<PAGE>
 
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C.  20549

                                  F O R M 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 1-9554


                      TCI PACIFIC COMMUNICATIONS, INC.
                      --------------------------------
             (Exact name of Registrant as specified in its charter)


<TABLE>

<S>                                                              <C>
              State of Delaware                                                 04-2980402
----------------------------------------------------              -------------------------------------
         (State or other jurisdiction of                           (I.R.S. Employer Identification No.)
          incorporation or organization)
 
               5619 DTC Parkway
              Englewood, Colorado                                                  80111
----------------------------------------------------              -------------------------------------
(Address of principal executive offices)                                         (Zip Code)
</TABLE>


       Registrant's telephone number, including area code: (303) 267-5500

          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 and (2) has been subject to such
filing requirements for the past 90 days.     Yes           No   X
                                                   ------      ------


          All of the Registrant's common stock is owned by TCI Communications,
Inc.  The number of shares outstanding of the Registrant's common stock as of
April 30, 1998 was:

                       Class B Common Stock - 100 shares.
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                          Consolidated Balance Sheets
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                  March 31,                 December 31,
                                                                                    1998                        1997
                                                                               -------------               -------------
                                                                                          amounts in thousands
<S>                                                                  <C>                      <C>
Assets
------

Cash                                                                           $       715                       2,966
 
Trade and other receivables, net                                                     8,782                      11,936
 
Prepaid expenses                                                                     4,935                       4,892
 
Property and equipment, at cost:
 Land                                                                                5,803                       5,803
 Distribution systems                                                              413,306                     397,142
 Support equipment and buildings                                                    43,422                      42,217
                                                                               -----------                  ----------
                                                                                   462,531                     445,162
 Less accumulated depreciation                                                      61,894                      50,843
                                                                               -----------                  ----------
                                                                                   400,637                     394,319
                                                                               -----------                  ----------
 
Franchise costs                                                                  3,035,012                   3,035,057
 Less accumulated amortization                                                     126,566                     107,582
                                                                               -----------                  ----------
                                                                                 2,908,446                   2,927,475
                                                                               -----------                  ----------
 
Other assets, at cost, net of amortization                                          16,246                      16,614
                                                                               -----------                  ----------
 
                                                                               $ 3,339,761                   3,358,202
                                                                               ===========                  ==========
Liabilities and Common Stockholder's Equity
-------------------------------------------
 
Accounts payable                                                               $     2,948                       3,609
 
Accrued interest                                                                     7,290                         177
 
Accrued expenses and subscriber advance payments                                    23,855                      23,762
 
Debt (note 4)                                                                      898,977                     952,348
 
Deferred income taxes                                                            1,056,245                   1,061,649
 
Other liabilities                                                                      413                         413
                                                                               -----------                  ----------
 
   Total liabilities                                                             1,989,728                   2,041,958
                                                                               -----------                  ----------
 
Exchangeable Preferred Stock (note 5)                                              629,739                     629,739
 
Common stockholder's equity:
 Class A common stock, $1 par value.  Authorized 6,257,961
  shares; no shares issued and outstanding                                              --                          --
 Class B common stock, $.01, par value.  Authorized, issued and
  outstanding 100 shares                                                                --                          --
 Additional paid-in capital                                                        297,809                     305,694
 Accumulated deficit                                                               (11,217)                     (8,104)
                                                                               -----------                  ----------
                                                                                   286,592                     297,590
 Due to TCI Communications, Inc. ("TCIC") (note 6)                                 433,702                     388,915
                                                                               -----------                  ----------
 
   Total common stockholder's equity                                               720,294                     686,505
                                                                               -----------                  ----------
 
Commitments and contingencies (note 7)
                                                                               $ 3,339,761                   3,358,202
                                                                               ===========                  ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      I-1
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                     Consolidated Statements of Operations
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                             Three months ended
                                                                                 March 31,
                                                               ----------------------------------------------
                                                                         1998                    1997
                                                               ----------------------   ---------------------
                                                                           amounts in thousands
<S>                                                            <C>                      <C> 
Revenue                                                               $ 128,303                 124,952          
                                                                                                                 
Operating costs and expenses:                                                                                    
 Operating:                                                                                                      
   Programming (primarily from related parties - note 6)                 35,564                  32,806          
   Other operating                                                       11,836                   9,714          
 Selling, general and administrative:                                                                            
   Related party (note 6)                                                 6,822                   7,215          
   Other                                                                 24,443                  20,199          
 Depreciation                                                            11,046                  12,322          
 Amortization                                                            19,381                  19,340          
                                                                      ---------               ---------          
                                                                        109,092                 101,596          
                                                                      ---------               ---------          
                                                                                                                 
        Operating income                                                 19,211                  23,356          
                                                                                                                 
