<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                                   FORM 10-K


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

                  For the Fiscal Year Ended December 31, 1997

                                       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 No. 0-10018

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

                         DSC COMMUNICATIONS CORPORATION
               (Exact Name of Registrant as Specified in Charter)

               DELAWARE                           54-1025763
     (State or other jurisdiction              (I.R.S. Employer
   of incorporation or organization)          Identification No.)

           1000 COIT ROAD
            PLANO, TEXAS                             75075
(Address of principal executive office)           (Zip Code)

       Registrant's telephone number, including area code: (972) 519-3000

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                                  COMMON STOCK
                                 $.01 PAR VALUE

                        PREFERRED STOCK PURCHASE RIGHTS
                                (Title of Class)

     Indicate by check mark whether registrant (1) has filed all reports 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
                                       ---    ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]

     As of March 3, 1998, 118,722,290 shares of DSC Communications Corporation
Common Stock, $.01 par value, were outstanding, and the aggregate market price
of the shares held by nonaffiliates were approximately $2,238,026,122. (Solely
for the purposes of calculating the preceding amount, all directors and
officers of the registrant  are deemed to be affiliates.)

                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the definitive proxy material for the 1998 Annual
Meeting of Stockholders are incorporated by reference in Items 10, 11, 12, and
13 of Part III of this report.

     Certain Portions of the Annual Report to Shareholders for the year ended
December 31, 1997 are incorporated by reference in Items 6, 7, and 8 of Part
II, and Item 14 of Part IV of this report.

<PAGE>   2

                         DSC COMMUNICATIONS CORPORATION

                                 ANNUAL REPORT

                                       ON

                                   FORM 10-K

                          YEAR ENDED DECEMBER 31, 1997


                                     PART I

ITEM 1.  BUSINESS

GENERAL

         DSC Communications Corporation was incorporated under the laws of the
State of Delaware in 1976.  As used herein, the term "Company" refers to DSC
Communications Corporation and, unless the context clearly indicates otherwise,
all of its subsidiaries.  The Company's executive offices are located at 1000
Coit Road, Plano, Texas 75075-5813.  Its telephone number is (972) 519-3000.

         The Company designs, develops, manufactures and markets digital
switching, access, transport and private network system products for the
worldwide telecommunications marketplace.  These products allow
telecommunications service providers to build and upgrade their networks to
support a wide range of voice, data and video services.  The Company offers a
comprehensive product line including digital switching systems, intelligent
network products, cellular switching systems, digital loop carrier products,
digital cross-connect products and optical transmission systems and related
advanced network management systems.  The Company develops such systems to meet
U.S. and international telecommunications standards and the specific
requirements of the operating companies of the Regional Holding Companies
("RHCs"), independent telephone companies, long-distance carriers, private
networks and companies operating public and private communications networks in
other countries.

         In December 1997, the Company acquired Celcore, Inc. (subsequently
renamed DSC/Celcore, Inc.), based in Memphis, Tennessee, a manufacturer of
Global Systems for Mobile Communications ("GSM") and Advanced Mobile Phone
Service ("AMPS") switch systems, for approximately $167 million, which included
cash, the assumption of stock options and acquisition costs.

         In early 1998, the Company sold its fixed wireless local loop business
to a syndicate of venture capitalists for a
<PAGE>   3
minority ownership interest in a newly-formed company, Airspan Communications
Corporation ("Airspan"), and a promissory note issued by Airspan.  Due to the
uncertainty regarding the ultimate recovery of the investment and the note, the
Company recorded a $22 million asset write-down in 1997.

         The Company supplies products to a domestic and international customer
base, including local exchange telephone companies, long-distance carriers,
cellular telephone companies, international telephone companies, various
Fortune 1000 companies and utility companies.  Its domestic customers include
the RHCs and most major domestic independent telephone and long-distance
companies, including MCI Communications Corporation, U.S. Sprint Communications
Company L.P., GTE Communications Systems Corporation and WorldCom, Inc.  The
Company is also a major manufacturer of high-capacity cellular switches for
Motorola, Inc., a leading supplier of wireless communication systems throughout
the world.  International customers include DDI Corporation of Japan, Tele
Danmark, Deutsche Telekom in Germany, Cable & Wireless PLC and Mercury
Communications, Ltd. in the United Kingdom, British Telecommunications PLC,
Telefonos de Mexico, S.A. de C.V. and AAP Communications, Pty. Ltd. of
Australia.

        This Annual Report on Form 10-K contains statements relating to future
results of the Company (including certain projections and business trends) that
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act of 1934, which
involve risks and uncertainties. Actual results may differ materially from the
results discussed in or implied by the forward-looking statements. Factors that
might cause such a difference include, but are not limited to, those set forth
throughout this document, incorporated herein and detailed from time to time in
the filings with the Securities and Exchange Commission.

PRODUCTS

         The percentage of consolidated revenue from the Company's product
groups was as follows:

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                           1997        1996         1995
                                                           ----        ----         ----
         <S>                                               <C>          <C>          <C>
         Switch Systems                                    42%          42%          48%
         Access Systems                                    37%          33%          28%
         Transport Systems                                 20%          23%          23%
</TABLE>

         SWITCH SYSTEMS.  The Company develops, manufactures and markets
advanced switching and Intelligent Network ("IN") solutions for the worldwide
telecommunications marketplace.  The Company's switching systems connect and
route calls and provide signaling for wireline and wireless networks.  They also
furnish long-distance switching and switching to support high-speed
communications such as data, image and video.  The Company's primary switching
products include tandem and cellular switching systems.

         Driven by the demand for advanced features in the 1980s, worldwide
standards bodies developed the IN concept.  As a result, service logic for
deploying enhanced services may be


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independent of the switching systems.  Carriers can now realize the benefits of
rapid service introduction, service customization and cost-effective service
deployment.  Currently active in wireless and wireline networks in Asia,
Europe, Japan and North America, the Company's compatible family of
INfusion(TM) products addresses the signaling, service commissioning and
service delivery requirements of current and emerging Intelligent Networks
throughout the world.


                 Tandem Switches.  As a telephone network becomes increasingly
         complex, the number of switching locations grows to a point where it
         is not economical to connect every switching point directly to every
         other switching point.  Intermediate switching points served by a
         tandem (or transit) switch solve this problem.  The Company offers a
         complete line of Megahub(R) high capacity, modular tandem switches that
         not only fulfill the intermediate switching function, but also provide
         flexible dialing plans, service access codes and customized screening,
         translation and routing.  The Megahub line, scaleable from 10,000 to
         120,000 traffic carrying ports, serves both North American and
         international markets.  The tandem product family also works with the
         INfusion Intelligent Service Peripheral ("ISP") to provide IN
         services.

                 Wireless Switches.  Since 1984, the Company has provided
         switching platforms to Motorola which, when integrated with a variety
         of I/O peripherals and mobility management software, become wireless
         switching systems. These systems, currently supporting cellular and PCS
         applications in 37 countries worldwide, use both analog and digital
         modes of operation.  The Company's wireless switch platforms, DSC
         DEX200C and DSC DEX600C, utilize the same proven common control
         elements that are integral to the Company's overall switching products
         family, including the large installed base of tandem switching systems.
         In addition, the Company now provides Celcore's GSM and AMPS switch
         systems.  Celcore's focus is developing and supplying cellular systems
         for low-subscriber density applications in emerging markets.

