UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION

                          Washington, DC 20549

                               FORM 10-Q

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

             For the Quarterly Period Ended March 31, 1998

                                 OR

       [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

              For the transition period from _____ to _____

                      Commission File Number 1-8611

                              U S WEST, Inc.

A Delaware Corporation                             IRS Employer No. 84-0926774

        7800 East Orchard Road, Englewood, Colorado 80111-2526

                      Telephone Number 303-793-6500

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

The number of shares of each class of U S WEST, Inc.'s common stock outstanding
(net of shares held in treasury), at April 30, 1998, was:

U S WEST Communications Group Common Stock - 484,953,012 shares;
U S WEST Media Group Common Stock - 608,893,048 shares



<PAGE>

                                                  U S WEST, Inc.
                                                     Form 10-Q
                                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>

Item                                                                                                   Page
                                      PART I - FINANCIAL INFORMATION
<S>      <C>                                                                                           <C>    

1.        U S WEST, Inc. Financial Information

                 Consolidated Statements of Operations -
                           Three Months Ended March 31, 1998 and 1997                                     3

                 Consolidated Balance Sheets -
                            March 31, 1998 and December 31, 1997                                          5

                 Consolidated Statements of Cash Flows -
                           Three Months Ended March 31, 1998 and 1997                                     7

                  Notes to Consolidated Financial Statements                                              8

2.        U S WEST, Inc. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                                                     26

3.        U S WEST, Inc. Quantitative and Qualitative Disclosures About
                  Market Risk                                                                            44

                                       PART II - OTHER INFORMATION

1.        Legal Proceedings                                                                              45

6.        Exhibits and Reports on Form 8-K                                                               45

</TABLE>

<PAGE>

Form 10-Q - Part I
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS                          U S WEST, Inc.
(Unaudited)
---------------------------------------------------------------------------------- ---------------------------
                                                                                       Three Months Ended
                                                                                             March 31,
Dollars in millions                                                                       1998           1997
---------------------------------------------------------------------------- ------------------ --------------
<S>                                                                                     <C>           <C>    

Sales and other revenues                                                                $3,967         $3,766

Operating expenses:
   Employee-related expenses                                                             1,247          1,148
   Other operating expenses                                                                914            842
   Taxes other than income taxes                                                           111            124
   Depreciation and amortization                                                           880            830
                                                                             ------------------ --------------
         Total operating expenses                                                        3,152          2,944
                                                                             ------------------ --------------

Operating income                                                                           815            822

Interest expense                                                                         (247)          (278)
Equity losses in unconsolidated ventures                                                 (136)          (165)
Gain on asset sales:
   Investments                                                                              17             51
   Rural telephone exchanges                                                                 -             18
Guaranteed minority interest expense                                                      (22)           (22)
Other expense - net                                                                       (62)           (26)
                                                                             ------------------ --------------

Income before income taxes                                                                 365            400
Provision for income taxes                                                               (153)          (170)
                                                                             ------------------ --------------

NET INCOME                                                                              $  212         $  230
                                                                             ================== ==============

Dividends on preferred stock                                                              (13)           (13)
                                                                             ------------------ --------------

EARNINGS AVAILABLE FOR COMMON STOCK                                                     $  199         $  217

                                                                             ================== ==============
</TABLE>





See Notes to Consolidated Financial Statements.



<PAGE>

Form 10-Q - Part I
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS                                   U S WEST, Inc.
(Unaudited), continued
---------------------------------------------------------------------------------- ---------------------------
                                                                                       Three Months Ended
                                                                                             March 31,
In thousands (except per share amounts)                                                   1998           1997
----------------------------------------------------------------------------
                                                                             ------------------ --------------
<S>                                                                                     <C>            <C>    

COMMUNICATIONS GROUP:

    Basic earnings per common share                                                      $0.72          $0.70
                                                                             ================== ==============

    Basic average common shares outstanding                                            484,964        481,341
                                                                             ================== ==============

    Diluted earnings per common share                                                    $0.71          $0.70
                                                                             ================== ==============

    Diluted average common shares outstanding                                          489,113        492,394
                                                                             ================== ==============

    Dividends per common share                                                          $0.535         $0.535
                                                                             ================== ==============

MEDIA GROUP:

    Basic and diluted loss per common share                                            $(0.24)        $(0.20)
                                                                             ================== ==============

    Basic and diluted average common shares outstanding                                608,295        606,527
                                                                             ================== ==============
</TABLE>












See Notes to Consolidated Financial Statements.




<PAGE>

Form 10-Q - Part I
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS                                                          U S WEST, Inc.
(Unaudited)
------------------------------------------------------------------------ ---------------- --------------------
                                                                               March 31,         December 31,
Dollars in millions                                                                 1998                 1997
------------------------------------------------------------------------ ---------------- --------------------

<S>                                                                           <C>                <C>    
ASSETS

Current assets:
     Cash and cash equivalents                                                $      521           $      211
     Accounts and notes receivable  - net                                          2,053                2,249
     Inventories and supplies                                                        202                  179
     Deferred directory costs                                                        263                  257
     Deferred tax asset                                                              330                  373
     Prepaid and other                                                               148                  130
                                                                         ---------------- --------------------

Total current assets                                                               3,517                3,399

Gross property, plant and equipment                                               39,791               39,223
Accumulated depreciation                                                          21,135               20,643
                                                                         ---------------- --------------------

Property, plant and equipment - net                                               18,656               18,580

Investment in Time Warner Entertainment                                            2,487                2,486
Net investment in international ventures                                             456                  475
Intangible assets - net                                                           12,537               12,674
Net investment in assets held for sale                                               441                  419
Other assets                                                                       1,786                1,707
                                                                         ---------------- --------------------

Total assets                                                                    $ 39,880             $ 39,740
                                                                         ================ ====================
</TABLE>












See Notes to Consolidated Financial Statements.



<PAGE>

Form 10-Q - Part I
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS                                                          U S WEST, Inc.
(Unaudited), continued
-------------------------------------------------------------------- ------------------- ---------------------
                                                                              March 31,          December 31,
Dollars in millions                                                                1998                  1997
-------------------------------------------------------------------- ------------------- ---------------------

<S>                                                                            <C>               <C>    
LIABILITIES AND SHAREOWNERS' EQUITY

Current liabilities:
     Short-term debt                                                           $  1,882              $  1,430
     Accounts payable                                                             1,446                 1,751
     Employee compensation                                                          402                   521
     Dividends payable                                                              269                   268
     Deferred revenues and customer deposits                                        466                   444
     Other                                                                        1,982                 1,901
                                                                     ------------------- ---------------------

Total current liabilities                                                         6,447                 6,315

Long-term debt                                                                   13,178                13,248
Postretirement and other postemployment
     benefit obligations                                                          2,562                 2,570
Deferred income taxes                                                             4,086                 4,068
Deferred credits and other                                                        1,075                 1,035

Contingencies

Company-obligated mandatorily redeemable preferred
   securities of subsidiary trust holding solely
   Company-guaranteed debentures                                                  1,080                 1,080
Preferred stock subject to mandatory redemption                                     100                   100

Shareowners' equity:
   Preferred stock                                                                  923                   923
   Common shares                                                                 10,871                10,876
   Retained deficit                                                               (417)                 (369)
   LESOP guarantee                                                                 (46)                  (46)
   Accumulated other comprehensive income (loss)                                     21                  (60)
                                                                     ------------------- ---------------------
Total shareowners' equity                                                        11,352                11,324
                                                                     ------------------- ---------------------

Total liabilities and shareowners' equity                                      $ 39,880              $ 39,740


                                                                     =================== =====================
</TABLE>



See Notes to Consolidated Financial Statements.




<PAGE>

Form 10-Q - Part I
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS                                    U S WEST, Inc.
(Unaudited)
----------------------------------------------------------------------------------- --------------------------

Three Months Ended March 31,                                                                1998         1997
------------------------------------------------------------------------------------ ------------ ------------
<S>                                                                                       <C>           <C>    
                                                                                          Dollars in millions
OPERATING ACTIVITIES
   Net income                                                                               $212         $230
   Adjustments to net income:
      Depreciation and amortization                                                          880          830
      Equity losses in unconsolidated ventures                                               136          165
      Gain on sales of investments                                                          (17)         (51)
      Gain on sale of rural telephone exchanges                                                -         (18)
      Deferred income taxes and amortization of investment tax credits                        33         (27)
   Changes in operating assets and liabilities:
      Postretirement medical and life costs, net of cash fundings                           (19)          (6)
      Accounts and notes receivable                                                          168          108
      Inventories, supplies and other current assets                                        (49)         (51)
      Accounts payable and accrued liabilities                                             (104)          161
   Other - net                                                                                19            5
                                                                                      ----------- ------------
   Cash provided by operating activities                                                   1,259        1,346
                                                                                      ----------- ------------

INVESTING ACTIVITIES
   Expenditures for property, plant and equipment                                          (918)        (764)
   Payment to Continental Cablevision shareowners                                              -      (1,150)
   Investment in international ventures                                                     (45)         (48)
   Investment in domestic ventures                                                         (117)         (55)
   Proceeds from sales of investments                                                         71          176
   Cash from net investment in assets held for sale                                           13           29
   Other - net                                                                                21            4
                                                                                      ----------- ------------
   Cash used for investing activities                                                      (975)      (1,808)
                                                                                      ----------- ------------

FINANCING ACTIVITIES
   Net proceeds from (repayments of) short-term debt                                         326      (3,339)
   Proceeds from issuance of long-term debt                                                    -        4,090
   Repayments of long-term debt                                                             (23)         (55)
   Dividends paid on common and preferred stock                                            (272)        (248)
   Proceeds from issuance of common stock                                                     30           30
   Purchases of treasury stock                                                              (35)         (53)
                                                                                      ----------- ------------
                                                                                      
   Cash provided by financing activities                                                      26          425
                                                                                      ----------- ------------

CASH AND CASH EQUIVALENTS
   Increase (decrease)                                                                       310         (37)
   Beginning balance                                                                         211          201
                                                                                      =========== ============
   Ending balance                                                                           $521         $164

                                                                                      =========== ============
</TABLE>



See Notes to Consolidated Financial Statements.



<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     For the Three Months Ended March 31, 1998
                                               (Dollars in millions)
                                                    (Unaudited)

A.  Summary of Significant Accounting Policies

Basis of  Presentation. U S WEST, Inc. ("U S WEST" or the "Company") has two 
classes of common stock that are intended to reflect separately the
 performance of its communications and multimedia businesses. One class of
stock, Communications Stock, reflects the communications businesses of 
U S WEST known as U S WEST Communications Group ("Communications Group") and 
the other class of stock, Media Stock, reflects the multimedia businesses of
U S WEST known as U S WEST Media Group ("Media Group").

