UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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 no. 333-110082

American Cellular Corporation

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		22-3043811 (I.R.S. Employer Identification No.)

14201 Wireless Way Oklahoma City, Oklahoma (Address of principal executive offices)		73134 (Zip Code)

(405) 529-8500

(Registrant’s telephone number, including area code)

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

The registrant is not subject to filing requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, but files reports required by those sections pursuant to contractual obligations.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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

As of November 4, 2005, there were 50 shares of the registrant’s $0.01 par value Class A common stock outstanding, which are owned of record by Dobson JV Company and 300 shares of the registrant’s $0.01 par value Class B common stock outstanding, which are owned of record by Dobson Communications Corporation.

AMERICAN CELLULAR CORPORATION

INDEX TO FORM 10-Q


Item
Number		Page

PART I. FINANCIAL INFORMATION
1	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004		2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2005 and 2004		3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004		4
	Notes to Condensed Consolidated Financial Statements		5
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
3	Quantitative and Qualitative Disclosures about Market Risk		16
4	Controls and Procedures		16
PART II. OTHER INFORMATION
1	Legal Proceedings		17
2	Unregistered Sales of Equity Securities and Use of Proceeds		17
3	Defaults Upon Senior Securities		17
4	Submission of Matters to a Vote of Security Holders		17
5	Other Information		17
6	Exhibits		17
Rule 15d-14(a) Certification by our Principal Executive Officer
Rule 15d-14(a) Certification by our Principal Financial Officer
Section 1350 Certification by our Principal Executive Officer
Section 1350 Certification by our Principal Financial Officer

PART I.

FINANCIAL INFORMATION


Item 1.	*Financial Statements*

AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


				September 30, 2005			December 31, 2004

				(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	55,683,580		$	41,488,979
	Accounts receivable				53,045,616			40,412,508
	Inventory				4,455,127			5,153,250
	Deferred tax assets				5,184,000			4,207,000
	Prepaid expenses				3,753,722			2,858,438

		Total current assets			122,122,045			94,120,175

PROPERTY, PLANT AND EQUIPMENT, net (Note 3)					163,544,572			177,141,717

OTHER ASSETS:
	Restricted assets				22,219			—
	Wireless license acquisition costs				679,434,666			669,168,756
	Goodwill				574,813,057			572,113,347
	Deferred financing costs, net				14,018,071			15,784,770
	Customer list, net				47,454,333			59,253,333
	Assets held for sale				97,158			—
	Other non-current assets				649,414			696,846

		Total other assets			1,316,488,918			1,317,017,052

			Total assets	$	1,602,155,535		$	1,588,278,944

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
	Accounts payable			$	14,805,726		$	10,297,625
	Accounts payable — affiliates				9,198,489			6,182,755
	Accrued expenses				12,980,989			13,140,622
	Accrued interest payable				15,792,882			37,867,260
	Deferred revenue and customer deposits				12,930,029			13,026,284

		Total current liabilities			65,708,115			80,514,546

OTHER LIABILITIES:
	Notes payable, net (Note 4)				914,538,462			913,773,624
	Deferred tax liabilities				163,087,287			160,231,500
	Deferred gain on disposition of operating assets and other non-current liabilities				29,455,678			4,161,627
	Commitments (Note 5)
STOCKHOLDER’S EQUITY:
	Class A common stock, $.01 par value, 50 shares authorized and issued				1			1
	Class B common stock, $.01 par value, 300 shares authorized and issued				3			3
	Paid-in capital				474,547,248			474,547,248
	Accumulated deficit				(45,181,259	)		(44,949,605	)

		Total stockholder’s equity			429,365,993			429,597,647

			Total liabilities and stockholder’s equity	$	1,602,155,535		$	1,588,278,944

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

AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


			For the Three Months Ended						For the Nine Months Ended
			September 30,						September 30,

			2005			2004			2005			2004

			(Unaudited)						(Unaudited)
OPERATING REVENUE:
	Service revenue		$	92,712,559		$	84,008,184		$	270,120,374		$	241,208,869
	Roaming revenue			34,658,745			26,525,298			83,341,930			66,039,064
	Equipment and other revenue			4,794,133			3,973,009			15,740,661			14,061,874

		Total operating revenue		132,165,437			114,506,491			369,202,965			321,309,807

OPERATING EXPENSES:
	Cost of service (exclusive of depreciation and amortization shown separately below)			30,871,850			26,632,889			87,380,767			72,392,143
	Cost of equipment			13,448,679			11,582,305			37,875,095			34,534,252
	Marketing and selling			15,003,570			14,342,789			44,270,890			42,805,593
	General and administrative			22,296,760			21,932,583			66,715,318			65,665,116
	Depreciation and amortization			20,356,770			20,881,069			62,773,512			62,030,537
	Gain on disposition of operating assets			(648,566	)		—			(1,587,704	)		—

		Total operating expenses		101,329,063			95,371,635			297,427,878			277,427,641

OPERATING INCOME				30,836,374			19,134,856			71,775,087			43,882,166
OTHER EXPENSE:
	Interest expense			(23,781,690	)		(23,971,275	)		(71,343,502	)		(71,339,009	)
	Other expense, net			(399,924	)		(615,360	)		(1,498,253	)		(1,969,041	)

INCOME (LOSS) BEFORE INCOME TAXES				6,654,760			(5,451,779	)		(1,066,668	)		(29,425,884	)
	Income tax (expense) benefit			(2,099,129	)		2,071,675			835,014			11,181,836