Other income (expense):                                                                                          
 Interest expense:                                                                                               
   Related party (note 6)                                                (8,659)                 (5,771)         
   Other                                                                (15,487)                (20,778)         
 Interest income:                                                                                                
   Related party (note 6)                                                 1,374                   1,242          
   Other                                                                     --                     405          
 Other, net                                                                (331)                     --          
                                                                      ---------               ---------          
                                                                        (23,103)                (24,902)         
                                                                      ---------               ---------          
                                                                                                                 
        Loss before income taxes                                         (3,892)                 (1,546)         
                                                                                                                 
Income tax benefit                                                          779                      71          
                                                                      ---------               ---------          
        Net loss                                                         (3,113)                 (1,475)         
 
Dividend requirement on Exchangeable Preferred 
  Stock                                                                  (7,885)                 (7,635)  
                                                                      ---------               ---------
                                                                         
                                                                      
      Net loss attributable to common 
        stockholder                                                   $ (10,998)                 (9,110) 
                                                                      =========               =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      I-2
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

             Consolidated Statement of Common Stockholder's Equity
                       Three months ended March 31, 1998

                                  (unaudited)

<TABLE>
<CAPTION>
                                                                           
                                                          Common stock        Additional                       
                                                      --------------------     paid-in     Accumulated  Due to     Total    
                                                      Class A      Class B     capital       deficit     TCIC      equity
                                                      -------      -------    ----------   -----------  -------   --------
                                                                                 amounts in thousands 
<S>                                                   <C>          <C>        <C>          <C>          <C>       <C>
 
Balance at January 1, 1998                            $    --           --      305,694       (8,104)   388,915    686,505  
                                                                                                                            
 Net loss                                                  --           --           --       (3,113)        --     (3,113) 
                                                                                                                            
 Accreted dividends on Exchangeable Preferred                                                                               
  Stock                                                    --           --       (7,885)          --         --     (7,885)
                                                                                                                            
                                                                                                                            
 Change in amounts due to TCIC                             --           --           --           --     44,787     44,787   
                                                      -------      -------     --------     --------   --------   --------
Balance at March 31, 1998                             $    --           --      297,809      (11,217)   433,702    720,294
                                                      =======      =======     ========     ========   ========   ========
</TABLE>
See accompanying notes to consolidated financial statements.

                                      I-3
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                     Consolidated Statements of Cash Flows
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                              Three months ended
                                                                                  March 31,
                                                                 --------------------------------------------
                                                                         1998                   1997
                                                                 --------------------   ---------------------
                                                                            amounts in thousands
                                                                                (see note 2)
<S>                                                              <C>                    <C>
Cash flows from operating activities:
 Net loss                                                                  $  (3,113)                 (1,475)
 Adjustments to reconcile net loss to net cash provided by
  operating activities:
    Depreciation and amortization                                             30,427                  31,662
    Deferred income tax benefit                                               (5,404)                 (2,608)
    Changes in operating assets and liabilities:
      Change in receivables                                                    3,154                   4,283
      Change in prepaid expenses                                                 (43)                  2,189
      Change in accruals and payables                                          6,545                  (8,619)
                                                                           ---------                --------
 
         Net cash provided by operating 
           activities                                                         31,566                  25,432
                                                                           ---------                --------

Cash flows from investing activities:
 Capital expended for property and equipment                                 (17,330)                 (6,108)
 Other investing activities                                                      (18)                    109
 Cash paid for acquisitions                                                       --                 (35,323)
 Decrease in restricted cash                                                      --                  33,664
                                                                           ---------                --------
 
         Net cash used in investing 
           activities                                                        (17,348)                 (7,658)
                                                                           ---------                --------
 
Cash flows from financing activities:
 Repayments of debt                                                          (53,371)               (110,000)
 Change in amounts due to TCIC                                                44,787                  97,993
 Payment of preferred stock dividends                                         (7,885)                 (7,885)
 Change in cash overdraft                                                         --                   2,118
                                                                           ---------                --------
         Net cash used in financing 
           activities                                                        (16,469)                (17,774)
                                                                           ---------                --------
         Net decrease in cash                                                 (2,251)                     --
 
            Cash at beginning of period                                        2,966                      --
                                                                           ---------                --------
            Cash at end of period                                          $     715                      --
                                                                           =========                ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      I-4
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                  Notes to Consolidated Financial Statements

                                 March 31, 1998
                                  (unaudited)

(1)  Basis of Presentation
     ---------------------

     The accompanying consolidated financial statements include the accounts of
     TCI Pacific Communications, Inc. ("Pacific" or the "Company") and those of
     all investments of more than 50% in subsidiaries in which the Company has
     significant control. All significant intercompany accounts and transactions
     have been eliminated in consolidation. TCIC owns 100% of the common stock
     of Pacific, and Tele-Communications, Inc. ("TCI") owns 100% of the common
     stock of TCIC.

     Pacific, through its subsidiaries and affiliates, is principally engaged in
     the construction, acquisition, ownership and operation of cable television
     systems. At March 31, 1998, Pacific operates its cable television systems
     primarily in the following six geographic markets: the San Francisco and
     Northern California area; Salem, Oregon; the Seattle, Washington and
     Greater Puget Sound area; Houston, Texas; Boulder County, Colorado; and
     Dayton, Ohio.