The Consolidated  Financial  Statements have been prepared by U S WEST pursuant 
to the interim reporting rules and regulations of the Securities and Exchange
Commission ("SEC"). Certain information  and footnote  disclosures normally  
accompanying financial statements prepared in accordance with generally 
accepted accounting  principles have  been condensed  or  omitted  pursuant to 
such SEC rules and regulations. In the opinion of U S WEST's management, the 
Consolidated  Financial  Statements  include all adjustments, consisting of 
only normal recurring adjustments, necessary to present fairly the financial 
information set forth therein. It is suggested that these Consolidated 
Financial Statements be read in conjunction with the 1997 U S WEST Consolidated
Financial Statements and notes thereto filed on Form 10-K, as amended by 
Form 10-K/A filed April 13, 1998, and included in U S WEST's proxy statement 
mailed to all shareowners on April 20, 1998.

Certain reclassifications within the Consolidated Financial Statements have 
been made to conform to the current year presentation.

New Accounting  Standards. Statement of Position ("SOP") 98-5, "Reporting on 
the Costs of Start-Up  Activities," was issued in April 1998. SOP 98-5 
requires, among other things, that the costs related to start-up activities of
a new entity, facility, product or service be expensed. Adoption of SOP 98-5 is 
required as of January 1, 1999, but earlier adoption is allowed. The effect of 
adopting SOP 98-5 is under evaluation.

 B.   U S WEST Separation

          On October 25, 1997, the Board of Directors of U S WEST adopted a 
proposal to separate U S WEST into two  independent companies 
(the "Separation").  As a result of the Separation, the Communications Group 
will become an independent public company and will be renamed "U S WEST, Inc." 
("New U S WEST"). In addition, Media Group's directory business known as
<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

U S WEST Dex, Inc. ("Dex") will be aligned with New U S WEST 
(the "Dex Alignment"). Following the Separation,  U S WEST will continue as an 
independent public company comprised of the current businesses of Media Group 
other than Dex and will be renamed "MediaOne Group, Inc." ("MediaOne").

The Separation will be implemented pursuant to the terms of a separation 
agreement between U S WEST and New U S WEST (the  "Separation  Agreement").  In 
connection with the Dex Alignment, (i) U S WEST will distribute, as a dividend,
an aggregate of $850 in value of New U S WEST common stock to holders of Media 
Stock and (ii) $3.9 billion of U S WEST debt, currently allocated to Media
Group, will be refinanced by New U S WEST (the "Dex Indebtedness").

MediaOne will account for the Separation as a  discontinuance  of the businesses
comprising  New U S WEST.  The  measurement  date  for  discontinued  operations
accounting purposes will be the date upon which U S WEST stockholder approval is
obtained.  Because  the  distribution  is non  pro-rata,  as  compared  with the
businesses previously  attributed to U S WEST's two classes of stockholders,  it
will be accounted  for at fair value and MediaOne  will  recognize a gain on the
distribution  of New U S WEST.  Based on the number of shares of  Communications
Stock  outstanding  and  market  price  as of May 1,  1998,  the  gain  (net  of
Separation costs) is estimated at approximately $25.6 billion.  The Company will
incur Separation  costs during 1998 of  approximately  $175, which includes cash
payments  under  severance  agreements  of $45 and  financial  advisory,  legal,
registration  fee,  printing and mailing costs.  Separation costs also include a
one-time  payment  to  terminate  the sale of the Media  Group  cable  system in
Minnesota.

Further information  about the Separation is contained in U S WEST's proxy
statement mailed to all shareowners on April 20,  1998. U S WEST shareowners  
have been asked to  consider and approve the Separation at its annual
meeting to be held on June 4, 1998. Subject to shareowner approval, the 
transaction is expected to be completed by mid-June 1998.


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

 C.   Comprehensive Income

During  first-quarter 1998, U S WEST adopted Statement of Financial  Accounting 
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 
requires, among other things, that the components and total amount of  
comprehensive income be displayed in the financial statements for interim and 
annual periods beginning in 1998. Comprehensive income includes net income and 
all changes in equity during a period  that arise from nonowner sources,  such 
as foreign currency items and unrealized gains and losses on certain 
investments in debt and equity securities.

Total comprehensive income and the components of comprehensive income follow:
<TABLE>
<CAPTION>

----------------------------------------------------------------------- ---------------------------------------
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                               1998                1997
----------------------------------------------------------------------- -------------------- ------------------
<S>                                                                                  <C>                <C>   
Net income                                                                           $  212             $  230

Other comprehensive income, before tax:
   Foreign currency translation adjustments                                              16                 12
   Unrealized gains (losses) on debt and equity securities                              118               (63)
   Reclassification for losses realized in net income                                     -                (3)
Income tax (expense)  benefit related to items of other  comprehensive
     income                                                                            (53)                 22
                                                                        --------------------  -----------------
                                                                                             

Total comprehensive income                                                           $  293             $  198
======================================================================= ==================== ==================
</TABLE>

 D.   Minnesota System

In May 1997, pursuant to a Federal Communications Commission ("FCC") order, 
U S WEST entered into an agreement to sell its cable  systems  
(the  "Minnesota  System") in Minnesota for proceeds of $600. Under the terms 
of the agreement, Media Group had the right to terminate the agreement at any 
time upon payment of a $30  termination fee. As a result of the  Separation, 
Media Group will no longer be  prohibited  by federal law from owning the
Minnesota  System. In February 1998, in response to U S WEST's petition,  the 
FCC granted to U S WEST a waiver which would permit Media Group to retain the  
Minnesota  System so long as the  Separation is  consummated  by July
31, 1998. Media Group has terminated the agreement to sell the Minnesota System 
and otherwise settled all claims related thereto.


<PAGE>

Form 10-Q - Part I

                                               U S WEST, Inc.
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (Dollars in millions, except per share amounts)
                                                 (Unaudited)
<TABLE>
<CAPTION>

E.  Earnings Per Share

The following  reflects the  computation of diluted  earnings (loss) per share  
for Communications Stock and Media Stock:

---------------------------------------------------------------------------------- ---------------------------
                                                                                       Three Months Ended
                                                                                              March 31,
                                                                                           1998          1997
------------------------------------------------------------------------------- ---------------- -------------
<S>                                                                                     <C>             <C>    
                                                                                        (Shares in thousands)
Communications Group
Income used for basic earnings per share                                                   $347          $339
Interest on convertible zero coupon subordinated
    notes, net of tax                                                                         -             3
                                                                                ---------------- -------------
Income used for diluted earnings per share                                                 $347          $342
                                                                                ================ =============

Weighted average number of shares used for basic
    earnings per share                                                                  484,964       481,341
Effect of dilutive securities:
    Stock options                                                                         4,149         1,667
    Convertible zero coupon subordinated notes                                                -         9,386
                                                                                ---------------- -------------
Weighted average number of shares used for diluted
    earnings per share                                                                  489,113       492,394
                                                                                ================ =============

Communications Group basic earnings per share                                             $0.72         $0.70
Communications Group diluted earnings per share                                            0.71          0.70
------------------------------------------------------------------------------- ---------------- -------------
</TABLE>



The Communications Group dilutive securities represent the incremental weighted 
average shares from the assumed exercise of Communications  Group stock options 
and the assumed conversion of the zero coupon subordinated notes which were 
redeemed in August 1997.




<PAGE>

Form 10-Q - Part I

                                              U S WEST, Inc.
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (Dollars in millions, except per share amounts)
                                                (Unaudited)
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------- ---------------------------
                                                                                          Three Months Ended
                                                                                              March 31,
                                                                                           1998          1997
------------------------------------------------------------------------------- ---------------- -------------
                                                                                        (Shares in thousands)
<S>                                                                                     <C>            <C>    
Media Group

Loss                                                                                     $(135)        $(109)
Dividends on preferred stock                                                               (13)          (13)
                                                                                ---------------- -------------
Loss available to common shareowners used for basic and
    diluted loss per share                                                               $(148)        $(122)
                                                                                ================ =============

Weighted average number of shares used for basic and
    diluted loss per share                                                              608,295       606,527
                                                                                ================ =============

Media Group basic and diluted loss per share                                            $(0.24)       $(0.20)
--------------------------------------------------------------------------------------------------------------
</TABLE>



Media Group diluted loss per share does not include  potential  share  issuances
associated with Media Group stock options,  convertible zero coupon subordinated
notes and the  convertible  Series D Preferred  Stock due to their  antidilutive
effects. The zero coupon subordinated notes were redeemed in August 1997.


F.  Contingencies

At U S WEST Communications,  Inc. ("U S WEST Communications")  there are pending
regulatory  actions  in local  regulatory  jurisdictions  that  call  for  price
decreases, refunds or both.

Oregon. On May 1, 1996, the Oregon Public Utilities Commission  ("OPUC") 
approved a  stipulation  terminating prematurely U S WEST Communications' 
alternative form of regulation ("AFOR") plan, and it then undertook a review
of U S WEST  Communications' earnings. In May 1997, the OPUC ordered U S WEST 
Communications to reduce its annual revenues by $97, effective May 1, 1997, and
to issue a one-time refund, including interest, of approximately $102 to 
reflect the revenue  reduction  for the period May 1, 1996 through  April 30, 
1997.  The one-time refund is for interim  rates which became subject to refund 
when U S WEST  Communications'  AFOR plan was  terminated  on May 1, 1996.


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

U S WEST Communications filed an appeal of the order and asked for an immediate 
stay of the  refund  with the Oregon  Circuit Court which  granted U S WEST  
Communications' request for a stay, pending a full review of the OPUC's order. 
On February 19, 1998, the Oregon Circuit Court entered a judgment in U S WEST  
Communications' favor on most of the appealed issues. The OPUC appealed on 
March 19, 1998. The potential  exposure, including interest, at March 31, 1998, 
is not expected to exceed $210.

Utah. In another  proceeding,  the Utah Supreme Court has remanded a Utah Public
Service Commission ("UPSC") order to the UPSC for hearing,  thereby establishing
two  exceptions to the rule against  retroactive  ratemaking:  1) unforeseen and
extraordinary  events,  and 2)  misconduct.  The UPSC's  initial  order denied a
refund request from interexchange  carriers and other parties related to the Tax
Reform Act of 1986. The potential  exposure,  including  interest,  at March 31,
1998, is not expected to exceed $160.

State Regulatory Accruals. U S WEST Communications has accrued $148 at 
March 31, 1998, which represents its estimated liability for all state 
regulatory proceedings, predominately the items discussed above. It is possible
that the ultimate liability could exceed the recorded liability by an amount up 
to approximately $220. U S WEST Communications will continue to monitor and 
evaluate the risks associated with its local regulatory jurisdictions, and will 
adjust estimates as new information becomes available.

In addition to its estimated liability for state regulatory proceedings, 
U S WEST Communications has an accrued liability of approximately $230 at 
March 31, 1998 related to refunds in the state of  Washington. The Company
expects that the majority of these refunds will be issued to ratepayers,  
interexchange carriers ("IXCs") and independent local exchange carriers 
("LECs") during the second- and third-quarters of 1998.