NET INCOME (LOSS)			$	4,555,631		$	(3,380,104	)	$	(231,654	)	$	(18,244,048	)

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

AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


				For the Nine Months Ended
				September 30,

				2005			2004

				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss				$	(231,654	)	$	(18,244,048	)
Adjustments to reconcile net loss to net cash provided by operating activities, net of effects of acquisition —
	Depreciation and amortization				62,773,512			62,030,537
	Amortization of bond premium and deferred financing costs				2,536,824			2,454,611
	Deferred income taxes				(820,923	)		(11,615,723	)
	Gain on disposition of operating assets				(1,587,704	)		—
	Other operating activities				5,928			23,591
Changes in current assets and liabilities —
	Accounts receivable				(12,633,108	)		2,511,953
	Inventory				698,123			(1,525,118	)
	Prepaid expenses and other				(895,503	)		(1,266,015	)
	Accounts payable				4,508,101			(6,205,569	)
	Accrued expenses				(22,234,011	)		(19,326,804	)
	Deferred revenue and customer deposits				(96,255	)		(27,257	)

			Net cash provided by operating activities		32,023,330			8,810,158

CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures				(36,266,014	)		(34,450,651	)
	Purchase of wireless licenses and properties				(15,174,662	)		—
	Proceeds from sale of property, plant and equipment				30,948,317			28,051
	Change in receivable/payable — affiliates				2,980,411			1,264,276
	Receipt of funds held in escrow for contingencies on sold assets				—			4,168,615
	Other investing activities				(289,494	)		(78,200	)

			Net cash used in investing activities		(17,801,442	)		(29,067,909	)

CASH FLOWS FROM FINANCING ACTIVITIES:
		Other financing activities			(27,287	)		(81,075	)

			Net cash used in financing activities		(27,287	)		(81,075	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					14,194,601			(20,338,826	)
CASH AND CASH EQUIVALENTS, beginning of period					41,488,979			27,505,267

CASH AND CASH EQUIVALENTS, end of period				$	55,683,580		$	7,166,441

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for —
	Interest			$	90,875,165		$	89,109,750
	Income taxes			$	62,050		$	278,960
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
	Transfer of fixed assets from affiliates			$	35,323		$	12,140

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

AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The condensed consolidated balance sheet of American Cellular Corporation, or ACC, and subsidiaries (collectively with ACC, the “Company”) as of September 30, 2005, the condensed consolidated statements of operations for the three and nine months ended September 30, 2005 and 2004 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2005 and 2004 are unaudited. In the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented.

The condensed consolidated balance sheet at December 31, 2004 was derived from audited financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles, or GAAP. The financial statements presented herein should be read in connection with the Company’s December 31, 2004 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.


1.	Organization

The Company, through its predecessors, was organized in 1998 to acquire the operations of PriCellular and adopted its current organizational structure in 2003, when the Company became a wholly owned, indirect subsidiary of Dobson Communications Corporation. The Company is a provider of rural and suburban wireless telephone services in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin.

The Company operates in one business segment pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information.”


2.	Business Combinations

On September 13, 2005, the Company acquired the non-license wireless assets of Endless Mountains Wireless, LLC in Pennsylvania 4 Rural Service Area, or RSA. The Company operates Endless Mountains’ licensed 850 MHz spectrum under a spectrum manager lease. In March 2006, the Company will have the right to acquire Endless Mountains’ Pennsylvania 4 RSA 850 MHz license, subject to Federal Communications Commission, or FCC, approval at the time of acquisition. If exercised, the Company’s acquisition of the license covering the leased spectrum is expected to close in mid-to-late 2006. The total purchase price for all acquired assets, including the FCC license, is approximately $12.2 million.

The above business combination is accounted for as a purchase. Accordingly, the related statements of financial position and results of operations have been included in the accompanying condensed consolidated statements of operations from the date of acquisition. The unaudited pro forma financial information related to the Company’s 2005 acquisition has not been presented because this acquisition was not significant to the Company’s consolidated results of operations.


3.	Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Newly constructed wireless systems are added to property, plant and equipment at cost, which includes contracted services, direct labor, materials and overhead. Existing property, plant and equipment purchased through acquisitions is recorded at its fair value at the date of the purchase. Repairs, minor replacements and maintenance are charged to operations as incurred. The provisions for depreciation are provided using the straight-line method based on the estimated useful lives of the various classes of depreciable property. Depreciation expense for the nine months ended September 30,

AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2005 and 2004 totaled $50.8 million and $50.0 million, respectively. Listed below are the gross property, plant and equipment amounts and the related accumulated depreciation for the periods described.


	September 30,			December 31,
	2005			2004

	($ in thousands)
Gross property, plant and equipment	$	304,246		$	268,048
Accumulated depreciation		(140,701	)		(90,906	)

Property, plant and equipment, net	$	163,545		$	177,142


	*Tower Sale and Lease Back*

The Company has entered into agreements to sell 204 towers to Global Towers, LLC and then lease them back under a lease with an initial ten-year term. These leases are accounted for as operating leases. On June 30, 2005, the Company completed the sale of 184 of these towers for approximately $30.9 million. This sale resulted in a total net gain of approximately $26.8 million, of which $0.9 million was recognized at June 30, 2005 and the remaining $25.9 million will be recognized over the life of the lease. The gain has and will continue to be recognized on the statement of operations as “Gain on disposition of operating assets.” Subsequent to September 30, 2005, the Company completed the sale of the remaining 20 towers on October 3, 2005 and one additional tower on October 7, 2005, for approximately $2.9 million. Therefore, these remaining assets are classified as assets held for sale on the Company’s September 30, 2005 balance sheet.