                 Signal Transfer Points (STPs).  Signal Transfer Points are
         network signaling hubs that provide access to CCS7 signaling networks
         and that route signaling messages between IN nodes and other networks.
         Deploying an STP provides efficient access to centralized node
         services, improved CCS7 link utilization and economics and streamlined
         network routing and control management.





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                 Based on the same MegaHub(R) architecture as the tandem family
         of switches, and supporting SS7 and C7 signaling protocols, the
         Company's INfusion STPs are installed in local, long-distance and
         cellular networks throughout the world.  The INfusion STP delivers the
         real-time processing capacity and signaling throughput required to
         handle heavy message traffic created by the growing number of
         intelligent network services in today's wireless and wireline
         networks.  Features such as Global Title Translation, Gateway
         Screening and Local Number Portability enable the network carrier to
         cost-effectively expand message types to include IN and mobility
         functions, to improve network protection and reliability, and to
         address growing regulatory requirements.

                 INfusion SCE (Service Creation Environment).  The SCE provides
         the capability to create services from a library of reusable
         components and is used to develop and test IN services and their
         supporting logic.  With its intuitive Graphic User Interface for
         service creation and comprehensive simulation capabilities, the
         INfusion SCE allows rapid creation, verification and deployment of IN
         services.

                 INfusion SMS (Service Management System).  The SMS provides
         the tools to deploy, provision and activate SCE-created IN services.
         It also manages the master database for IN services by distributing
         changes to affected network elements and synchronizing the distributed
         databases.

                 INfusion SCP (Service Control Point) and SCPm.  These are
         scaleable service delivery platforms that execute SCE-created
         services.  Designed to allow multiple services on a single platform,
         the INfusion SCP and SCPm support a variety of wireline and wireless
         services such as Number Translation, Calling Card Validation, Virtual
         Private Networks ("VPN"), Home Location Register ("HLR") and Short
         Message Service Center ("SMSC").

                 INfusion ISP (Intelligent Service Peripheral).  The ISP
         executes SCE-created services that require the exchange of information
         with the caller (Intelligent Peripheral or IP capabilities) or
         database look-up (SCP functions).  The INfusion ISP supports number
         translation, enhanced routing and calling card services for the
         Company's tandem switches.

                 INfusion Intelligent Network Applications.  The Intelligent
         Network, by concentrating network intelligence into dedicated nodes,
         introduces a method of creating services based on Service Independent
         Building Blocks ("SIBBs").  Taking advantage of this IN design concept
         of





                                     Page 4
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         reusable components, the Company offers a variety of pre-packaged,
         SIBB-based, wireline and wireless services that minimize development
         time and allow rapid introduction of IN services.  Developed by the
         Company or in conjunction with its "Partners IN Vision," the portfolio
         of services include HLR, Authentication Center, SMSC, Location-Based
         Services, Calling Card and VPN.

The Company's major competitors in switching and intelligent network systems
are Lucent Technologies, Inc. ("Lucent"); Northern Telecom Ltd. ("Nortel"); AB
Telefon LM Ericsson ("Ericsson"); and Tandem Computers, Inc.

         ACCESS PRODUCTS.  The Company designs, manufactures and markets
equipment for the local loop, that portion of the public telecommunications
network which extends from the local telephone company's central office switch
to the individual home or business user.  The demand for access equipment has
been strong in recent years due primarily to the deployment of fiber optics by
the major service providers in the United States.  The Company believes that
software-based access products which support fiber optic communications will
continue to experience growth in demand and, accordingly, has developed a line
of such products to serve telecommunications service carriers in the United
States and abroad.

                 Litespan(R)-2000/2012.  In 1991, the Company began shipments of
         Litespan-2000, a second generation digital loop carrier product that
         enables local exchange carriers and other service providers to utilize
         fiber optics in the local loop.  Over a single pair of optical fibers,
         Litespan can transmit voice, data and video on an integrated basis to
         as many as 2,000 subscribers.  The Litespan-2000 is the world's first
         digital loop carrier to meet North American Synchronous Optical Network
         ("SONET") standards and related fiber optic interface requirements set
         forth by the RHCs.  This year, the Company expanded the Litespan
         offering with the Litespan-2012 product.  Its OC-12 transport
         capability and broadband interfaces enable delivery of very high rate
         services such as DS3 and OC3, to end users, making the Litespan-2012
         system a desirable choice for managing growth in networks.  The
         Litespan-2000 platform allows telecommunications service providers to
         introduce the high-capacity technology of fiber optics into the local
         loop and support basic services in a cost-effective manner.  The
         Company believes that upon completed development and introduction of
         high-speed data services, such as asymmetrical digital subscriber line
         ("ADSL"), demand for access platforms such as Litespan will increase.
         The Company currently has multi-year agreements with most of the RHCs
         for purchases of Litespan systems.





                                     Page 5
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                 Litespan-Broadband(TM).  The Litespan-Broadband system
         provides an Asynchronous Transfer Mode ("ATM")-based, interactive,
         fiber switched solution capable of delivering video, data and voice
         services to residences and businesses.  The Company will offer
         Litespan-Broadband systems as a migratory path for new and current
         Litespan customers as they upgrade to interactive, broadband
         full-service networks.  These new ATM-based networks will enable
         carriers to offer a multitude of new revenue-generating services over a
         single integrated platform.

                 Litespan(R)-120.  The Company evolved the Litespan system to
         address access applications in international markets.  The
         Litespan-120 product is a flexible access multiplexer that may be
         deployed as a loop carrier or primary mux, using copper, fiber or radio
         feeders. It offers benefits such as integral fiber optic interfaces,
         software control and support of a wide range of telephony services in a
         compact, cost-effective package.  Deliveries of Litespan-120 systems
         began in late 1995.  Network deployments are taking place in Latin
         America and Eastern Europe.  There is also additional field testing
         under way.

         Companion products from the Company's access products portfolio
include the Starspan(R) optical fiber system, which extends the capabilities of
the Litespan-2000 to the customer's premises; and Metrospan(R), which is used as
a broadband transport system within a campus-type setting or a metropolitan
communications network.

         The Company's primary competitors in the access market are Lucent,
Nortel and Fujitsu, Ltd.

         TRANSPORT SYSTEMS.  Transport equipment includes a vast array of
products that carry signals throughout the telecommunications network.  The
Company's transport product portfolio consists of digital cross-connects,
high-capacity fiber optic add/drop and terminal multiplexers, access
multiplexers and network management systems that route voice, video and data
traffic efficiently through the network.  The Company's products are used by
telephone companies, cellular service providers and large private or
governmental networks to add efficiency, lower costs, improve network
resiliency and enhance the quality of their services.

                 Digital Cross-Connects.  The Company's digital cross-connect
         family, comprised of the (1)DSC DEXCS, iMTN(R), iDCS(TM), microDX(R),
         (2)DSC DEX ECS1 and DSC DEX ECS3 models, has enabled





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

(1)   DSC DEXCS is a trademark of DSC Communications Corporation.

(2)   DSC DEX is a trademark of DSC Communications Corporation.


