”), Unit of Accounting for Testing of Impairment of Indefinite-Lived Intangible Assets, impairment tests for indefinite-lived intangible assets, including FCC licenses, are required to be performed on an annual basis or on an interim basis if an event occurs or circumstances change that would indicate the asset might be impaired. We utilize a fair value approach, incorporating discounted cash flows, to complete the test. This approach determines the fair value of the FCC licenses, using start-up model assumptions and, accordingly, incorporates cash flow assumptions regarding the investment in a network, the development of distribution channels, and other inputs for making the business operational. These inputs are included in determining free cash flows of the reporting unit, using assumptions of weighted average costs of capital and the long-term rate of growth for each reporting unit. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. If any of the assumptions were to change, FCC licenses may become impaired. There was no impairment charge in the three or nine months ended September 30, 2005 and 2004 related to our assessment under SFAS No. 142.

Deferred Debt Issuance Costs

Deferred debt issuance costs relate to the credit agreement, senior secured notes, senior notes, senior subordinated notes and certain preferred stock issuances. These costs are being amortized over the terms of the respective instruments. If the related debt issuance is extinguished prior to maturity, the debt issuance costs are immediately expensed. We recorded within interest expense $243,000 and $12.6 million of debt issuance costs in the nine months ended September 30, 2005 and September 30, 2004, respectively.

5) LONG-TERM LIABILITIES:

We had the following long-term liabilities outstanding (in thousands):

	September 30,		December 31,
	2005		2004
8 1/4% senior secured notes	$	350,000	$	350,000
Senior secured floating rate notes		160,000		160,000
9 ⅞% senior notes		325,000		325,000
9 3/4% senior subordinated notes		300,000		300,000
9 ⅝% senior subordinated notes		125,000		125,000
11 ⅜% senior exchangeable preferred stock		149,709		174,176
Accrued dividends on 11 ⅜% senior exchangeable preferred stock		45,716		34,844
12 ¼% junior exchangeable preferred stock		255,558		247,984
Accrued dividends on 12 ¼% junior exchangeable preferred stock		20,132		—
Deferred tax liability		13,665		13,979
Other		2,358		2,096
Long-term liabilities	$	1,747,138	$	1,733,079

Credit Agreement — As of September 30, 2005, we had $60 million in undrawn availability under our revolving credit agreement. The credit agreement is subject to various covenants, including the ratio of senior secured indebtedness to annualized operating cash flow (as defined in the credit agreement), the ratio of total indebtedness to annualized operating cash flow, and the ratio of annualized operating cash flow to interest expense.

Our borrowings under the revolving credit facility bear interest at rates based on, at our option, either (i) the one, two, three, six, or, if made available by the lender, nine or twelve month Eurodollar rate, which is determined by reference to the Adjusted LIBO rate, or (ii) the Alternate Base Rate, which is the higher of the prime lending rate on page 5 of the Telerate Service and the Federal Funds Effective Rate plus ½ of 1 percent. In each case, we are required to pay an additional margin of interest above the Eurodollar rate or the Alternate Base Rate. The margin is based on the ratio of our senior secured debt to our adjusted cashflow. The margin above the Alternate Base Rate ranges from 1.50% to 2.00%. The margin above the Eurodollar rate fluctuates from 2.50% to 3.00%.

9

Although the credit agreement financial covenants are not applicable unless we draw against the credit facility, we were in compliance with all of the credit agreement financial covenants at September 30, 2005. Because we had failed to pay six or more quarterly dividends on our 11 ⅜% senior exchangeable preferred stock (“senior exchangeable preferred stock”), a “Voting Rights Triggering Event” as defined in the terms of our senior exchangeable preferred stock existed at September 30, 2005. While a “Voting Rights Triggering Event” exists, certain terms of our senior exchangeable preferred stock, if enforceable, may prohibit incurrence of additional indebtedness, including borrowings under our revolving credit facility.

See Note 9, “Events Subsequent to September 30, 2005,” for information regarding our payment in October 2005 of four quarterly dividends on our senior exchangeable preferred stock and our draw of $58.0 million against the revolving credit facility on November 3, 2005.

Senior Secured Notes — In March 2004, we issued $160 million aggregate principal amount of senior secured floating rate notes due March 15, 2010 (“2010 notes”) and $350 million aggregate principal amount of 8 ¼% senior secured notes due March 15, 2012 (“2012 notes”). Interest on the 2010 notes is reset quarterly and payable on March 15, June 15, September 15, and December 15 of each year. The effective interest rate on the 2010 notes was 8.37% at September 30, 2005. Interest on the 2012 notes is payable on March 15 and September 15 of each year.

After March 15, 2006, we may redeem the 2010 notes, in whole or in part, at prices starting at 102.000% of the principal amount at March 15, 2006, and declining to 101.000% at March 15, 2007 and to 100.000% at March 15, 2008, plus accrued and unpaid interest to but excluding the date fixed for repurchase. At any time, which may be more than once, before March 15, 2006, we can choose to redeem up to 35% of the 2010 notes with proceeds from certain equity offerings for 100% of the aggregate principal amount of the 2010 notes redeemed plus a premium equal to the interest rate per annum on the 2010 notes applicable on the date on which notice of repurchase is given, plus accrued and unpaid interest to, but excluding, the date of repurchase. At least 65% of the aggregate principal amount of the 2010 notes issued under the indenture must remain outstanding after the repurchase.

After March 15, 2008, we may redeem the 2012 notes, in whole or in part, at prices starting at 104.125% of the principal amount at March 15, 2008, and declining to 102.063% at March 15, 2009 and 100.000% at March 15, 2010, plus accrued and unpaid interest to but excluding the date fixed for repurchase. At any time, which may be more than once, before March 15, 2007, we can choose to redeem up to 35% of the 2012 notes with proceeds from certain equity offerings for 108.250% of the aggregate principal amount of the 2012 notes redeemed, plus accrued and unpaid interest to, but excluding, the date of repurchase. At least 65% of the aggregate principal amount of the 2012 notes issued under the indenture must remain outstanding after the repurchase.

9 ⅞ % Senior Notes - In 2003, RCC issued $325 million principal amount of 9 ⅞% senior notes due 2010. Interest is payable on February 1 and August 1 of each year. The notes will mature on February 1, 2010. After August 1, 2007, at our option, we may redeem the 9 ⅞% notes at prices starting at 104.938% of the principal amount at August 1, 2007, declining to 102.469% at August 1, 2008 and 100% at August 1, 2009, plus accrued and unpaid interest to but excluding the date fixed for repurchase. Prior to August 1, 2006, we may redeem up to 35% of the outstanding principal amount of the 9 ⅞% notes at 109.875% of the principal amount plus accrued and unpaid interest to but excluding the date fixed for repurchase with the net cash proceeds of certain equity offerings.

9 ¾ % Senior Subordinated Notes - In 2002, we issued $300 million principal amount of 9 ¾% senior subordinated notes due 2010. Interest on the 9 ¾% senior subordinated notes is payable semi-annually on January 15 and July 15. The 9 ¾% senior subordinated notes will mature on January 15, 2010. After January 15, 2006, at our option, we may redeem the 9 ¾% notes at prices starting at 104.875% of the principal amount at January 15, 2006, declining to 103.250%, 101.625%, and 100.000% at January 15, 2007, 2008, and 2009, respectively, plus accrued and unpaid interest to but excluding the date fixed for repurchase.

10

9 ⅝% Senior Subordinated Notes - In 1998, RCC issued $125 million principal amount of 9 ⅝% senior subordinated notes due 2008 (“9 ⅝ Notes”). Interest on the senior subordinated notes is payable semi-annually on May 15 and November 15. The senior subordinated notes will mature on May 15, 2008, and are redeemable, in whole or in part, at our option, at a rate of 101.604% of the principal amount at May 15, 2005, declining to 100.000% at May 15, 2006, plus accrued and unpaid interest to but excluding the date fixed for repurchase.

11 ⅜% Senior Exchangeable Preferred Stock — Due May 15, 2010. Dividends on the senior exchangeable preferred stock are cumulative, are payable quarterly, and were payable, until May 15, 2003, at our option either in cash or by the issuance of additional shares of senior exchangeable preferred stock having an aggregate liquidation preference equal to the amount of such dividends.

We accrue undeclared dividends by increasing the carrying amount of the senior exchangeable preferred stock. At September 30, 2005, RCC had accrued $45.7 million in undeclared dividends with respect to our senior exchangeable preferred stock, which will be payable at the senior preferred mandatory repurchase date, if not sooner declared and paid.

Because we failed to pay six or more quarterly dividends on our senior exchangeable preferred stock, the holders of senior exchangeable preferred stock have the right to elect the lesser of two directors or the number of directors constituting 25% of the members of our board. Accordingly, James V. Continenza and Jacques Leduc were elected to our board by the holders of the senior exchangeable preferred stock at our annual meeting on May 24, 2005. The holders of senior exchangeable preferred stock have the right to elect two directors until all dividends in arrears are paid.

See Note 9, “Events Subsequent to September 30, 2005”, for information regarding our payment in October 2005 of four quarterly dividends on our outstanding 11 ⅜% senior exchangeable preferred stock.

We may redeem the senior exchangeable preferred stock, in whole or in part, at any time at a repurchase price equal to 102.844% at May 15, 2005, declining to 101.422% at May 15, 2006, and 100.000% at May 15, 2007, plus accumulated and unpaid dividends, if any, to but excluding the repurchase date.

Exchange of Senior Exchangeable Preferred Stock for Class A Common Stock. In September we exchanged an aggregate of 9,535 shares of our senior exchangeable preferred stock for an aggregate of 1,070,190 shares of our Class A common stock in negotiated transactions. The shares were issued in reliance upon the exemption from registration provided in Section 3(a)(9) of the Securities Act of 1933, as amended.

Gain on repurchase of senior exchangeable preferred stock. During the nine months ended September 30, 2005, we repurchased 14,932 shares of our senior exchangeable preferred stock for $13.4 million. These shares had accrued $4.0 million in unpaid dividends. The resulting $5.6 million gain was recorded as a reduction of interest expense.

During the three and nine months ended September 30, 2004, we repurchased 22,750 and 80,500 shares of our senior exchangeable preferred stock for $19.0 million and $68.4 million, respectively, resulting in gains of $7.3 million and $22.6 million, respectively, which were recorded as a reduction of interest expense.

12 ¼% Junior Exchangeable Preferred Stock — Due February 15, 2011 (“junior exchangeable preferred stock”). Dividends on the junior exchangeable preferred stock are cumulative, are payable quarterly, and were payable until February 15, 2005, at our option, either in cash or by the issuance of additional shares of junior exchangeable preferred stock having an aggregate liquidation preference equal to the amount of such dividends. We have not declared or paid the cash dividends due on May 15, 2005 or August 15, 2005.

We may redeem the junior exchangeable preferred stock, in whole or in part, at any time, at a repurchase price equal to 106.125% of the liquidation preference at February 15, 2005, declining to 104.594% at February 15, 2006, 103.063% at February 15, 2007, 101.531% at February 15, 2008, and 100.000% at February 15, 2009, plus accumulated and unpaid dividends, if any, to but excluding the repurchase date.

11

If we fail to pay six or more quarterly dividends on our junior exchangeable preferred stock, the holders of junior exchangeable preferred stock will have the right to elect the lesser of two directors or the number of directors constituting 25% of the members of our board by following the procedures set forth in the certificate of designation.

At September 30, 2005, we had accrued $20.1 million in undeclared dividends with respect to our junior exchangeable preferred securities, which will be payable at the mandatory repurchase date, if not sooner declared and paid. The shares of senior and junior exchangeable preferred stock are non-voting, except as otherwise required by law and as provided in their respective Certificates of Designation. Each Certificate of Designation provides that at any time dividends on the outstanding exchangeable preferred stock are in arrears and unpaid for six or more quarterly dividend periods (whether or not consecutive), the holders of a majority of the outstanding shares of the affected exchangeable preferred stock, voting as a class, will be entitled to elect the lesser of two directors or that number of directors constituting 25% of the members of our Board of Directors. The voting rights continue until such time as all dividends in arrears on the affected class of exchangeable preferred stock are paid in full (and, in the case of the senior exchangeable preferred stock after May 15, 2003, or in the case of the junior exchangeable preferred stock after February 15, 2005, are paid in cash), at which time the terms of any directors elected pursuant to such voting rights will terminate. Voting rights may also be triggered by other events described in the Certificates of Designation.

6) REDEEMABLE PREFERRED STOCK:

We have issued the following preferred stock with liquidation preferences of $1,000 per share:

				Other		Accrued
			Conversion	features,	Number of	dividends at
		Dividend	price to	rights,	shares	September 30,	Total
	Repurchase	rate per	common	preferences	originally	2005	Valuation
	Date	annum	stock	and powers	issued	(In thousands)	(In thousands)
Class M Voting Convertible Preferred Stock	April 3, 2012	8.000%	$53.000	Voting	110,000	$59,975	$169,975
Class T Convertible Preferred Stock	April 1, 2020	4.000%	$50.631	Non-Voting	7,541	1,659	9,200
Total					117,541	$61,634	$179,175

Preferred security balance sheet reconciliation (in thousands):

	As of
	September 30, 2005
Preferred securities originally issued	$	117,541
Accrued dividends		61,634
Unamortized issuance costs		(2,578	)
	$	176,597

Dividends on the Class M convertible preferred stock are compounded quarterly, accrue at 8% per annum, and are payable upon repurchase or upon liquidation of RCC. The Class M convertible preferred stock is convertible into shares of our Class A common stock at an original conversion price of $53.00 per share, subsequently adjusted to $50.43 per share. Dividends are not payable if the shares are converted. The holders of the Class M convertible preferred stock are entitled to vote on all matters submitted to the holders of the common stock on an as-converted basis. The Class M convertible preferred stock is senior to our common stock with respect to dividend rights and rights on liquidation, winding-up and dissolution of RCC.

The senior exchangeable preferred stock, junior exchangeable preferred stock, Class M convertible preferred stock are redeemable at 100% of their total liquidation preference plus accumulated and unpaid dividends at their respective repurchase dates.

12

In order to comply with the FCC rules regarding cross-ownership of cellular licensees within a given market, we issued 7,541 shares of Class T convertible preferred stock with a liquidation preference of $1,000 per share to Telephone and Data Systems, Inc. (“TDS”) on September 30, 2000 in exchange for 43,000 shares of Class A common stock and 105,940 shares of Class B common stock owned by TDS or its affiliates. TDS or RCC can convert the convertible preferred stock into the original number of shares of Class A or Class B common stock at any time that ownership by TDS or its affiliates of the common stock would then be permissible under FCC rules.