4.	Notes Payable

The Company’s notes payable consisted of the following:


		September 30,		December 31,
		2005		2004

		($ in thousands)
9.5% senior subordinated notes, net of discount		$	14,538	$	13,774
10.0% senior notes			900,000		900,000

	Total notes payable	$	914,538	$	913,774


5.	Commitments and Contingencies

Commitments. The Company is obligated under a purchase and license agreement with Nortel Networks Corp. to purchase approximately $29.7 million of GSM/ GPRS/ EDGE related products and services prior to June 9, 2007. This obligation is the Company’s share of a total $90 million commitment of the Company’s parent, Dobson Communications Corporation. If the Company fails to achieve this commitment, the agreement provides for liquidated damages in an amount equal to 20% of the portion of the $29.7 million that remains unfulfilled. As of September 30, 2005, $15.0 million of this commitment has been fulfilled.

Contingencies. The Company is party to various legal actions arising in the normal course of business. None of the actions are believed by management to involve amounts that would be material to the Company’s consolidated financial position, results of operations or liquidity.


	Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

The following discussion and analysis presents factors that we believe are relevant to an assessment and understanding of our condensed consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our December 31, 2004 consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and our condensed consolidated financial statements and the notes thereto included in Item 1.

OVERVIEW

We provide rural and suburban wireless telephone services in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin.

ACC Escrow Corp. was formed on June 23, 2003, as a wholly owned, indirect subsidiary of Dobson Communications Corporation and began operations on August 8, 2003, when it completed the sale of $900.0 million of 10.0% senior notes, the proceeds of which were used in our restructuring. Prior to August 19, 2003, we were owned by a joint venture which was equally owned by Dobson Communications Corporation and AT&T Wireless. On August 19, 2003, we restructured our indebtedness and equity ownership. To affect this restructuring, ACC Escrow Corp. was merged into us, and we completed an exchange offer for our existing 9.5% senior subordinated notes due 2009, which we refer to as our existing notes. Upon consummation of the restructuring on August 19, 2003, we became a wholly owned, indirect subsidiary of Dobson Communications Corporation.

CRITICAL ACCOUNTING POLICIES AND PRACTICES

We prepare our condensed consolidated financial statements in accordance with GAAP. Our significant accounting polices are discussed in detail in our Management’s Discussion and Analysis and in Note 2 to the consolidated financial statements, both included in our Annual Report on Form 10-K for the year ended December 31, 2004.

In preparing our consolidated financial statements, it is necessary that we use estimates and assumptions for matters that are inherently uncertain. We base our estimates on historical experiences and reasonable assumptions. Our use of estimates and assumptions affects the reported amounts of assets, liabilities and the amount and timing of revenue and expenses we recognize for and during the reporting period. Actual results may differ from estimates.

ACQUISITIONS

Acquisition of Pennsylvania 4 RSA. On September 13, 2005, we acquired the non-license wireless assets of Endless Mountains Wireless, LLC in Pennsylvania 4 RSA. We will operate Endless Mountains’ licensed 850 MHz spectrum under a spectrum manager lease. In March 2006, we will have the right to acquire Endless Mountains’ Pennsylvania 4 RSA 850 MHz license, subject to FCC approval at the time of acquisition. If exercised, our acquisition of the license covering the leased spectrum is expected to close in mid-to-late 2006. The total purchase price for all acquired assets, including the FCC license, is approximately $12.2 million. Pennsylvania 4 RSA encompasses a population of approximately 96,600, all of which are incremental to our current service area. Endless Mountains currently provides GSM wireless service to less than 1,000 subscribers. We plan to upgrade Endless Mountains’ network with GPRS/ EDGE data capability. We will offer products and services in Pennsylvania 4 RSA under the CELLULARONE® service mark.

NEW ROAMING AGREEMENT WITH CINGULAR WIRELESS

On August 12, 2005, we entered into a new, multi-year roaming agreement with Cingular Wireless, our primary wireless roaming partner, and amended the existing GSM operating agreement with the former AT&T Wireless entity. The new roaming agreement, which replaces the existing roaming agreements with

Cingular Wireless and the former AT&T Wireless entity, established a new roaming rate structure that was effective as of April 9, 2005. The new roaming agreement’s key provisions include the following:


	•	Mutual agreement to lower rates, with us paying Cingular a flat incollect rate through mid-2009 that is approximately half the blended rate in previous roaming agreements;

	•	Agreement to continue to mutually prefer one another for roaming through the new roaming agreement, which has been extended approximately one year through mid-2009; and

	•	The new roaming agreement provides for “home-on-home” roaming in areas where both carriers operate.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

The following table summarizes our key operating data for the periods indicated:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2005			2004			2005			2004

Market population(1)		5,166,500			4,997,000			5,166,500			4,997,000
Ending subscribers		682,200			719,000			682,200			719,000
Market penetration(2)		13.2	%		14.4	%		13.2	%		14.4	%
Gross subscriber additions		54,600			54,200			159,800			146,200
Average subscribers		688,600			716,400			696,800			712,600
Average monthly service revenue per subscriber(3)	$	45		$	39		$	43		$	38
Average monthly post-paid churn(4)		2.9	%		1.9	%		2.5	%		1.7	%


(1)	Represents the population in our licensed areas for the period indicated. The results are based upon the 2003 population estimates provided by MapInfo Corporation, a location software company, adjusted to exclude those portions of our RSAs and metropolitan statistical areas, or MSAs, not covered by our licenses.