     Tele-Communications, Inc. common stock, par value $1.00 per share, is
     comprised of six series: Tele-Communications, Inc. Series A TCI Group
     Common Stock ("TCI Group Series A Stock") and Tele-Communications, Inc.
     Series B TCI Group Common Stock (collectively, "TCI Group Stock"), Tele-
     Communications, Inc. Series A Liberty Media Group Common Stock and Tele-
     Communications, Inc. Series B Liberty Media Group Common Stock
     (collectively, "Liberty Group Stock"), Tele-Communications, Inc. Series A
     TCI Ventures Group Common Stock and Tele-Communications, Inc. Series B TCI
     Ventures Group Common Stock (collectively, "TCI Ventures Group Stock").

     The Liberty Group Stock is intended to reflect the separate performance of
     the "Liberty Media Group," which is comprised of TCI's assets which produce
     and distribute programming services. The TCI Ventures Group Stock is
     intended to reflect the separate performance of the "TCI Ventures Group,"
     which is comprised of TCI's principal international assets and businesses
     and substantially all of TCI's non-cable and non-programming assets. The
     TCI Group Stock is intended to reflect the separate performance of TCI and
     its subsidiaries and assets not attributed to Liberty Media Group or TCI
     Ventures Group. Such subsidiaries and assets are referred to as "TCI Group"
     and are comprised primarily of TCI's domestic cable and communications
     business. Pacific is attributed to the TCI Group.

     The accompanying interim financial statements are unaudited but, in the
     opinion of management, reflect all adjustments (consisting of normal
     recurring accruals) necessary for a fair presentation of the results for
     such periods. The results of operations for any interim period are not
     necessarily indicative of results for the full year. These financial
     statements should be read in conjunction with Pacific's combined financial
     statements and notes thereto contained in Pacific's Annual Report on Form
     10-K for the year ended December 31, 1997.

                                                                     (continued)

                                      I-5
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)
        
                  Notes to Consolidated Financial Statements

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities at
     the date of the financial statements and the reported amounts of revenue
     and expenses during the reporting period. Actual results could differ from
     those estimates.

     Certain amounts have been reclassified for comparability with the 1998
     presentation.

(2)  Supplemental Disclosure to Statements of Cash Flows
     ---------------------------------------------------

     Cash paid for interest was $17,033,000 and $24,469,000 for the three months
     ended March 31, 1998 and 1997, respectively.  Also during these periods,
     cash paid for income taxes was not material.

(3)  Acquisition
     -----------

     In January 1997, Pacific used restricted cash obtained in a 1996 exchange
     of cable television systems with a related party (the "Exchange Cash") to
     purchase a cable system serving approximately 20,000 subscribers in and
     around Boulder County, Colorado (the "Boulder Acquisition").

(4)  Debt
     ----

     At March 31, 1998, Pacific's $1.4 billion credit agreement (the "Credit
     Agreement") consisted of a $350 million term loan (the "Term Loan") which
     is due December 31, 2004 and a $1.05 billion revolving commitment loan (the
     "Revolving Loan") which provides for semi-annual escalating commitment
     reductions from June 30, 1998 through September 30, 2004.  The Term Loan
     and the Revolving Loan provide for quarterly interest payments at variable
     rates (6.8% and 6.4% respectively, at March 31, 1998) based upon the
     Company's debt to cash flow ratio (as defined in the Credit Agreement).
     The Credit Agreement contains restrictive covenants which require, among
     other things, the maintenance of specified cash flow and financial ratios
     and include certain limitations of indebtedness, investments, guarantees,
     dispositions, stock repurchases and dividend payments.  In addition, the
     Revolving Loan requires a commitment fee ranging from 1/4% to 3/8% per
     annum to be paid quarterly on the average unborrowed portion of the total
     amount available for borrowing.  At March 31, 1998, the unborrowed portion
     of the Revolving Loan was $503 million.

                                                                     (continued)

                                      I-6
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                  Notes to Consolidated Financial Statements


     Based on current rates available for debt of the same maturity, the Company
     believes that the fair value of Pacific's debt is approximately equal to
     its carrying value at March 31, 1998.

     In accordance with the terms of the Credit Agreement, Pacific has entered
     into an interest rate exchange agreement (the "Interest Rate Swap") with
     TCIC pursuant to which Pacific will pay a fixed interest rate of 7.5% on a
     notional amount of $600 million.  The terms of the Interest Rate Swap
     become effective only if the one month London Interbank Offered Rate
     ("LIBOR") exceeds 6.5% for five consecutive days within the two-year
     observation period, as defined by the Interest Rate Swap (the "Trigger").
     In the event the Trigger occurs, the terms of the agreement become
     effective until August 1, 2001.  As of March 31, 1998, the terms of the
     Interest Rate Swap have not become effective.

     Additionally, in connection with the Credit Agreement, TCIC incurred
     commitment fees of approximately $13 million which have been deferred and
     are being amortized over the terms of the Credit Agreement.