See Note 9, “Events subsequent to September 30, 2005,” for information regarding our conversion of the Class T convertible preferred stock into common stock in October 2005.

7) NET INTEREST EXPENSE

Components of interest expense are as follows:

	Three months ended						Nine months ended
(in thousands)	September 30,						September 30,
	2005			2004			2005			2004
Interest expense on credit agreement	$	—		$	—		$	—		$	4,884
Interest expense on senior secured notes		10,531			9,564			30,865			19,878
Interest expense on senior notes		8,023			8,023			24,070			24,070
Interest expense on senior subordinated notes		10,320			10,320			30,961			30,961
Amortization of debt issuance costs		1,170			1,148			3,510			3,518
Write-off of debt issuance costs		92			269			243			12,605
Senior and junior preferred stock dividends		13,969			13,331			41,639			42,111
Effect of derivative instruments		(172	)		(172	)		(515	)		5,380
Gain on repurchase and exchange of senior exchangeable preferred stock		(131	)		(7,296	)		(5,685	)		(22,572	)
Other		(26	)		(58	)		(984	)		1,049
	$	43,776		$	35,129		$	124,104		$	121,884

Exchange of senior exchangeable preferred stock preferred stock for common stock. During the three months ended September 30, 2005, we exchanged an aggregate of 9,535 shares of our 11 ⅜% senior exchangeable preferred stock for an aggregate of 1,070,190 shares of our Class A common stock in negotiated transactions. The shares were issued in reliance upon the exemption from registration provided in Section 3(a)(9) of the Securities Act of 1933, as amended. These transactions resulted in a gain of $131,000, which was recorded as a reduction of interest expense.

Gain on repurchase of senior exchangeable preferred stock. During the nine months ended September 30, 2005, we repurchased 14,932 shares of our senior exchangeable preferred stock for $13.4 million. These shares had accrued $4.0 million in unpaid dividends. The resulting $5.6 million gain was recorded as a reduction of interest expense.

During the three and nine months ended September 30, 2004, we repurchased 22,750 and 80,500 shares of our senior exchangeable preferred stock for $19.0 million and $68.4 million, respectively. During the three and nine months ended September 30, 2004, the repurchases resulted in gains of $7.3 million and $22.6 million, respectively, which were recorded as a reduction of interest expense.

8) GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL INFORMATION

RCC’s obligations under the Senior Secured Floating Rate Notes due 2010 and 8 ¼% Senior Secured Notes due 2012 are senior secured obligations and are fully and unconditionally guaranteed on a senior, secured, third-priority basis by certain of RCC’s subsidiaries. Wireless Alliance, LLC is not a guarantor of the notes.

13

We account for our investment in subsidiaries using the equity method for purposes of the supplemental consolidating presentation. The principal eliminating entries eliminate investments in subsidiaries and inter-company balances and transactions. For financial reporting purposes, each subsidiary computes income tax expense (benefit), income taxes payable, and deferred income taxes on a separate company basis as if they filed separate federal and state income tax returns. The differences between the separate company basis and consolidated income taxes is then adjusted in the elimination column of the condensed consolidating financial information.

The financial accounting records of RGI Group, Inc. (“RGI”), a guarantor subsidiary, are not maintained on a stand-alone basis and, accordingly, are included in the parent company financial presentation. RGI’s assets were approximately $6 million as of September 30, 2005 and December 31, 2004.

THE FOLLOWING CONSOLIDATING FINANCIAL INFORMATION AS OF THE DATES AND FOR THE PERIODS INDICATED OF RURAL CELLULAR CORPORATION (THE PARENT), ITS GUARANTOR SUBSIDIARIES, AND ITS NON-GUARANTOR SUBSIDIARY REFLECTS ALL INTER-COMPANY REVENUE AND EXPENSE.

14

Balance Sheet Information as of September 30, 2005 (unaudited)
(In thousands, except per share data):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	33,425		$	2,283		$	58		$	—		$	35,766
Accounts receivable, less allowance for doubtful accounts		31,852			41,784			2,600			—			76,236
Inventories		1,432			7,098			276			—			8,806
Other current assets		2,177			2,618			(29	)		—			4,766
Intercompany receivable		38,691			—			—			(38,691	)		—
Total current assets		107,577			53,783			2,905			(38,691	)		125,574
PROPERTY AND EQUIPMENT, net		53,877			214,360			9,782			—			278,019
LICENSES AND OTHER ASSETS:
Licenses, net		—			539,834			8,679			—			548,513
Goodwill, net		3,151			345,533			—			—			348,684
Customer lists, net		1,033			32,913			—			—			33,946
Deferred debt issuance costs, net		25,882			—			—			—			25,882
Investment in consolidated subsidiaries		1,156,035			—			—			(1,156,035	)		—
Other assets, net		3,571			6,805			2,294			(6,474	)		6,196
Total licenses and other assets		1,189,672			925,085			10,973			(1,162,509	)		963,221
	$	1,351,126		$	1,193,228		$	23,660		$	(1,201,200	)	$	1,366,814
CURRENT LIABILITIES:
Accounts payable	$	22,200		$	14,077		$	723		$	—		$	37,000
Current portion of long-term debt		15			—			—			—			15
Advance billings and customer deposits		2,356			9,444			262			—			12,062
Accrued interest		17,871			—			—			—			17,871
Other accrued expenses		35,726			50,970			21			(74,349	)		12,368
Intercompany liabilities		—			41,184			(2,492	)		(38,692	)		—
Total current liabilities		78,168			115,675			(1,486	)		(113,041	)		79,316
LONG-TERM LIABILITIES		1,732,598			1,088,647			41,023			(1,115,130	)		1,747,138
Total liabilities		1,810,766			1,204,322			39,537			(1,228,171	)		1,826,454
REDEEMABLE PREFERRED STOCK		176,597			—			—			—			176,597
SHAREHOLDERS’ EQUITY (DEFICIT):
Class A common stock; $.01 par value; 200,000 shares authorized,13,140 outstanding		131			918			—			(918	)		131
Class B common stock; $.01 par value; 10,000 shares authorized, 453 outstanding		5			—			—			—			5
Additional paid-in capital		207,212			760,152			31,679			(791,831	)		207,212
Accumulated earnings (deficit)		(843,998	)		(772,164	)		(47,556	)		819,720			(843,998	)
Unearned compensation		(1,408	)		—			—			—			(1,408	)
Accumulated other comprehensive income		1,821			—			—			—			1,821
Total shareholders’ equity (deficit)		(636,237	)		(11,094	)		(15,877	)		26,971			(636,237	)
	$	1,351,126		$	1,193,228		$	23,660		$	(1,201,200	)	$	1,366,814

15

Balance Sheet Information as of December 31, 2004 (in thousands, except per share data):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	84,068		$	1,253		$	18		$	—		$	85,339
Accounts receivable, less allowance for doubtful accounts		17,047			43,252			2,250			—			62,549
Inventories		1,905			5,435			318			—			7,658
Other current assets		1,669			2,425			81			—			4,175
Total current assets		104,689			52,365			2,667			—			159,721
PROPERTY AND EQUIPMENT, net		61,016			203,148			11,969			—			276,133
LICENSES AND OTHER ASSETS:
Licenses, net		—			539,834			8,679			—			548,513
Goodwill, net		3,149			345,533			—			—			348,682
Customer lists, net		1,268			46,600			—			—			47,868
Deferred debt issuance costs, net		30,228			—			—			—			30,228
Investment in consolidated subsidiaries		1,184,801			—			—			(1,184,801	)		—
Other assets, net		3,453			10,245			2,518			(9,911	)		6,305
Total licenses and other assets		1,222,899			942,212			11,197			(1,194,712	)		981,596
	$	1,388,604		$	1,197,725		$	25,833		$	(1,194,712	)	$	1,417,450
CURRENT LIABILITIES:
Accounts payable	$	22,609		$	28,991		$	865		$	—		$	52,465
Current portion of long-term debt		81			—			—			—			81
Advance billings and customer deposits		2,147			8,619			310			—			11,076
Accrued interest		41,112			—			—			—			41,112
Other accrued expenses		34,442			49,248			42			(74,053	)		9,679
Total current liabilities		100,391			86,858			1,217			(74,053	)		114,413
LONG-TERM LIABILITIES		1,718,255			1,852,703			41,025			(1,878,904	)		1,733,079
Total liabilities		1,818,646			1,939,561			42,242			(1,952,957	)		1,847,492
REDEEMABLE PREFERRED STOCK		166,296			—			—			—			166,296
SHAREHOLDERS’ EQUITY (DEFICIT):
Class A common stock; $.01 par value; 200,000 shares authorized, 11,836 outstanding		118			918			—			(918	)		118
Class B common stock; $.01 par value; 10,000 shares authorized, 540 outstanding		5			—			—			—			5
Additional paid-in capital		193,347			349			31,679			(32,028	)		193,347
Accumulated earnings (deficit)		(791,446	)		(743,103	)		(48,088	)		791,191			(791,446	)
Unearned compensation		(698	)		—			—			—			(698	)
Accumulated other comprehensive income		2,336			—			—			—			2,336
Total shareholders’ equity (deficit)		(596,338	)		(741,836	)		(16,409	)		758,245			(596,338	)
	$	1,388,604		$	1,197,725		$	25,833		$	(1,194,712	)	$	1,417,450

16

Statement of Operations Information for the Three Months Ended September 30, 2005
(unaudited) (in thousands):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
REVENUE:
Service	$	24,838		$	71,833		$	1,877		$	(261	)	$	98,287
Roaming		9,961			29,683			2,141			—			41,785
Equipment		1,844			6,197			179			—			8,220
Total revenue		36,643			107,713			4,197			(261	)		148,292
OPERATING EXPENSES:
Network costs, excluding depreciation		6,269			26,033			790			(207	)		32,885
Cost of equipment sales		2,772			10,685			281			—			13,738
Selling, general and administrative		12,016			27,653			1,253			(54	)		40,868
Depreciation and amortization		4,081			19,659			809			—			24,549
Stock based compensation		321			—			—			—			321
Total operating expenses		25,459			84,030			3,133			(261	)		112,361
OPERATING INCOME		11,184			23,683			1,064			—			35,931
OTHER INCOME (EXPENSE):
Interest expense		(43,757	)		(26,498	)		(827	)		27,306			(43,776	)
Interest and dividend income		27,555			—			—			(27,306	)		249
Inter-company charges		2,703			(2,703	)		—			—			—
Equity in subsidiaries		(5,304	)		—			—			5,304			—
Other		2			(127	)		—			—			(125	)
Other expense, net		(18,801	)		(29,328	)		(827	)		5,304			(43,652	)
INCOME (LOSS) BEFORE INCOME TAXES		(7,617	)		(5,645	)		237			5,304			(7,721	)
INCOME TAX PROVISION (BENEFIT)		—			117			—			(221	)		(104	)
NET INCOME (LOSS)		(7,617	)		(5,762	)		237			5,525			(7,617	)
PREFERRED STOCK DIVIDEND		(3,534	)		—			—			—			(3,534	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	(11,151	)	$	(5,762	)	$	237		$	5,525		$	(11,151	)

17

Statement of Operations Information for the Nine Months Ended September 30, 2005
(unaudited) (in thousands):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
REVENUE:
Service	$	70,205		$	216,590		$	5,722		$	(670	)	$	291,847
Roaming		18,553			61,699			6,269			(2	)		86,519
Equipment		4,906			21,288			500			—			26,694
Total revenue		93,664			299,577			12,491			(672	)		405,060
OPERATING EXPENSES:
Network costs, excluding depreciation		16,277			70,277			2,333			(510	)		88,377
Cost of equipment sales		8,286			33,612			849			—			42,747
Selling, general and administrative		29,252			81,359			3,785			(162	)		114,234
Depreciation and amortization		13,035			55,740			2,700			—			71,475
Stock based compensation		429			—			—			—			429
Impairment of assets		7,020			—			—			—			7,020
Total operating expenses		74,299			240,988			9,667			(672	)		324,282
OPERATING INCOME		19,365			58,589			2,824			—			80,778
OTHER INCOME (EXPENSE):
Interest expense		(124,041	)		(78,634	)		(2,294	)		80,865			(124,104	)
Interest and dividend income		81,765			9			2			(80,865	)		911
Inter-company charges		9,490			(9,490	)		—			—			—
Equity in subsidiaries		(28,839	)		—			—			28,839			—
Other		9			(158	)		—			—			(149	)
Other expense, net		(61,616	)		(88,273	)		(2,292	)		28,839			(123,342	)
INCOME (LOSS) BEFORE INCOME TAXES		(42,251	)		(29,684	)		532			28,839			(42,564	)
INCOME TAX PROVISION (BENEFIT)		—			(623	)		—			310			(313	)
NET INCOME (LOSS)		(42,251	)		(29,061	)		532			28,529			(42,251	)
PREFERRED STOCK DIVIDEND		(10,301	)		—			—			—			(10,301	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	(52,552	)	$	(29,061	)	$	532		$	28,529		$	(52,552	)

18

Statement of Operations Information for the Three Months Ended September 30, 2004
(unaudited) (in thousands):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
REVENUE:
Service	$	22,969		$	71,764		$	2,425		$	(65	)	$	97,093
Roaming		5,614			22,435			1,693			(3	)		29,739
Equipment		1,668			3,717			204			—			5,589
Total revenue		30,251			97,916			4,322			(68	)		132,421
OPERATING EXPENSES:
Network costs, excluding depreciation		4,680			22,453			700			(65	)		27,768
Cost of equipment sales		2,517			7,234			284			—			10,035
Selling, general and administrative		8,703			25,013			1,275			(3	)		34,988
Depreciation and amortization		4,138			14,446			890			—			19,474
Total operating expenses		20,038			69,146			3,149			(68	)		92,265
OPERATING INCOME		10,213			28,770			1,173			—			40,156
OTHER INCOME (EXPENSE):
Interest expense		(35,103	)		(42,956	)		(570	)		43,500			(35,129	)
Interest and dividend income		43,925			(1	)		—			(43,500	)		424
Inter-company charges		(7,874	)		7,874			—			—			—
Equity in subsidiaries		(5,435	)		—			—			5,435			—
Other		—			(14	)		—			—			(14	)
Other expense, net		(4,487	)		(35,097	)		(570	)		5,435			(34,719	)
NET INCOME (LOSS) BEFORE INCOME TAXES		5,726			(6,327	)		603			5,435			5,437
INCOME TAX PROVISION (BENEFIT)		289			5,296			—			(5,585	)		—
NET INCOME (LOSS)		5,437			(11,623	)		603			11,020			5,437
PREFERRED STOCK DIVIDEND		(3,253	)		—			—			—			(3,253	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	2,184		$	(11,623	)	$	603		$	11,020		$	2,184