(2)	Market penetration is calculated by dividing ending subscribers by market population.

(3)	Average monthly service revenue per subscriber is calculated by dividing service revenue by average subscribers and dividing by the number of months in the period. We exclude roaming revenue from this calculation, since roaming revenue is not derived from our subscribers.

(4)	Average monthly post-paid churn represents the percentage of the post-paid subscribers which deactivate service each month. The calculation divides the total post-paid deactivations during the period by the average post-paid subscribers for the period.


	*Basis of Presentation*

The following table sets forth the components of our results of operations for the periods indicated:


																Percentage Changes

				Three Months Ended						Nine Months Ended						Three Months			Nine Months
				September 30,						September 30,						Ended			Ended
																September 30,			September 30,
				2005			2004			2005			2004			’05 vs. ’04			’05 vs. ’04

				($ In thousands)						($ In thousands)
Operating Revenue:
	Service revenue			$	92,712		$	84,008		$	270,120		$	241,209			10.4	%		12.0	%
	Roaming revenue				34,659			26,526			83,342			66,039			30.7	%		26.2	%
	Equipment and other revenue				4,794			3,973			15,741			14,062			20.7	%		11.9	%

			Total operating revenue		132,165			114,507			369,203			321,310			15.4	%		14.9	%

Operating Expenses:
	Cost of service (exclusive of depreciation and amortization shown separately below)				30,872			26,633			87,381			72,392			15.9	%		20.7	%
	Cost of equipment				13,448			11,582			37,875			34,534			16.1	%		9.7	%
	Marketing and selling				15,004			14,343			44,271			42,806			4.6	%		3.4	%
	General and administrative				22,296			21,933			66,715			65,665			1.7	%		1.6	%
	Depreciation and amortization				20,358			20,881			62,774			62,031			(2.5	)%		1.2	%
	Gain on disposition of operating assets				(649	)		—			(1,588	)		—			**			**

		Total operating expenses			101,329			95,372			297,428			277,428			6.2	%		7.2	%

Operating income					30,836			19,135			71,775			43,882			61.1	%		63.6	%
	Interest expense				(23,782	)		(23,971	)		(71,344	)		(71,339	)		*			*
	Other expense, net				(400	)		(616	)		(1,498	)		(1,969	)		(35.1	)%		(23.9	)%

Income (loss) before income taxes					6,654			(5,452	)		(1,067	)		(29,426	)		222.1	%		96.4	%
	Income tax (expense) benefit				(2,099	)		2,072			835			11,182			**			**

Net income (loss)				$	4,555		$	(3,380	)	$	(232	)	$	(18,244	)		234.8	%		98.7	%


*	less than 1%

**	Calculation is not meaningful


	*Subscribers*

Our subscriber base contains three types of subscribers; post-paid, reseller and pre-paid. At September 30, 2005, post-paid subscribers accounted for 89.3% of our subscriber base. These subscribers pay a monthly access fee for a wireless service plan that generally includes a fixed amount of minutes and certain service features. In addition to the monthly access fee, these subscribers are typically billed in arrears for long-distance charges, roaming charges and rate plan overages. Our reseller subscribers are similar to our post-paid subscribers in that they pay monthly fees to utilize our network and services. However, these subscribers are billed by a third party, which we refer to as a reseller, who has effectively resold our service to the end user, which we refer to as a subscriber. We in turn bill the reseller for the monthly usage of the subscriber. At September 30, 2005, the reseller base accounted for 7.9% of our total subscriber base. Our pre-paid subscribers, which at September 30, 2005 accounted for 2.8% of our subscriber base, are subscribers that pre-pay for an agreed upon amount of usage.

During the nine months ended September 30, 2005, we experienced an increase in our gross subscriber additions. Our gross subscriber additions had been decreasing as a result of increased competition attributable to an accelerating pace of improvements in the quality of digital technology and increased products offered to the consumer. However, our deployment of GSM/ GPRS/ EDGE in our networks during 2004 has helped this decline to level off and result in growth in our gross subscriber additions in the three and nine months ended September 30, 2005 compared to the three and nine months ended September 30, 2004. As of September 30, 2005, GSM subscribers accounted for 57.5% of our subscriber base, compared to 18.1% as of September 30, 2004.

Since the middle of 2004, we have experienced churn rates above our historical levels. This increase in churn is primarily the result of two factors impacting our business. First, we have experienced challenges with operating both a TDMA and GSM/ GPRS/ EDGE network and in managing the migration of our customer base from TDMA to GSM. This has impacted the level of customer satisfaction with our service in certain of our markets. We have implemented several initiatives that have and should continue to improve the quality of our networks. Secondly, Wireless Local Number Portability, or WLNP, which allows customers to keep their wireless phone number in their local area when switching to a different service provider, was implemented in all of our markets by May 24, 2004. Although we expect churn to improve as we continue our initiatives to improve customer satisfaction, churn could continue to be adversely affected by continued network issues and WLNP.


	*Operating Revenue*

Our operating revenue consists of service revenue, roaming revenue and equipment and other revenue.

Service revenue. We derive service revenue by providing wireless services to our subscribers. In recent past, the wireless industry experienced declining average revenue per minute as competition among wireless service providers led to reductions in rates for airtime. However, this decline has been offset by increases in average minutes-of-use. For the past year, we have experienced growth in our average monthly service revenue per subscriber from prior year levels and we believe there is a continued opportunity throughout the remainder of 2005 for our average monthly service revenue per subscriber to continue to increase from prior levels, primarily due to additional voice and data services available as a result of our GSM/ GPRS/ EDGE technology. In addition, we have applied for federal ETC designation in certain states in which we provide wireless service to qualifying high cost areas. Success in obtaining ETC status has and may continue to make available to us an additional source of revenue that would be used to provide, maintain and improve the service we provide in those high-cost areas, thus also increasing our average monthly service revenue per subscriber. Service revenue included ETC revenue of approximately $3.6 million for the three months ended September 30, 2005 and approximately $8.3 million for the nine months ended September 30, 2005.