G.  Subsequent Events

PrimeStar. Prior to April 1, 1998, Media Group held a 10.4 percent interest in 
PrimeStar Partners,  L.P. ("Old PrimeStar"). In addition, Media Group 
distributed PrimeStar direct broadcast satellite ("DBS") services to
subscribers in its service areas and, as a result, reflected consolidated 
operating results with respect to such subscribers. On April 1, 1998, Media 
Group contributed its interest in Old PrimeStar, as well as its PrimeStar
subscribers and certain related assets, to PrimeStar, Inc. ("PrimeStar"), a 
newly formed entity, in exchange for an approximate 10 percent interest in 
PrimeStar and approximately $80 in cash (the "PrimeStar Contribution").



<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

AirTouch  Transaction.  On April 6, 1998, Media Group sold its domestic wireless
businesses to AirTouch  Communications,  Inc.  ("AirTouch")  in a  tax-efficient
transaction  (the  "AirTouch   Transaction").   The  AirTouch   Transaction  was
consummated  pursuant to an agreement and plan of merger (the  "AirTouch  Merger
Agreement")  dated as of January 29,  1998.  The  domestic  wireless  businesses
included cellular communication services provided to 2.6 million customers in 12
western and  midwestern  states and a 25 percent  interest  in PrimeCo  Personal
Communications,  L.P.  ("PrimeCo").  Pursuant to the AirTouch Merger  Agreement,
AirTouch  acquired these cellular and personal  communications  services ("PCS")
interests.  Consideration under the AirTouch  Transaction  consisted of (i) debt
reduction of $1.35  billion,  (ii) the issuance to U S WEST of $1.65  billion in
liquidation  preference of dividend bearing AirTouch preferred stock (fair value
of  approximately  $1.5  billion),  and (iii) the  issuance  to U S WEST of 59.5
million shares of AirTouch common stock.

This transaction  resulted in the disposition of Media Group's domestic wireless
businesses.   Applying  the  terms  of  the  AirTouch  Merger  Agreement,   this
transaction  resulted in a gain of approximately  $2.2 billion,  net of deferred
taxes of $1.7 billion.

In connection with this transaction, U S WEST and AirTouch have entered into an 
investment agreement, pursuant to which AirTouch has agreed to provide to
U S WEST registration rights with respect to the shares of  AirTouch
preferred stock and AirTouch common stock which U S WEST received in the 
AirTouch Transaction and to assist U S WEST in the monetization of such shares.

In order to minimize U S WEST's exposure to fluctuations in the market value of
its investment in  AirTouch preferred stock, U S WEST entered into an interest 
rate swap transaction on April 6, 1998 in the notional amount of $1.5 billion  
terminating on September 30, 1998. Such transaction requires that U S WEST  
(MediaOne after the Separation) either pay or receive the  difference between 
the fixed interest rate of 5.865 percent and a floating rate which is indexed
to the 30-year U. S. Treasury Bond rate. The contract  qualifies for hedge  
accounting and is carried at market value with gains or losses recorded in 
equity until sale of the investment.

Debt and Preferred Securities Refinancing. In connection with the Separation, 
New U S WEST and MediaOne are seeking  to refinance substantially all of the  
indebtedness issued or guaranteed by U S WEST (the "U S WEST Indebtedness")  
through a combination of tender offers, prepayments, defeasance, consent 
solicitations and/or exchange offers (the "Refinancing").


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

At March 31, 1998, prior to giving effect to the AirTouch Transaction,  U S WEST
and  its  subsidiaries  (including  U  S  WEST's  capital  assets  segment)  had
outstanding  approximately  $16.5  billion of  indebtedness.  Such  indebtedness
consists of approximately $8.1 billion of U S WEST Indebtedness, $5.5 billion of
U S WEST  Communications  indebtedness,  $2.7  billion of MediaOne of  Delaware,
Inc.("MediaOne  Delaware")  indebtedness and $200 million of indebtedness of U S
WEST Financial Services,  Inc. ("Financial  Services"),  a member of the capital
assets segment.  The approximate $8.1 billion of U S WEST Indebtedness  includes
$5.4 billion of medium and long-term debt securities, $1.1 billion of commercial
paper, $500 million of other indebtedness and $1.08 billion of Company-obligated
mandatorily  redeemable  preferred securities of subsidiary trust holding solely
Company-guaranteed debentures ("Preferred Securities").

As part of the Refinancing, the Company is offering the holders of Preferred  
Securities the right to exchange their Preferred Securities for an equal amount 
of new preferred securities guaranteed by MediaOne or cash (the "Exchange  
Offer"). Also as part of the Refinancing, the Company is making offers to 
purchase for cash (the "Cash Tender Offer") $5.2 billion of medium and 
long-term debt securities. Any securities not tendered pursuant to the Cash 
Tender Offer will be assumed by  MediaOne, although U S WEST may determine to 
defease certain of such securities in lieu of assumption. In addition, U S WEST 
will prepay certain other U S WEST Indebtedness pursuant to the Refinancing.

Consummation of the Exchange Offer and the Cash Tender Offer is subject to
certain  conditions, including the approval of the Separation by U S WEST's
shareowners.

After  the  Separation  and  related  Refinancing,   New  U  S  WEST  will  have
approximately  $9.9 billion of debt, which will include $5.5 billion of U S WEST
Communications  indebtedness  and $4.4  billion of U S WEST  Indebtedness  which
includes the effects of the Refinancing  (which  includes the Dex  Indebtedness)
and the funding of certain costs of the  Separation.  New U S WEST,  through its
financing  subsidiary U S WEST Capital Funding,  Inc. ("Capital  Funding),  will
initially  finance the  repurchase  or repayment of U S WEST  Indebtedness  with
commercial paper.  Following  consummation of the Separation,  New U S WEST will
issue medium and long-term  securities to refinance a portion of the  commercial
paper.


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

After the Separation and related  Refinancing and after giving effect to the 
AirTouch Transaction, MediaOne will have approximately $5.4 billion of debt and 
preferred securities, which will include $2.7 billion of MediaOne Delaware  
indebtedness and $2.7 billion of debt and preferred securities issued or 
guaranteed by MediaOne, which includes  new debt  incurred by MediaOne Group  
Funding, Inc. ("MediaOne Funding"), a newly formed financing subsidiary of 
MediaOne, to refinance a portion of the U S WEST Indebtedness. It is
anticipated that such new debt will be a combination  of commercial paper and  
commercial bank debt. In addition, the capital assets segment, which will 
remain with MediaOne, will have approximately $400 million of indebtedness.  
MediaOne Funding's bank debt will include certain  additional terms and 
covenants which are generally included in the bank indebtedness of cable  
companies.  In addition, any senior indebtedness issued by MediaOne Funding
after the Separation will be guaranteed  by  MediaOne Delaware and, as a 
result, will rank pari passu with MediaOne Delaware's senior indebtedness. To 
the extent the Preferred Securities are tendered for cash pursuant to the 
Exchange Offers, it is anticipated that MediaOne will issue  additional 
preferred securities following the Separation so that it will have
approximately $1 billion of preferred securities  outstanding. Following the 
Separation, MediaOne intends to monetize the AirTouch securities it received in 
the AirTouch Transaction and use a portion of the proceeds to reduce its 
commercial paper and commercial bank debt.

In May 1998, New U S WEST and MediaOne entered into revolving bank credit
facilities to support their commercial paper programs and, in the case of 
MediaOne, to provide financing in conjunction with the Refinancing. New 
U S WEST's credit facility totals $4.5 billion; $3.5 billion matures in one 
year and $1.0 billion matures in five years. MediaOne's credit facility totals 
$4.0 billion; $2.0 billion matures in one year and $2.0 billion matures in five 
years.

H.  Net Investment in Assets Held for Sale

The capital assets segment is being accounted for in accordance with Staff 
Accounting Bulletin No. 93, issued by the SEC, which requires discontinued  
operations not disposed of within one year of the measurement date to be
accounted for prospectively in continuing operations as "net investment in 
assets held for sale." The net realizable value of the assets is evaluated on 
an ongoing basis with adjustments to the existing reserve, if any, being 
charged to continuing operations. No such adjustment has been required. Prior 
to January 1, 1995, the entire capital assets segment was accounted for as 
discontinued operations in accordance with Accounting Principles Board Opinion 
No. 30.


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)
<TABLE>
<CAPTION>

The components of net investment in assets held for sale follow:

------------------------------------------------------------------------ ----------------------- -------------------
                                                                                      March 31,        December 31,
                                                                                           1998                1997
------------------------------------------------------------------------ ----------------------- -------------------
<S>                                                                                   <C>              <C>       
ASSETS
Cash and cash equivalents                                                              $     65            $     54
Finance receivables - net                                                                   774                 777
Investment in real estate - net of valuation allowance                                      107                 156
Bonds, at market value                                                                      118                 119
Investment in FSA                                                                           397                 365
Other assets                                                                                206                 197
                                                                         ----------------------- -------------------

Total assets                                                                              1,667               1,668
                                                                         ----------------------- -------------------

LIABILITIES
Debt                                                                                        364                 372
Deferred income taxes                                                                       683                 669
Accounts payable, accrued liabilities and other                                             168                 197
Minority interests                                                                           11                  11
                                                                         ----------------------- -------------------

Total liabilities                                                                         1,226               1,249
                                                                         ----------------------- -------------------

Net investment in assets held for sale                                                   $  441              $  419
====================================================================================================================
</TABLE>


Building sales and operating revenues of the capital assets segment were $63 
and $57 for the three months ended March 31, 1998 and 1997, respectively.


Revenues of Financial Services were $5 for the three months ended 
March 31, 1998 and 1997. Selected financial data for Financial Services 
follows:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
                                                                                    March 31,          December 31,
                                                                                         1998                  1997
--------------------------------------------------------------------------------------------------------------------
                                                                     
<S>                                                                                   <C>                   <C>    
Net finance receivables                                                               $   822               $   824
Total assets                                                                            1,174                 1,208
Total debt                                                                                353                   363
Total liabilities                                                                       1,082                 1,121
Equity                                                                                     92                    87
--------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)
<TABLE>
<CAPTION>

I.  Supplemental Communications Group and Media Group Combined Statements

U S WEST COMMUNICATIONS GROUP COMBINED STATEMENTS OF INCOME
--------------------------------------------------------------------------------------------------------------
                                                                                       Three Months Ended
                                                                                             March 31,
                                                                                           1998          1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>          <C>    

Operating revenues:
     Local service                                                                       $1,350        $1,231
     Interstate access service                                                              698           687
     Intrastate access service                                                              206           200
     Long-distance network services                                                         201           250
     Other services                                                                         255           219
                                                                                ---------------- -------------
          Total operating revenues                                                        2,710         2,587

Operating expenses:
     Employee-related expenses                                                              938           864
     Other operating expenses                                                               481           445
     Taxes other than income taxes                                                           97           107
     Depreciation and amortization                                                          524           527
                                                                                ---------------- -------------
          Total operating expenses                                                        2,040         1,943
                                                                                ---------------- -------------

Operating income                                                                            670           644

Interest expense                                                                           (97)         (103)
Gain on sale of rural telephone exchanges                                                     -            18
Other expense - net                                                                        (25)          (22)
                                                                                ---------------- -------------

Income before income taxes                                                                  548           537
Provision for income taxes                                                                (201)         (198)
                                                                                ---------------- -------------