19

Statement of Operations Information for the Nine Months Ended September 30, 2004
(unaudited) (in thousands):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
REVENUE:
Service	$	63,776		$	210,256		$	6,786		$	(161	)	$	280,657
Roaming		11,210			65,812			4,729			(6	)		81,745
Equipment		4,071			11,768			611			—			16,450
Total revenue		79,057			287,836			12,126			(167	)		378,852
OPERATING EXPENSES:
Network costs, excluding depreciation		12,826			61,770			2,641			(164	)		77,073
Cost of equipment sales		5,851			23,907			869			—			30,627
Selling, general and administrative		24,092			70,542			3,854			(3	)		98,485
Depreciation and amortization		11,265			41,479			2,645			—			55,389
Total operating expenses		54,034			197,698			10,009			(167	)		261,574
OPERATING INCOME		25,023			90,138			2,117			—			117,278
OTHER INCOME (EXPENSE):
Interest expense		(121,791	)		(122,578	)		(1,730	)		124,215			(121,884	)
Interest and dividend income		125,581			4			—			(124,215	)		1,370
Inter-company charges		(20,848	)		20,848			—			—			—
Equity in subsidiaries		(10,979	)		—			—			10,979			—
Other		(6	)		(72	)		—			—			(78	)
Other expense, net		(28,043	)		(101,798	)		(1,730	)		10,979			(120,592	)
NET INCOME (LOSS) BEFORE INCOME TAXES		(3,020	)		(11,660	)		387			10,979			(3,314	)
INCOME TAX PROVISION (BENEFIT)		294			18,738			—			(19,032	)		—
NET INCOME (LOSS)		(3,314	)		(30,398	)		387			30,011			(3,314	)
PREFERRED STOCK DIVIDEND		(9,581	)		—			—			—			(9,581	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	(12,895	)	$	(30,398	)	$	387		$	30,011		$	(12,895	)

20

Statement of Cash Flows Information for Nine Months Ended September 30, 2005
(unaudited) (in thousands):

				Guarantor			Non Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(42,251	)	$	(29,061	)	$	532		$	28,529		$	(42,251	)
Adjustments to reconcile to net cash (used in) provided by operating activities:
Depreciation and amortization		13,035			55,740			2,700			—			71,475
Loss on write-off of debt issuance costs		243			—			—			—			243
Gain on repurchase of preferred stock		(5,685	)		—			—			—			(5,685	)
Non-cash preferred stock dividends		3,797			—			—			—			3,797
Impairment of assets		7,020			—			—			—			7,020
Stock based compensation		429			—			—			—			429
Deferred income taxes		—			(623	)		—			310			(313	)
Other		3,053			476			(1	)		—			3,528
Change in other operating elements:
Accounts receivable		(7,766	)		(5,777	)		(350	)		—			(13,893	)
Inventories		473			(1,663	)		42			—			(1,148	)
Other current assets		(349	)		(192	)		109			—			(432	)
Accounts payable		447			(4,241	)		(142	)		—			(3,936	)
Advance billings and customer deposits		210			824			(48	)		—			986
Accrued preferred stock dividends		37,842			—			—			—			37,842
Accrued interest		(19,443	)		—			—			—			(19,443	)
Other accrued expenses		1,186			1,426			(21	)		—			2,591
Net cash (used in) provided by operating activities		(7,759	)		16,909			2,821			28,839			40,810
INVESTING ACTIVITIES:
Purchases of property and equipment		(20,009	)		(57,224	)		(288	)		—			(77,521	)
Proceeds from sale of property and equipment		27			91			—			—			118
Other		(124	)		(1	)		—			—			(125	)
Net cash used in investing activities		(20,106	)		(57,134	)		(288	)		—			(77,528	)
FINANCING ACTIVITIES:
Change in parent company receivable and payable		(9,923	)		41,255			(2,493	)		(28,839	)		—
Proceeds from issuance of common stock related to employee stock purchase plan and stock options		587			—			—			—			587
Repurchase of preferred stock		(13,355	)		—			—			—			(13,355	)
Other		(87	)		—			—			—			(87	)
Net cash (used in) provided by financing activities		(22,778	)		41,255			(2,493	)		(28,839	)		(12,855	)
NET INCREASE (DECREASE) IN CASH		(50,643	)		1,030			40			—			(49,573	)
CASH AND CASH EQUIVALENTS, at beginning of year		84,068			1,253			18			—			85,339
CASH AND CASH EQUIVALENTS, at end of period	$	33,425		$	2,283		$	58		$	—		$	35,766

21

Statement of Cash Flows information for the Nine Months Ended September 30, 2004
(unaudited) (in thousands):

				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(3,314	)	$	(30,398	)	$	387		$	30,011		$	(3,314	)
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization		11,265			41,479			2,645			—			55,389
Loss on write-off of debt and preferred stock issuance costs		12,605			—			—			—			12,605
Gain on repurchase of preferred stock		(22,573	)		—			—			—			(22,573	)
Adjustments of interest rate derivatives to fair market value		4,339			—			—			—			4,339
Non-cash preferred stock dividends		21,144			—			—			—			21,144
Tax adjustments		294			18,738			—			(19,032	)		—
Other		3,813			2,160			(42	)		—			5,931
Change in other operating elements:
Accounts receivable		1,478			822			(212	)		—			2,088
Inventories		(269	)		1,067			48			—			846
Other current assets		31			(418	)		26			—			(361	)
Accounts payable		(6,655	)		(1,918	)		(254	)		—			(8,827	)
Advance billings and customer deposits		101			976			43			—			1,120
Accrued preferred stock dividends		20,967			—			—			—			20,967
Accrued interest		(13,024	)		—			—			—			(13,024	)
Other accrued liabilities		(1,960	)		180			(77	)		—			(1,857	)
Net cash provided by operating activities		28,242			32,688			2,564			10,979			74,473
INVESTING ACTIVITIES:
Purchases of property and equipment		(19,356	)		(41,717	)		(529	)		—			(61,602	)
Proceeds from property exchange, net		(414	)		13,987			—			—			13,573
Proceeds from sale of property and equipment		18			36			—			—			54
Other		19			(15	)		—			—			4
Net cash used in investing activities		(19,733	)		(27,709	)		(529	)		—			(47,971	)
FINANCING ACTIVITIES:
Change in parent company receivable and payable		17,773			(4,754	)		(2,040	)		(10,979	)		—
Proceeds from issuance of common stock related to employee stock purchase plan and stock options		187			—			—			—			187
Repayments of long-term debt under the credit agreement		(525,724	)		—			—			—			(525,724	)
Proceeds from issuance of 8 ¼% senior secured notes		350,000			—			—			—			350,000
Proceeds from issuance of variable rate notes		160,000			—			—			—			160,000
Repurchase of preferred stock		(68,351	)		—			—			—			(68,351	)
Payments to settle interest rate swaps		(7,645	)		—			—			—			(7,645	)
Payments of debt issuance costs		(13,928	)		—			—			—			(13,928	)
Other		(161	)		—			—			—			(161	)
Net cash used in financing activities		(87,849	)		(4,754	)		(2,040	)		(10,979	)		(105,622	)
NET (DECREASE) INCREASE IN CASH		(79,340	)		225			(5	)		—			(79,120	)
CASH AND CASH EQUIVALENTS, at beginning of year		141,263			1,266			18			—			142,547
CASH AND CASH EQUIVALENTS, at end of period	$	61,923		$	1,491		$	13		$	—		$	63,427

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9) EVENTS SUBSEQUENT TO SEPTEMBER 30, 2005

Declaration of Senior Exchangeable Preferred Stock Dividends. On October 10, 2005, our board declared payment of four quarterly dividends on our outstanding senior exchangeable preferred Stock. These dividends, which were paid on October 26, 2005, represented the quarterly dividends payable on November 15, 2004, February 14, 2005, May 15, 2005 and August 15, 2005, and totaled $118.69 per share, including accrued interest.

The aggregate total dividends of approximately $17.8 million were paid from existing cash and reduced the number of unpaid quarterly dividends to five, which remedied the existing Voting Rights Triggering Event and removed any uncertainty regarding our ability to incur indebtedness, including under the revolving credit facility. We do not anticipate paying additional cash dividends on our senior exchangeable preferred stock in the foreseeable future. Accordingly future draws on the revolving credit facility may be restricted.

Revolving Credit Agreement. Effective October 18, 2005, we received approval from a majority of the banks who are lenders under the revolving credit agreement to exclude $17.8 million of senior exchangeable preferred dividends paid on October 26, 2005, from the interest coverage covenant calculation. We also borrowed $58.0 million against the revolving credit facility on November 3, 2005 and are in compliance with all of the credit facility financial covenants as of November 3, 2005.

Effective October 18, 2005, we received approval from a majority of the banks who are lenders under the revolving credit agreement to exclude $17.8 million of 11 ³/8% senior exchangeable preferred dividends paid on October 26, 2005, from the interest coverage covenant calculation.

Conversion of Class T Convertible Preferred Stock into Class A Common Stock. On October 27, 2005, RCC converted all of its outstanding shares of Class T convertible preferred stock into the 43,000 shares of Class A and 105,940 shares of Class B common stock. Dividends are not payable if the shares are converted. Accrued dividends reversed in this transaction resulted in a gain of approximately $7.0 million, which will reduce preferred stock dividends in the fourth quarter of 2005.

Offering of Senior Subordinated Floating Rate Notes. On November 7, 2005, we completed an offering of $175 million of Senior Subordinated Floating Rate Notes. With the proceeds of this offering, we will redeem all of our outstanding 9 ⁵/8% notes. The total amount for such redemption will be approximately $133 million, including $125.0 million aggregate principal, $6.7 million accrued interest to the redemption date, anticipated to be December 7, 2005, and $2 million premium for early redemption. This transaction will result in a loss of approximately $1.0 million, which will be included in interest expense in the fourth quarter of 2005.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW

We are a wireless communications service provider focusing primarily on rural markets in the United States. Our principal operating objective is to increase revenue and achieve profitability through increased penetration in existing wireless markets.

Our operating territories include portions of five states in the Northeast, three states in the Northwest, four states in the Midwest, and three states in the South. Within each of our four territories, we have a strong local sales and customer service presence in the communities we serve.

Our marketed networks covered a total population of approximately 6.4 million POPs and served approximately 704,605 voice customers as of September 30, 2005. We have national roaming agreements in our markets with Cingular (effective through December 2009) and Verizon (effective through December 2007). Under these agreements, we are able to attain preferred roaming status by overlaying our existing TDMA networks in our South, Northeast and Northwest networks with GSM/GPRS/EDGE technology and our Midwest region network with CDMA technology. We also have various agreements with T-Mobile, which are effective through December 2007.

In July 2005, we decided to centralize and streamline our business processes in order to redeploy resources to better support our new products and services. RCC’s sales, customer service, network operations, and financial areas will now be managed on a functional basis through a centralized management structure. We believe this change should allow us to more efficiently apply best practices company-wide, streamline decision-making, and reframe our relationship with customers.

Summary of three months ended September 30, 2005

Our third quarter operating highlights reflect:

• Continued construction and substantial completion of our 2.5G networks and, accordingly, improved roaming minutes over the comparable period of the previous year,

• Continued transition of our 2.0G customers to 2.5G handsets,

• Increased service revenue, primarily reflecting higher Local Service Revenue (“LSR”) and Universal Service Fund (“USF”) support,

• Increased costs required to support and market 2.5G networks, products, and customers,

• Increased customer churn and declining customers reflecting increased customer care needs, which we encountered during the commercial introduction of our GSM networks, and new technology billing system issues.

For the three months ended September 30, 2005 as compared to the three months ended September 30, 2004, service revenue increased 1.2% to $98.3 million and LSR increased to $51 as compared with $48. Contributing to the increase in LSR were increased levels of USF and increased access and features revenue. During the three months ended September 30, 2005, our total customers decreased by 12,150 to 704,605 at September 30, 2005 as compared to 716,755 at June 30, 2005.

Roaming revenue for the three months ended September 30, 2005 was $41.8 million as compared to $29.7 million in the three months ended September 30, 2004. The increase in roaming revenue reflects outcollect roaming yield declining to $0.13 per minute in the three months ended September 30, 2005 as compared to $0.16 per minute in the three months ended September 30, 2004, which was more than offset by a 65% increase in roaming outcollect minutes as compared to the comparable period of the prior year.

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At September 30, 2005, substantially all of our 974 cell sites were equipped with next-generation technology. During the three months ended September 30, 2005 and June 30, 2005, 2.5G outcollect minutes accounted for 85% and 72%, respectively, of our total outcollect minutes.

Including the cost of our anticipated overlays, our total capital expenditures for 2005 and 2006 are expected to be approximately $150 million, of which we had spent approximately $77.5 million through September 30, 2005.

Operating revenue

Our revenue primarily consists of service, roaming, and equipment revenue, each of which is described below:

•	Service revenue includes monthly access charges, charges for airtime used in excess of the time included in the service package purchased, long distance charges derived from calls placed by customers, data related services, as well as wireless and paging equipment lease revenue.
	Also included are charges for features such as voicemail, call waiting, call forwarding, and incollect revenue, which consists of charges to our customers when they use their wireless phones in other wireless markets. We do not charge installation or connection fees. We also include in service revenue the USF support funding that we receive as a result of our ETC status in certain states and the USF pass-through fees we charge our customers.
•	Roaming revenue includes only outcollect revenue, which we receive when other wireless providers’ customers use our network.
•	Equipment revenue includes sales of wireless equipment and accessories to customers, network equipment reselling, and customer activation fees.

Operating expenses

Our operating expenses include network costs, cost of equipment sales, selling, general and administrative expenses, and depreciation and amortization, each of which is described below:

• Network costs include switching and transport expenses and expenses associated with the maintenance and operation of our wireless network facilities, including salaries for employees involved in network operations, site costs, charges from other service providers for resold minutes, and the service and expense associated with incollect revenue.

• Cost of equipment sales includes costs associated with telephone equipment and accessories sold to customers. In recent years, we and other wireless providers have increased the use of discounts on phone equipment to attract customers as competition between service providers has intensified. As a result, we have incurred, and expect to continue to incur, losses on equipment sales per gross additional and migrated customer. We expect to continue these discounts and promotions because we believe they will increase the number of our wireless customers and, consequently, increase service revenue.

• Selling, general and administrative (“SG&A”) expenses include salaries, benefits, and operating expenses such as marketing, commissions, customer support, accounting, administration, and billing. We also include in SG&A contributions payable to the USF.