For the three and nine months ended September 30, 2005, our service revenue increased compared to the three and nine months ended September 30, 2004. This increase in our service revenue was primarily attributable to an increase in average monthly service revenue per subscriber as a result of the continued migration of our subscribers to our GSM/ GPRS/ EDGE offerings and ETC revenue.

Roaming revenue. We derive roaming revenue by providing service to subscribers of other wireless providers when those subscribers “roam” into our markets and use our systems to carry their calls. Roaming revenues have traditionally had higher margins than revenues from our subscribers. We achieve these higher margins because we incur relatively lower incremental costs related to billing, customer service and collections in servicing roaming customers as compared to our home subscribers. However, our roaming margins have been declining due to increased market pressures and competition among wireless providers resulting in reduced roaming rates. Our roaming yield (roaming revenue, which includes airtime, toll charges and surcharges, divided by roaming minutes-of-use) was $0.128 for the three months ended September 30, 2005 compared to $0.144 for the three months ended September 30, 2004, $0.132 for the nine months ended September 30, 2005 compared to $0.146 for the nine months ended September 30, 2004. We expect our roaming yield to continue to decline. As previously discussed, we recently entered into a new roaming agreement with our most significant roaming partner, Cingular Wireless, who accounted for approximately

89% of our roaming minutes-of-use for the nine months ended September 30, 2005. Under this new roaming agreement, roaming rates will decline through 2008. Even though this contract provides for decreasing rates over time, we believe these roaming contracts are beneficial because they secure existing traffic and provide opportunity for a continuing increase in traffic volumes. Roaming revenue tends to be impacted by seasonality. Historically, we have experienced higher roaming minutes-of-use and related roaming revenue during the second and third quarters of each year, as users tend to travel more and, therefore, use their wireless phones more during the spring and summer months.

For the three and nine months ended September 30, 2005, our roaming revenue increased compared to the three and nine months ended September 30, 2004. When comparing the three months ended September 30, 2005 to the three months ended September 30, 2004, our roaming minutes increased 47.3% due to expanded coverage areas and increased usage; however it was partially offset by an 11.3% decrease in roaming revenue per minute-of-use. When comparing the nine months ended September 30, 2005 to the nine months ended September 30, 2004, our roaming minutes increased 39.7% due to expanded coverage areas and increased usage; however it was partially offset by a 9.7% decrease in roaming revenue per minute-of-use.

Equipment and other revenue. Equipment revenue is revenue from selling wireless equipment to our subscribers. Equipment revenue is recognized when the equipment is delivered to the customer. Other revenue is primarily rental income from the lease of space on company-owned towers and payments to be received relating to a settlement for prior claims under various agreements between us and the former AT&T Wireless.

For the three and nine months ended September 30, 2005, our equipment and other revenue increased compared to the three and nine months ended September 30, 2004. When comparing the three months ended September 30, 2005 to the three months ended September 30, 2004, this increase in our equipment and other revenue was primarily due to an increase in equipment revenue due to the increased number of phones sold, increases in activation fees charged to customers and payments to be received of approximately $0.1 million related to settlement for prior claims under various agreements between us and the former AT&T Wireless, offset by a decrease in rental income due to the sale of our towers on June 30, 2005 (described below). When comparing the nine months ended September 30, 2005 to the nine months ended September 30, 2004, the increase in equipment and other revenue related to increases in activation fees charged to customers and payments to be received of approximately $0.9 million related to a settlement for prior claims under various agreements between us and the former AT&T Wireless, offset by decreases in rental income due to the sale of our towers on June 30, 2005.


	*Operating Expenses*

Our primary operating expense categories include cost of service, cost of equipment, marketing and selling costs, general and administrative costs and depreciation and amortization.

Cost of service. Our cost of service consists primarily of costs to operate and maintain our facilities utilized in providing service to customers and amounts paid to third-party wireless providers for providing service to our subscribers when our subscribers roam into their markets, referred to as “roaming” costs. As previously discussed, we recently signed a new roaming agreement with Cingular Wireless, our primary roaming partner, which reduced our roaming cost per minute-of-use effective April 9, 2005, to a flat-rate that will remain constant until mid-2009. While future rates charged by third party providers may continue to decrease, we expect our overall growth in off-network minutes-of-use to grow at a rate faster than the per minute costs will decline. Therefore, we expect that our roaming costs may increase in future periods. In addition, as a result of the sale and leaseback of 184 of our towers on June 30, 2005, and the additional 21 towers in October 2005, we expect our leasing costs to increase in future periods, thus increasing our total cost of service.