                                     Page 6
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          carriers and service providers to make their central offices and
          long-distance facilities more efficient and less labor-intensive,
          worldwide.

                  DSC DEXCS.  The DEXCS system is a fully featured 3/1/0 SONET
          cross-connect.  The system provides scaleable growth to the industry's
          largest narrow-band cross-connect.  The DEXCS cross-connect also
          provides the unique capability to bridge between the traditional
          telephony network and the emerging cell based data networks (frame
          relay and ATM).

                  iMTN (Integrated Multi-Rate Transport Node).  The iMTN system
          provides broadband routing, distribution and management throughout the
          network. The iMTN cross-connect also provides the unique capability of
          optical interfaces up to OC48 for the public telecommunications
          network's evolution to the North American SONET, international
          Synchronous Digital Hierarchy ("SDH") fiber optic standards and ATM
          transport requirements.  Early applications of iMTN systems include
          network video broadcast and high-volume voice/data transfer.  The iMTN
          product has been deployed both domestically and internationally.

                  iDCS (Integrated Digital Cross-Connect System).  The iDCS
          system addresses the smaller size wide-band transmission requirements
          for management of voice and data circuits in the telecommunications
          network.  This product also meets the domestic requirements of SONET
          and international specifications of SDH.  The iDCS cross-connect
          provides optical and electrical interfaces to other telephone company
          equipment, and economically manages circuit traffic throughout the
          network.

                  microDX(R).  The microDX product offers sophisticated
          cross-connect features to sites of varying size and remoteness.  For
          example, with the Company's microDX system, cell sites, wireless hubs
          and private networks can inexpensively incorporate high-end
          cross-connect features.  The microDX cross-connect supports
          small-capacity applications that require DSO-level add/drop
          multiplexing, as well as RF fingerprinting fraud control,
          interconnect, Cellular Digital Packet Data, and Rural Service Area
          cellular hubbing.


                  Transmission and Network Management.  The Company's broad
          product spectrum in Telecom Transmission and Network Management is
          further developed at DSC Communications A/S, the Danish subsidiary,
          acquired at the end of 1994. The FOCUS family of products encompasses
          second generation high speed add/drop multiplexers and cross-connects
          for international use.  The optical fiber transport systems


                                     Page 7
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          include (3)DSC FOCUS AC0 primary multiplexers; DSC FOCUS AC1, an
          ultra-compact SDH transmission family designed for STM-1 and STM-4;
          and DSC FOCUS AC4 high speed SDH transport family with a capacity of
          up to 120,000 simultaneous telephone channels per optical fiber pair,
          when enhanced with WDM technology (defined below).  Traffic continuity
          is ensured by the selection of various network protection schemes.
          Through the Danish optical amplifier technology, the Company is a
          world leader in long-distance optical transmission at high data rates
          without repeaters.  Easy and efficient network management at all
          levels is provided by the DSC FOCUS NM2100 network management family,
          extending from local equipment management with PCs to nationwide
          network management utilizing several distributed high-performance
          computers.  Traffic path setup and surveillance, automatic traffic
          rerouting and network optimization are some of the built-in features.
          The latest result of the Company's optical expertise is Wavelength
          Division Multiplexing (WDM) technology that allows a number of high
          speed data channels to be transmitted at the same time through a
          single fiber.  In addition, the Company manufactures a stand-alone
          WDM system that can be used with existing transmission equipment of
          any make.

          The Company also develops, manufactures, and markets a variety of
digital transmission products such as echo cancellers and transcoders, as well
as various customer premises products.

          The Company's primary competitors in the digital cross-connect market
are Lucent, Alcatel Network Systems ("Alcatel") and Tellabs, Inc.  The primary
competitors in the transmission equipment market in which the Company's Danish
subsidiary targets its products are Alcatel, Ericsson and Siemens AG.


REGULATION

         The telecommunications industry is subject to regulation in the United
States and other countries.  These regulations, some of which apply directly to
the Company and others of which govern the Company's customers and competitors,
may also have an impact on the Company's business.


         In the U.S., federal and state regulatory agencies, including the
Federal Communications Commission ("FCC") and various state commissions
(usually either Public Utility Commissions, Public Service Commissions, or
Corporation





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

(3)   DSC FOCUS is a trademark of DSC Communications Corporation.


                                     Page 8
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Commissions, collectively the "PUCs") regulate most of the Company's domestic
customers. In early 1996, the Telecommunications Act of 1996 (the "1996
Legislation") was passed.  The 1996 Legislation seeks to increase competition
in telecommunications by making it easier for competitors to enter new markets,
particularly the market for local exchange services.  This legislation could
increase the demand for systems, software and services as new entrants build
networks and existing network operators respond to the changing competitive
environment by constructing new or enhancing existing networks.  However, such
competition may be slower to develop than Congress anticipated.  An FCC Order
preempting state PUC regulation of interconnection charges, the setting of
uniform rules for such charges, and the imposition of requirements with respect
to the duty of incumbent local exchange carriers to provide unbundled network
elements has been overturned in several respects by the Court of Appeals for
the Eighth Circuit.  The case is not expected to be heard by the U.S. Supreme
Court until the October 1998 term.  In the meantime, much of these matters will
be the responsibility of the various state PUCs insofar as they deal with
intrastate service.

         In addition, the 1996 Legislation contains provisions that permit the
RHCs, subject to satisfying certain conditions, to manufacture
telecommunications equipment.  Prior to the 1996 Legislation, the RHCs were
restricted by the terms of the Modified Final Judgment ("MFJ") that resulted in
the divestiture of the RHCs by AT&T Corporation.  The MFJ prohibited the RHCs
from, among other things, manufacturing telecommunications equipment and
providing interLATA long distance services. On December 31, 1997, a federal
district court in Texas determined that the conditions on RHC entry into these
areas that were contained in the 1996 Legislation amounted to an
unconstitutional bill of attainder.  Although the impact of that ruling has
been stayed pending appeal, it could, if upheld, allow the RHCs to enter the
manufacturing market more quickly than they could under the 1996 Legislation.
One or more RHCs may decide to manufacture telecommunications equipment, to
design and provide telecommunications software, or to form alliances with other
manufacturers.  This could result in increased competition for the Company and
reduce the RHCs' purchases from the Company.

         In addition, the FCC and a majority of the states have enacted or are
considering regulations based upon alternative pricing methods.  Under
traditional rate of return pricing, telecommunications service providers were
limited to a stated percentage profit on their investment.  Under the new
method of pricing, many PUCs have entered into agreements with the local
exchange carriers where the PUCs have relaxed or eliminated the profit cap in
return for the carrier's promise to reduce or hold service prices at current
levels.  In some states, the PUCs and





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the carriers have further agreed, in order to win relaxation of profit limits,
that the carriers would invest large sums to further upgrade the digital and
optical capabilities of the network.  The Company believes that the new methods
of price regulation could increase the demand for its products that enhance the
efficiency of the network or allow the expedited introduction of new
revenue-producing services.