• Depreciation and amortization represents the costs associated with the depreciation of fixed assets and the amortization of customer lists and spectrum relocation.

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Other expenses

In addition to the operating expenses discussed above, RCC also incurs other expenses, primarily interest on debt and dividends on preferred stock.

• Interest expense primarily results from the issuance of outstanding notes and exchangeable preferred stock, the proceeds of which were used to finance acquisitions, repay other borrowings, and further develop our wireless network.

     Interest expense includes the following:

• Interest expense on our credit agreement, senior secured notes, senior notes, and senior subordinated notes,

• Amortization of debt issuance costs,

• Early extinguishment of debt issuance costs,

• Dividends on senior and junior exchangeable preferred stock,

• Amortization of preferred stock issuance costs,

• Gain (loss) on derivative instruments, and

• Gains on repurchase and exchange of preferred stock.

• Preferred stock dividends are accrued on our outstanding Class M convertible preferred stock and Class T convertible preferred stock.

Customer Base

At September 30, 2005, our customer base consisted of three types of customers: postpaid, wholesale, and prepaid. Postpaid customers accounted for the largest portion of our customer base as of that date, at 85.4%. These customers pay a monthly access fee for a wireless service plan that generally includes a fixed number of minutes and certain service features. In addition to the monthly access fee, these customers are typically billed in arrears for long-distance charges, roaming charges, and minutes of use exceeding their rate plans. Our wholesale customers are similar to our postpaid customers in that they pay monthly fees to utilize our network and services; however, the customers are billed by a third party (reseller), who has effectively resold our service to the end user (customer). We in turn bill the third party for the monthly usage of the end user. Wholesale customers accounted for 12.8% of our total customer base as of September 30, 2005. Our prepaid customers accounted for 1.8% of our customer base as of September 30, 2005.

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SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The following discussion and analysis is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets, and liabilities during the periods reported. Estimates are used when accounting for certain items such as unbilled revenue, allowance for doubtful accounts, depreciation or amortization periods, income taxes, valuation of intangible assets, and litigation contingencies. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. We believe that certain significant accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

For a detailed discussion of our significant accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2004. There have been no material changes in the application of our significant accounting policies subsequent to the report. Applications of these policies in preparing the third quarter 10-Q require that estimates be made by management to fairly present the financial position of RCC.

Property, Plant and Equipment and Definite Life Intangibles Impairment

Fixed assets and definite life intangibles are evaluated for impairment whenever indicators of impairment exist. Accounting standards require that if an impairment indicator is present, we must assess whether the carrying amount of the asset is unrecoverable by estimating the sum of the future cash flows expected to result from the asset, undiscounted and without interest charges. If the carrying amount is more than the recoverable amount, an impairment charge must be recognized, based on the fair value of the asset. We believe that the accounting estimate related to asset impairment is a “significant accounting estimate” because: (1) it requires us to make assumptions about future revenues and costs of sales over the life of the asset, (2) judgment is involved in determining the occurrence of a “triggering event,” and (3) recognizing an impairment could have a material impact on our financial position and results of operations. Our assumptions about future revenues require significant judgment because actual revenues have fluctuated in the past and may continue to do so. In estimating future revenues, we use our internal business forecasts, which we develop based on recent revenue data for existing products and services, planned timing of new products and services, and other industry and economic factors. When indicators are present, RCC tests for impairment.

On June 28, 2005, our customer relationship management and billing managed services agreement with Amdocs was mutually terminated. Until October 2005, our GSM customers were being served through a transitional Amdocs system implemented earlier this year. As a result of the termination of the agreement, we recorded a charge to operations during the three months ended June 30, 2005 of $7.0 million, reflecting the write down of certain development costs previously capitalized.

27

Recently Issued Accounting Pronouncements

Accounting for Share-Based Compensation. On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment,” which is a revision of SFAS No. 123 and supersedes Accounting Principles Board (“APB”) Opinion No. 25. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. SFAS No. 123(R) is effective for us as of January 1, 2006. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123. We are currently assessing the impact of adopting SFAS No. 123(R) on our consolidated results of operations.

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RESULTS OF OPERATIONS

The following tables present certain consolidated statement of operations data as a percentage of total revenue as well as other operating data for the periods indicated.

(in thousands)	Three months ended September 30,												Nine months ended September 30,
	2005						2004						2005						2004
				%						%						%						%
	Actual			of revenue			Actual			of revenue			Actual			of revenue			Actual			of revenue
REVENUE:
Service	$	98,287			66.3	%	$	97,093			73.3	%	$	291,847			72.1	%	$	280,657			74.1	%
Roaming		41,785			28.2			29,739			22.5			86,519			21.3			81,745			21.6
Equipment		8,220			5.5			5,589			4.2			26,694			6.6			16,450			4.3
Total revenue		148,292			100.0			132,421			100.0			405,060			100.0			378,852			100.0
OPERATING EXPENSES:
Network costs, excluding depreciation		32,885			22.2			27,768			21.0			88,377			21.8			77,073			20.3
Cost of equipment sales		13,738			9.3			10,035			7.6			42,747			10.6			30,627			8.1
Selling, general and administrative		40,868			27.6			34,988			26.4			114,234			28.2			98,485			26.0
Depreciation and amortization		24,549			16.6			19,474			14.7			71,475			17.6			55,389			14.6
Stock based compensation		321			0.2			—			—			429			0.1			—			—
Impairment of assets		—			—			—			—			7,020			1.7			—			—
Total operating expenses		112,361			75.9			92,265			69.7			324,282			80.0			261,574			69.0
OPERATING INCOME		35,931			24.1			40,156			30.3			80,778			20.0			117,278			31.0
OTHER INCOME (EXPENSE):
Interest expense		(43,776	)		(29.5	)		(35,129	)		(26.5	)		(124,104	)		(30.6	)		(121,884	)		(32.2	)
Interest and dividend income		249			0.2			424			0.3			911			0.2			1,370			0.4
Other		(125	)		(0.1	)		(14	)		0.0			(149	)		0.0			(78	)		0.0
Other expense, net		(43,652	)		(29.4	)		(34,719	)		(26.2	)		(123,342	)		(30.4	)		(120,592	)		(31.8	)
INCOME (LOSS) BEFORE INCOME TAX BENEFIT		(7,721	)		(5.3	)		5,437			4.1			(42,564	)		(10.4	)		(3,314	)		(0.8	)
INCOME TAX BENEFIT		(104	)		(0.1	)		—			—			(313	)		(0.1	)		—			—
NET INCOME (LOSS)		(7,617	)		(5.2	)		5,437			4.1			(42,251	)		(10.3	)		(3,314	)		(0.8	)
PREFERRED STOCK DIVIDEND		(3,534	)		(2.4	)		(3,253	)		(2.5	)		(10,301	)		(2.5	)		(9,581	)		(2.5	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	(11,151	)		(7.6	)%	$	2,184			1.6	%	$	(52,552	)		(12.8	)%	$	(12,895	)		(3.3	)%

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Consolidated Operating Data:	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
Penetration (1) (2)		9.6	%		10.5	%		9.6	%		10.5	%
Retention (3)		97.0	%		97.8	%		97.3	%		98.0	%
Average monthly revenue per customer (4)	$	74		$	63		$	65		$	60
Local service revenue per customer (5)	$	51		$	48		$	50		$	46
Acquisition cost per customer (6)	$	477		$	442		$	484		$	428
Voice customers at period end
Postpaid								601,699			636,655
Prepaid								12,931			21,018
Wholesale								89,975			81,890
Total customers								704,605			739,563
Direct marketed POPs (1)
RCC Cellular								5,651,000			5,525,000
Wireless Alliance								754,000			754,000
Total POPs								6,405000			6,279,000

(1)	Reflects 2000 U.S. Census Bureau data updated for December 2002.
(2)	Represents the ratio of wireless voice customers, excluding wholesale customers, at the end of the period to population served (“POPs”).
(3)	Determined for each period by dividing total postpaid wireless voice customers discontinuing service during such period by the average postpaid wireless voice customers for such period (customers at the beginning of the period plus customers at the end of the period, divided by two), dividing that result by the number of months in the period, and subtracting such result from one.
(4)	Determined for each period by dividing service revenue (not including pass-through regulatory fees) and roaming revenue by the monthly average postpaid customers for such period.
(5)	Determined for each period by dividing service revenue (not including pass-through regulatory fees) by the monthly average postpaid customers for such period.
(6)	Determined for each period by dividing selling and marketing expenses, net cost of equipment sales, and depreciation of rental telephone equipment by the gross postpaid wireless voice customers added during such period.

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Three months ended September 30, 2005 and 2004

Revenue

Operating Revenue:

	Three months ended September 30,
(In thousands)	2005		2004		$ Increase		% Increase
Service	$	98,287	$	97,093	$	1,194		1.2	%
Roaming		41,785		29,739		12,046		40.5	%
Equipment		8,220		5,589		2,631		47.1	%
Total operating revenue	$	148,292	$	132,421	$	15,871		12.0	%

Service Revenue. Service revenue growth for the three months ended September 30, 2005 primarily reflects LSR increasing to $51 for the three months ended September 30, 2005 compared to $48 for the three months ended September 30, 2004, partially offset by declining customers. Driving the higher LSR were increased access and features revenue together with increased USF payments.

Service Revenue

	Three months ended September 30,
(In thousands)					$ Increase			% Increase
	2005		2004		(Decrease)			(Decrease)
Local service	$	75,204	$	75,892	$	(688	)		(0.9	)%
USF support		10,795		7,616		3,179			41.7	%
Regulatory pass through		3,424		3,204		220			6.9	%
Other		8,864		10,381		(1,517	)		(14.6	)%
Total service revenue	$	98,287	$	97,093	$	1,194			1.2	%

Reflecting the increase in USF qualified service areas, USF support payments increased to $10.8 million for the three months ended September 30, 2005 as compared to $7.6 million for the three months ended September 30, 2004. We are currently receiving USF support in the states of Alabama, Kansas, Maine, Minnesota, Mississippi, Oregon, Vermont, and Washington. We recently received ETC designation in South Dakota and expect to begin receiving USF support in that state during the first quarter of 2006. We have pending applications for ETC designation for New Hampshire and for the additional markets in Alabama and Mississippi that we acquired in 2004. Given the expansion of USF qualified service areas in states that we serve, we expect the amount of USF support to be approximately $40 million in 2005.

The increase in regulatory pass-through fees reflects a change in federally managed rates.

Customers. Primarily reflecting customer retention declining to 97.0% for the three months ended September 30, 2005, our total customers decreased to 704,605 at September 30, 2005 as compared to 739,563 at September 30, 2004. Our decline in customer retention reflects a multitude of technology related issues, including increased customer care needs (which we encountered during the commercial introduction of our GSM networks), GSM billing system changes, and the transitional stage of our networks. Customer migrations and postpaid gross customer adds for the three months ended September 30, 2005 were 46,000 and 41,000, respectively. We expect to continue a more moderate and controlled rollout of GSM products, which we believe will eventually improve customer retention. At September 30, 2005, approximately 35% of our total customers were equipped with next generation products as compared to 25% at June 30, 2005.

Beginning in 2004, we implemented a new data processing and billing system with Amdocs. In June 2005, our agreement with Amdocs was mutually terminated based upon our determination that the proposed system would not meet our requirements. Subsequently, we entered into an agreement with VeriSign to be the wireless billing provider for our GSM subscribers. We began implementation of a VeriSign data processing and billing system in October 2005. In October 2005, we transitioned our GSM customers previously on the Amdocs system over to the VeriSign platform.

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Roaming Revenue. The 40.5% increase in roaming revenue during the three months ended September 30, 2005 primarily reflects a 65% increase in outcollect minutes partially offset by a decline in outcollect yield. Our outcollect yield for the three months ended September 30, 2005 was approximately $0.13 per minute as compared to $0.16 per minute in the three months ended September 30, 2004. Declines in TDMA outcollect minutes were offset by increases in next generation GSM and CDMA outcollect minutes. GSM and CDMA outcollect minutes accounted for approximately 85% of our total outcollect minutes during the three months ended September 30, 2005 as compared to 40% during the three months ended September 30, 2004.

For the three months ended September 30, 2005 and 2004, Cingular, Verizon Wireless, and T-Mobile accounted for approximately 92% and 87%, respectively, of our total outcollect roaming minutes.

We have national roaming agreements in our markets with Cingular (effective through December 2009) and Verizon (effective through December 2007). Under these agreements, we are able to attain preferred roaming status by overlaying our existing TDMA networks in our South, Northeast and Northwest networks with GSM/GPRS/EDGE technology and our Midwest region network with CDMA/2000/1XRTT technology. We expect to have these technology conversions substantially completed during 2005. We also have various agreements with T-Mobile, which are effective through December 2007.

Equipment Revenue. Equipment revenue increased 47.1% to $8.2 million for the three months ended September 30, 2005 as compared to $5.6 million during the three months ended September 30, 2004. Contributing to equipment revenue this quarter were gross postpaid customer additions of approximately 41,000 and customer migrations of approximately 46,000. During the three months ended September 30, 2004, gross postpaid customer additions and migrations were approximately 40,000 and 32,800, respectively.

Operating Expenses

	Three months ended September 30,
(In thousands)					$ Increase			% Increase
	2005		2004		(Decrease)			(Decresae)
Network cost
Incollect cost	$	12,137	$	12,322	$	(185	)		(1.5	)%
Other network cost		20,748		15,446		5,302			34.3	%
		32,885		27,768		5,117			18.4	%
Cost of equipment sales		13,738		10,035		3,703			36.9	%
Selling, general and administrative		40,868		34,988		5,880			16.8	%
Depreciation and amortization		24,549		19,474		5,075			26.1	%
Stock based compensation		321		—		321			—
Total operating expenses	$	112,361	$	92,265	$	20,096			21.8	%

Network Cost. Network cost, as a percentage of total revenues, increased to 22.2% in the three months ended September 30, 2005 as compared to 21.0% in the three months ended September 30, 2004. This increase reflects additional costs of operating multiple networks (analog, TDMA and 2.5G networks), increased incollect usage by 2.5G customers, and additional cell site costs related to our network improvement and expansion. Per minute incollect cost for the three months ended September 30, 2005 was approximately $0.11 per minute as compared to $0.13 per minute in three months ended September 30, 2004.