NET INCOME                                                                                 $347          $339
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

<TABLE>
<CAPTION>

U S WEST COMMUNICATIONS GROUP COMBINED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------
                                                                               March 31,         December 31,
                                                                                    1998                 1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                <C>        

ASSETS

Current assets:
     Cash and cash equivalents                                                  $    373            $      27
     Accounts and notes receivable  - net                                          1,586                1,681
     Inventories and supplies                                                        179                  150
     Deferred tax asset                                                              217                  247
     Prepaid and other                                                                78                   77
                                                                         ---------------- --------------------

Total current assets                                                               2,433                2,182

Gross property, plant and equipment                                               33,681               33,408
Accumulated depreciation                                                          19,503               19,176
                                                                         ---------------- --------------------

Property, plant and equipment - net                                               14,178               14,232

Other assets                                                                         825                  832
                                                                         ---------------- --------------------

Total assets                                                                     $17,436              $17,246
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)
<TABLE>
<CAPTION>


U S WEST COMMUNICATIONS GROUP COMBINED BALANCE SHEETS (continued)
--------------------------------------------------------------------------------------------------------------
                                                                              March 31,          December 31,
                                                                                   1998                  1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                 <C>    

LIABILITIES AND EQUITY

Current liabilities:
     Short-term debt                                                             $  898                $  626
     Accounts payable                                                             1,113                 1,325
     Employee compensation                                                          287                   375
     Dividends payable                                                              260                   259
     Advanced billings and customer deposits                                        306                   292
     Payable to Media Group                                                          92                    90
     Other                                                                        1,202                 1,033
                                                                      ------------------ ---------------------

Total current liabilities                                                         4,158                 4,000

Long-term debt                                                                    4,931                 5,020
Postretirement and other postemployment
     benefit obligations                                                          2,456                 2,468
Deferred income taxes                                                               839                   805
Deferred credits and other                                                          771                   754

Contingencies

Communications Group equity                                                       4,281                 4,199
                                                                      ------------------ ---------------------

Total liabilities and equity                                                    $17,436               $17,246
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

<TABLE>
<CAPTION>

U S WEST COMMUNICATIONS GROUP COMBINED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,                                                                1998         1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>         <C>    
OPERATING ACTIVITIES
   Net income                                                                               $347       $  339
   Adjustments to net income:
      Depreciation and amortization                                                          524          527
      Gain on sale of rural telephone exchanges                                                -         (18)
      Deferred income taxes and amortization of investment tax credits                        61           18
   Changes in operating assets and liabilities:
      Postretirement medical and life costs, net of cash fundings                           (22)         (10)
      Accounts receivable                                                                     95           82
      Inventories, supplies and other current assets                                        (36)         (34)
      Accounts payable and accrued liabilities                                                98          193
   Other - net                                                                                 2            -
                                                                                      ----------- ------------
   Cash provided by operating activities                                                   1,069        1,097
                                                                                      ----------- ------------
INVESTING ACTIVITIES
   Expenditures for property, plant and equipment                                          (557)        (400)
   Proceeds from sale of rural telephone exchanges                                             -            7
   Proceeds from (payments on) disposals of
      property, plant and equipment                                                           19          (7)
   Purchase of PCS licenses                                                                 (18)            -
                                                                                      ----------- ------------
   Cash used for investing activities                                                      (556)        (400)
                                                                                      ----------- ------------
FINANCING ACTIVITIES
   Net proceeds from (repayments of) short-term debt                                         119        (429)
   Repayments of long-term debt                                                             (23)         (54)
   Dividends paid on common stock                                                          (259)        (237)
   Proceeds from issuance of common stock                                                     17           24
   Purchases of treasury stock                                                              (21)            -
                                                                                      ----------- ------------
                                                                                      
   Cash used for financing activities                                                      (167)        (696)
                                                                                      ----------- ------------
CASH AND CASH EQUIVALENTS
   Increase                                                                                  346            1
   Beginning balance                                                                          27           80
                                                                                      =========== ============
   Ending balance                                                                           $373       $   81
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)
<TABLE>
<CAPTION>


U S WEST MEDIA GROUP COMBINED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------------------------------------
                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                ------------------------------
                                                                                          1998           1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>            <C>    

Sales and other revenues:
     Cable and broadband                                                                 $ 624          $ 556
     Wireless communications                                                               341            335
     Directory and information services                                                    307            309
     Other                                                                                   7              7
                                                                                --------------- --------------
          Total sales and other revenues                                                 1,279          1,207

Operating expenses:
     Cost of sales and other revenues                                                      424            406
     Selling, general and administrative expenses                                          354            320
     Depreciation and amortization                                                         356            303
                                                                                --------------- --------------
          Total operating expenses                                                       1,134          1,029
                                                                                --------------- --------------

Operating income                                                                           145            178

Interest expense                                                                         (150)          (175)
Equity losses in unconsolidated ventures                                                 (136)          (165)
Gains on sales of investments                                                               17             51
Guaranteed minority interest expense                                                      (22)           (22)
Other expense - net                                                                       (37)            (4)
                                                                                --------------- --------------

Loss before income taxes                                                                 (183)          (137)
Income tax benefit                                                                          48             28
                                                                                --------------- --------------

NET LOSS                                                                                $(135)         $(109)
                                                                                =============== ==============

Dividends on preferred stock                                                              (13)           (13)
                                                                                --------------- --------------

LOSS AVAILABLE FOR COMMON STOCK                                                         $(148)         $(122)
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

<TABLE>
<CAPTION>

U S WEST MEDIA GROUP COMBINED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------
                                                                                March 31,        December 31,
                                                                                     1998                1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>              <C>    

ASSETS

Current assets:
     Cash and cash equivalents                                                       $148                $184
     Accounts and notes receivable  - net                                             478                 589
     Deferred directory costs                                                         263                 257
     Receivable from Communications Group                                              92                  90
     Deferred tax asset                                                               113                 126
     Other                                                                             93                  82
                                                                         ----------------- -------------------

Total current assets                                                                1,187               1,328

Property, plant and equipment - net                                                 4,478               4,348
Investment in Time Warner Entertainment                                             2,487               2,486
Net investment in international ventures                                              456                 475
Intangible assets - net                                                            12,443              12,597
Net investment in assets held for sale                                                441                 419
Other assets                                                                        1,064                 961
                                                                         ----------------- -------------------

Total assets                                                                      $22,556             $22,614
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)
<TABLE>
<CAPTION>


U S WEST MEDIA GROUP COMBINED BALANCE SHEETS (continued)
--------------------------------------------------------------------------------------------------------------
                                                                                March 31,        December 31,
                                                                                     1998                1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>              <C>    

LIABILITIES AND EQUITY

Current liabilities:
     Short-term debt                                                               $  984              $  804
     Accounts payable                                                                 338                 432
     Deferred revenue and customer deposits                                           160                 152
     Other                                                                            910               1,038
                                                                      -------------------- -------------------

Total current liabilities                                                           2,392               2,426

Long-term debt                                                                      8,247               8,228
Deferred income taxes                                                               3,247               3,262
Deferred credits and other                                                            419                 393

Company-obligated mandatorily redeemable preferred
   securities of subsidiary trust holding solely
   Company-guaranteed debentures                                                    1,080               1,080
Preferred stock subject to mandatory redemption                                       100                 100

Media Group equity                                                                  7,071               7,125
                                                                      -------------------- -------------------

Total liabilities and equity                                                      $22,556             $22,614
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I
                                                  U S WEST, Inc.
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               (Dollars in millions)
                                                    (Unaudited)

<TABLE>
<CAPTION>

U S WEST MEDIA GROUP COMBINED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,                                                                1998         1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>          <C>    
OPERATING ACTIVITIES
   Net loss                                                                               $(135)       $(109)
   Adjustments to net loss:
      Depreciation and amortization                                                          356          303
      Equity losses in unconsolidated ventures                                               136          165
      Distributions from unconsolidated ventures                                               3            3
      Gains on sales of investments                                                         (17)         (51)
      Deferred income taxes                                                                 (27)         (45)
      Provision for uncollectibles                                                            28           25
   Changes in operating assets and liabilities:
      Accounts and notes receivable                                                           81            8
      Deferred directory costs, prepaid and other                                           (17)         (17)
      Accounts payable and accrued liabilities                                             (209)         (36)
   Other - net                                                                               (9)            3
                                                                                      ----------- ------------
   Cash provided by operating activities                                                     190          249
                                                                                      ----------- ------------

INVESTING ACTIVITIES
   Expenditures for property, plant and equipment                                          (361)        (364)
   Payment to Continental Cablevision shareowners                                              -      (1,150)
   Investment in international ventures                                                     (45)         (48)
   Investment in domestic ventures                                                          (99)         (55)
   Proceeds from sales of investments                                                         71          176
   Cash from net investment in assets held for sale                                           13           29
   Other - net                                                                                 2            4
                                                                                      ----------- ------------
   Cash used for investing activities                                                      (419)      (1,408)
                                                                                      ----------- ------------

FINANCING ACTIVITIES
   Net proceeds from (repayments of) short-term debt                                         207      (2,910)
   Proceeds from issuance of long-term debt                                                    -        4,090
   Repayments of long-term debt                                                                -          (1)
   Proceeds from issuance of common stock                                                     13            6
   Dividends paid on preferred stock                                                        (13)         (11)
   Purchases of treasury stock                                                              (14)         (53)
                                                                                      ----------- ------------
   Cash provided by financing activities                                                     193        1,121
                                                                                      ----------- ------------

CASH AND CASH EQUIVALENTS
   Decrease                                                                                 (36)         (38)
   Beginning balance                                                                         184          121
                                                                                      =========== ============
   Ending balance                                                                          $ 148       $   83
==============================================================================================================
</TABLE>


<PAGE>

Form 10-Q - Part I

Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions, except per share amounts)

Some  of  the  information  presented  in  or in  connection  with  this  report
constitutes  "forward-looking  statements"  within the  meaning  of the  Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations  are  based on  reasonable  assumptions  within  the  bounds of its
knowledge of its business and operations,  there can be no assurance that actual
results will not differ  materially  from its  expectations.  Factors that could
cause  actual  results to differ from  expectations  include:  (i) greater  than
anticipated  competition  from new entrants into the local  exchange,  intraLATA
toll, cable, wireless,  data and directories markets, (ii) changes in demand for
the Company's products and services, including optional custom calling features,
(iii)  higher  than  anticipated  employee  levels,  capital  expenditures,  and
operating expenses (such as costs associated with year 2000  remediation),  (iv)
the loss of  significant  customers,  (v)  pending  regulatory  actions in state
jurisdictions,    (vi)    regulatory    changes    affecting   the   cable   and
telecommunications  industries,  including  changes that could have an impact on
the  competitive  environment  in the local exchange  market,  (vii) a change in
economic  conditions in the various markets served by the Company's  operations,
including international markets, that could adversely affect the level of demand
for cable,  telephone,  wireless,  directories or other services  offered by the
Company,  (viii) greater than  anticipated  competitive  activity  requiring new
pricing for services,  (ix) higher than  anticipated  start-up costs  associated
with new business  opportunities,  (x)  increases in  fraudulent  activity  with
respect to broadband and wireless services, (xi) delays in the Company's ability
to begin offering interLATA long-distance services, (xii) consumer acceptance of
broadband services,  including telephony, data, and wireless services, or (xiii)
delays in the  development of anticipated  technologies,  or the failure of such
technologies to perform according to expectations.