         Outside the United States, telecommunications networks are primarily
owned by the government or are strictly regulated by the government.  Although
potential growth rates of some international markets are higher than those of
the United States, access to such markets is often difficult due to the
established relationship between the government-owned or controlled
telecommunications operating company and its traditional indigenous suppliers
of telecommunications equipment.  However, there has been a global trend
towards privatization and deregulation of the state-owned telecommunications
operations.  This trend has found favor in the industrialized world, the
emerging markets of the newly-industrialized countries, and various developing
market countries, which want to both capitalize on the value of the existing
network and promote the development of the telecommunications network as an
integral part of the economic infrastructure.  The Company believes that the
current trend of privatization and deregulation will continue, and that such
trend could provide the Company with additional international opportunities due
primarily to increased investment in infrastructure by newly privatized
entities and new competitors.  The entry that went into effect on February 5,
1998 of the World Trade Organization's Agreement on Basic Telecommunications
Services, intended to facilitate the entry of foreign investment in the
telecommunications sector, should encourage this trend.

         The Company's products may need to comply with various technical
requirements and regulations.   Failure by the Company to obtain timely
approval of products could have an adverse effect on the Company's business. In
addition, the Communications Assistance for Law Enforcement Act ("CALEA"),
which currently is scheduled to become effective in October 1998, requires
carriers to retool their telecommunications networks to assist law enforcement
agencies to intercept communications.  Manufacturers of telecommunications
network equipment are obligated to cooperate by making available, at reasonable
prices on a reasonably timely basis, features and modifications necessary for
carriers to comply.  Enforcement orders may be entered against carriers and
manufacturers who fail to comply.  At this time the exact technical
requirements that the federal government will expect equipment manufacturers to
meet, the cost of complying with those requirements, and whether sufficient
money will be





                                    Page 10
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appropriated to reimburse carriers for the full costs of compliance has not
been fully determined.


MARKETING

         The Company sells products and services on a domestic and
international basis to both the public and private network markets through
various sales and distribution channels.  The Company's internal sales group is
a direct sales force, divided into market business segments.  The Company also
sells through third-party distributors such as original equipment manufacturers
("OEMs"), sales representatives and certain distributors in foreign countries.


INTERNATIONAL OPERATIONS AND MAJOR CUSTOMERS

         The information required for this section is set forth in the
"International Operations and Major Customers" footnote on page 42 of the
Company's 1997 Annual Report to Shareholders, which information is incorporated
herein by reference.  Customers who accounted for at least 10% of the Company's
consolidated revenue in 1997 were Motorola and Bell Atlantic/Nynex.


BACKLOG

         The Company's backlog, calculated as the aggregate of the sales price
of orders received from customers less revenue recognized, was approximately
$901 million and $811 million on December 31, 1997 and December 31, 1996,
respectively.  Approximately $318 million of orders included in the December
31, 1997 backlog are scheduled for delivery after December 31, 1998.  However,
all orders are subject to possible rescheduling by customers.  While the
Company believes that the orders included in the backlog are firm, some orders
may be canceled by the customer without penalty, and the Company may elect to
permit cancellation of orders without penalty where management believes that it
is in the Company's best interest to do so.


RESEARCH AND PRODUCT DEVELOPMENT

         The industry in which the Company operates is characterized by
rapidly-changing technological and market conditions which may shorten product
life cycles.  The Company's future competitive position will depend not only
upon successful production and sales of its existing products, but also upon
its ability to develop and produce, on a timely basis, new products to meet





                                    Page 11
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existing and anticipated industry demands.  The Company is currently engaged in
the development of several new products and enhancements to existing products.
During the product development process, the Company invests a substantial
amount of resources in products which often require extensive field testing and
evaluation prior to actual sales to its customers.

         The Company's research and product development costs charged to
expense were $252.1 million, $210.1 million, and $189.8 million, for the years
ended December 31, 1997, 1996, and 1995 respectively.  Additionally,
approximately $50.0 million, $37.0 million, and $26.8 million, of software
development costs were capitalized in the Consolidated Balance Sheets in 1997,
1996, and 1995, respectively. Also in 1997, the Company recorded a $135.0
million charge related to in-process research and development in connection
with the acquisition of Celcore.


COMPETITION

         The Company currently faces significant competition in its markets and
expects that the level of price and product competition will increase.  In
addition, as a result of both the trend toward global expansion by foreign and
domestic competitors and technological and public policy changes, the Company
anticipates that new and different competitors will enter its markets.  These
competitors may include entrants from the telecommunications, software and data
networking industries.  The Company believes that it enjoys a strong
competitive position due to its large installed base, its strong relationship
with key customers and its technological leadership and new product development
capabilities.  However, many of the Company's foreign and domestic competitors
have more extensive engineering, manufacturing, marketing, financial and
personnel resources than those of the Company.  The Company's ability to
compete is dependent upon several factors, including, but not limited to,
product features, innovation, quality, reliability, service, support, price and
the retention and attraction of qualified design and development personnel.
See "Products" for a discussion of competitors by product.



MANUFACTURING AND SUPPLIERS

         The Company generally uses standard parts and components for its
products, and believes that, in most cases, there are a number of alternative,
qualified vendors for most of those parts and components.  The Company
purchases certain custom components and products from single suppliers.  The
Company believes that the manufacturers of the particular custom components and
products should be able to meet expected future demands.  Recent changes in
silicon wafer and other electronic component technologies have required the
Company to evaluate the





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feasibility of "lifetime" purchases of certain component materials.  Such
"lifetime" purchases may or may not be sufficient to fulfill customer demand.
Alternatively, the Company could be required to find second sourcing of these
component materials or modify existing product designs.  Although the Company
has not experienced any material adverse effects from the inability to obtain
timely delivery of needed components, an unanticipated failure of any
significant supplier to meet the Company's requirements for an extended period,
or an interruption of the Company's ability to secure comparable components
could have an adverse effect on the Company's revenue and profitability.  In
addition, the Company's products contain a number of subsystems or components
acquired from other manufacturers on an OEM basis.  These OEM products are
often available only from a limited number of manufacturers.  In the event that
an OEM product was no longer available from a current OEM vendor, second
sourcing would be required and could delay customer deliveries which could have
an adverse effect on the Company's revenue and profitability.


PATENTS AND PROTECTION OF OTHER PROPRIETARY INFORMATION

         The Company's proprietary technology is a key component of the value
of its products.  The Company has an established program to protect its
proprietary information through patent, trademark, copyright and trade secret
procedures.  The Company currently has patents issued to it and numerous patent
applications pending in the United States and foreign countries.  There is no
guarantee that the pending applications will mature into issued patents or that
the patents issued will be held valid or will provide competitive advantage to
the Company in the respective jurisdictions if challenged or circumvented.  The
laws of some foreign countries do not extend the same level of protection for
intellectual property as do the laws of the United States.  While the Company
believes that the protection of its intellectual property by patents,
copyrights and trade secrets has value, it also believes the continued
innovative skills, technological expertise and management abilities of its
employees underlies the success of the Company.

         Because of the rapid rate of technological innovation in the
telecommunications industry, the high numbers of patents being applied for
internationally and delays in various patent offices, it is not possible to
anticipate whether each of the Company's products or any of their respective
components may be covered by a patent applied for or issued to a third party.
From time to time, the Company receives notice from third parties regarding
patent or other intellectual property claims.  If infringement is alleged, the
Company believes that, based upon industry practice,





                                    Page 13
<PAGE>   15
any necessary license or right from a third party may be obtained on terms that
would not have a material adverse effect on the Company's financial condition
or its results of operations.  Nevertheless, there can be no assurance that the
necessary licenses would be available on acceptable terms, if at all, or that
the Company would prevail in any challenge by a third party.  The inability to
obtain certain licenses or other rights or to obtain such licenses or rights on
favorable terms, or litigation arising out of such other parties' assertion,
could have a material adverse effect on the Company's business, operating
results and financial condition.