Cost of Equipment Sales. Cost of equipment sales increased 36.9% to $13.7 million for the three months ended September 30, 2005, reflecting the cost of increased customer migration to next generation handsets together with increases in gross customer additions. As a percentage of revenue, cost of equipment sales for the three months ended September 30, 2005 increased to 9.3% as compared to 7.6% in the three months ended September 30, 2004. We migrated approximately 46,000 customers to primarily next generation handsets during the three months ended September 30, 2005. During the three months ended September 30, 2004, we migrated approximately 32,800 customers to upgraded handsets. Postpaid gross customer additions in the three months ended September 30, 2005 and September 30, 2004 were approximately 41,000 and 40,000, respectively.

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Selling, General and Administrative. As a percentage of revenue, SG&A increased to 27.6% in the three months ended September 30, 2005 as compared to 26.4% during the three months ended September 30, 2004. Contributing to the increase in SG&A were increases in customer service contract labor related to our roll out of next generation products and billing system conversion and severance costs related to the reorganization announced in August 2005. Sales and marketing costs increased reflecting the market launch of next-generation technology products. The increase in bad debt expense results from the increase in customer churn together with a resource realignment of our customer service departments to focus on customer service calls.

Components of SG&A are as follows:

(in thousands)	Three months ended September 30,
	2005		2004		$ Increase		% Increase
General and administrative	$	19,259	$	15,270	$	3,989		26.1	%
Sales and marketing		14,244		13,864		380		2.7	%
Bad debt		3,854		2,485		1,369		55.1	%
Regulatory pass-through fees		3,511		3,369		142		4.2	%
	$	40,868	$	34,988	$	5,880		16.8	%

Depreciation and Amortization. Depreciation and amortization expense increased 26.1% during the three months ended September 30, 2005 to $24.6 million as compared to $19.5 million for the three months ended September 30, 2004. This increase primarily reflects the accelerated depreciation of our 2.0G TDMA networks and depreciation on the recently activated 2.5G networks in our Northeast and Northwest territories. We expect 2.5G networks to eventually replace 2.0G networks. With our South territory launch of its 2.5G network in May 2005, all of our four territories are operating both 2.0G and 2.5G networks. At September 30, 2005, substantially all of our 974 cell sites were equipped with next-generation technology.

Other Income (Expense)

Interest Expense. Interest expense for the three months ended September 30, 2005, increased 24.6% to $43.8 million as compared to $35.1 million in the three months ended September 30, 2004. The increase in interest expense for the three months ended September 30, 2005 primarily reflects a 98.2% decrease in gains on repurchase and exchange of senior exchangeable preferred stock from the three months ended September 30, 2004.

Components of Interest Expense	Three months ended
(in thousands)	September 30,
	2005			2004
Interest expense on credit agreement	$	—		$	—
Interest expense on senior secured notes		10,531			9,564
Interest expense on senior notes		8,023			8,023
Interest expense on senior subordinated notes		10,320			10,320
Amortization of debt issuance costs		1,170			1,148
Write-off of debt issuance costs		92			269
Senior and junior preferred stock dividends		13,969			13,331
Effect of derivative instruments		(172	)		(172	)
Gain on repurchase and exchange of senior exchangeable preferred stock		(131	)		(7,296	)
Other		(26	)		(58	)
	$	43,776		$	35,129

Gain on repurchase of senior exchangeable preferred stock. During the three months ended September 30, 2005, we did not repurchase shares of senior exchangeable preferred stock. During the three months ended September 30, 2004, we repurchased 22,750 shares of our senior exchangeable preferred stock for $19.0 million. These shares had accrued $3.5 million in unpaid dividends. The corresponding $7.3 million gain on repurchase of preferred shares was recorded as a reduction of interest expense.

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Gain on exchange of senior exchangeable preferred stock for common stock. During the three months ended September 30, 2005, we exchanged an aggregate of 9,535 shares of our senior exchangeable preferred stock for an aggregate of 1,070,190 shares of our Class A common stock in negotiated transactions. The shares were issued in reliance upon the exemption from registration provided in Section 3(a)(9) of the Securities Act of 1933, as amended. These transactions resulted in a gain of $131,000, which reduced interest expense.

Preferred Stock Dividends

Preferred stock dividends for the three months ended September 30, 2005 increased by 8.6% to $3.5 million as compared to $3.3 million in the three months ended September 30, 2004. The increase in preferred stock dividends reflects the compounding effect of the accrual of past dividends.

Nine months ended September 30, 2005 and 2004

Revenue

Operating Revenue:

	Nine months ended September 30,
(In thousands)	2005		2004		$ Increase		% Increase
Service	$	291,847	$	280,657	$	11,190		4.0	%
Roaming		86,519		81,745		4,774		5.8	%
Equipment		26,694		16,450		10,244		62.3	%
Total operating revenue	$	405,060	$	378,852	$	26,208		6.9	%

Service Revenue. Service revenue growth for the nine months ended September 30, 2005 primarily reflects LSR increasing to $50 for the nine months ended September 30, 2005 compared to $46 for the nine months ended September 30, 2004, partially offset by declining customers. Driving the higher LSR were increased access and features revenue together with increased USF payments. Contributing to the increase in LSR was approximately $1 in increased billing to our customers, with the remainder being related to the increase in USF payments.

Service Revenue

	Nine months ended September 30,
(In thousands)					$ Increase			% Increase
	2005		2004		(Decrease)			(Decrease)
Local service	$	224,420	$	223,940	$	480			0.2	%
USF support		30,295		19,081		11,214			58.8	%
Regulatory pass through		10,551		7,981		2,570			32.2	%
Other		26,581		29,655		(3,074	)		(10.4	)%
Total service revenue	$	291,847	$	280,657	$	11,190			4.0	%

Reflecting the increase in USF qualified service areas, USF support payments increased to $30.3 million for the nine months ended September 30, 2005 as compared to $19.1 million for the nine months ended September 30, 2004.

Service revenue was negatively impacted by a decrease in customers resulting from AT&T Wireless (“AWE”) property exchange completed on March 1, 2004 and customers lost due to the transition of our TDMA networks to 2.5G technology. As part of the AWE property exchange, on March 1, 2004, we transferred approximately 35,000 Oregon RSA 4 customers to AWE. We received from AWE operations in Alabama and Mississippi, including approximately 14,000 customers.

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Customers. Primarily reflecting customer retention declining to 97.3% for the nine months ended September 30, 2005, our total customers decreased to 704,605 at September 30, 2005 as compared to 739,563 at September 30, 2004. Our decline in customer retention reflects a multitude of technology related issues, including increased customer care needs (which we encountered during the commercial introduction of our GSM networks), GSM billing system changes, and the transitional stage of our networks. Customer postpaid gross customer adds and migrations and for the nine months ended September 30, 2005 were 122,341 and 146,641, respectively. We expect to continue a more moderate and controlled rollout of GSM products, which we believe will eventually improve customer retention. Customer postpaid gross customer adds and migrations and for the nine months ended September 30, 2004 were 117,950 and 95,331, respectively.

Roaming Revenue. The 5.8% increase in roaming revenue during the nine months ended September 30, 2005 primarily reflects a decline in roaming yield that was more than offset with increased outcollect minutes. Our outcollect yield for the nine months ended September 30, 2005 was $0.14 per minute as compared to $0.17 per minute in the nine months ended September 30, 2004. Declines in TDMA outcollect minutes were offset by increases in next generation GSM and CDMA outcollect minutes. Partially offsetting the increase in roaming revenue was the transfer of our Oregon RSA 4 service area to AWE on March 1, 2004.

Also impacting roaming revenue primarily during the first and second quarters of 2005 was the accelerated transition by our national roaming partners to 2.5G technology handsets. Because these partners converted their customer base to this new technology before we had completed our network overlays, we did not capture a portion of available roaming revenue. At September 30, 2005, substantially all of our 974 cell sites were equipped with next-generation technology. During the nine months ended September 30, 2005 and 2004, 2.5G outcollect minutes accounted for 76% and 32%, respectively, of our total outcollect minutes. For the nine months ended September 30, 2005 and 2004, Cingular, Verizon Wireless, and T-Mobile accounted for approximately 91% and 85%, respectively, of our total outcollect roaming minutes.

Equipment Revenue. Equipment revenue increased 62.3% to $26.7 million for the nine months ended September 30, 2005 as compared to $16.5 million during the nine months ended September 30, 2004. Contributing to equipment revenue for the nine months ended September 30, 2005 were gross postpaid customer additions increasing to approximately 122,341 as compared to approximately 117,950 during the nine months ended September 30, 2004. Also contributing to equipment revenue were customer migrations of approximately 146,641, during the nine months ended September 30, 2005 as compared to approximately 95,331 during the nine months ended September 30, 2004.

Operating Expenses

	Nine months ended September 30,
(In thousands)	2005		2004		$ Increase		% Increase
Network cost
Incollect cost	$	35,409	$	34,103	$	1,306		3.8	%
Other network cost		52,968		42,970		9,998		23.3	%
		88,377		77,073		11,304		14.7	%
Cost of equipment sales		42,747		30,627		12,120		39.6	%
Selling, general and administrative		114,234		98,485		15,749		16.0	%
Depreciation and amortization		71,475		55,389		16,086		29.0	%
Stock-based compensation		429		—		429		—
Impairment of assets		7,020		—		7,020		—
Total operating expenses	$	324,282	$	261,574	$	62,708		24.0	%

Network Cost. Network cost, as a percentage of total revenues, increased to 21.8% in the nine months ended September 30, 2005 as compared to 20.3% in the nine months ended September 30, 2004. This increase reflects additional costs of operating multiple networks (analog, TDMA and 2.5G networks), increased incollect usage by 2.5G customers, and additional cell site costs related to our network improvement and expansion. Per minute incollect cost for the nine months ended September 30, 2005 was approximately $0.11 per minute as compared to $0.13 in nine months ended September 30, 2004.

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Cost of Equipment Sales. Cost of equipment sales increased 39.6% to $42.7 million for the nine months ended September 30, 2005, reflecting the cost of increased customer migration to next generation handsets together with increases in gross customer additions. As a percentage of revenue, cost of equipment sales for the nine months ended September 30, 2005 increased to 10.6% as compared to 8.1% in the nine months ended September 30, 2004. We migrated approximately 146,641 customers to primarily next generation handsets during the nine months ended September 30, 2005. During the nine months ended September 30, 2004, we migrated approximately 95,331 customers to upgraded handsets. Postpaid gross customer additions in the nine months ended September 30, 2005 were approximately 122,340 as compared to approximately 118,114 in the nine months ended September 30, 2004.

Selling, General and Administrative. As a percentage of revenue, SG&A increased to 28.2% in the nine months ended September 30, 2005 as compared to 26.0% during the nine months ended September 30, 2004. Contributing to the increase in SG&A were increases in customer service contract labor related to our roll out of next generation products and billing system conversion and severance costs related to the reorganization announced in August 2005. Sales and marketing costs increased reflecting the market launch of next-generation technology products. The increase in bad debt expense reflects increased customer churn together with a resource realignment of our customer service departments to focus on customer service calls. Regulatory pass-through fees increased to $10.7 million in the nine months ended September 30, 2005 as compared to $8.3 million in the nine months ended September 30, 2004, reflecting a change in federally managed rates.

Components of SG&A are as follows:

(in thousands)	Nine months ended September 30,
	2005		2004		$ Increase		% Increase
General and administrative	$	50,025	$	44,313	$	5,712		12.9	%
Sales and marketing		44,220		39,124		5,096		13.0	%
Bad debt		9,301		6,789		2,512		37.0	%
Regulatory pass-through fees		10,688		8,259		2,429		29.4	%
	$	114,234	$	98,485	$	15,749		16.0	%

Depreciation and Amortization. Depreciation and amortization expense increased 29.0% during the nine months ended September 30, 2005 to $71.5 million as compared to $55.4 million for the nine months ended September 30, 2004. This increase primarily reflects the accelerated depreciation of our 2.0G TDMA networks and depreciation on the recently activated 2.5G networks in our Northeast and Northwest territories. With our South territory launch of its 2.5G network in May 2005, all four of our territories are operating both 2.0G and 2.5G networks. At September 30, 2005, substantially all of our 974 cell sites were equipped with next-generation technology.

Impairment of Assets. Effective June 28, 2005, our agreement with Amdocs was mutually terminated. Reflecting the termination of the agreement, we recorded a charge to operations during the three months ended June 30, 2005 of $7.0 million, reflecting the write down of certain development costs previously capitalized.

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Other Income (Expense)

Interest Expense. Interest expense for the nine months ended September 30, 2005, increased 1.8% to $124.1 million as compared to $121.9 million in the nine months ended September 30, 2004. The increase primarily reflects the $11.0 million increase in interest on the senior secured notes and a 74.8% decrease in gain on repurchase and exchange of senior exchangeable preferred stock to $5.7 million as compared to $22.6 million in the previous year. Partially offsetting the increase in interest expense was $12.6 million in write-off of debt issuance costs for the nine months ended September 30, 2004.

	Nine months ended
(in thousands)	September 30,
	2005			2004
Interest expense on credit agreement	$	—		$	4,884
Interest expense on senior secured notes		30,865			19,878
Interest expense on senior notes		24,070			24,070
Interest expense on senior subordinated notes		30,961			30,961
Amortization of debt issuance costs		3,510			3,518
Write-off of debt issuance costs		243			12,605
Senior and junior preferred stock dividends		41,639			42,111
Effect of derivative instruments		(515	)		5,380
Gain on repurchase and exchange of senior exchangeable preferred stock		(5,685	)		(22,572	)
Other		(984	)		1,049
	$	124,104		$	121,884

Gain on repurchase of Senior Exchangeable preferred stock. During the nine months ended September 30, 2005 and September 30, 2004, we repurchased 14,932 and 80,500 shares of senior exchangeable preferred stock for $13.4 million and $68.4 million, respectively. The corresponding $5.6 million and $22.6 million gains, not including transaction commissions and other related fees, were recorded as a reduction of interest expense within the condensed statement of operations.

Gain on exchange of Senior Exchangeable Preferred Stock for Class A Common Stock. During the nine months ended September 30, 2005, we repurchased an aggregate of 9,535 shares of our senior exchangeable preferred stock in exchange for an aggregate of 1,070,190 shares of our Class A common stock in negotiated transactions resulting in a gain of $131,000. The shares were issued in reliance upon the exemption from registration provided in Section 3(a)(9) of the Securities Act of 1933, as amended.

Preferred Stock Dividends

Preferred stock dividends for the nine months ended September 30, 2005 increased by 7.5% to $10.3 million as compared to $9.6 million in the nine months ended September 30, 2004 reflecting the compounding effect of the accrual of past dividends.