(5)  Exchangeable Preferred Stock
     ----------------------------

     The Company is authorized to issue and has issued 6,257,961 shares of 5%
     Class A Senior Cumulative Exchangeable Preferred Stock (the "Exchangeable
     Preferred Stock") with a stated value of $100 per share.

     The Exchangeable Preferred Stock is exchangeable, at the option of the
     holder commencing after the fifth anniversary of the date of issuance, for
     shares of TCI Group Series A Stock at an exchange rate of 5.447 shares of
     TCI Group Series A Stock for each share of Exchangeable Preferred Stock
     exchanged.  The Exchangeable Preferred Stock is subject to redemption, at
     the option of Pacific, on or after the fifteenth day following the fifth
     anniversary of the date of issuance, initially at a redemption price of
     $102.50 per share and thereafter at prices declining ratably annually to
     $100 per share on and after the eighth anniversary of the date of issuance,
     plus accrued and unpaid dividends to the date of redemption.  The
     Exchangeable Preferred Stock is also subject to mandatory redemption on the
     tenth anniversary of the date of issuance for $100 per share plus accrued
     and unpaid dividends.  Amounts payable by the Company in satisfaction of
     its dividend, optional redemption and mandatory redemption obligations with
     respect to the Exchangeable Preferred Stock may be made in cash or, at the
     election of the Company, in shares of TCI Group Series A Stock, or in any
     combination of the foregoing.  If payments are made in shares of TCI Group
     Series A Stock, Pacific will discount the market value of such stock by 5%
     in determining the number of shares required to be issued to satisfy such
     payments.

(6)  Related Party Transactions
     --------------------------

     Pacific purchases, at TCIC's cost, certain pay television and other
     programming through a certain indirect subsidiary of TCIC.  Charges for
     such programming were $34,384,000 and $28,564,000 during the three months
     ended March 31, 1998 and 1997, respectively.

                                                                     (continued)

                                      I-7
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                  Notes to Consolidated Financial Statements


     Effective August 1, 1996, TCI began to provide certain administrative and
     other services to Pacific pursuant to a services agreement entered into
     among TCI, TCIC and Pacific (the "Services Agreement").  The Services
     Agreement provides that, for so long as TCI continues to beneficially own
     shares of Pacific's common stock representing at least a majority in voting
     power of the outstanding shares of capital stock of Pacific entitled to
     vote generally in the election of directors, TCI will continue to provide
     in the same manner, and on the same basis as is generally provided from
     time to time to other participating TCI subsidiaries, benefits and
     administrative services to Pacific's employees.  In this regard, Pacific is
     allocated that portion of TCI's compensation expense attributable to
     benefits extended to employees of Pacific.

     Pursuant to the Services Agreement, Pacific reimburses TCI for all direct
     expenses incurred by TCI in providing services and a pro rata share of all
     indirect expenses incurred by TCI in connection with the rendering of such
     general and administrative services, including a pro rata share of the
     salary and other compensation of TCI employees performing services for
     Pacific and general overhead expenses.  Charges for expenses incurred in
     connection with the Services Agreement were $6,822,000 and $7,215,000
     during the three months ended March 31, 1998 and 1997, respectively.  The
     obligations of TCI to provide services under the Services Agreement (other
     than TCI's obligation to allow Pacific's employees to participate in TCI's
     employee benefit plans) will continue in effect until terminated by any
     party to the Services Agreement at any time on not less than 60 days
     notice.

     Due to TCIC's ownership of 100% of the common stockholder's equity of
     Pacific, the amounts due to TCIC have been classified as a component of
     common stockholder's equity in the accompanying consolidated balance
     sheets.  Such amounts are due on demand and accrue interest at variable
     rates.  Pacific recorded $8,659,000 and $5,771,000 of interest expense for
     the three months ended March 31, 1998 and 1997, respectively, related to
     the intercompany amounts due to TCIC.

     In 1996, Pacific transferred (the "Transfer") its investment in TCG San
     Francisco and TCG Seattle to TCI Development Corporation, a subsidiary of
     TCI, in exchange for a $47,300,000 note receivable.  Such note bears
     interest at 10.5% per annum and is included as a reduction of the amount
     due to TCIC.  No gain or loss was recognized in connection with the
     Transfer.  During the three months ended March 31, 1998 and 1997, interest
     income related to the note receivable aggregated $1,374,000 and $1,242,000,
     respectively.