         In addition to the patent protection described above, the Company
protects its software through contractual arrangements with its customers and
through copyright protection procedures.


ENVIRONMENTAL AFFAIRS

         The Company's manufacturing operations are subject to numerous
federal, state and local laws and regulations designed to protect the
environment.  Compliance with these laws and regulations has not had, and is
not expected to have, a material effect upon the capital expenditures,
earnings, or the competitive position of the Company.


EMPLOYEES

         As of December 31, 1997, the Company had a total of 6,681 employees.





                                    Page 14
<PAGE>   16
ITEM 2.  PROPERTIES

         The Company's principal facilities are in the following locations:

<TABLE>
<CAPTION>
                           Approximate Square
                                Footage
                      ----------------------------
 Location               Owned             Leased                              Description
 ------------------------------------------------------------------------------------------------------------------
 <S>                   <C>                <C>         <C>
 Plano, Texas          1,470,000          655,000     Corporate offices;  administration; engineering, research
                                                      and development; manufacturing and assembly; customer service
                                                      and support; and warehousing.

 Copenhagen,            223,000           20,100      Administration; manufacturing  and assembly;  engineering,
 Denmark                                              research and development; and warehousing.

 Aguadilla, Puerto Rico    --             164,000     Manufacturing; assembly; and warehousing.

 Petaluma, California      --             162,000     Engineering, research and development; and assembly.

 Feltham and               --             87,000      Engineering,  research and  development;  customer  sales
 Ashford, England                                     and service; and warehousing.

 San Jose, Costa Rica      --             97,000      Manufacturing; assembly; and warehousing.

 Drogheda, Ireland         --             122,000     Manufacturing and assembly;  engineering, research and
                                                      development; and warehousing.

 Memphis, Tennessee        --             50,255      Administration; engineering, research and development; and
                                                      assembly.
</TABLE>

         In late 1997, the Company began construction on a new customer service
facility on the Plano campus. This facility, which will replace current leased
facilities, will be approximately 200,000 square feet developed on approximately
16 acres of land. The Company owns approximately 291 acres of land in Plano,
Texas and approximately 28 acres of land in Copenhagen, Denmark, of which 119
acres have been developed for existing facilities and the balance is
undeveloped.  The undeveloped land is expected to be used for future Company
expansion.  The Company also has additional leased facilities, which are
primarily sales offices, located in various cities throughout the world. The
Company believes that the above-described facilities are suitable and adequate
to meet the Company's production requirements.




                                    Page 15
<PAGE>   17
ITEM 3.  LEGAL PROCEEDINGS

         In August, 1996, the Company filed suit against Samsung Information
Systems America, Inc., Samsung Electronics Co., Ltd. and James L. Bunch and
later added additional defendants Leo Putchinski, Kevin Gallagher, Jim Olivier,
Nancy Korman, Martin Wu, David Fox, Bhushan Gupta and Michael Bray
(collectively the "Defendants").  The suit arises out of research and
development that the Company was and is doing on a next-generation switching
system.  Many of the Defendants to this suit were long-term employees of the
Company and were involved in the research and development of the Company's
next-generation switching system.  In the summer and early fall of 1996,
Samsung hired each of these individuals and placed them into similar positions
researching and developing Samsung's next-generation switching system.





                                    Page 16
<PAGE>   18
         The Company alleges claims for breach of contract, theft of trade
secrets, unfair competition and tortious interference with contract and
prospective contractual relations.  Based on these claims, the Company is
seeking damages in an amount that is not yet specified.  The Company is also
seeking an injunction against the Defendants to prevent them from using the
Company's trade secrets.  The Company obtained a Temporary Restraining Order
against Defendant Bunch on August 14, 1996.

         On December 31, 1996, the Defendants filed a counterclaim against the
Company, alleging a variety of causes of action, including a claim for
declaratory judgment, wrongful injunction, tortious interference with actual
and prospective contractual relations, misappropriation of trade secrets,
unfair competition, exclusion from telephony switch market, civil conspiracy,
fraud and negligent misrepresentation, breach of fiduciary or confidential
relationship, defamation and intentional infliction of emotional distress.
These allegations arise primarily out of the filing and prosecution of the
Company's suit against the Defendants.

         The Company believes that it has valid and substantial claims against
the Defendants and valid defenses to the Defendants' counterclaims.

         On October 8, 1996, the Company filed suit against Pulse
Communications, Inc. ("Pulsecom") alleging contributory copyright infringement
and misappropriation of trade secrets relating to the manufacture and sale of a
POTS line card advertised as compatible with the Company's Litespan-2000
system.  The Company sought damages and an injunction barring further
infringement of the Company's intellectual property rights by Pulsecom and its
agents.  Pulsecom filed a counterclaim alleging that the Universal Voice Grade
line card manufactured by the Company for the Litespan-2000 system infringes U.
S. Patent No. 5,263,081 assigned to Pulsecom.  The Company's claims against
Pulsecom were dismissed by the trial court on June 10, 1997.  Pulsecom's claims
against the Company were dismissed August 29, 1997.  Both parties have filed
appeals.  Based on the facts known at this time, the Company believes it has a
valid defense to Pulsecom's claim and that the ultimate outcome of the dispute
will not have a material adverse effect on the Company's consolidated financial
position.

         On May 25, 1994, the Company filed suit against DGI Technologies, Inc.
("DGI"), a Texas corporation, in the United States District Court for the
Northern District of Texas, Dallas Division.  The Company alleged that DGI
misappropriated the Company's trade secrets regarding digital trunk interface
cards and microprocessor cards.  The Company sought damages for DGI's prior
actions and permanent injunctive relief.  DGI brought counterclaims for alleged
violations of federal antitrust statutes, tortious interference, industrial
espionage, misappropriation of trade secrets, trespass, conversion and unfair
competition.  DGI's antitrust counterclaims were based upon allegations that
the Company's claims constituted "sham" litigation, that the Company's
statements to customers about the impact of their use of DGI products on the
Company's warranties were unlawful attempts to exclude competition, and that
the Company had unlawfully tied the sale of its microprocessors to the sale of
other products.  The balance of DGI's counterclaim was based upon certain
investigative procedures employed by the Company in connection with this
controversy.  DGI asked the court to award unspecified actual damages, treble
damages under antitrust statutes, punitive damages, injunctive relief and
attorneys' fees, and sought declaratory relief that DGI's sales of
microprocessors did not violate any proprietary rights of the Company or any
applicable law.

         The case was tried in January 1997 and the jury returned a verdict.
The Court entered a final judgment on November 18, 1997.  The judgment enjoined
DGI from selling its microprocessor cards and included a net monetary judgment
of $300,000 in the Company's favor. Both parties have filed appeals to the
Fifth Circuit Court of Appeals.