Results of Operations - First Quarter 1998 Compared with First Quarter 1997
<TABLE>
<CAPTION>

Net Income (Loss)

-------------------------------- ----------------------------------------- -- ---------------------------------------
                                            Net Income (Loss)                   Diluted Earnings (Loss) Per Share
                                 -----------------------------------------    ---------------------------------------
                                                           Increase                                    Increase
                                                          (Decrease)                                  (Decrease)
                                                      -------- -----------                        -------- ----------
Three Months Ended March 31,         1998       1997     $         %              1998      1997     $         %
--------------------------------- -------- ---------- -------- -----------    --------- --------- -------- ----------
<S>                                <C>        <C>      <C>        <C>          <C>       <C>       <C>       <C>
Communications Group               $  347     $  339   $    8     2.4          $  0.71   $  0.70   $ 0.01     1.4
Media Group                         (135)      (109)     (26)     23.9          (0.24)    (0.20)   (0.04)    20.0
                                 ========= ========== ======== ===========
Total net income                   $  212     $  230    $(18)    (7.8)
================================ ========= ========== ======== ===========

</TABLE>


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions, except per share amounts), 
continued
<TABLE>
<CAPTION>

Communications Group Net Income

---- --- -- --------------------------- ------------------------------------ -- -------------------------------------
                                                    Net Income                       Diluted Earnings Per Share
                                        ------------------- ----------------    -------------------- ----------------
                                                               Increase                                 Increase
                                                            ----------------                         ----------------
Three Months Ended March 31,               1998      1997                 %         1998   1997(1)        $       %
                                                             $
--------------------------------------- -------- --------- ------- ---------    --------- --------- --------- ------
<S>                                        <C>       <C>       <C>      <C>         <C>        <C>     <C>      <C>
Reported net income                        $347      $339      $8       2.4         $0.71      $0.70   $0.01    1.4
Adjustment to reported net income:
  Gain on sale of rural
     telephone exchanges (2)                  -      (11)      11         -             -     (0.02)    0.02      -
                                        -------- --------- ------- ---------    ---------- ---------- ------- ------
Normalized income                          $347      $328     $19       5.8         $0.71      $0.67   $0.04    6.0
======================================= ======== ========= ======= ========= == ========== ========== ======= ======
</TABLE>


(1)  Column does not add due to rounding of individual components.
(2)  In first-quarter 1997, the Communications Group sold certain rural 
telephone exchanges in Nebraska for a pretax gain of $18 and an after-tax gain 
of $11.


During 1998, the Communications Group's normalized income increased $19, or 
5.8 percent, to $347  Normalized diluted earnings per share was $0.71 per 
Communications share, an increase of $0.04, or 6.0 percent. The increase in  
normalized income is primarily due to higher demand for services partially  
offset by interstate access rate reductions, higher expenses related to 
interconnection and start-up costs associated with growth initiatives, 
including wireless PCS.
<TABLE>
<CAPTION>

Media Group Net Loss

---- --- -- ---------------------- ------------------------------------- -- -----------------------------------------
                                                 Net Loss                            Diluted Loss Per Share
                                   ------------------- ------------------    -------------------- -------------------
                                                           Increase                                    Increase
                                                          (Decrease)                                  (Decrease)
                                                       ------- ----------                         -------- -----------
Three Months Ended March 31,           1998      1997      $       %              1998      1997      $        %
---------------------------------- --------- --------- ------- ----------    ---------- --------- -------- -----------
<S>                                  <C>       <C>        <C>    <C>           <C>       <C>        <C>       <C> 
Reported net loss                    $(135)    $(109)     $(26)  23.9          $(0.24)   $(0.20)    $(0.04)   20.0
Adjustments to reported net loss:
  Gains on sales of investments        (10)      (31)        21 (67.7)          (0.02)    (0.05)      0.03   (60.0)
  Other - Separation costs               35     -            35    -              0.06     -          0.06     -
                                   ========= ========= ======= ==========    ========== ========= ======== ===========
Normalized loss                      $(110)    $(140)       $30 (21.4)         $(0.20)   $(0.25)     $0.05   (20.0)
================================== ========= ========= ======= ========== == ========== ========= ======== ===========
</TABLE>

During 1998, Media Group's normalized net loss decreased $30, or 21.4 percent,  
to $110. Normalized diluted loss per share was $0.20, a decrease of $0.05, or 
20.0 percent. The normalized net loss decrease was primarily a result of lower 
interest expense and reductions in losses generated by unconsolidated
international ventures. During first-quarter 1998, Media Group recorded a gain 
on the sale of an investment of $10, net of tax expense of $7, and U S WEST
incurred costs related to the proposed Separation of $35, net of tax benefits 
of $14.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and  Analysis of Financial Condition and
Results of Operations (Dollars in millions), continued

Upon consummation of the Separation, certain Separation costs will be netted 
against the gain realized upon distribution of the New U S WEST common stock to 
U S WEST's shareowners. The estimated $25.6 billion gain on the distribution  
represents the difference between the fair value of New U S WEST and the  
historical investment in New U S WEST.
<TABLE>
<CAPTION>

Sales and Other Revenues

--------------------------------------------------------------- -------------------------- -------------------------
                                                                   Three Months Ended              Increase
                                                                        March 31,                 (Decrease)
                                                                -------------------------- -------------------------
                                                                       1998          1997            $          %
--------------------------------------------------------------- ------------ ------------- ------------- -----------
<S>                                                                  <C>           <C>             <C>          <C>
Communications Group                                                 $2,710        $2,587          $123         4.8
Media Group                                                           1,279         1,207            72         6.0
Intergroup eliminations                                                (22)          (28)             6      (21.4)
                                                                ============ ============= ============= ===========
Total                                                                $3,967        $3,766          $201         5.3
=============================================================== ============ ============= ============= ===========

Communications Group Operating Revenues

--------------------------------------------------------------- -------------------------- --- ---------------------
                                                                   Three Months Ended                Increase
                                                                        March 31,                   (Decrease)
                                                                --------------------------     ---------------------
                                                                                           -------------
                                                                       1998          1997            $          %
--------------------------------------------------------------- ------------ ------------- ------------- -----------
Local service                                                        $1,350        $1,231          $119         9.7
Interstate access service                                               698           687            11         1.6
Intrastate access service                                               206           200             6         3.0
Long-distance network services                                          201           250          (49)      (19.6)
Other services                                                          255           219            36        16.4
                                                                ============ ============= ============= ===========
Total                                                                $2,710        $2,587          $123         4.8
=============================================================== ============ ============= ============= ===========
</TABLE>

Local Service Revenues. During 1998, local service revenues increased $119, or
9.7 percent, to $1,350, primarily as a result of access  line  growth and  
increased demand for new product and service offerings, and existing central 
office features. Total reported access lines increased 568,000, or 3.6 percent, 
during the past 12 months, of which 284,000 was attributable to second lines.  
Second line installations increased 25.2 percent. Access lines grew 634,000, or 
4.1 percent, when adjusted for sales of approximately 66,000 rural telephone 
access lines during the past twelve months. Also contributing  to the increase 
in revenues were rate increases of $17 in various states, and interim 
compensation revenues from IXCs as a result of the FCC payphone orders which 
took effect in April 1997.



<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions), continued

Interstate Access Service Revenues. Interstate access service revenues increased
$11, or 1.6  percent,  to $698  during  1998,  primarily  due to a change in the
classification of universal service fundings which increased revenues by $19. In
1997 these  fundings were offset  against  interstate  access  service  revenues
through a contra-revenue account.  Beginning in 1998 these fundings are recorded
as access expense within other operating  expense.  Excluding the effects of the
reclassification,  interstate  access  revenues  declined  $8,  or 1.2  percent,
primarily  due to the effects of lower prices under the FCC's  current price cap
plan and the effects of 1997  true-ups to  sharing-related  accruals.  Partially
offsetting  these decreases were the effects of a 6.1 percent increase in billed
interstate access minutes of use and increased demand for private line services.

Intrastate Access Service Revenues. Intrastate access service revenues 
increased $6 in 1998, or 3.0 percent, to $206, primarily due to a 7.1 percent
increase in billed intrastate minutes of use and higher demand for private
line services. Partially offsetting the increase were net rate reductions of 
$5 in local jurisdictions, the majority of which were in the state of 
Washington.

Long Distance Network Services Revenues. Long-distance network services revenues
decreased  $49,  or 19.6  percent,  to $201,  primarily  due to the  effects  of
competition and rate reductions of $14 in local jurisdictions. Also contributing
to the decline were the  implementation of multiple toll carrier plans ("MTCPs")
in  various  jurisdictions  in 1997.  The MTCPs  essentially  allow  independent
telephone  companies to act as toll carriers and are net income neutral with the
reduction in toll revenues largely offset by increased intrastate access service
revenues and lower access expense.

Other Services Revenues. Revenues from other services  increased $36, or 16.4
percent, to $255, primarily as a result of greater sales of inside wire 
maintenance and continued market penetration in voice messaging services.
Increased sales of wireless communication services and other unregulated 
products and services also contributed to the increase.



<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued
<TABLE>
<CAPTION>

Media Group Sales and Other Revenues

----------------------------------------------------------- ---------------------------- ---------------------------
                                                                  Three Months Ended                  Increase
                                                                         March 31,                   (Decrease)
                                                            ---------------------------- ---------------------------
                                                                     1998          1997             $             %
----------------------------------------------------------- -------------- ------------- ------------- -------------
<S>                                                                 <C>            <C>           <C>         <C>    
Cable and broadband:
     Domestic                                                        $619          $552           $67          12.1
     International                                                      5             4             1          25.0
                                                            -------------- ------------- ------------- -------------
                                                                      624           556            68          12.2
Wireless communications:
    Cellular service                                                  318           303            15           5.0
    Cellular equipment                                                 23            32           (9)        (28.1)
                                                            -------------- ------------- ------------- -------------
                                                                      341           335             6           1.8
Directory and information services:
    Domestic                                                          307           287            20           7.0
    International                                                       -            22          (22)             -
                                                            -------------- ------------- ------------- -------------
                                                                      307           309           (2)         (0.6)
Other                                                                   7             7             -             -
                                                            ============== ============= ============= =============
Total                                                              $1,279        $1,207           $72           6.0
=========================================================== ============== ============= ============= =============
</TABLE>

Media Group sales and other revenues increased $72, or 6.0 percent, to $1,279
in 1998, primarily as a result of growth in domestic cable and broadband 
services.