                                                                     (continued)

                                      I-8
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                  Notes to Consolidated Financial Statements


(7)  Commitments and Contingencies
     -----------------------------

     On October 5, 1992, the United States Congress enacted the Cable Television
     Consumer Protection and Competition Act of 1992 (the "1992 Cable Act").  In
     1993 and 1994, the Federal Communications Commission (the "FCC") adopted
     certain rate regulations required by the 1992 Cable Act and imposed a
     moratorium on certain rate increases.  As a result of such actions,
     Pacific's basic and tier service rates and its equipment and installation
     charges (the "Regulated Services") are subject to the jurisdiction of local
     franchising authorities and the FCC.  Basic and tier service rates are
     evaluated against competitive benchmark rates as published by the FCC, and
     equipment and installation charges are based on actual costs.  Any rates
     for Regulated Services that exceeded the benchmarks were reduced as
     required by the 1993 and 1994 rate regulations.  The rate regulations do
     not apply to the relatively few systems which are subject to "effective
     competition" or to services offered on an individual service basis, such as
     premium movie and pay-per-view services.

     Pacific believes that it has complied in all material respects with the
     provisions of the 1992 Cable Act, including its rate setting provisions.
     However, Pacific's rates for Regulated Services are subject to review by
     the FCC, if a complaint is filed by a customer, or the appropriate
     franchise authority, if such authority has been certified by the FCC to
     regulate rates.  If, as a result of the review process, a system cannot
     substantiate its rates, it could be required to retroactively reduce its
     rates to the appropriate benchmark and refund the excess portion of rates
     received.  Any refunds of the excess portion of tier service rates would be
     retroactive to the date of complaint.  Any refunds of the excess portion of
     all other Regulated Service rates would be retroactive to one year prior to
     the implementation of the rate reductions.

     Pacific has contingent liabilities related to legal proceedings and other
     matters arising in the ordinary course of business.  Although it is
     reasonably possible that Pacific may be required to make payments upon
     conclusion of such matters, an estimate of any loss or range of loss cannot
     be made.  In the opinion of management, it is expected that amounts, if
     any, which may be required to satisfy such contingencies will not have a
     material effect upon the Company's financial condition.


                                                                     (continued)

                                      I-9
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                  Notes to Consolidated Financial Statements


     During the three months ended March 31, 1998, the Company continued its
     enterprise-wide comprehensive review of its computer systems and related
     software to ensure systems properly recognize the year 2000 and continue to
     process business information. The systems being evaluated include all
     internal use software and devices and those systems and devices that manage
     the distribution of the Company's products.  The Company is utilizing both
     internal and external resources to identify, correct or reprogram, and test
     systems for year 2000 readiness.

     As of March 31, 1998, the Company had inventoried substantially all of its
     cable systems and began its assessment of the systems that will require
     remediation or replacement.  Inventoried systems include the Company's
     financial systems and related software, its business systems, data and
     voice networks, engineering systems and facilities and related software
     supporting the distribution of the Company's products and other equipment
     and systems potentially impacted by the year 2000.  Additionally, the
     Company continued to have formal communications with its principal vendors
     to determine their year 2000 readiness.

     The Company completed a preliminary assessment of its systems and related
     software that support the Company's financial applications. For those
     financial systems and software which will continue to be utilized by the
     Company beyond the year 1999, the Company has tentatively concluded that
     such systems are capable of recognizing the year 2000 and therefore will
     not require material remediation or replacement. One of the Company's
     financial applications is externally managed by a third party vendor and
     such financial application will be replaced with software provided by such
     vendor.  No assurances can be given that as the Company completes its year
     2000 assessment, additional internally managed systems will not be
     identified as requiring remediation or replacement.  The Company has
     completed an initial assessment of its business systems, including
     networks, engineering systems, facilities and related software supporting
     the distribution of the Company's products and has tentatively concluded
     that certain portions of those systems will require remediation or
     replacement.  Although no assurance can be given, management of the Company
     anticipates that such systems will be remediated or replaced prior to the
     year 2000.

     Significant third party vendors whose systems are critical to the Company's
     cable operations have been identified and/or surveyed and confirmations
     from such parties have been received indicating that they are either year
     2000 ready or have plans in place to ensure readiness.  Management of the
     Company intends to have further communication with primary vendors
     identified as having systems that are not year 2000 compliant to assess
     those vendors' plans for remediating their own year 2000 issues and
     to assess the impact on the Company if such vendors fail to remediate their
     year 2000 issues.
 
                                                                     (continued)

                                      I-10
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)

                  Notes to Consolidated Financial Statements


     The Company's assessment of the impact of the year 2000 date change should
     be complete by the end of 1998. The Company continues to evaluate the level
     of validation it will require of third party vendors to ensure their year
     2000 readiness. Management of the Company has not yet determined the cost
     associated with its year 2000 readiness efforts and the related potential
     impact on the Company's results of operations. Amounts expended to date
     have not been material, although there can be no assurance that costs
     ultimately required to be paid to ensure the Company's year 2000 readiness
     will not have an adverse effect on the Company's financial position.
     Additionally, there can be no assurance that the Company's systems or the
     systems of other companies on which the Company relies will be converted in
     time or that any such failure to convert by the Company or other companies
     will not have an adverse effect on its financial position.

                                      I-11
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)



Management's Discussion and Analysis of
---------------------------------------
 Financial Condition and Results of Operations
 ---------------------------------------------

     The following discussion and analysis should be read in conjunction with
the Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.  The following discussion focuses on material
changes in the trends, risks and uncertainties affecting the Company's results
of operations and financial condition.  Reference should also be made to the
Company's consolidated financial statements included herein.

     Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.  In particular, some of the statements contained
under this caption are forward-looking.  Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors that could
cause the actual results, performance or achievements of the Company (or
entities in which the Company has interests), or industry results, to differ
materially from future results, performance or achievements expressed or implied
by such forward-looking statements.  Such risks, uncertainties and other factors
include, among others:  general economic and business conditions and industry
trends; the regulatory and competitive environment of the industries in which
the Company, and the entities in which the Company has interests, operate;
uncertainties inherent in new business strategies, new product launches and
development plans; rapid technological changes; the acquisition, development
and/or financing of telecommunications networks and services; the development
and provision of programming for new television and telecommunications
technologies; future financial performance, including  availability, terms and
deployment of capital; the ability of vendors to deliver required equipment,
software and services; availability of qualified personnel; changes in, or
failure or inability to comply with, government regulations, including, without
limitation, regulations of the FCC, and adverse outcomes from regulatory
proceedings; changes in the nature of key strategic relationships with partners
and joint venturers; competitor responses to the Company's products and
services, and the products and services of the entities in which the Company has
interests, and the overall market acceptance of such products and services; and
other factors.  These forward-looking statements (and such risks, uncertainties
and other factors) speak only as of the date of this Report, and the Company
expressly disclaims any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein, to reflect any
change in the Company's expectations with regard thereto, or any other change in
events, conditions or circumstances on which any such statement is based.

                                                                    

                                      I-12
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)



     Year 2000
     ---------

     During the three months ended March 31, 1998, the Company continued its
enterprise-wide comprehensive review of its computer systems and related
software to ensure systems properly recognize the year 2000 and continue to
process business information. The systems being evaluated include all internal
use software and devices and those systems and devices that manage the
distribution of the Company's products.  The Company is utilizing both internal
and external resources to identify, correct or reprogram, and test systems for
year 2000 readiness.

     As of March 31, 1998, the Company had inventoried substantially all of its
cable systems and began its assessment of the systems that will require
remediation or replacement.  Inventoried systems include the Company's financial
systems and related software, its business systems, data and voice networks,
engineering systems and facilities and related software supporting the
distribution of the Company's products and other equipment and systems
potentially impacted by the year 2000. Additionally, the Company continued to
have formal communications with its principal vendors to determine their year
2000 readiness.

     The Company completed a preliminary assessment of its systems and related
software that support the Company's financial applications. For those financial
systems and software which will continue to be utilized by the Company beyond
the year 1999, the Company has tentatively concluded that such systems are
capable of recognizing the year 2000 and therefore will not require material
remediation or replacement. One of the Company's financial applications is
externally managed by a third party vendor and such financial application will
be replaced with software provided by such vendor.  No assurances can be given
that as the Company completes its year 2000 assessment, additional internally
managed systems will not be identified as requiring remediation or replacement.
The Company has completed an initial assessment of its business systems,
including networks, engineering systems, facilities and related software
supporting the distribution of the Company's products and has tentatively
concluded that certain portions of those systems will require remediation or
replacement.  Although no assurance can be given, management of the Company
anticipates that such systems will be remediated or replaced prior to the year
2000.

     Significant third party vendors whose systems are critical to the Company's
cable operations have been identified and/or surveyed and confirmations from
such parties have been received indicating that they are either year 2000 ready
or have plans in place to ensure readiness.  Management of the Company intends
to have further communication with primary vendors identified as having systems
that are not year 2000 compliant to assess those vendors' plans for remediating
their own year 2000 issues and to assess the impact on the Company if such
vendors fail to remediate their year 2000 issues.

                                                                    

                                      I-13
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)


     The Company's assessment of the impact of the year 2000 date change should
be complete by the end of 1998. The Company continues to evaluate the level of
validation it will require of third party vendors to ensure their year 2000
readiness. Management of the Company has not yet determined the cost associated
with its year 2000 readiness efforts and the related potential impact on the
Company's results of operations. Amounts expended to date have not been
material, although there can be no assurance that costs ultimately required to
be paid to ensure the Company's year 2000 readiness will not have an adverse
effect on the Company's financial position.  Additionally, there can be no
assurance that the Company's systems or the systems of other companies on which
the Company relies will be converted in time or that any such failure to convert
by the Company or other companies will not have an adverse effect on its
financial position.

     Material Changes in Results of Operations
     -----------------------------------------

     The operation of Pacific's cable television systems is regulated at the
federal, state and local levels.  The 1992 Cable Act and the Telecommunications
Act of 1996  (the "Cable Acts") established rules under which Pacific's basic
and tier service rates and its equipment and installation charges are regulated
if a complaint is filed by a customer or if the appropriate franchise authority
is certified by the FCC to regulate rates.

     During the three months ended March 31, 1998, 77% of Pacific's revenue was
derived from Regulated Services.  As noted above, any increases in rates charged
for Regulated Services are regulated by the Cable Acts.  Moreover, competitive
factors may limit Pacific's ability to increase its  service rates.