The following table sets forth the components of our cost of service for the periods indicated:


		Three Months Ended September 30,										Nine Months Ended September 30,

		2005					2004					2005					2004

		Amount		Percentage			Amount		Percentage			Amount		Percentage			Amount		Percentage

		($ in thousands)										($ in thousands)
Network costs		$	22,584		73.1	%	$	16,553		62.2	%	$	61,724		70.6	%	$	45,618		63.0	%
Roaming costs			8,288		26.9	%		10,080		37.8	%		25,657		29.4	%		26,774		37.0	%

	Total cost of service	$	30,872		100.0	%	$	26,633		100.0	%	$	87,381		100.0	%	$	72,392		100.0	%

For the three and nine months ended September 30, 2005, our network costs, which are the costs incurred from operating our wireless network and providing service to our customers, increased compared to the three and nine months ended September 30, 2004. This increase is a result of adding new circuits and cell sites related to our new GSM/ GPRS/ EDGE network, as well as increasing costs as a result of providing more service features, such as handset insurance and wireless internet and an increase in rent expense related to our towers we sold on June 30, 2005 (described below).

For the three and nine months ended September 30, 2005, roaming costs decreased compared to the three and nine months ended September 30, 2004. When comparing the three months ended September 30, 2005 to the three months ended September 30, 2004, this decrease in our roaming costs was the result of a 42.3% decrease in roaming costs per minute-of-use as contractual rates were lower in the three months ended September 30, 2005 compared to the same period in 2004, offset by a 42.4% increase in the minutes used by our customers on third-party wireless providers’ networks. When comparing the nine months ended September 30, 2005 to the nine months ended September 30, 2004, this decrease was the result of a 31.9% decrease in roaming costs per minute-of-use as contractual rates were lower in the nine months ended September 30, 2005 compared to the same period in 2004, offset by a 40.7% increase in the minutes used by our customers on third-party wireless providers’ networks. With the continued migration of our customer base to GSM/ GPRS/ EDGE rate plans, which promote more off-network usage, we expect our minutes-of-use by our customers on third-party wireless providers’ networks to continue to increase.

Cost of equipment. Our cost of equipment represents the costs associated with wireless equipment and accessories sold. Cost of equipment is impacted by the volume of equipment transactions. The volume of equipment transactions is impacted by gross subscriber additions and customer upgrades. We, like other wireless providers, have continued to use discounts on phone equipment and have continued to offer free phone promotions. As a result, we have incurred, and expect to continue to incur, losses on equipment sales. While we expect to continue these discounts and promotions, we believe that these promotions will result in increased service revenue from increases in the number of wireless subscribers and from higher-priced rate plans. With the continued migration of our customer base to GSM/ GPRS/ EDGE rate plans and the continued increases in the cost of handsets, we expect our cost of equipment to continue to increase during the remainder of 2005.

For the three and nine months ended September 30, 2005, our cost of equipment increased compared to the three and nine months ended September 30, 2004. This increase in cost of equipment is due to an increase in the number of customers upgrading to new rate plans and purchasing new handsets and an increase in gross subscriber additions. As previously noted, most of these customers are upgrading to our new GSM/ GPRS/ EDGE rate plans.

Marketing and selling costs. Our marketing and selling costs include advertising, compensation paid to sales personnel and independent agents and all other costs to market and sell our wireless products and services. We pay commissions to sales personnel and independent dealers for new business generated.

For the three and nine months ended September 30, 2005, our marketing and selling costs increased compared to the three and nine months ended September 30, 2004. This increase was due to an increase in advertising costs spent to promote our GSM/ GPRS/ EDGE rate plans along with an increase in commissions paid as a result of an increase in gross subscriber additions.

General and administrative costs. Our general and administrative costs include all infrastructure costs, including costs for customer support, billing, collections and corporate administration.

For the three and nine months ended September 30, 2005, our general and administrative costs increased slightly compared to the three and nine months ended September 30, 2004. This increase was attributable to an increase in bad debt expense and costs related to the restructuring of our call center operations, offset by efficiencies gained from centralized administrative functions.

Depreciation and amortization. Our depreciation and amortization expense represents the costs associated with the depreciation of our fixed assets and the amortization of certain identifiable intangible assets. However, we do not amortize our wireless license acquisition costs or goodwill. Rather, these assets are subject to periodic evaluation for impairment. During 2005, we have and continue to expect the increases in depreciation and amortization, as a result of newly acquired or constructed assets, will mostly be offset as older assets become fully depreciated. Thus, for the three and nine months ended September 30, 2005, our depreciation and amortization expense remained fairly constant compared to the three and nine months ended September 30, 2004.

Gain on disposition of operating assets. Our gain on disposition of operating assets for the three and nine months ended September 30, 2005, was a result of the sale and leaseback of 184 of our towers on June 30, 2005. On June 30, 2005 we recognized $0.9 million of the gain from the transaction and we deferred the remaining gain of $25.9 million, which will be recognized over the lease term of ten years. We expect to recognize a gain of approximately $2.6 million per year over the life of the lease.


	*Non-Operating Results*

Interest expense. For the three and nine months ended September 30, 2005, our interest expense remained fairly constant compared to the three and nine months ended September 30, 2004. This is the result of fixed interest rates on all of our outstanding debt.

LIQUIDITY AND CAPITAL RESOURCES

We have required, and will likely continue to require, substantial capital to further develop, expand and upgrade our wireless systems and those we may acquire. We have financed our operations through cash flows from operating activities, and when necessary, bank debt, the sale of debt securities and infusions of equity capital from our parent company, Dobson Communications Corporation. Although we cannot provide assurance, assuming successful implementation of our strategy, including the continuing development of our wireless systems and significant and sustained growth in our cash flows, we believe that our cash on hand and cash flows from operations will be sufficient to satisfy our currently expected capital expenditures, working capital and debt service obligations over the next year. The actual amount and timing of our future capital requirements and expenditures may differ materially from our estimates as a result of, among other things, the demand for our services and the regulatory, technological and competitive developments that may arise.