Cable and  Broadband.  Domestic cable and broadband  revenues  increased $67, or
12.1  percent,  to $619,  primarily as a result of higher core cable revenue per
subscriber and continued growth in PrimeStar DBS service revenues. Excluding the
one-time  effects of cable system  acquisitions and dispositions and a change in
classification  of late fee revenues,  revenues  increased $69, or 12.5 percent.
Basic cable  programming  services revenue  increased $46, or 12.5 percent,  due
primarily to a 10 percent increase in revenue per average cable subscriber and a
1.5  percent  increase  in  basic  subscribers.  The  increase  in  revenue  per
subscriber  is  primarily  a  result  of  expanded  channel  offerings  and rate
increases resulting from higher programming fees. PrimeStar DBS service revenues
contributed $11 to the revenue increase,  due primarily to a 27 percent increase
in PrimeStar DBS  subscribers  since the end of first quarter 1997.  Advertising
and equipment and installation  revenues also contributed $11 to the increase in
domestic  cable and  broadband  revenues.  Core cable  revenue per average cable
subscriber  increased 7.4 percent to $39.17 in 1998, compared with $36.47 in the
first  quarter  of  1997.   Excluding  the  one-time  effects  of  cable  system
acquisitions  and  dispositions  and a  change  in  classification  of late  fee
revenues, core cable revenue per average cable subscriber increased 8.3 percent.

<PAGE>

Form 10-Q - Part I

Item 2 Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued

Prior to April 1, 1998, Media Group distributed PrimeStar DBS services to 
subscribers in its service areas, and as a result, reflected  consolidated 
operating results with respect to such subscribers. Subsequent to April 1,
1998, in conjunction with the Prime Star Contribution,  Media Group will no 
longer reflect consolidated operating results for PrimeStar DBS services.

Wireless Communications. Cellular service revenues increased $15, or 5.0 
percent,  to $318 in 1998 due to a 22 percent increase in subscribers,  
partially offset by a 15 percent decrease in average revenue per subscriber to
$40.46 per month.

On April 6, 1998, U S WEST sold its domestic wireless businesses to AirTouch in 
a tax-efficient transaction.

Directory and Information Services. Revenues related to Yellow Pages directory 
advertising  represent 99 percent of domestic directory and information 
services  revenues. Yellow Pages directory  advertising  revenues increased
$20, or 7.0  percent, to $304. The increase is driven by a 5.8 percent increase 
in revenue per local advertiser primarily  resulting from  price increases of  
4.7  percent and an increase in volume and complexity of advertisements sold.

In conjunction with the proposed Separation, the domestic directory business 
will be aligned with New U S WEST.  

During 1997, Media Group sold its wholly 
owned international directory and information services operations.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations (Dollars in millions), continued
<TABLE>
<CAPTION>

Operating Income

--------------------------------------------------------------- -------------------------- --- ---------------------
                                                                   Three Months Ended                Increase
                                                                        March 31,                   (Decrease)
                                                                --------------------------     ---------------------
                                                                                           
                                                                       1998          1997            $           %
--------------------------------------------------------------- ------------ ------------- ------------- -----------
<S>                                                                    <C>           <C>            <C>         <C>
Communications Group                                                   $670          $644           $26         4.0
Media Group                                                             145           178          (33)      (18.5)
                                                                ============ ============= ============= ===========
Total                                                                  $815          $822          $(7)       (0.9)
=============================================================== ============ ============= ============= ===========

Communications Group Operating Income

             --------------------------------------------------------------------------------------------------------------------
                                                                               hree Months Ended         Increase
                                                                                    March 31,           (Decrease)
                                                                                -------------------------------------------------
                                                                               1998         1997       $          %
   ------------------------------------------------------------------------------------------------------------------------------
  Operating revenues                                                        $2,710       $2,587      $123        4.8
  Operating expenses:
      Employee-related expenses                                                938          864        74        8.6
      Other operating expenses                                                 481          445        36        8.1
      Taxes other than income taxes                                             97          107      (10)      (9.3)
      Depreciation and amortization                                            524          527       (3)      (0.6)
                                                                     ------------------------------------------------
          Total operating expenses                                           2,040        1,943        97        5.0
                                                                     ------------------------------------------------
  Operating income                                                            $670         $644       $26        4.0
  ===================================================================================================================
</TABLE>

During 1998, the Communications Group's operating income increased $26, or 4.0 
percent, to $670. Revenue growth of $123,  or 4.8  percent, was partially  
offset by an increase of $97, or 5.0 percent, in operating  costs, including  
approximately $50 of expenses related to interconnection. Total operating
expense growth was primarily due to increases in employee-related costs and 
other operating expenses.

Total employee-related expenses increased $74, or 8.6  percent, to $938 during  
1998  primarily due to higher contract labor costs and  increased  salaries and 
wages. The higher contract labor costs were predominately a result of systems  
development work (which includes  expenses related to  interconnection  and 
year 2000 costs) and marketing and sales efforts. Higher salaries and wages 
were a result of workforce increases and wage increases.

Other operating expenses  increased  $36, or 8.1 percent, to $481 during 1998. 
The increase is primarily due to interconnection  expenses of approximately 
$30 and costs associated with growth initiatives (primarily PCS). Other 
operating expenses also increased $19 due to the change

<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued

in the classification of the universal service funding expenses. Partially  
offsetting the increases were reduced access expense (primarily due to
dial-around competition and the MTCPs) and a 1997 reserve adjustment associated
with billing and collection activities performed for IXCs.

Taxes other than income taxes decreased $10, or 9.3 percent, primarily as a 
result of adjustments related to the 1997 property tax accrual.
<TABLE>
<CAPTION>

Media Group Operating Income

-------------------------------------------------------- ------------------------------- ---------------------------
                                                                 Three Months Ended                Increase
                                                                        March 31,                (Decrease)
                                                         ------------------------------- ---------------------------
                                                                   1998            1997             $             %
-------------------------------------------------------- --------------- --------------- ------------- -------------
<S>                                                               <C>             <C>           <C>         <C>    
Cable and broadband:
     Domestic                                                     $(48)           $(17)         $(31)             -
     International                                                  (2)             (4)             2        (50.0)
                                                         --------------- --------------- ------------- -------------
                                                                   (50)            (21)          (29)             -

Wireless communications:
     Domestic                                                        87              95           (8)         (8.4)
     International                                                  (3)             (3)             -             -
                                                         --------------- --------------- ------------- -------------
                                                                     84              92           (8)         (8.7)

Directory and information services:
    Domestic                                                        143             130            13          10.0
    International                                                     -             (7)             7             -
                                                         --------------- --------------- ------------- -------------
                                                                    143             123            20          16.3

Other (1)                                                          (32)            (16)          (16)             -
                                                         --------------- --------------- ------------- -------------
Total operating income                                             $145            $178         $(33)        (18.5)
======================================================== =============== =============== ============= =============
</TABLE>


(1) Primarily includes headquarters  expenses for shared services and 
divisional expenses associated with equity investments.


During 1998, Media Group's operating income decreased $33, or 18.5 percent, to 
$145. The decrease in operating income is primarily a result of an increase in
domestic cable and broadband operating losses.



<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued

Cable and Broadband.  Domestic cable and broadband  operating  losses  increased
$31, to $48, as compared with 1997.  Revenue  increases of $67, or 12.1 percent,
to $619,  were more than offset by increased  programming  costs of $22, or 17.3
percent, to $149, increases in operating, marketing and advertising, and general
and  administrative  costs  of $30 or  15.0  percent,  to  $230,  and  increased
depreciation and amortization charges of $46, or 19.0 percent, to $288.

     Programming  cost  increases  were  primarily a result of expanded  channel
     offerings and  increased  programming  costs per  subscriber as a result of
     rate  increases.   Programming   costs  increased  13.4  percent  excluding
     programming  costs related to PrimeStar  services.  Increases in operating,
     marketing  and  advertising,  and  general  and  administrative  costs  are
     primarily a function of an increase in employee costs primarily  associated
     with  customer  service  initiatives,  as well  as  costs  associated  with
     deployment of new services such as high-speed data, and advertising  costs.
     The  termination  of the  Minnesota  System  sale  resulted  in a  one-time
     increase  to  depreciation  and  amortization  expense of $28 during  1998.
     Depreciation and amortization  expense was suspended on this property while
     it was held for sale in 1997.

     The  domestic  cable and  broadband  business  will  continue  to  generate
     operating  losses for the  foreseeable  future due to the  amortization  of
     intangible  assets  associated  with the acquisition of Media Group's cable
     properties and depreciation associated with network upgrades.

     Wireless  Communications.  Domestic cellular operating income decreased $8,
     or 8.4  percent,  to $87 during 1998.  The decrease in operating  income is
     primarily  a  result  of  accelerated   depreciation  associated  with  the
     replacement of certain infrastructure equipment. On a per subscriber basis,
     revenue  decreased  15.3  percent  and the costs  incurred  to acquire  and
     support customers decreased 12.8 percent.

     Directory  and  Information  Services.   Domestic  Yellow  Pages  directory
     advertising  operating  income  increased  $12,  or 8.8  percent,  to $149.
     Revenue  increases  of  $20,  or 7.0  percent,  were  partially  offset  by
     increases in the costs  associated  with selling more premium  advertising,
     primarily  graphic  arts  design,   and  higher  general  operating  costs,
     including  printing  and paper  costs.  Operating  losses  associated  with
     on-going product  development  activities  reduced  domestic  directory and
     information  services  operating  income  by $6 in  1998,  compared  with a
     reduction of $7 in 1997.

During 1997, Media Group sold its wholly owned international directory and 
information services operations.

Other.  Other operating losses increased primarily as a result of increased 
corporate  costs, including costs associated with international activities.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions), continued
<TABLE>
<CAPTION>

Interest Expense and Other

-------------------------------------------------------------------------------------------------------------------
                                                                 Three Months Ended                Increase
                                                                     March 31,                    (Decrease)
                                                             ------------------------------------------------------
                                                                  1998            1997              $        %
------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>             <C>       <C>   
Interest expense                                                 $(247)          $(278)          $(31)     (11.2)
Equity losses in unconsolidated ventures                          (136)           (165)           (29)     (17.6)
Gains on sales of investments                                        17              51           (34)     (66.7)
Gain on sale of rural telephone exchanges                             -              18           (18)          -
Guaranteed minority interest expense                               (22)            (22)              -          -
Other expense - net                                                (62)            (26)             36          -
------------------------------------------------------------------------------------------------------------------
</TABLE>

Interest  Expense. Interest expense decreased $31, or 11.2 percent, due
primarily to lower debt levels at the Media Group during 1998 as compared with 
1997.

     Equity Losses in  Unconsolidated  Ventures.  Equity losses decreased $29 in
     1998. This decrease is comprised of a $41 decrease in international  losses
     offset by a $12 increase in domestic losses.  The decrease in international
     losses  relates  to  foreign   exchange  rate   improvements   at  Telewest
     Communications,  plc ("Telewest");  rapid subscriber growth  experienced by
     the central European  wireless  ventures located in Hungary,  the Czech and
     Slovak Republics, and Poland; and the absence of losses related to ventures
     in Malaysia and  Indonesia in the first  quarter of 1998.  In 1998,  equity
     method  accounting  was suspended on the Company's  investments in Malaysia
     and  Indonesia  in  conjunction  with a 1997  adjustment  to write down the
     carrying  value of the investment in Malaysia to its fair value of zero and
     to recognize probable funding  commitments in connection with a shareholder
     support agreement related to the investment in Indonesia.