LIQUIDITY AND CAPITAL RESOURCES

We need cash primarily for working capital, capital expenditures, debt service, customer growth, and purchases of additional spectrum. We began a 2.5G technology network overlay process in late 2003, which we expect to be substantially complete in 2005. We have made commitments to our roaming partners and to equipment vendors to substantially complete our 2.5G networks by the end of 2005. At September 30, 2005, substantially all of our 974 cell sites were equipped with next-generation technology. We are also pursuing a strategy of expanding our network coverage in all of our territories, which will result in an increase in the number of our cell sites and an increase in total marketed POPs. We believe our network overlay and expansion efforts will improve our ability to attract customers in addition to providing our roaming partners greater access to our networks. Including the cost of our anticipated overlays, our total capital expenditures for 2005 and 2006 are expected to be approximately $150 million, of which we had spent approximately $77.5 million through September 30, 2005. We expect to fund these capital expenditures primarily from cash on hand and operating cash flow.

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Liquidity. RCC’s cash and cash equivalents at September 30, 2005 declined to $35.8 million as compared to $85.3 million at December 31, 2004.

Until August 2003, we paid the dividends on our senior exchangeable preferred stock by issuing additional shares of exchangeable preferred stock and until February 15, 2005, we paid the dividends on our junior exchangeable preferred stock by issuing additional shares of junior preferred stock. Because we had failed to pay six or more quarterly dividends on our senior exchangeable preferred stock, a “Voting Rights Triggering Event,” as defined in the terms of our senior preferred stock, existed as of November 15, 2004. Accordingly, the holders of senior exchangeable preferred stock exercised their right to elect two directors. Additionally, while a “Voting Rights Triggering Event” exists, certain terms of our senior preferred stock, if enforceable, may prohibit incurrence of additional indebtedness, including borrowings under our revolving credit facility.

Beginning in May 2005 our junior exchangeable preferred stock dividends are to be paid in cash. We did not declare or pay the quarterly dividends payable in May or August 2005 on the junior exchangeable preferred stock. If we elect not to pay the required cash dividends on our junior exchangeable preferred stock for six or more quarters, the holders will have right to elect directors.

Total accrued dividends in arrears for both the junior and senior exchangeable preferred securities, through September 30, 2005, were approximately $68.8 million.

On October 26, 2005, we paid four quarterly dividends on our outstanding senior exchangeable preferred stock. These quarterly dividends totaled $118.69 per share, including accrued interest. The aggregate total dividends of approximately $17.8 million were paid from existing cash. As of September 30, 2005, we would have been able to make a total of $90.0 million in restricted payments, which amount was reduced by the dividend payment. The payment of these dividends reduced the number of unpaid quarterly dividends to five and eliminated the “Voting Rights Triggering Event” and any uncertainty regarding our ability to incur indebtedness, including under the revolving credit facility. Management does not anticipate paying additional dividends in the foreseeable future.

Although we have paid sufficient dividends to remedy the Voting Rights Triggering Event under the senior exchangeable preferred stock, the holders of the senior exchangeable preferred stock will continue to have the right to elect directors until all of the dividends in arrears have been paid. We do not anticipate paying cash dividends on our senior exchangeable preferred stock in the foreseeable future.

Cash interest payments during the nine months ended September 30, 2005 were $103.3 million as compared to $93.5 million during the nine months ended September 30, 2004.

We do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned subsidiaries or any interests in, or relationships with, any material special-purpose entities that are not included in the consolidated financial statements.

Credit Agreement. As of September 30, 2005, we had $60 million in undrawn availability under our revolving credit agreement. The credit agreement is subject to various covenants, including the ratio of senior secured indebtedness to annualized operating cash flow (as defined in the credit agreement), the ratio of total indebtedness to annualized operating cash flow, and the ratio of annualized operating cash flow to interest expense.

Our borrowings under the revolving credit facility bear interest at rates based on, at our option, either (i) the one, two, three, six, or, if made available by the lender, nine or twelve month Eurodollar rate, which is determined by reference to the Adjusted LIBO rate, or (ii) the Alternate Base Rate, which is the higher of the prime lending rate on page 5 of the Telerate Service and the Federal Funds Effective Rate plus 1/2 of 1 percent. In each case, we are required to pay an additional margin of interest above the Eurodollar rate or the Alternate Base Rate. The margin is based on the ratio of our senior secured debt to our adjusted cashflow. The margin above the Alternate Base Rate ranges from 1.50% to 2.00%. The margin above the Eurodollar rate fluctuates from 2.50% to 3.00%.

On November 3, 2005, we borrowed $58.0 million against the revolving credit facility. Accordingly, we expect to fund our anticipated cash requirements primarily from cash on hand and operating cash flow and anticipate that we will be in compliance with our revolving credit facility covenants. We were in compliance with the covenants as of November 3, 2005.

See Note 9, “Events Subsequent to September 30, 2005,” for information regarding our payment in October 2005 of four quarterly dividends on our outstanding 11 ⅜% senior exchangeable preferred stock and our draw of $58.0 million against our revolving credit facility on November 3, 2005.

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Effective October 18, 2005, we received approval from a majority of the banks who are lenders under the revolving credit agreement to exclude $17.8 million of senior exchangeable preferred dividends paid on October 26, 2005, from the interest coverage covenant calculation.

Cash flows for the nine months ended September 30, 2005, compared with the nine months ended September 30, 2004

	September 30,			September 30,
	2005			2004			Change
Net cash provided by operating activities	$	40,810		$	74,473		$	(33,663	)
Net cash used in investing activities		(77,528	)		(47,971	)		(29,557	)
Net cash used in financing activities		(12,855	)		(105,622	)		92,767
Net decrease in cash and cash equivalents		(49,573	)		(79,120	)		29,547
Cash and cash equivalents, at beginning of year		85,339			142,547			(57,208	)
Cash and cash equivalents, at end of period	$	35,766		$	63,427		$	(27,661	)

Net cash provided by operating activities was $40.8 million for the nine months ended September 30, 2005. Adjustments to the $42.3 million net loss to reconcile to net cash provided by operating activities include $71.5 million in depreciation and amortization, a $7.0 million impairment of assets, and a $37.8 million increase in accrued preferred stock dividends. Partially offsetting these items were increases of $13.9 million in accounts receivable and $19.4 million in accrued interest.

Net cash used in investing activities for the nine months ended September 30, 2005 was $77.5 million for purchases of property and equipment. The majority of property and equipment purchases are related to our 2.5G network overlay.

Net cash used in financing activities for the nine months ended September 30, 2005 was $12.9 million, primarily reflecting the repurchase of shares of senior exchangeable preferred stock.

Under the documents governing our indebtedness, we are able to make limited restricted payments, including the repurchase of senior subordinated notes or preferred stock and the payment of dividends to holders of our equity securities. As of September 30, 2005, we had approximately $90.0 million of restricted payments capacity. Giving effect to the 11 ⅜% senior exchangeable preferred stock dividend payment of $17.8 million in October 2005, our restricted payment basket was approximately $72 million.

Based upon existing market conditions and our present capital structure, we believe that cash flows from operations and funds from currently available credit facilities will be sufficient to enable us to meet required cash commitments through the next twelve-month period.

Supplemental Disclosure of Condensed Consolidated Cash Flow Information

	Nine months ended
(in thousands)	September 30,
	2005		2004
Cash paid for:
Interest	$	103,343	$	93,487

Forward-Looking Statements

Forward-looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although RCC believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. A number of factors could cause actual results, performance, achievements of RCC, or industry results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These factors include but are not limited to, competitive considerations, success of customer enrollment initiatives, the ability to increase wireless usage and reduce customer acquisition costs, the ability to improve customer retention, the successful integration of any acquired operations with RCC’s existing operations, the ability to negotiate favorable roaming agreements, the ability

39

to service debt, the completion of network upgrades, and other factors discussed in RCC’s Report on Form 10-K for the year ended December 31, 2004 and in other filings with the Securities and Exchange Commission. Investors are cautioned that all forward-looking statements involve risks and uncertainties.

In addition, such forward-looking statements are necessarily dependent upon assumptions, estimates, and data that may be incorrect or imprecise and involve known and unknown risks, uncertainties, and other factors. Accordingly, any forward-looking statements included herein do not purport to be predictions of future events or circumstances and may not be realized. All subsequent written and oral forward-looking statements attributable to RCC or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. RCC disclaims any obligation to update any such statements or to announce publicly the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have used senior secured notes, senior notes, senior subordinated notes, preferred securities, and bank credit facilities as well as cash from operations to finance our capital requirements and operations. These financial instruments, to the extent they provide for variable rates of interest, expose us to interest rate risk. One percentage point of an interest rate adjustment would have changed our cash interest payments on an annual basis by approximately $1.6 million in 2005.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. As of September 30, 2005, based on an evaluation carried out under the supervision and with the participation of RCC’s management, including the chief executive officer (CEO) and the chief financial officer (CFO), of the effectiveness of our disclosure controls and procedures, the CEO and CFO have concluded that RCC’s disclosure controls and procedures are effective.

There was no change in our internal control over financial reporting during the nine months ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

As noted in our Form 8-K filed on July 1, 2005, we terminated our plans to install the Amdocs Software Systems Limited billing system. Subsequently, we entered into an agreement with VeriSign to be the wireless billing provider for our GSM subscribers. We began implementation of a VeriSign data processing and billing system in October 2005 and accordingly have transitioned our GSM customers to the VeriSign system during the fourth quarter of 2005.

40

PART II. OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

(b) Preferred Stock Dividends

11 ⅜% Senior Exchangeable Preferred Stock. We had not declared or paid the cash dividends on our senior exchangeable preferred stock through August 2005. On October 26, 2005 we paid four of the quarterly dividends on our outstanding senior exchangeable preferred stock. The dividends paid represent the quarterly dividends that were payable on November 15, 2004, February 14, 2005, May 15, 2005 and August 15, 2005, and totaled $118.69 per share, including accrued interest. The aggregate total dividends, which totaled approximately $17.8 million, were paid from existing cash. The payment of these dividends reduced the number of unpaid quarterly dividends to five and removed any uncertainty regarding our ability to incur indebtedness, including under the revolving credit facility.

Because we had, as of November 15, 2004, failed to pay six quarterly dividends on our senior exchangeable preferred stock, the holders of senior exchangeable preferred stock exercised their right to elect two directors. Accordingly, James V. Continenza and Jacques Leduc were elected to our board at our annual meeting on May 24, 2005. This right of the holders of the senior exchangeable preferred stock to elect members of the Board of Directors continues until all past due dividends are paid in full in cash. Accrued senior exchangeable preferred stock dividends in arrearage, through November 9, 2005, were approximately $29.8 million.

12¼% Junior Exchangeable Preferred Stock. Our board of directors determined not to declare or pay the quarterly cash dividends on our Junior Exchangeable Preferred Stock in May, August 2005, or November 2005. Accrued dividends in arrearage, through November 9, 2005 were approximately $23.7 million. If dividends on the outstanding junior exchangeable preferred stock are in arrears and unpaid for six or more quarterly dividend periods (whether or not consecutive), the holders of a majority of the outstanding shares of the junior exchangeable preferred stock, voting as a class, are entitled to elect the lesser of two directors or that number of directors constituting 25% of the members of the Board of Directors.

ITEM 5. OTHER INFORMATION

Item 5. Other Information

The following information is being filed with this Report on Form 10-Q in lieu of a separate Report on Form 8-K. The item numbers correspond to the item numbers in Form 8-K.

Item 1.01. Entry into a Material Definitive Agreement.

On November 3, 2005, the Board of Directors of the Company, upon recommendation of the compensation committee, adopted a new compensation structure for non employee directors. The new compensation structures retains the current annual cash retainer of $20,000 (payable quarterly) and per meeting fee of $1000 for each board meeting attended. The per meeting fees for committee members have been eliminated and replaced with a $10,000 annual retainer for the audit committee chair, $5,000 annual retainer for audit committee members, and $3,000 annual retainer for compensation committee members. There will be no annual retainer or meeting fees for members of the nominating committee. The current annual option grant will be replaced by an annual award of restricted share units, which will be issued under a new stock compensation plan to be submitted to shareholders at the 2006 annual meeting. These restricted share units will vest after one year and be payable six months following the director’s termination or retirement from the board. Nonemployee directors will continue to be reimbursed reasonable expenses for attending board meetings and carrying out duties as board members.

41

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

A. Draw under Revolving Credit Facility

On November 3, 2005, the Company borrowed $58.0 million under its revolving credit facility, leaving $1.4 million of remaining availability. This is the first draw on the facility since it was entered into on March 24, 2005. The agreement matures in March 2010.

The Company’s borrowings under the revolving credit facility bear interest at rates based on, at its option, either (i) the one, two, three, six, or, if made available by the lender, nine or twelve month Eurodollar rate, which is determined by reference to the Adjusted LIBO rate, or (ii) the Alternate Base Rate, which is the higher of the prime lending rate on page 5 of the Telerate Service and the Federal Funds Effective Rate plus ¹/2 of 1 percent. In each case, the Company is required to pay an additional margin of interest above the Eurodollar rate or the Alternate Base Rate. The margin is based on the ratio of its senior secured debt to its adjusted cashflow (as defined in the credit agreement). The margin above the Alternate Base Rate ranges from 1.50% to 2.00%. The margin above the Eurodollar rate fluctuates from 2.50% to 3.00%. As of October 31, 2005, the effective rate for the Company’s borrowings under the facility was 7.27%.

The credit agreement is subject to various covenants, including the ratio of senior secured indebtedness to annualized operating cash flow, (as defined in the credit agreement), the ratio of total indebtedness to annualized operating cash flow, and the ratio of annualized operating cash flow to interest expense. The Company was in compliance with all covenants on the date of the draw.

On October 18, 2005, the Company amended the revolving credit facility in connection with the payment of the dividends on its senior exchangeable preferred stock:

• to exclude those dividends from the calculation of cash interest expense, which is used in various financial ratio tests in the revolving credit agreement; and

• to permit the incurrence of up to $50.0 million senior indebtedness that matures on the same date as the Company’s senior notes (out of a total of $200.0 million of additional senior indebtedness that is permitted).

This amendment was reported under Item 1.01 in a Report on 8-K filed October 24, 2005.

The revolving credit facility was filed as Exhibit 10.1(a) to the Company’s Report on Form 10-Q for the quarter ended March 31, 2004.

B. Issuance of Senior Subordinated Floating Rate Notes due 2012

On November 7, 2005, the Company issued $175,000,000 aggregate principal amount of Senior Subordinated Floating Rate Notes due 2012. The proceeds from these notes are being used primarily to redeem the $125,000,000 aggregate principal amount of outstanding 9 ⁵/8% Senior Subordinated Notes due 2008, plus accrued interest of approximately $6.7 million and a prepayment premium of $2.0 million. The remaining proceeds will be used to pay the costs of the transaction and for general corporate purposes, including, without limitation, replenishing cash used for the recent payment of dividends on the Company’s senior exchangeable preferred stock and repurchasing preferred securities.