         On December 22, 1997, Catherine Millet, the Company's former Vice
President of advanced planning in the Access Products Division and her new
employer, Advanced Fibre Communications ("AFC"), sued the Company in Roseville,
California State Court for declaratory judgment against the Company.  Millet is
attempting to keep the Company from enforcing rights in its trade secrets and
intellectual property which Millet will inevitably be




                                    Page 17
<PAGE>   19
required to use in her new position with AFC.  Ms. Millet is performing the
identical job function in advanced product planning that she performed for the
Company in regard to the same line of products.  The Company had previously
sued AFC for theft of trade secrets in U. S. District Court.  That case was
resolved at trial.

         The Company plans to vigorously defend its trade secrets and
intellectual property in this matter.  In a related action, the Company has
brought an action for patent infringement against AFC in Federal Court in
Texarkana, Texas.

         The Company is also party to other routine legal proceedings
incidental to its business.

         The Company does not believe the ultimate resolution of these matters
will have a material adverse effect on its consolidated financial position.


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

         No matters were submitted to a vote of security holders during the
fourth quarter of 1997.


EXECUTIVE OFFICERS OF THE REGISTRANT

         Executive officers are elected annually and serve at the pleasure of
the Board of Directors.  No family relationships exist among the executive
officers of the Company.  As of March 3, 1998, the executive officers of the
Company are as follows:





                                    Page 18
<PAGE>   20
<TABLE>
<CAPTION>
    NAME                   AGE     PRESENT POSITION(S) WITH COMPANY
    ----                   ---     --------------------------------
<S>                        <C>    <C>
Allen R. Adams             48     Senior Vice President
Wylie D. Basham            59     Senior Vice President
James L. Donald            66     Chairman of the Board, President,
                                  and Chief Executive Officer
Gerald F. Montry           59     Senior Vice President, Chief
                                  Financial Officer, and Director
Michael J. Pisterzi        38     Vice President
</TABLE>

         Allen R. Adams joined the Company in 1979, as Director of Hardware and
Systems Development.  Since 1979, Mr.  Adams has held a variety of project and
design engineering positions.  In May 1996 he was appointed Senior Vice
President, Corporate Strategic Planning and Business Development.

         Wylie D. Basham joined the Company in February 1983 as Vice President,
Quality and Reliability Assurance.  In March 1993, he was appointed Vice
President, Subassembly Operations, and in June of that year given the added
responsibility for the Access Product Division.  In August 1996, Mr. Basham was
named Group Vice President, Switch Systems, with responsibility for the
Company's switch and intelligent networking activity.  In August 1997,
Mr. Basham was named Senior Vice President, Product Group Operations.

         James L. Donald became President and a Director of the Company in
March 1981.  He was elected Chief Executive Officer in August 1981.  Mr. Donald
was elected Chairman of the Company's Board of Directors in 1989.

         Gerald F. Montry joined the Company in 1986 as Senior Vice President
and Chief Financial Officer.  In 1989, Mr.  Montry was elected to the Company's
Board of Directors.

         Michael J. Pisterzi joined the Company in 1993 as Director, Access
Sales, for the Central U.S. Region. In October 1994, he was appointed Regional
Vice President, Central U.S. Region. In September 1995, Mr. Pisterzi was
appointed to lead the sales effort to the Bell Operating Companies as Vice
President, Telco Sales. He now serves as Vice President, North American Sales
and Global Customer Services.


                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

         The Company's common stock prices are listed daily in The Wall Street
Journal and other publications under the Nasdaq National Market of the
over-the-counter listing with the abbreviation "DSC Commun" or "DSC".  The
stock is traded in the Nasdaq National Market with the ticker symbol "DIGI".





                                    Page 19
<PAGE>   21
         The following were the high and low closing prices of the Company's
stock per the Nasdaq National Market:

<TABLE>
<CAPTION>
1997:                                           High             Low
----                                            ----             ---
<S>                                           <C>              <C>
4th Quarter                                   $30 11/16        $20 23/32
3rd Quarter                                    32 1/8           21 11/16
2nd Quarter                                    26 7/16          18 5/8
1st Quarter                                    24 1/4           18
</TABLE>

<TABLE>
<CAPTION>
1996:                                          High              Low
----                                           ----              ---
<S>                                           <C>              <C>
4th Quarter                                   $23 1/8          $12 7/8
3rd Quarter                                    32 3/4           25 1/8
2nd Quarter                                    35 1/4           24 3/8
1st Quarter                                    37 1/8           22 7/8
</TABLE>

         The Company has not paid or declared any cash dividends on the common
stock since its organization.  The closing price of the Company's common stock
on March 3, 1998, was $19 1/16 per share.  As of December 31, 1997, there were
4,694 shareholders of record of the Company's common stock.


ITEM 6.  SELECTED FINANCIAL DATA

         The information required by this item is set forth on page 19 of the
Company's 1997 Annual Report to Shareholders, which information is incorporated
herein by reference.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The information required by this item is set forth in the text on
pages 20 through 25 of the Company's 1997 Annual Report to Shareholders, which
information is incorporated herein by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this item is set forth on pages 26 through
44 of the Company's 1997 Annual Report to Shareholders, which information is
incorporated herein by reference.





                                    Page 20
<PAGE>   22
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       The information required by this item with respect to the directors and
nominees for election to the Board of Directors of the Company is incorporated
by reference from the information set forth on page 1 of the definitive proxy
statement of the Company, filed in connection with its 1998 Annual Meeting of
Stockholders on page 1 under the heading "ELECTION OF DIRECTORS", and on page
12 of such definitive proxy material under the heading "DIRECTORS CONTINUING IN
OFFICE".  The information regarding executive officers of the Company is
contained in Part I of this Annual Report on Form 10-K.  The information
required by this item regarding compliance with Section 16(a) of the Exchange
Act is incorporated by reference from the information set forth under the
heading "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" on page 15 of
the definitive proxy statement of the Company, filed in connection with its
1998 Annual Meeting of Stockholders.


ITEM 11. EXECUTIVE COMPENSATION

         The information required by this item is incorporated by reference
from the information set forth under the headings "EXECUTIVE COMPENSATION" on
pages 3 through 12, and "Compensation of Directors" on page 13 of the
definitive proxy statement of the Company, filed in connection with its 1998
Annual Meeting of Stockholders.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is incorporated by reference
from the information set forth under the heading "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" on page 14 of the definitive proxy statement
of the Company, filed in connection with the 1998 Annual Meeting of
Stockholders.





                                    Page 21
<PAGE>   23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated by reference
from the information set forth under the heading "Compensation of Directors"
on page 13 of the definitive proxy statement of the Company, filed in
connection with the 1998 Annual Meeting of Stockholders.


                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

(a)    The following is a list of the consolidated financial statements and the
       financial statement schedule which are included in this Form 10-K or
       which are incorporated herein by reference.

                 1.       Financial Statements:

                          As of December 31, 1997 and 1996:  Consolidated
                          Balance Sheets

                          For the Years Ended December 31, 1997, 1996, and 1995:
                          -  Consolidated Statements of Operations
                          -  Consolidated Statements of Cash Flows
                          -  Consolidated Statements of Changes in
                             Shareholders' Equity

                          Notes to Consolidated Financial Statements

                          Report of Independent Auditors

                 2.       Financial Statement Schedule:

                          For the Years Ended December 31, 1997, 1996, and 1995:
                          -   Schedule II - Valuation and Qualifying Accounts

All other financial statements and financial statement schedules have been
omitted because they are not applicable, or the required information is
included in the consolidated financial statements or notes thereto.