The Company continues to monitor its investments in Malaysia and  Indonesia. 
During the first quarter of 1998, the Indonesian  currency declined 55 percent 
as compared with the U. S. dollar; whereas, the Malaysian currency recovered  
slightly. The Company funded an additional $6 pursuant to the terms of the  
Indonesian venture shareholder support agreement. After such funding the 
Company's contractual funding commitment is reduced to $13 and its partners'
commitments remain at $36.

Domestically, the increase in losses is attributed to Media Group's interests 
in PrimeCo, Time  Warner Entertainment and Old PrimeStar. U S WEST's interest  
in PrimeCo was transferred to AirTouch on April 6, 1998 pursuant to the 
AirTouch Transaction, and U S WEST's interest in Old PrimeStar was exchanged 
for an approximate 10 percent interest in PrimeStar on April 1, 1998.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued

Gains on Sales of Investments. During  1998, Media Group sold a cable
programming investment resulting in a pretax  gain of $17. During 1997, Media  
Group sold its 5 percent interest in a  wireless venture in France resulting in 
a pretax gain of $51 and Communications Group sold certain rural telephone 
exchanges in Nebraska resulting in a pretax gain of $18.

Other Expense - Net. Other expense increased primarily due to costs incurred by 
U S WEST related to the proposed Separation  totaling  $49.  Such costs
include the Minnesota System termination fee and settlement of related claims, 
and certain filing and consulting fees as of March 31, 1998, to effect the  
Separation. U S WEST will incur total  Separation costs during 1998 of  
approximately $175. Upon consummation of the Separation, certain Separation 
costs will be netted against the gain realized upon distribution of the New 
U S WEST common stock to U S WEST's shareowners. The  Separation costs were 
partially offset by decreased foreign exchange transaction losses associated 
with loans to international ventures during the quarter.

Liquidity and Capital Resources
<TABLE>
<CAPTION>

Operating Activities

------------------------------------------------------------ -------------------------------------- ----------------
                                                                              Three Months Ended
                                                                                  March 31,            Decrease
                                                             -------------------------------------- ---------------
                                                                             1998             1997         $
------------------------------------------------------------ --------------------- ---------------- ----------------
<S>                                                                        <C>              <C>               <C>  
Communications Group (1)                                                   $1,069           $1,097            $(28)
Media Group (1)                                                               190              249             (59)
                                                             ===================== ================ ================
Total cash provided by operating activities                                $1,259           $1,346            $(87)
============================================================ ===================== ================ ================
</TABLE>


   (1)  Individual  group  cash  flow  statements  are  provided  in  Note I -
     Supplemental  Communications Group and Media Group Combined Statements - to
     the Consolidated Financial Statements.


     The decrease in Communications  Group's operating cash flow during 1998, as
     compared with 1997, reflects a reduction in accounts payable largely offset
     by business growth and lower tax payments and  restructuring  expenditures.
     Operating cash flow at Media Group decreased primarily due to the timing of
     interest  payments  as  compared  with  1997,  a one-time  payment  for the
     termination of the Minnesota  System sale and increased tax payments.  Such
     decreases  were  partially  offset  by an  increase  in cash  generated  by
     operations.

The  Communications Group's operating cash flow during the second- and  
third-quarters of 1998 will be affected by the payment of approximately $205 of 
rate refunds and $25 of interest in the state of Washington. The rate refunds 
are for revenues that were collected subject to refund (with  interest) from 
May 1, 1996 through January 31, 1998.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued
<TABLE>
<CAPTION>

Investing Activities

--------------------------------------------------------------------------------- ------------------------------
                                                                                          Three Months Ended
                                                                                               March 31,
                                                                                  ------------------------------
                                                                                            1998           1997
--------------------------------------------------------------------------------- --------------- --------------
<S>                                                                                        <C>          <C>    
Communications Group (1)                                                                   $ 556        $   400
Media Group (1)                                                                              419          1,408  (2)
                                                                                  =============== ==============
Total cash used for investing activities                                                   $ 975         $1,808
================================================================================= =============== ==============
</TABLE>


(1)   Individual  group cash flow statements are provided in Note I - 
Supplemental Communications Group and Media Group Combined Statements - to the 
Consolidated Financial Statements.
(2)   1997 Media Group investing  activities include the cash portion of the  
Continental Cablevision, Inc. ("Continental") acquisition of $1,150 paid by 
Media Group during 1997 to the Continental shareowners.


Total capital expenditures, on a cash basis, were $918 during first-quarter 
1998. On a cash basis, Communications Group capital expenditures were $557 and
Media Group capital expenditures were $361 during 1998. The majority of the  
Communications Group's capital expenditures related to access line growth and 
continued  improvement of the telecommunications  network. Expenditures 
associated with entering wireless communications markets and meeting the  
Telecommunications Act requirements including interconnection and local number  
portability also impacted capital expenditures. The majority of Media Group  
capital expenditures in 1998 were  devoted to upgrading the domestic cable 
network and preparing for the provision of new and enhanced services. Media 
Group anticipates capital expenditures will accelerate during the remainder of 
1998.

Investing activities include Media Group's investments in international 
ventures of $45, primarily capital contributions to a cable investment in 
Belgium, and the Company's investments in domestic ventures of $117. The
investments in domestic ventures include Media Group's capital contributions to 
PrimeCo of $64 and the purchase of various cable investments totaling $35, and 
Communications  Group's purchase of PCS licenses in connection with its launch 
of PCS service in various markets of $18. Media Group also sold various cable  
investments during 1998, resulting in proceeds of $71.

On March 29, 1998,  Telewest announced that merger discussions were underway 
for Telewest to acquire General Cable plc ("General  Cable"). On April 15, 
1998, the boards of Telewest and General Cable announced agreement on the
proposed merger terms for Telewest to acquire General Cable for Telewest shares
and cash ("Merger  Offer"). General Cable shareholders will receive 1.243 new 
Telewest shares and 65 pence in cash for each General Cable share (or an 
aggregate of approximately L409  million in Telewest  shares and L240  million 
in cash). Telewest intends to raise the cash  portion of the purchase price  
through a rights offering to Telewest's existing shareholders 
("Pre-emptive Issue"), including Media Group. Media Group and certain


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations (Dollars in millions), continued

     of  Telewest's  other  principal  shareholders  have agreed to purchase any
     Telewest  shares not  purchased by  Telewest's  other  shareholders  in the
     rights offering.

The Merger Offer and Pre-emptive Issue are conditional on the approval of 
Telewest's shareholders. A 40 percent shareholder of General Cable has agreed 
to irrevocably accept the Merger Offer. There can be no assurance that any 
transaction involving the acquisition of General Cable will be consummated.
<TABLE>
<CAPTION>

Financing Activities

--------------------------------------------- -------------------------------- -------------------------------------
                                                                                           Three Months Ended
                                                                                                 March 31,
                                                                               -------------------------------------
                                                                                             1998              1997
------------------------------------------------------------------------------ ------------------- -----------------
<S>                                                                                        <C>              <C>    
Communications Group (1)                                                                   $(167)           $ (696)
Media Group (1)                                                                               193             1,121
                                                                               =================== =================
Total cash provided by financing activities                                               $    26           $   425
============================================================================== =================== =================
</TABLE>


(1)   Individual group cash flow statements are provided in Note I - 
Supplemental Communications Group and Media Group Combined Statements - to the 
Consolidated Financial Statements.


Dividends

U S WEST paid dividends on the Communications Stock totaling $259 and $237 
during the three months ended March 31, 1998 and 1997, respectively.

Debt Activity

Total debt at March 31, 1998 was $15,060, an increase of $382 compared with 
December 31, 1997. Including debt associated with the capital assets segment of
$364 and Preferred Securities of $1,080, total indebtedness at March 31, 1998 
was $16,504. Excluding debt associated with the capital assets segment, the 
Company's percentage of debt to total capital at March 31, 1998, was 54.6
percent compared with 54.0 percent at December 31, 1997. Including debt 
associated with the capital assets segment, Preferred Securities and 
mandatorily redeemable preferred stock, the Company's percentage of debt to 
total capital at March 31, 1998, was 59.4 percent compared with 58.9 percent at
December 31, 1997.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations (Dollars in millions), continued

U S WEST Communications and New U S WEST Credit Ratings

During the first quarter of 1998, Moody's downgraded U S WEST Communications'  
senior unsecured debt from Aa3 to A2 due to recent regulatory rulings and 
financial challenges associated with the Separation. See "Contingencies."
U S WEST Communications' debt remains under review by Moody's for possible 
downgrade pending clarification of New U S WEST's corporate structure and 
future strategic initiatives.

     On May 7, 1998, Duff & Phelps  reaffirmed U S WEST  Communications'  senior
     unsecured debt and commercial paper ratings of AA- and D-1+,  respectively.
     In addition, Duff & Phelps announced that the credit ratings to be assigned
     to the  senior  unsecured  debt and  commercial  paper of  Capital  Funding
     following  the   consummation   of  the  Separation  will  be  A  and  D-1,
     respectively.


MediaOne Credit Ratings

On May 7, 1998, Duff & Phelps announced MediaOne Funding's senior unsecured  
indebtedness will be rated BBB, its  commercial  paper will be rated D-2, 
and  MediaOne's Preferred Securities will be rated BBB-. In addition,
MediaOne Delaware's senior indebtedness will be assigned a rating of BBB.


Other

U S WEST from time to time engages in preliminary discussions regarding 
restructurings, dispositions and other similar  transactions. Any such 
transaction  may include, among other things, the transfer of certain  assets,
businesses or interests, or the incurrence or assumption of  indebtedness, and
could be material to the financial condition and results of operations of
U S  WEST. There is no  assurance that any such discussions will result in the  
consummation of any such transaction.

Risk Management

In conjunction with the AirTouch Transaction, Media Group received $1.65 
billion in liquidation preference of dividend bearing AirTouch preferred stock 
and 59.5 million shares of AirTouch common stock. As of April 30, 1998,  the
market value of the AirTouch common stock was approximately $3.2 billion and 
the market value of the preferred stock was approximately $1.5 billion.



<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations (Dollars in millions), continued

Equity-Price Risk Management. Media Group is exposed to market risks associated
with fluctuations in the price of the AirTouch common securities. A 
hypothetical 10 percent increase in the price of AirTouch common stock would
increase the market value of Media Group's investment in AirTouch common stock 
by approximately $320.

     Interest Rate Risk Management.  The market value of the AirTouch  preferred
     stock is exposed to market risks  associated with  fluctuations in interest
     rates.  U S WEST has reduced its  exposure  to  fluctuations  in the market
     value of the AirTouch  preferred  stock by entering  into an interest  rate
     swap which locks in the treasury rate  component of the market value of the
     AirTouch preferred stock. As a result, a hypothetical 25 basis point change
     in interest rates would not have a material  effect on the combined  market
     value of the AirTouch preferred stock and the interest rate swap.