We may have to refinance our 10.0% senior notes at their final maturity in 2011. Sources of additional financing may include commercial bank borrowings, vendor financing and the issuance of debt securities. Some or all of these financing options may not be available to us in the future, since these resources are dependent upon our financial performance and condition, along with certain other factors that are beyond our control, such as economic events, technological changes and business trends and developments. Our parent, Dobson Communications Corporation, is not obligated to contribute equity capital or provide any other financing to our subsidiaries or to us and does not guarantee our debt. Thus, if at any time financing is not available on acceptable terms, it could have a materially adverse effect on our business and financial condition.


	*Tower Sale and Lease Back*

We have entered into agreements to sell 204 towers to Global Towers, LLC and then lease them back under a lease with an initial ten-year term. These leases are accounted for as operating leases. On June 30, 2005, we completed the sale of 184 of these towers for approximately $30.9 million. This sale resulted in a

total net gain of approximately $26.8 million, of which $0.9 million was recognized at June 30, 2005 and the remaining $25.9 million will be recognized over the life of the lease. We completed the sale of the remaining 20 towers on October 3, 2005 and one additional tower on October 7, 2005, for approximately $2.9 million. Therefore, these remaining assets are classified as assets held for sale on our September 30, 2005 balance sheet.


	*Working Capital and Net Cash Flow*

At September 30, 2005, we had working capital of $56.4 million, a ratio of current assets to current liabilities of 1.9:1 and an unrestricted cash balance of $55.7 million which compares to working capital of $13.6 million, a ratio of current assets to current liabilities of 1.2:1 and an unrestricted cash balance of $41.5 million at December 31, 2004.

Our net cash provided by operating activities totaled $32.0 million for the nine months ended September 30, 2005, compared to $8.8 million for the nine months ended September 30, 2004. The increase from 2004 to 2005 was primarily due to an increase in our operating income. For additional analysis of the changes impacting net loss, see “Results of Operations for the Three and Nine Months Ended September 30, 2005 and 2004.” We expect that any future improvements in cash provided by operating activities will primarily be driven by improvements in net income.

We used cash in investing activities for the nine months ended September 30, 2005 and 2004. Investing activities are typically related to capital expenditures. We generally use cash in investing activities. Our net cash used in investing activities for the nine months ended September 30, 2005 primarily related to capital expenditure of $36.3 million and our acquisition of Pennsylvania 4 RSA on September 13, 2005, partially offset by proceeds from our tower sale and leaseback on June 30, 2005. Our capital expenditures were $34.5 million for the nine months ended September 30, 2004. Except for the proceeds from the sale of certain towers, during 2005, we expect to continue to use cash in investing activities primarily on capital expenditures as a result of the continued development and improvement of our GSM/ GPRS/ EDGE wireless networks.

We used cash in financing activities for the nine months ended September 30, 2005 and 2004. Financing activities are typically related to proceeds from long-term debt, repayments of long-term debt, deferred financing costs associated with long-term debt and purchase of debt and equity securities. For future expected payments of long-term debt, see the “Contractual Obligations” table included in our Management’s Discussion and Analysis in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004.


	*Capital Resources*

On August 8, 2003, we and ACC Escrow Corp., a wholly owned, indirect subsidiary of Dobson Communications Corporation, completed a private offering of $900.0 million aggregate principle amount of 10.0% senior notes due 2011. These senior notes were issued at par. The net proceeds from the sale of the notes were used to (i) repay in full all amounts owing under our bank credit facility and (ii) pay a portion of the fees of our restructuring. The notes rank pari passu in right of payment with any of our existing and future senior indebtedness and are senior to all existing and future subordinated indebtedness. Dobson Communications Corporation and Dobson Cellular Systems Inc. are not guarantors of these senior notes.

In connection with the closing of the sale of the notes, we entered into an indenture dated August 8, 2003 with Bank of Oklahoma, National Association, as Trustee. The indenture contains certain covenants including, but not limited to, covenants that limit the ability of us and our restricted subsidiaries to:


	•	incur indebtedness;

	•	incur or assume liens;

	•	pay dividends or make other restricted payments;

	•	impose dividend or other payment restrictions affecting our restricted subsidiaries;

	•	issue and sell capital stock of our restricted subsidiaries;


	•	issue certain capital stock;

	•	issue guarantees of indebtedness;

	•	enter into transactions with affiliates;

	•	sell assets;

	•	engage in unpermitted lines of business;

	•	enter into sale and leaseback transactions; and

	•	merge or consolidate with or transfer substantial assets to another entity.


	*Capital Expenditures and Commitments*

Our capital expenditures were $36.3 million for the nine months ended September 30, 2005. We plan to spend up to $50.0 million for capital expenditures during 2005. The majority of these expected expenditures would expand the capacity of our GSM/ GPRS/ EDGE network, support the addition of new GSM/ GPRS/ EDGE cell sites, upgrade acquired networks, and fund certain mandates to comply with the requirements of E-911 Phase II.

The amount and timing of capital expenditures may vary depending on the rate at which we expand and develop our wireless systems and whether we consummate additional acquisitions.


	*Contractual Obligations*

We are obligated under a purchase and license agreement with Nortel Networks Corp. to purchase approximately $29.7 million of GSM/ GPRS/ EDGE related products and services prior to June 9, 2007. This obligation is our share of a total $90 million commitment of our parent Company, Dobson Communications Corporation. If we fail to achieve this commitment, the agreement provides for liquidated damages in an amount equal to 20% of the portion of the $29.7 million that remains unfulfilled. As of September 30, 2005, $15.0 million of this commitment has been fulfilled.