     Revenue
     -------

     Revenue increased $3,351,000 or 3% for the three months ended March 31,
1998, as compared to the corresponding prior year period. Revenue from Pacific's
customers accounted for 1% of such increase, primarily as a result of a 3%
increase in basic revenue, partially offset by a 2% decrease in premium revenue.
Advertising sales accounted for the remaining increase in revenue. Pacific
experienced a 2% increase in its average basic rate, a 1% increase in the number
of average basic customers, a 15% decrease in its average premium rate and a 1%
increase in the number of average premium subscriptions during the first quarter
of 1998, as compared to the corresponding prior year period.


     Operating Costs and Expenses
     ----------------------------

     Operating expenses increased $4,880,000 or 11% for the three months ended
March 31, 1998, as compared to the corresponding prior year period.  Programming
expenses accounted for the majority of such increase.  The Company cannot
determine whether and to what extent increases in the cost of programming will
affect its future operating costs.  However, due to TCI Group's obligations
under a 25 year affiliation agreement with Encore Media Group LLC, a subsidiary
of TCI that is a member of the Liberty Media Group, it is anticipated that the
Company's programming costs with respect to the "STARZ!" and "Encore" premium
services will increase in 1998 and future periods.  See note 6 to the
accompanying consolidated financial statements.  The remaining increase in
operating expenses is due to an increase in operating labor costs related to the
hiring of additional installers as part of the Company's efforts to increase
digital cable television customers during 1998.

                                                                    

                                      I-14
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)


     Material Changes in Results of Operations (continued):
     ------------------------------------------------------

     Selling, general and administrative expenses increased $3,851,000 or 14%
for the three months ended March 31, 1998, as compared to the corresponding
prior year period. Such increase is primarily attributable to an increase in
labor costs associated with administrative support for the Company's efforts to
increase digital cable television customers and increases in other individually
insignificant items, partially offset by a decrease in expenses incurred in
connection with the Services Agreement. See note 6 to the accompanying
consolidated financial statements for additional information regarding the
Services Agreement.

     Depreciation expense decreased $1,276,000 or 10% for the three months ended
March 31, 1998, as compared to the corresponding period of 1997.  Exclusive of
certain 1996 depreciation expense that was included in the amount reported for
the three months ended March 31, 1997, depreciation expense increased $1,564,000
or 16% during the three months ended March 31, 1998.  Such increase is primarily
attributable to capital expenditures.

     Other Income and Expenses
     -------------------------

     Interest expense decreased $2,403,000 or 9% during the three months ended
March 31, 1998, as compared to the corresponding period of 1997.  Such decrease
is primarily the result of lower average debt balances due to partial repayments
of amounts owed under the Credit Agreement.  Pacific's weighted average interest
rate on borrowings was 6.6% and 7.4% during the three months ended March 31,
1998 and 1997, respectively.

     Interest income decreased $273,000 or 17% during the three months ended
March 31, 1998, as compared to the corresponding period of 1997.  Such decrease
is the result of a lower average restricted cash balance due to the use of the
Exchange Cash in January 1997 for the Boulder Acquisition.

     Pacific is included in the consolidated federal income tax return of TCI.
Income tax expense or benefit for Pacific is based on those items in the
consolidated calculation applicable to Pacific.  The payable or receivable
arising from the intercompany income tax allocation is recorded as an increase
or decrease in amounts due to TCIC.

     Net Loss
     --------

     As a result of the above-described fluctuations in the Company's results of
operations, Pacific's net loss (before preferred stock dividend requirements) of
$3,113,000 for the three months ended March 31, 1998 changed by $1,638,000 as
compared to Pacific's net loss (before preferred stock dividend requirements) of
$1,475,000 for the three months ended March 31, 1997.

                                                                     

                                      I-15
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)


     Material Changes in Financial Condition
     ---------------------------------------

     At March 31, 1998, the unborrowed portion of the Revolving Loan was $503
million.  Although Pacific was in compliance with the restrictive covenants
contained in the Credit Agreement at said date, additional borrowings under the
Credit Agreement are subject to Pacific's continuing compliance with the
restrictive covenants after giving effect to such additional borrowings.  Such
restrictive covenants require, among other things, the maintenance of certain
earnings, specified cash flow and financial ratios (primarily the ratios of cash
flow to total debt and cash flow to debt service, as defined), and include
certain limitations on indebtedness, investments, guarantees, dispositions,
stock repurchases and/or dividend payments.  See note 4 to the accompanying
consolidated financial statements for additional information regarding the
material terms of the Credit Agreement.