The notes, which will mature on November 1, 2012, will bear interest at the rate per annum, reset quarterly, equal to LIBOR plus 5.75%, currently an effective rate of 10.0% per annum. Interest on the notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year, commencing February 1, 2006. The notes may be redeemed at any time on or after November 1, 2007, in whole or in part, in cash at stated redemption prices, plus accrued and unpaid interest and liquidated damages, if any, up to and excluding the date of redemption. In addition, on or before November 1, 2007, up to 35% of the aggregate principal amount of the notes may be redeemed at a price of 100% of the principal amount plus a premium

42

equal to the interest rate per annum applicable on the date on which notice of redemption is given, plus accrued and unpaid interest and liquidated damages, if any, up to and excluding the date of redemption, with the proceeds of certain equity offerings within 30 days of the closing of those equity offerings. At least 65% of the aggregate principal amount of notes issued must remain outstanding after such a redemption. Upon the occurrence of specified change of control events, the Company is required to make an offer to repurchase all the notes at a purchase price of 101% of the outstanding principal amount plus accrued and unpaid interest to the date of repurchase.

ITEM 6. EXHIBITS

     The following exhibits are filed with this report.

*10.1	Billing Services and License Agreement between VeriSign, Inc. and Rural Cellular Corporation effective July 21, 2005
31.1	Certification of Rural Cellular Corporation’s Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of Rural Cellular Corporation’s Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

*Portions of this exhibit have been omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to Registrant’s request for confidential treatment of such information under Rule 24b-2 of the Securities Exchange Act of 1934.

43

SIGNATURES

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

	RURAL CELLULAR CORPORATION (Registrant)
Date: November 9, 2005	/s/ Richard P. Ekstrand
	Richard P. Ekstrand
	President and Chief Executive Officer
Date: November 9, 2005	/s/ Wesley E. Schultz
	Wesley E. Schultz
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

44

EX-10.1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

BILLING SERVICES AND LICENSE AGREEMENT

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

CONTENTS

SECTION 1.	GRANT	1
A.	Subscription	1
B.	***	1
SECTION 2.	***	2
SECTION 3.	TERM	2
A.	Implementation Period	2
B.	***	2
C.	***	2
D.	***	2
SECTION 4.	INTELLECTUAL PROPERTY; LIMITATIONS ON USE	3
SECTION 5.	CONFIDENTIALITY	3
SECTION 6.	WARRANTIES	4
SECTION 7.	IMPLEMENTATION AND TRAINING	4
A.	Implementation	4
B.	Training	4
C.	Additional Training	5
D.	Out-of-Pocket Expenses	5
SECTION 8.	FEES	5
A.	Implementation Period ***	5
B.	VBOSS Solution *** Fees	6
C.	*** Fees	6
D.	Payment Terms	6
E.	Test Server Fees	6
F.	***	6
G.	Taxes	6
SECTION 9.	MAINTENANCE AND OTHER SERVICES	6
A.	Technical Support Services	6
B.	Customizations	6
C.	Premise Based Services -- Cooperation	7
D.	***	7

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

i

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

E.	Software Services	7
F.	Roaming Distribution	7
G.	Print and Mail Services	7
H.	Premise Based Services-- Hardware/Software	7
I.	***	8
J.	VBOSS Solution	8
K.	Implementation Services	8
L.	Gap Analysis	8
M.	***	8
N.	Advanced Solutions	8
O.	Federal Regulations and Industry Standards	8
P.	No Viruses, Etc	9
Q.	Date Compliance	9
SECTION 10.	LIMITATION OF LIABILITY	9
SECTION 11.	INFRINGEMENT INDEMNITY	9
SECTION 12.	NO TRANSFER OR EXPORT	10
SECTION 13.	ESCALATIONS AND DISPUTES	10
A.	Escalations	10
B.	Disputes	10
SECTION 14.	DEFAULT AND TERMINATION	11
SECTION 15.	GENERAL	11
SECTION 16.	NOTICES	13

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

ii

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

BILLING SERVICES AND LICENSE AGREEMENT

     BILLING SERVICES AND LICENSE AGREEMENT (this “Agreement”) dated as of the Effective Date defined below, between VeriSign, Inc., (“VeriSign”), a Delaware corporation, and Rural Cellular Corporation, a Minnesota corporation (“Customer” or “RCC”).

     WHEREAS, Customer and VeriSign are the current parties in interest to a License Agreement dated February 12, 1999 by and between VeriSign and RCC Holdings, permitted assigns, as such License Agreement was previously amended (the “1999 Agreement”); and

     WHEREAS, Customer desires to obtain from VeriSign certain billing and support services and a limited nonexclusive license to use VeriSign’s Billing & OSS system and customer relationship management software *** (the “Licensed Software”) as described below; and

     WHEREAS, VeriSign desires to license the Licensed Software to Customer and provide such billing and support services upon the terms and conditions set forth in this Agreement;

     NOW, THEREFORE, in consideration of the above declarations and the covenants and conditions set forth in this Agreement, the parties agree as follows:

SECTION 1. GRANT

     In consideration of the payments described in Section 8, Exhibit A and elsewhere in this Agreement, VeriSign agrees to provide the services described in this Agreement (the “Services”) and also hereby grants to Customer a nontransferable *** nonexclusive license to use the Licensed Software during the Term of this Agreement.

     A. Subscription

     As used in this Agreement, “Active Subscription” means ***

     For purposes of this definition, the following additional definitions shall apply:

     “Active” means the subscription is getting services from the network and the billing system.

     “Disconnected” means a subscription is completely de-provisioned from the network, and is not active in the system.

     “Suspended” means the subscription might be temporarily blocked on some of the network activities, but has not been Disconnected; ***

     B. ***

     ***

 **Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

(i) ***

(ii) ***

(iii) ***

(iv) ***

SECTION 2. ***

     ***

SECTION 3. TERM

     The Term of this Agreement will commence on the date on which this Agreement is executed by both parties (the “Effective Date”) and will continue for five (5) years *** (the “Term”).

     A. Implementation Period

     The implementation period (the “Implementation Period”) shall commence on the Effective Date and expire on ***

     B. ***

     ***

     C. ***

     ***

     D. ***

     ***

(i) ***

(ii) ***

(iii) ***

(iv) ***

(v) ***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

2

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

SECTION 4. INTELLECTUAL PROPERTY; LIMITATIONS ON USE

     A. Customer acknowledges and agrees that VeriSign retains all rights and title (including any patent, copyright, trademark and other rights) in and to the Licensed Software, including without limitation all modifications, enhancements, configurations, upgrades, and Customizations (as defined below) to the Licensed Software.

     B. For each of the Licensed Software utilized by Customer for which Customer does not elect to have VeriSign provide Hardware and Software Hosting Services, the following provisions of this Section 4.B shall apply. Customer shall use the Licensed Software only on central processing units provided or designated by VeriSign (each a “Designated CPU”). In the event a Designated CPU fails, Customer may use the Licensed Software on another central processing unit at the same location upon notification to VeriSign. Customer may make one backup copy of the Licensed Software only for its own backup purposes, which copy must display the copyright notice and information relating to the proprietary rights as they appear in the Licensed Software. Customer shall not sublicense, decompile, disassemble, or reverse engineer any portion of the Licensed Software. Customer shall not make any modifications or additions to the Licensed Software or derivative works of the Licensed Software without the prior written consent of VeriSign. Customer shall not allow the Licensed Software to be used for time-sharing or service bureau, or any similar purpose. Except as otherwise expressly permitted herein, Customer will not make available any copy of the Licensed Software, in whole or in part, whether modified or not, to any other individual or entity.

     C. ***

SECTION 5. CONFIDENTIALITY

     Both parties acknowledge that they may receive Confidential Information of the other party, including, but not limited to, the other’s proprietary or business information, the other’s trade secrets, the Licensed Software, Customer’s subscriber information, and other vital data on the Customer’s business. Customer and VeriSign will use efforts not less than the efforts and means that it uses to protect its own confidential and proprietary information of a similar nature, but in any event not less than reasonable care, to prevent the disclosure of such information to any third party and to protect the confidentiality of Confidential Information. As used in this Agreement, “Confidential Information” means (a) any written information received from the other party which is marked or identified as confidential and including but not limited to, that which relates to the number of subscribers of Customer, or the terms and provisions of this Agreement, including, without limitation, the pricing terms set forth in or related to this Agreement; and (b) any non-written information received from the other party which is verbally identified as confidential and proprietary; and (c) any information which should reasonably be deemed confidential based upon the nature of the information and the circumstances surrounding its disclosure, whether or not identified as such in writing or otherwise. For purposes of example only, information covered by the preceding clause (c) would include, without limitation, personally identifiable information of Customer’s subscribers, customer proprietary network information or CPNI (as defined by FCC rules and regulations) of Customer’s subscribers, Customer’s business and operation roadmaps and strategies and Customer’s billing system

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

3

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

configuration. Customer and VeriSign will use Confidential Information received from the other party only to perform their respective obligations under this Agreement. Notwithstanding the foregoing, the provisions of this Section 5 will not prevent either Customer or VeriSign from disclosing its own Confidential Information or from disclosing Confidential Information of the other party hereto which is (a) already known by the recipient party without an obligation of confidentiality; (b) publicly known or becomes publicly known through no unauthorized act of the recipient party; (c) rightfully received from a third party that is not subject to any legally binding restrictions on disclosure or (d) required to be disclosed pursuant to a requirement of a governmental agency or law or pursuant to a subpoena or other legal process; provided that the disclosing party immediately provides the other party with notice (if permitted) of such requirement prior to any such disclosure in order to permit such other party, at its expense, to seek an appropriate protection order or other similar remedy. This provision shall survive the termination or expiration of this Agreement.

SECTION 6. WARRANTIES

     A. VeriSign represents and warrants that (i) it has the corporate power and authority *** necessary to grant this License to Customer and provide the services set forth in this Agreement; and (ii) at the time of delivery, the Licensed Software will be free from material errors. The warranties set forth above are inapplicable to and exclude any defect, damage or malfunction resulting from (i) misuse, negligence or unauthorized repair by Customer or its agents or (ii) failure by Customer to follow installation, operating or repair manuals and instructions provided to Customer by VeriSign. Customer’s sole and exclusive remedy for warranty claims shall be correction or re-performance of the services within forty five days, or if VeriSign is unable to correct or re-perform, termination pursuant to Section 16 and the ability to seek recovery of damages hereunder. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY AND NON-INFRINGEMENT.

     B. ***

SECTION 7. IMPLEMENTATION AND TRAINING

     A. Implementation

     Following execution of this Agreement, VeriSign shall provide implementation and migration services as set forth in Exhibit E attached hereto (the “Implementation Services”). ***

     B. Training

     VeriSign shall provide the training as described below (“Training”). As part of initial installation, VeriSign shall provide Customer initial training in the operation and use of the Licensed Software at the Customer’s offices or other mutually agreed upon location. VeriSign shall provide training materials, including workbooks with multimedia CD’s (such CDs only for

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

4

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

VBOSS), and VeriSign’s training preparation shall be performed*** Training shall consist of the following:

Orientation
Customer Care
Point of Sale
Inventory
Airtime and Roaming
System Administration
Security and Permissions
Collections
Payments and Adjustments
Interpreting Reports

     C. Additional Training

     Upon reasonable notice, any additional training (including training associated with upgrades, customizations, and the addition of new markets) requested by Customer *** Web based training ***

     D. Out-of-Pocket Expenses

     Customer shall reimburse VeriSign for out of pocket expenses incurred by actual training personnel, such as travel, meals and lodging incurred by actual training personnel of VeriSign in connection with any initial, follow-up or additional training provided to Customer, provided such expenses have been approved by Customer in advance.

     SECTION 8. FEES

     In consideration for the Licensed Software and the maintenance and other services provided by VeriSign hereunder, Customer shall pay VeriSign the following fees:

     A. Implementation Period ***

     During the Implementation Period *** RCC shall pay *** License Fee, Implementation Fee, Hardware/Software Fees ***

     License Fee. The License Fee shall be due and payable ***

     Implementation Fee. ***

     ***

     Hardware/Software Fee. ***

     ***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

5

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

     B. VBOSS Solution *** Fees

     ***

     C. *** Fees

     ***

     D. Payment Terms

     Payment terms shall be net thirty (30) from date of invoice for all fees and charges. Interest may be charged by VeriSign for overdue fees and charges at the rate of one and one-half percent (1.5%) per month or the maximum amount allowed by law, whichever is less, commencing with the date payment was due.

     E. Test Server Fees

     ***

     F. ***

     ***

     G. Taxes

     All fees payable under this Agreement are exclusive of tax. Customer shall pay any tax, including sales, use, value-added, goods and services, or similar taxes imposed as a result of the provision of the Services or Licensed Software pursuant to this Agreement. Customer shall pay any tax, including sales, use, value-added, goods and services, or similar taxes imposed on Hardware/Software Fees, or on the sale of goods, in excess of any such taxes already paid by VeriSign on such Hardware, Software, or goods. If Customer claims exemption from taxation, it shall submit an exemption certificate to VeriSign. Each party shall be responsible for taxes based on their respective property or net income, and shall be responsible for their respective franchise taxes. Each party shall be responsible for the withholding, remittance, and reporting of payroll taxes relating to their respective employees.

SECTION 9. MAINTENANCE AND OTHER SERVICES

     A. Technical Support Services

     The fees described in Section 8 cover telephone support ***

     B. Customizations

     The monthly fees do not cover modifications to the Licensed Software made on behalf of Customer *** (collectively “Customizations”). *** Requests for customization services will be managed by VeriSign’s Advance Solutions group. VeriSign shall not be responsible for

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

6

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

maintenance or support of any portion of the Licensed Software affected by unauthorized modifications, additions, or derivative works made by the Customer. ***

     C. Premise Based Services — Cooperation

     Customer will provide VeriSign with reasonable cooperation and will afford to the representatives of VeriSign access, during Customer’s normal business hours, to Customer’s premises sufficient to enable VeriSign to inspect, repair, replace or remove any equipment or other assets of VeriSign installed or otherwise present on Customer’s premises.

     D. ***

     ***

     E. Software Services

     The fees described in Section 8 cover all updates and modifications (software releases) which VeriSign furnishes without extra charge to all licensees of the Licensed Software.