We completed the sale of 184 towers on June 30, 2005 and we completed the sale of an additional 21 towers in October 2005. We will lease these towers back over the next ten years. The lease payments began at approximately $3.3 million per year and increase 3% a year through 2015. In addition, on September 13, 2005, we entered into a spectrum manager lease related to our Pennsylvania 4 RSA acquisition. Except for the tower sale and lease back and the spectrum lease, we have not had a material change in the resources required for scheduled repayments of contractual obligations from the table of Contractual Cash Obligations included in Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the year ended December 31, 2004.

FORWARD-LOOKING STATEMENTS

The description of our plans and expectations set forth herein, including expected capital expenditures and acquisitions, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These plans and expectations involve a number of risks and uncertainties. Important factors that could cause actual capital expenditures, acquisition activity or our performance to differ materially from the plans and expectations include, without limitation, our substantial leverage and debt service requirements; our ability to satisfy the financial covenants of our outstanding debt instruments and to raise additional capital; our ability to manage our growth successfully and to compete effectively in our wireless business against competitors with greater financial, technical, marketing and other resources; changes in end-user requirements and preferences; the development of other technologies and products that may gain more commercial acceptance than those of ours; terms in our roaming agreements; and adverse regulatory changes. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date hereof including, without

limitation, changes in our business strategy or expected capital expenditures, or to reflect the occurrence of unanticipated events.


Item 3.	*Quantitative and Qualitative Disclosures about Market Risk*

Market risk is the potential loss arising from adverse changes in market prices and rates, including interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The objective of our financial risk management is to minimize the negative impact of interest rate fluctuations on our earnings and equity. At September 30, 2005, we were not involved with any derivatives or other financial instruments, and all of our outstanding long-term debt bore interest at fixed rates.


Item 4.	*Controls and Procedures*

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the principal executive officer and principal financial officer concluded that the design and operation of these disclosure controls and procedures were effective. We did not effect any change in our internal controls over financial reporting during the quarter ended September 30, 2005 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION


Item 1.	*Legal Proceedings*

We are not currently aware of any pending or threatened litigation against us or our subsidiaries that could have a material adverse effect on our financial condition, results of operations or cash flows.


Item 2.	*Unregistered Sales of Equity Securities and Use of Proceeds*

Not applicable.


Item 3.	*Defaults Upon Senior Securities*

Not applicable.


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

Not applicable.


Item 5.	*Other Information*

On August 12, 2005, we entered into a new, multi-year roaming agreement with Cingular Wireless, our primary wireless roaming partner, and amended the existing GSM operating agreement with the former AT&T Wireless entity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — New Roaming Agreement with Cingular Wireless.”


Item 6.	*Exhibits*

The following exhibits are filed as a part of this report:


Exhibit				Method of
Numbers			Description	Filing

	10	.1*	InterCarrier Multi-standard Roaming Agreement by and among Cingular Wireless LLC and Dobson Cellular Systems, Inc. and American Cellular Corporation dated as of August 12, 2005.		(1)[10.1]
	10	.2*	Addendum to GSM Operating Agreement by and between New Cingular Wireless Services, Inc. (f/k/a AT&T Wireless Services, Inc.), Dobson Cellular Systems, Inc., an Oklahoma corporation and American Cellular Corporation, a Delaware corporation.		(1)[10.2]
	31	.1	Rule 15d-14(a) Certification by our principal executive officer.		(2)
	31	.2	Rule 15d-14(a) Certification by our principal financial officer.		(2)
	32	.1	Section 1350 Certification by our principal executive officer.		(2)
	32	.2	Section 1350 Certification by our principal financial officer.		(2)


*	Confidential treatment has been requested for portions of this document.


(1)	Filed as an exhibit to the Current Report on Form 8-K/ A filed by Dobson Communications Corporation on August 23, 2005 as the exhibit number indicated in brackets and incorporated by reference herein.

(2)	Filed herewith.

SIGNATURES

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


	American Cellular Corporation

Date: November 9, 2005


	/s/ Steven P. Dussek

	Steven P. Dussek
	Chief Executive Officer and
	principal executive officer

Date: November 9, 2005


	/s/ Bruce R. Knooihuizen

	Bruce R. Knooihuizen
	Executive Vice President,
	Chief Financial Officer and
	principal financial officer

INDEX TO EXHIBITS


Exhibit				Method of
Numbers			Description	Filing

	10	.1*	InterCarrier Multi-standard Roaming Agreement by and among Cingular Wireless LLC and Dobson Cellular Systems, Inc. and American Cellular Corporation dated as of August 12, 2005.		(1)[10.1]
	10	.2*	Addendum to GSM Operating Agreement by and between New Cingular Wireless Services, Inc. (f/k/a AT&T Wireless Services, Inc.), Dobson Cellular Systems, Inc., an Oklahoma corporation and American Cellular Corporation, a Delaware corporation.		(1)[10.2]
	31	.1	Rule 15d-14(a) Certification by our principal executive officer.		(2)
	31	.2	Rule 15d-14(a) Certification by our principal financial officer.		(2)
	32	.1	Section 1350 Certification by our principal executive officer.		(2)
	32	.2	Section 1350 Certification by our principal financial officer.		(2)


*	Confidential treatment has been requested for portions of this document.


(1)	Filed as an exhibit to the Current Report on Form 8-K/ A filed by Dobson Communications Corporation on August 23, 2005 as the exhibit number indicated in brackets and incorporated by reference herein.

(2)	Filed herewith.

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AMERICAN CELLULAR CORP /DE/ 10-Q