     One measure of liquidity is commonly referred to as "interest coverage".
Interest coverage, which is measured by the ratio of "Operating Cash Flow"
(operating income before depreciation and amortization) ($49,638,000 and
$55,018,000 during the three months ended March 31, 1998 and 1997, respectively)
to interest expense ($24,146,000 and $26,549,000 for the three months ended
March 31, 1998 and 1997, respectively), is determined by reference to the
consolidated statements of operations.  The Company's interest coverage ratio
was 206% and 207% during the three months ended March 31, 1998 and 1997,
respectively.  Management of the Company believes that the foregoing interest
coverage ratio is adequate in light of the relative predictability of its cable
television operations and interest expense.  However, the Company's current
intent is to continue to reduce its outstanding indebtedness such that its
interest coverage ratio could be increased.  There is no assurance that the
Company will be able to achieve such objective.  In the event the Company is
unable to achieve such objective, management believes that net cash provided by
operating activities, available capacity pursuant to the Credit Agreement and
advances from TCIC, as required, will provide adequate sources of short-term and
long-term liquidity in the future.  See the Company's combined statements of
cash flows included in the accompanying consolidated financial statements.

     Operating Cash Flow is a measure of value and borrowing capacity within the
cable television industry and is not intended to be a substitute for cash flows
provided by operating activities, a measure of performance prepared in
accordance with generally accepted accounting principles, and should not be
relied upon as such.  Operating Cash Flow, as defined, does not take into
consideration substantial costs of doing business, such as interest expense, and
should not be considered in isolation to other measures of performance.

     Another measure of liquidity is net cash provided by operating activities,
as reflected in the accompanying consolidated statements of cash flows.  Net
cash provided by operating activities ($31,566,000 and $25,432,000 during the
three months ended March 31, 1998 and 1997, respectively) generally reflects net
cash from the operations of the Company available for the Company's liquidity
needs after taking into consideration the aforementioned additional substantial
costs of doing business not reflected in Operating Cash Flow.

                                                                    

                                      I-16
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                  (A Subsidiary of TCI Communications, Inc.)


     Material Changes in Financial Condition (continued):
     ----------------------------------------------------

     The amount of capital expended by the Company for property and equipment
was $17,330,000 and $6,108,000 during the three months ended March 31, 1998 and
1997 and $35,154,000 during the year ended December 31, 1997, respectively.  In
light of the Company's plans to upgrade the capacity of its cable distribution
systems, and its plans to increase the number of customers who subscribe to
digital video services, the Company anticipates that its annual capital
expenditures during the next several years will significantly exceed the amount
expended during 1997.  In this regard, the Company estimates that it will expend
approximately $150 million to $160 million over the next three years to expand
the capacity of its cable distribution systems.  The Company expects that the
actual amount of capital that will be required in connection with its plans to
increase the number of digital video service customers will be significant.
However, the Company cannot reasonably estimate such actual capital requirement
since such actual capital requirement is dependent upon the extent of any
customer increases and the average installed per-unit cost of digital set-top
devices.

     In accordance with the terms of the Credit Agreement, Pacific has entered
into the Interest Rate Swap with TCIC pursuant to which Pacific will pay a fixed
interest rate of 7.5% on a notional amount of $600 million.  The terms of the
Interest Rate Swap become effective only if the one month LIBOR rate exceeds
6.5% for five consecutive days within the two-year observation period.  In the
event the Trigger occurs, the terms of the agreement become effective until
August 1, 2001.  As of March 31, 1998, the terms of the Interest Rate Swap had
not become effective.  Further, the Company is not currently exposed to material
near-term losses in future earnings, fair values or cash flows resulting from
derivative financial instruments.

     The Company's debt ($898,977,000 at March 31, 1998) and amounts owed to
TCIC ($433,702,000 at March 31, 1998) bear interest at variable rates.
Accordingly, in an environment of rising interest rates, the Company expects
that it would experience an increase in interest expense. However any such
increase would be somewhat mitigated by the above-described Interest Rate Swap.

                                      I-17
<PAGE>
 
               TCI PACIFIC COMMUNICATIONS, INC. AND SUBSIDIARIES
                   (A Subsidiary of TCI Communications, Inc.)

                                        


PART II - OTHER INFORMATION

Item 6.            Exhibit and Reports on Form 8-K.
------             ------------------------------- 

  (a)              Exhibit -

                   (27) TCI Pacific Communications, Inc. Financial Data Schedule

  (b)              Reports on Form 8-K filed during the quarter ended March 31,
                   1998:

                   None.

<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.

 
                                    TCI PACIFIC COMMUNICATIONS, INC.
                                   
                                   
                                   
                                   
Date:     May 11, 1998               By:   /s/ Stephen M. Brett
                                           ----------------------------------
                                           Stephen M. Brett
                                           Senior Vice President
                                           and Secretary
                                     
                                     
Date:     May 11, 1998               By:   /s/ Bernard W. Schotters
                                           ----------------------------------
                                           Bernard W. Schotters
                                           Senior Vice President and
                                           Treasurer
                                           (Principal Financial Officer)
                                     
                                     
Date:     May 11, 1998               By:   /s/ Gary K. Bracken
                                           ----------------------------------
                                           Gary K. Bracken
                                           Senior Vice President
                                           (Principal Accounting Officer)