     F. Roaming Distribution

     VeriSign shall provide roaming distribution for Customer ***

     G. Print and Mail Services

     ***

     H. Premise Based Services— Hardware/Software

     *** The initial computer equipment and software recommended by VeriSign shall only include enough memory (RAM) and disk drive space to provide online retrieval *** of call detail and *** of account level detail inclusive of memos and work orders based upon the volumes forecasted by the Customer as of Effective Date. This equipment shall include the Designated CPU; tape drive devices; I/O terminal device server for remote offices; a high-speed modem for maintenance communications; and any adjunct processors needed for communication to or from the switch for call collection and/or service provisioning or any point-of-sale equipment. *** VeriSign shall be responsible for arranging, at Customer’s expense (for Customer’s hardware), for the maintenance, repair, upgrades and replacement of any of the foregoing computer equipment during the Term of this Agreement. Customer will be responsible for the actual costs of purchasing the equipment and services described above and all required software tools,*** Additional charges may apply for reasonable expenses relating to staging and configuration, travel, lodging and meals. Customer will be responsible for all applicable hardware and software maintenance costs during the Term of this agreement. Customer will be responsible for insuring its owned equipment other than that equipment housed at Service Bureau. All costs arising from the maintenance, repair or replacement of any computer equipment supplied by VeriSign to Customer pursuant to this Agreement shall be the responsibility of the Customer. ***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

7

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

     I. ***

     ***

     J. VBOSS Solution

     ***(the “VBOSS Solution”). The VBOSS Solution would include the hardware and software set forth in Section III.B of Exhibit A.***

     K. Implementation Services

     VeriSign will provide implementation and related services (the “Implementation Services”)*** VeriSign shall, with RCC’s cooperation and involvement, be primarily responsible for monitoring and reporting on VeriSign’s progress in implementing the Services pursuant to this Agreement. Such monitoring and reporting shall include, without limitation, managing and maintaining all jointly defined schedules, action lists, issues lists, and daily and weekly status reporting and meeting facilitation. The date that such Implementation Services are complete according to the completion criteria set forth in Exhibit E, shall be defined as the “Implementation Completion Date.”

     L. Gap Analysis

      ***  VeriSign and RCC shall cooperate in performing a functional differences analysis (a “Gap Analysis”) ***

     M. ***

     ***

     N. Advanced Solutions

     VeriSign’s Advanced Solutions Group provides solutions and services that are offered to licensees of the Licensed Software for an additional charge. Customer change requests or addon software modules or solutions to Licensed Software may be made pursuant to a mutually agreed upon statement of work. ***

     O. Federal Regulations and Industry Standards

     The parties shall consult and cooperate with each other in order to facilitate compliance with each party’s legal requirements. Such cooperation shall include, without limitation, a party notifying the other party as soon as it has cause to believe that such other party is not in full compliance with its legal requirements, and jointly developing a plan for achieving such compliance. *** All fees and charges assessed by any third party, including without limitation, state and local governments, that are beyond the control of VeriSign will be passed through to Customer.

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

8

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

     P. No Viruses, Etc.

     VeriSign agrees that at the time of delivery, the Licensed Software will not contain any Trojan-horses, anomalies, worms, viruses, self-destruct mechanisms, time bombs or the like which are intended to interfere with Customer’s use of the Licensed Software.

     Q. Date Compliance

     VeriSign agrees that the Licensed Software will be capable of recording and maintaining all dates in a format which will allow a date value of at least 2050 (i.e., the Licensed Software will be the equivalent of Year 2000 compliant through 2050).

     SECTION 10. LIMITATION OF LIABILITY

     A. ***

(i) ***

(ii) ***

     B. ***

(i) ***

(ii) ***

SECTION 11. INFRINGEMENT INDEMNITY

     VeriSign shall defend, indemnify and hold harmless Customer (including its directors, officers, employees and agents) from and against any and all claims, liabilities, damages, costs and expenses (including, but not limited to, reasonable attorneys’ fees) arising out of any third party claim (a) alleging that the Licensed Software, used within the scope of the license granted herein, or the Services infringe, violate or misappropriate any copyright, trademarks, service marks, trade dress, trade names, corporate names, proprietary logos or identifiers, any patent granted under United States law, or constitutes an unlawful disclosure, or use, violation or misappropriation of any party’s trade secrets or intellectual property or proprietary right. VeriSign will bear the expense of such defense and pay any damages and attorneys’ fees finally awarded by a court of competent jurisdiction which are attributable to such claim, provided that Customer notifies VeriSign promptly in writing of the claim, allows VeriSign to fully direct the defense or settlement of such claim, and provides reasonable cooperation. VeriSign will not be responsible for any settlement or compromise made without its written consent. ***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

9

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

SECTION 12. NO TRANSFER OR EXPORT

     *** Customer shall not assign, sublicense, or otherwise transfer, in whole or in part, this Agreement, the Licensed Software or any license or right or obligation hereunder, and Customer shall not permit any such assignment, sublicense, or other transfer without VeriSign’s written consent. Customer shall not export the Licensed Software outside of the United States without the prior written consent of VeriSign.

SECTION 13. ESCALATIONS AND DISPUTES

     A. Escalations

     Both parties agree to use commercially reasonable efforts to comply with their respective requirements identified in the Implementation SOS within the time specified therein. If any task is not completed by its scheduled date, the parties agree to the following escalation schedule and will seek timely and effective resolution.

Initial delay – 1-3 days
Customer Implementation Project Manager
VeriSign Project Manager

Extended delay – 4-7 days
Customer Billing Manager
VeriSign Site Implementations Manager

Critical delays – beyond 7 days
Customer Senior Director of MIS
VeriSign Vice President of Software Development and Architecture

     Initial resolution attempts at each level will be attempted by conference calls prior to the implementation of higher level escalation. The parties agree to have appropriate representation for resolution.

     Delays beyond 7 days that are not resolved at the levels above will be escalated to VeriSign Vice President of Billing.

     B. Disputes

1. ***

***

2. ***

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

10

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

          3. Good Faith Resolution.

     The parties to this Agreement shall use their best efforts in good faith to settle any dispute with respect to the terms and conditions of this Agreement, or any subject matter referred to in or governed by this Agreement, between their respective managers and/or officers *** from the date such dispute is claimed. If settlement cannot be reached within *** and the parties cannot agree to (a) extend such period, or (b) settle such dispute through a mutually agreed form of alternative dispute resolution involving a disinterested third party, then each party may pursue any available remedies at law or in equity.

SECTION 14. DEFAULT AND TERMINATION

     A. In the event that either Customer or VeriSign materially defaults in the performance of any of its obligations hereunder, which default shall not be substantially cured within *** after written notice is given to the defaulting party specifying the default or, with respect to any default which cannot be reasonably cured within *** if the defaulting party fails to proceed within *** to commence curing said default and thereafter to proceed expeditiously to substantially cure the same, then the party not in default may, by giving written notice thereof to the defaulting party, terminate this Agreement as of a date specified in such notice of termination, which date shall be no earlier than the date of such notice.

     B. Upon termination of this Agreement pursuant to this Section 14 *** any and all licenses granted hereunder shall cease and Customer shall promptly return or destroy the Licensed Software and return to VeriSign (at Customer’s expense) any related materials, equipment or other assets owned by VeriSign and used to provide the services hereunder. Customer shall furnish VeriSign with a written certificate stating that the original Licensed Software and any backup copies of the Licensed Software in the Customer’s possession have been destroyed. In addition, VeriSign will return to Customer (at Customer’s expense) any equipment or other assets owned by Customer that are held by VeriSign. *** The following provisions will survive any termination or expiration of this Agreement: ***

SECTION 15. GENERAL

     A. This Agreement supersedes all prior oral or written representations or communications between the parties and constitutes the entire understanding between the parties with respect to the subject matter of this Agreement.

     B. Neither party may assign or delegate this Agreement or any of its licenses, rights or duties under this Agreement, directly or indirectly, by operation of law or otherwise, without the prior written consent of the other party,*** Upon any attempted prohibited assignment or delegation, this Agreement will automatically terminate. Any attempted prohibited assignment or delegation shall be null and void. Subject to the terms of this section, this Agreement will inure to the benefit of, and will be binding upon, each Party’s successors and permitted assigns.

     C. This Agreement shall not be changed, modified or amended except by written agreement of the parties executed by their authorized representatives.

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

11

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

     D. Neither the failure nor the delay in exercising any right, power or privilege under this Agreement will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege by VeriSign will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege under this Agreement. No waiver by either party of any default or breach by the other party of any provision of this Agreement will operate as or be deemed a waiver of any subsequent breach or default. If any provisions of this Agreement are held invalid or unenforceable, the validity and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

     E. Each party hereto covenants that it will cause each of its controlled affiliates and their respective directors, officers, employees, agents and representatives to comply with all of the provisions of this Agreement.

     F. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same instrument.

     G. This Agreement will be governed by the laws of the Commonwealth of Virginia irrespective of its choice of law principles. The Parties agree that jurisdiction and venue for any matter arising out of or pertaining to this Agreement shall be proper only in the state and federal courts located in Fairfax County and the Eastern District of the Commonwealth of Virginia, United States of America.

     H. The relationship of the parties is that of a service provider and client. Nothing herein is intended or will be construed to establish any agency, partnership or joint venture relationship between the parties.

     I. Neither party shall issue a press release or otherwise advertise, make a public statement, or disclose to any third party information pertaining to the relationship arising under this Agreement, the existence or terms of this Agreement, the underlying transactions between VeriSign and Customer, or referring to the other party in relation to this Agreement without the other party’s prior written approval.

     J. Neither party shall be deemed in default hereunder, nor shall it hold the other party responsible for, any cessation, interruption or delay in the performance of its obligations hereunder (with the exception of payment obligations) due to any causes or conditions which are beyond such party’s reasonable control and which such party is unable to overcome by the exercise of reasonable diligence.

     K. The parties hereto are sophisticated and have had the opportunity to be represented by lawyers throughout the negotiation of this Agreement. As a consequence, the parties agree that the presumptions of any laws or rules relating to the interpretation of contracts against the drafter of any particular clause should not be applied in this case and therefore waive their effects.

     L. Unless mutually agreed to by the parties in writing, each party agrees not to hire, or solicit the employment of, the other party’s personnel, agents, contractors or consultants

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

12

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

associated with the services provided under this Agreement, during the Term and for a period of *** thereafter.

     M. Upon request, VeriSign will provide annual SAS-70 audit reports to Customer, and provide reasonable cooperation and follow-up relating thereto. Specifically, VeriSign will provide, at no additional cost, reasonable assistance, reasonable information and reasonable access to VeriSign personnel as may be required to meet Customer’s obligations under applicable laws (including those relating to accounting, governance, telecommunications and securities law matters and specifically including reports and information related to executable changes, tracking access to the System, change control management). VeriSign will provide, at no additional cost, an annual high-level schematic representing the architecture, software and technologies employed by VeriSign in delivering the Services. The parties agree to maintain records relating to this Agreement in accordance with their respective standard record retention policies. The parties agree to cooperate with each other in good faith with respect to Sarbanes-Oxley, securities regulations, and the like.

     N. ***

SECTION 16. NOTICES

     Notices under the terms of this Agreement will be in writing and will be given or made by delivery in person, by courier service, by facsimile or by registered or certified mail (postage prepaid, return receipt requested). Notices under Section 14 shall be effective on the date received. Other notices will be effective on the first business day following receipt thereof. Notices sent by registered or certified mail shall be deemed received on the date of delivery as indicated on the return receipt; notices sent by facsimile will be deemed received on the date transmitted. Either party may change its address and the related information for notice by written notice given to the other party in accordance with this paragraph.

To VeriSign:	VeriSign
	222 West Oglethorpe Ave Savannah, GA 31401 ***
To Customer:	Rural Cellular Corporation
	3905 Dakota Street SW Alexandria, MN 56308-2000 ***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

13

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

     Customer and VeriSign each represents that it has read this Agreement and understands and agrees to all terms and conditions stated herein.

VERISIGN, INC.	RURAL CELLULAR CORPORATION
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

14

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

Exhibit A

***

     I. ***

***

     II. ***

***

A. ***

***

B. ***

***

     III. ***

A. ***

***

B. ***

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

Exhibit B
***

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

Exhibit C

VeriSign Billing & OSS

     VeriSign Billing & OSS system (“VBOSS Solution”) is a billing and customer management product, together with related service as described below, which allows a customer to support and bill the wireless delivery of next generation communication commerce, and content services. VBOSS Solution offers processing of voice and data events, integration of payment methods, ready-to-sell content, content management, secure commerce payments, flexible component based and rules-based architecture, web-based access, and comprehensive customer care.

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

Proprietary and Confidential

Exhibit D

***

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

Exhibit E

Implementation Statement of Services
For
Rural Cellular Corporation

***

1.0 Purpose

***

2.0 Project Overview

***

3.0 Assumptions

     VeriSign has developed this Statement of Services based on the following project assumptions within these major areas:

     PROJECT

     ***

     MILESTONE DELIVERABLES

     ***

     HARDWARE

     ***

     TESTING

     ***

     MARKET BUILD AND OPERATIONS

     ***

     SWITCH INTERFACES

     ***

4.0 SOFTWARE

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

1

CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.1 Redacted

5.0 TRAINING

***

6.0 IMPLEMENTATION SERVICES

***

7.0 IMPLEMENTATION SERVICES COMPLETION CRITERIA

***

**Information omitted and filed separately with the Securities and Exchange Commission pursuant to a request for Confidential Treatment.

2

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Richard P. Ekstrand, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Rural Cellular Corporation, a Minnesota corporation (the “registrant”);
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2005	/s/ Richard P. Ekstrand
	Richard P. Ekstrand
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Wesley E. Schultz, certify that:

1)	I have reviewed this Quarterly Report on Form 10-Q of Rural Cellular Corporation, a Minnesota corporation (the “registrant”);
2)	Based on my knowledge, this 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 report;
3)	Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2005	/s/ Wesley E. Schultz
	Wesley E. Schultz
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Report on Form 10-Q of Rural Cellular Corporation for the quarter ended September 30, 2005, we, Richard P. Ekstrand, President and Chief Executive Officer of Rural Cellular Corporation, and Wesley E. Schultz, Executive Vice President and Chief Financial Officer, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	such Form 10-Q for the quarter ended September 30, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in such Form 10-Q for the quarter ended September 30, 2005, fairly presents, in all material respects, the financial condition and results of operations of Rural Cellular Corporation.

Date: November 9, 2005	/s/ Richard P. Ekstrand
	Richard P. Ekstrand
	President and Chief Executive Officer
Date: November 9, 2005	/s/ Wesley E. Schultz
	Wesley E. Schultz
	Executive Vice President and Chief Financial Officer