                                    Page 22
<PAGE>   24
         3.      Exhibits:

                 3.1        Restated Certificate of Incorporation of DSC
                            Communications Corporation dated October
                            27, 1997 (16)

                 3.2        Amended and Restated By-laws of the Company (13)

                 4.1        Rights Agreement, Dated as of April 25, 1996,
                            Between the Company and KeyCorp Shareholder
                            Services, Inc. as Rights Agent (10)

                 4.2        Form of Letter to the Company's Stockholders, Dated
                            May 28, 1996, Relating to the Adoption of
                            the Rights Agreement Described in Exhibit 4.1 (10)

                 4.3        Indenture, Dated August 12, 1997, between DSC
                            Communications Corporation and the Bank of New
                            York, as Trustee (14)

                 10.1       Employment Agreement Between the Company and James
                            L. Donald, Dated January 1, 1990 (3)

                 10.2       Executive Income Continuation Plan, Dated January
                            1, 1990, Between the Company and James L. Donald (3)

                 10.3       Insurance Ownership Agreement, Dated January 1,
                            1990, Between the Company and James L. Donald (3)

                 10.4       The Company's Amended and Restated 1984 Employee
                            Stock Option Plan (2)





                                    Page 23
<PAGE>   25
                 10.5       The Company's Amended and Restated 1988 Employee
                            Stock Option Plan (2)

                 10.6       The Company's 1993 Employee Stock Option and
                            Securities Award Plan (4)

                 10.7       The Company's 1993 Non-Employee Directors Stock
                            Option Plan (4)

                 10.8       The Company's 1997 Non-Employee Directors Stock
                            Option and Restricted Stock Plan (15)

                 10.9       The Company's Restoration Plan, Dated July 1, 1988
                            (1)

                 10.10      Form of Indemnification Agreement Between the
                            Company and its Directors and Senior
                            Officers as Approved by the Board of
                            Directors and Entered Into on or After
                            January 22, 1990, and the Related Trust
                            Agreement, Dated March 1, 1990, Between
                            the Company and Texas Commerce Bank, N.A., as
                            Trustee (2)

                 10.11      The 1990 Optilink Stock Option and Cash Payment
                            Plan, Dated May 15, 1990 (3)

                 10.12      The Company's 1994 Long-Term Incentive Compensation
                            Plan, Effective as of January 1, 1994 (5)

                 10.13      DSC Communications Corporation Executive Deferred
                            Income Plan (6)

                 10.14      Note Purchase Agreement Between the Company and
                            Certain Financial Institutions, dated
                            April 15, 1995 (7)






                                    Page 24
<PAGE>   26
                 10.15      Multicurrency Credit Agreement, Dated as of May 8,
                            1996, Among the Company and Certain of
                            its Subsidiaries and Certain Lenders
                            Providing for Unsecured Revolving Credit (9)

                 10.16      Promissory Note for 250 Million Danish Kroner dated
                            July 23, 1996 to Den Danske Bank (11)

                 10.17      Line Letter for 250 Million Danish Kroner dated
                            July 23, 1996 issued by Den Danske Bank (11)

                 10.18      Promissory Note for 300 Million Danish Kroner dated
                            July 23, 1996 to Den Danske Bank (11)

                 10.19      Line Letter for 300 Million Danish Kroner dated
                            July 23, 1996 issued by Den Danske Bank (11)

                 10.20      Guaranty dated July 23, 1996 (11)

                 10.21      Subordination Agreement dated July 23, 1996 (11)

                 10.22      First Amendment (Effective September 27, 1996) to
                            the 250 Million Danish Kroner and the 300
                            Million Danish Kroner Promissory Notes to
                            Den Danske Bank, Guaranty and
                            Subordination Agreement dated July 23, 1996 (12)

                 10.23      First Amendment (Effective September 27, 1996) to
                            Multicurrency Credit Agreement Dated May
                            8, 1996 (12)

                 10.24      Form of Amended and Restated Severance Compensation
                            Agreement Between the Company and Certain of its
                            Officers and schedule thereto (18)

                 10.25      The Company's Annual Incentive Bonus Plan, Dated
                            January 1, 1996 (8)

                 10.26      The Company's Supplemental Executive Retirement
                            Plan, Dated July 1, 1997 (18)

                 10.27      Amended and Restated Agreement and Plan of Merger
                            among the Company, CI Acquisition Company and
                            Celcore, Inc., Dated October 29, 1997 (17)


                                    Page 25
<PAGE>   27
                 13.1       1997 Annual Report to Shareholders (for EDGAR
                            filing purposes only)

                 21.1       Subsidiaries of the Registrant (18)

                 23.1       Consent of Ernst & Young LLP (18)

                 27.1       Financial Data Schedule (for EDGAR filing purposes
                            only)


MANAGEMENT CONTRACTS OR COMPENSATORY PLANS AND ARRANGEMENTS

         The following above-described exhibits are management contracts or
compensatory plans and arrangements:  10.1 Employment Agreement Between the
Company and James L. Donald, Dated January 1, 1990; 10.2 Executive Income
Continuation Plan, Dated January 1, 1990, Between the Company and James L.
Donald; 10.3 Insurance Ownership Agreement, Dated January 1, 1990, Between the
Company and James L. Donald; 10.4 The Company's Amended and Restated 1984
Employee Stock Option Plan; 10.5 The Company's Amended and Restated 1988
Employee Stock Option Plan; 10.6 The Company's 1993 Employee Stock Option and
Securities Award Plan; 10.7 The Company's 1993 Non-Employee Directors Stock
Option Plan; 10.8 The Company's 1997 Non-Employee Directors Stock Option Plan;
10.9 The Company's Restoration Plan, Dated July 1, 1988; 10.10 Form of
Indemnification Agreement Between the Company and its Directors and Senior
Officers as Approved by the Board of Directors and Entered Into on or After
January 22, 1990, and the Related Trust Agreement, Dated March 1, 1990, Between
the Company and Texas Commerce Bank, N.A., as Trustee; 10.12 The Company's 1994
Long-Term Incentive Compensation Plan, Effective as of January 1, 1994; 10.13
DSC Communications Corporation Executive Deferred Income Plan;





                                    Page 26
<PAGE>   28
10.24 Form of Amended and Restated Severance Compensation Agreement Between the
Company and Certain of its Officers and schedule thereto; 10.25 The Company's
Annual Incentive Bonus Plan, Dated January 1, 1996; 10.26 The Company's
Supplemental Executive Retirement Plan, Dated July 1, 1997.


(b)      Reports on Form 8-K:

       Form 8-K, dated November 3, 1997

         Item 5. Other Events - Press Release related to acquisition of
                                Celcore, Inc.

         Item 7. Financial Statements and Exhibits

       Form 8-K, dated November 13, 1997

         Item 5. Other Events - Press Release related to the collection of the
                                $140 million judgment from Next Level
                                Communications.