Effects of the Separation, the Refinancing and the AirTouch Transaction

In connection with the Separation, New U S WEST and MediaOne are seeking to 
refinance substantially all of the U S WEST Indebtedness through a combination 
of tender offers, prepayments, defeasance, consent solicitations and/or
exchange offers.

     At March 31, 1998, prior to giving effect to the AirTouch Transaction,  U S
     WEST and its subsidiaries (including U S WEST's capital assets segment) had
     outstanding approximately $16.5 billion of indebtedness.  Such indebtedness
     consists  of  approximately  $8.1  billion of U S WEST  Indebtedness,  $5.5
     billion of U S WEST Communications  indebtedness,  $2.7 billion of MediaOne
     Delaware indebtedness and $200 million of Financial Services  indebtedness.
     The approximate $8.1 billion of U S WEST Indebtedness includes $5.4 billion
     of medium and long-term debt securities,  $1.1 billion of commercial paper,
     $500  million  of  other   indebtedness  and  $1.08  billion  of  Preferred
     Securities.

     As  part of the  Refinancing,  the  Company  is  offering  the  holders  of
     Preferred  Securities the right to exchange their Preferred  Securities for
     an equal amount of new preferred securities guaranteed by MediaOne or cash.
     Also as part of the  Refinancing,  the Company is making offers to purchase
     for cash  $5.2  billion  of  medium  and  long-term  debt  securities.  Any
     securities  not tendered  pursuant to the Cash Tender Offer will be assumed
     by MediaOne,  although U S WEST may  determine  to defease  certain of such
     securities in lieu of assumption. In addition, U S WEST will prepay certain
     other U S WEST Indebtedness pursuant to the Refinancing.



<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations (Dollars in millions), continued

     As of April 30, 1998, the estimated cost of the Refinancing is $339 (net of
     income tax  benefits of $226)  which  includes  approximately  $278 (net of
     income tax benefits of $186) of debt  extinguishment  costs. In addition to
     refinancing costs, such costs include the difference between the market and
     fair value of the U S WEST  Indebtedness  and a charge for unamortized debt
     issuance  costs.  Refinancing  costs  also  include  $48 (net of income tax
     benefits  of $32)  related to the  Exchange  Offer.  Such costs will reduce
     MediaOne equity and earnings available for common stock.

Consummation of the Exchange Offer and the Cash Tender Offer is subject to 
certain conditions, including the approval of the Separation by U S WEST's 
shareowners.

After the Separation and related  Refinancing, New U S WEST will have
approximately $9.9 billion of debt, which will include $5.5  billion of 
U S WEST Communications indebtedness and $4.4 billion of U S WEST Indebtedness
which includes the effects of the Refinancing (which includes the Dex  
Indebtedness) and the funding of certain costs of the Separation. During the 
second-quarter of 1998, New U S WEST's operating cash flow will be affected by 
the payment of its allocated share of Separation costs, estimated at $45 
(after-tax). In addition, New U S WEST will pay to MediaOne approximately $122 
for its allocated, after-tax share of Refinancing costs. New U S WEST, through  
its financing subsidiary Capital Funding, will initially finance the repurchase 
or repayment of U S WEST Indebtedness with commercial paper. Following 
consummation of the  Separation, New U S WEST will issue medium and long-term 
securities to refinance a portion of the commercial paper.

     After the Separation and related Refinancing and after giving effect to the
     AirTouch Transaction, MediaOne will have approximately $5.4 billion of debt
     and  preferred  securities,  which will  include  $2.7  billion of MediaOne
     Delaware  indebtedness  and $2.7 billion of debt and  preferred  securities
     issued or  guaranteed  by MediaOne,  which  includes  new debt  incurred by
     MediaOne Funding to refinance a portion of the U S WEST Indebtedness. It is
     anticipated  that such new debt will be a combination  of commercial  paper
     and commercial bank debt. In addition,  the capital assets  segment,  which
     will  remain  with  MediaOne,  will  have  approximately  $400  million  of
     indebtedness.  MediaOne Funding's bank debt will include certain additional
     terms and covenants which are generally  included in the bank  indebtedness
     of cable companies. In addition, any senior indebtedness issued by MediaOne
     Funding after the Separation  will be guaranteed by MediaOne  Delaware and,
     as  a  result,  will  rank  pari  passu  with  MediaOne  Delaware's  senior
     indebtedness.  To the extent the Preferred Securities are tendered for cash
     pursuant to the Exchange Offers, it is anticipated that MediaOne will issue
     additional  preferred  securities  following the Separation so that it will
     have approximately $1 billion of preferred securities outstanding.

Following the Separation, MediaOne intends to monetize the AirTouch securities  
it received in the AirTouch Transaction and use a portion of the proceeds to 
reduce its commercial paper and commercial bank debt.



<PAGE>

Form 10-Q - Part I

Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations (Dollars in millions), continued

U S WEST, after consultation with and based upon the advice of its financial  
advisors, believes that New U S WEST and MediaOne have sufficient financing 
capability to accomplish the refinancings described above.

In May 1998, New U S WEST and MediaOne entered into revolving bank credit  
facilities to support their commercial paper programs and, in the case of 
MediaOne, to provide financing in conjunction with the Refinancing. New U S
WEST's credit facility totals $4.5 billion; $3.5 billion matures in one year 
and $1.0 billion  matures in five years. MediaOne's credit facility totals $4.0 
billion; $2.0 billion matures in one year and $2.0 billion matures in five
years.

Contingencies

Communications Group Contingencies

At U S WEST Communications there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both.

     Oregon.  On May 1,  1996,  the  OPUC  approved  a  stipulation  terminating
     prematurely U S WEST  Communications'  AFOR plan,  and it then  undertook a
     review of U S WEST Communications'  earnings. In May 1997, the OPUC ordered
     U S WEST Communications to reduce its annual revenues by $97, effective May
     1,  1997,  and  to  issue  a  one-time  refund,   including  interest,   of
     approximately  $102 to reflect the revenue  reduction for the period May 1,
     1996 through April 30, 1997. The one-time refund is for interim rates which
     became  subject  to  refund  when U S WEST  Communications'  AFOR  plan was
     terminated on May 1, 1996.

     U S WEST  Communications  filed an  appeal  of the  order  and asked for an
     immediate  stay of the refund with the Oregon Circuit Court which granted U
     S WEST  Communications'  request  for a stay,  pending a full review of the
     OPUC's  order.  On February 19, 1998,  the Oregon  Circuit  Court entered a
     judgment in U S WEST Communications'  favor on most of the appealed issues.
     The OPUC  appealed on March 19, 1998.  The  potential  exposure,  including
     interest, at March 31, 1998, is not expected to exceed $210.

     Utah.  In another  proceeding,  the Utah Supreme  Court has remanded a UPSC
     order to the UPSC for hearing,  thereby  establishing two exceptions to the
     rule  against  retroactive  ratemaking:  1)  unforeseen  and  extraordinary
     events, and 2) misconduct. The UPSC's initial order denied a refund request
     from interexchange carriers and other parties related to the Tax Reform Act
     of 1986. The potential exposure,  including interest, at March 31, 1998, is
     not expected to exceed $160.


<PAGE>

Form 10-Q - Part I

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations (Dollars in millions), continued

State Regulatory Accruals. U S WEST Communications has accrued $148 at 
March 31, 1998, which represents its estimated liability for all state
regulatory proceedings, predominately the items discussed above. It is possible
that the ultimate liability could exceed the recorded liability by an amount up 
to approximately $220. U S WEST Communications  will continue to monitor and 
evaluate the risks  associated with its local regulatory jurisdictions, and 
will adjust estimates as new information becomes available.

In addition to its estimated liability for state regulatory proceedings, 
U S WEST Communications has an accrued liability  of  approximately $230 at 
March 31, 1998 related to refunds in the state of Washington.  The Company
expects that the majority of these refunds will be issued to rate payers, IXCs 
and independent LECs during the second- and third-quarters of 1998.

New Accounting Standards

SOP 98-5, "Reporting on the Costs of Start-Up  Activities,"  was issued in
April 1998. SOP 98-5  requires, among other things, that the costs related to 
start-up activities of a new entity, facility, product or service be expensed.  
Adoption of SOP 98-5 is required as of January 1, 1999, but earlier  adoption 
is allowed. The effect of adopting SOP 98-5 is under evaluation.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Reference is made to the information set forth on pages 39 and 40.



<PAGE>

Form 10-Q - Part II

                                            PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

U S WEST and its subsidiaries are subject to claims and  proceedings arising in 
the ordinary course of business. While complete assurance cannot be given as to 
the outcome of any contingent liabilities, in the opinion of U S WEST, any 
financial impact to which U S WEST and its subsidiaries are subject is not 
expected to be material in amount to U S WEST's operating results or its 
financial position.

Item 6.  Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>

(a)  Exhibits
<S>          <C>    

     Exhibit  Number 10a.  364-Day  Credit  Agreement  dated May 8, 1998,  among
     MediaOne Group Funding,  Inc., U S WEST, Inc., the Banks listed therein and
     Morgan Guaranty Trust Company of New York, as  Administrative  Agent.  10b.
     Five-Year Credit Agreement dated May 8, 1998, among MediaOne Group Funding,
     Inc., U S WEST,  Inc., the Banks listed  therein and Morgan  Guaranty Trust
     Company of New York, as Administrative Agent. 10c. 364-Day Credit Agreement
     dated May 8, 1998,  among U S WEST Capital  Funding,  Inc., U S WEST, Inc.,
     USW-C,  Inc., the Banks listed therein and Morgan Guaranty Trust Company of
     New York, as Administrative  Agent.  10d.  Five-Year Credit Agreement dated
     May 8, 1998, among U S WEST Capital Funding,  Inc., U S WEST, Inc.,  USW-C,
     Inc.,  the Banks listed  therein and Morgan  Guaranty  Trust Company of New
     York, as  Administrative  Agent.  12.  Statement  regarding  computation of
     earnings to fixed  charges ratio of U S WEST, Inc. and U S WEST Financial
     Services, Inc. 27. Financial Data Schedule.
</TABLE>
<TABLE>
<CAPTION>

(b)  Reports on Form 8-K filed during the First Quarter of 1998
<S>          <C>    

(i)          Form 8-K report  dated  January 29, 1998,  regarding a press  release with respect to a merger
             agreement between AirTouch and U S WEST Media Group.
(ii)         Form 8-K report dated February 6, 1998,  concerning the release of earnings for the year ended
             December 31, 1997, and
(iii)        Form 8-K report  dated March 25,  1998,  concerning  Unaudited  Pro Forma  Condensed  Combined
             Financial Statements of U S WEST, Inc.
</TABLE>

<PAGE>



                                                    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.




May 15, 1998                       U S WEST, INC.

                                  /s/  Michael P. Glinksy
                                 ---------------------------
                                 Michael P. Glinsky
                                 Executive Vice President and
                                 Chief Financial Officer