         Item 7. Financial Statements and Exhibits

       Form 8-K, dated December 19, 1997

         Item 2. Acquisition or Disposition of Assets - Amended and Restated
                 Agreement and Plan of Merger relating to the Celcore, Inc.
                 acquisition.







                                    Page 27
<PAGE>   29

       (1)       Incorporated by reference from the Company's Annual Report on
                 Form 10-K for the year ended December 31, 1988

       (2)       Incorporated by reference from the definitive proxy statement
                 of the Company, filed in connection with the 1990 Annual
                 Meeting of Stockholders

       (3)       Incorporated by reference from the Company's Annual Report on
                 Form 10-K for the year ended December 31, 1990

       (4)       Incorporated by reference from the definitive proxy statement
                 of the Company, filed in connection with the 1993 Annual
                 Meeting of Stockholders

       (5)       Incorporated by reference from the definitive proxy statement
                 of the Company, filed in connection with the 1994 Annual
                 Meeting of Stockholders

       (6)       Incorporated by reference from the Company's Annual Report on
                 Form 10-K for the year ended December 31, 1994

       (7)       Incorporated by reference from the Company's Quarterly Report
                 on Form 10-Q for the quarter ended March 31, 1995

       (8)       Incorporated by reference from the definitive proxy statement
                 of the Company, filed in connection with the 1996 Annual
                 Meeting of Stockholders


       (9)       Incorporated by reference from the Company's Quarterly Report
                 on Form 10-Q for the quarter ended March 31, 1996

       (10)      Incorporated by reference from the Company's Current Report on
                 Form 8-K, filed with the Securities and Exchange Commission on
                 May 13, 1996

       (11)      Incorporated by reference from the Company's Quarterly Report
                 on Form 10-Q for the quarter ended June 30, 1996





                                    Page 28
<PAGE>   30
       (12)      Incorporated by reference from the Company's Quarterly Report
                 on Form 10-Q for the quarter ended September 30, 1996

       (13)      Incorporated by reference from the Company's Annual Report on
                 Form 10-K for the year ended December 31, 1996

       (14)      Incorporated by reference from the Company's Current Report on
                 Form 8-K, filed with the Securities and Exchange Commission on
                 August 26, 1997

       (15)      Incorporated by reference from the Company's Registration
                 Statement on Form S-8, File No. 333-39469, filed with the
                 Securities and Exchange Commission on November 4, 1997

       (16)      Incorporated by reference from the Company's Registration
                 Statement on Form S-4, File No. 333-39591, filed with the
                 Securities and Exchange Commission on November 5, 1997

       (17)      Incorporated by reference from the Company's Current Report on
                 Form 8-K, filed with the Securities and Exchange Commission on
                 December 19, 1997

       (18)      Filed herewith



                                    Page 29
<PAGE>   31
         "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995.  Except for the historical information contained herein, the
matters discussed or incorporated by reference in this Annual Report on Form
10-K herein, including the matters relating to future performance, are
forward-looking statements that are dependent upon a number of risks and
uncertainties that could cause actual results to differ materially from those
in the forward looking statements. These risks and uncertainties include, but
are not limited to, economic conditions, product demand and industry capacity,
competitive products and pricing, manufacturing efficiencies, research and new
product development, protection of intellectual property, patents and
technology, ability to attract and retain highly qualified personnel, quarterly
earnings fluctuations from factors such as a shift in the mix of products
delivered including the amount of software content and the impact of sales
price changes, availability of components and critical manufacturing equipment,
facility construction and startups, the regulatory and trade environment, the
timing and ultimate receipt of orders from certain customers which continue to
constitute a large portion of the Company's revenue, the successful integration
of strategic acquisitions, effects of consolidation among the Company's
customer base, the success of underlying technologies in which the Company has
chosen to target its products, the successful completion of certain multi-year
projects which include requirements to develop new technologies including
hardware, software and installation of infrastructure systems, effects of
customer purchasing budgets, which have historically resulted in weaker demand
for the Company's products in the first half of the year, and other risks
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.





                                    Page 30
<PAGE>   32
                                   SIGNATURES

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

                                             DSC COMMUNICATIONS CORPORATION
                                                       (Registrant)

   March 31, 1998                                  /s/ JAMES L. DONALD
                                             --------------------------------
                                             James L. Donald, Chairman of the
                                             Board, President, Chief Executive
                                             Officer, and Director
<PAGE>   33
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature and Title                      Date
-------------------                      ----

<S>                                      <C>

/s/ James L. Donald                      March 31, 1998
---------------------------
James L. Donald, Chairman
of the Board, President, Chief
Executive Officer, and Director
(Principal Executive Officer)

/s/ Raymond J. Dempsey                   March 31, 1998
---------------------------
Raymond J. Dempsey
Director

/s/ Sir John Fairclough                  March 31, 1998
---------------------------
Sir John Fairclough
Director

/s/ James L. Fischer                     March 31, 1998
---------------------------
James L. Fischer
Director

/s/ Robert S. Folsom                     March 31, 1998
---------------------------
Robert S. Folsom
Director

/s/ William O. Hunt                      March 31, 1998
---------------------------
William O. Hunt
Director

/s/ Gerald F. Montry                     March 31, 1998
---------------------------
Gerald F. Montry, Senior Vice
President, Chief Financial
Officer, and Director
(Principal Financial Officer)

</TABLE>
<PAGE>   34

<TABLE>
<CAPTION>
Signature and Title                           Date
-------------------                           ----
<S>                                           <C>
/s/ KENNETH R. VINES                          March 31, 1998
------------------------------
Kenneth R. Vines
Vice President, Finance
(Principal Accounting Officer)
</TABLE>
<PAGE>   35
                DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
                                   SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                        ALLOWANCE FOR DOUBTFUL ACCOUNTS
                        -------------------------------
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                            Additions
                                                    --------------------------
                                    Balance at                        Charged          Deductions        Balance at
                                    Beginning       Charged to        to Other            from             End of
       Receivables                  of Period         Income          Accounts           Reserves          Period
       -----------                  ----------      ----------       ----------        -----------       ----------
<S>                                 <C>             <C>              <C>               <C>               <C>
Year Ended December 31, 1997         $ 7,062         $ 7,626         $ 1,770(1)         $ 2,491(2)         $13,967
Year Ended December 31, 1996           6,904           1,381             660(1)           1,883(2)           7,062
Year Ended December 31, 1995           4,012           1,233           4,077(1)           2,418(2)           6,904
</TABLE>


(1)   The 1995 amount includes amounts related to the acquisition of DSC
      Communications A/S. The 1997 amount includes amounts related to the
      acquisition of Celcore Inc. Additionally, the 1996 and 1997 amounts
      include transfers from "Accrued Liabilities", to "Allowance for Doubtful
      Accounts".

(2)   Includes accounts written off, net of collections.
<PAGE>   36
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit             Description
-------             -----------
<S>                 <C>
10.24               Form of Amended and Restated Severance Compensation
                    Agreement between the Company and Certain of its Officers
                    and schedule thereto

10.26               The Company's Supplemental Executive Retirement Plan, Dated
                    July 1, 1997

13.1                1997 Annual Report to Shareholders

21.1                Subsidiaries of the Registrant

23.1                Consent of Ernst & Young LLP

27.1                Financial Data Schedule
</TABLE>