<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
 
                                   FORM 10-K
 
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<C>              <S>
   (MARK ONE)
 
        X        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      ----       THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                 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 [NO FEE REQUIRED]
                 FOR THE TRANSITION PERIOD FROM ------------ TO ------------
</TABLE>
 
                          COMMISSION FILE NO. 0-28196
                         ------------------------------
                            PAGEMART WIRELESS, INC.
               (Exact name of registrant as specified in charter)
 
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<S>                                            <C>
                   DELAWARE                                           75-2575229
       (State or other jurisdiction of                             (I.R.S. Employer
        incorporation or organization)                          Identification Number)
</TABLE>
 
                          3333 LEE PARKWAY, SUITE 100
                              DALLAS, TEXAS 75219
                    (Address of principal executive offices)
 
      (Registrant's telephone number, including area code): (214) 765-4000
                         ------------------------------
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                              TITLE OF EACH CLASS
                                ---------------
 
               Class A Common Stock, par value $0.0001 per share
                         ------------------------------
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
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 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]
 
     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Common Stock on January
31, 1998 as reported on the Nasdaq National Market System, was approximately
$76,430,161. Shares of Common Stock held by each executive officer and director
and by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status for this purpose is not necessarily a conclusive
determination for other purposes.
 
     As of January 31, 1998, 34,150,907 shares of the Registrant's Class A
Common Stock were outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
     Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders scheduled to be held on April 8, 1998 are incorporated by reference
into Part III (items 11, 12 and 13) hereof.
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<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Unless the context otherwise requires, references to "the Company" are to
PageMart Wireless, Inc. and its subsidiaries on a consolidated basis. References
to "PageMart Wireless" are to PageMart Wireless, Inc. on a non-consolidated
basis. References to "PageMart" are to PageMart, Inc., a wholly-owned subsidiary
of PageMart Wireless that was merged into PageMart Wireless on January 28, 1998.
 
FORWARD LOOKING STATEMENTS
 
     This Annual Report contains statements that constitute forward-looking
statements. The words "estimate," "project," "plan," "expect," "believe" and
similar expressions are intended to identify forward-looking statements. Readers
are cautioned that such forward-looking statements involve risks and
uncertainties, and are subject to change based on various important factors. The
factors set forth in other filings with the Securities Exchange Commission and
the following factors, among others, in some cases have affected and in the
future could affect the Company's financial performance and actual results and
could cause actual results to differ materially from those expressed in any such
forward-looking statements: economic conditions generally in the United States
and consumer confidence; the ability of the Company to manage its high
outstanding indebtedness; the impact of technological change in the
telecommunications industry; the future cost of network infrastructure and
subscriber equipment; the impact of competition and pricing of paging and
wireless services; the timely development and acceptance of new products;
changes in regulation by the Federal Communications Commission ("FCC") and
various state regulatory agencies; and the ability of the Company to fully
finance the construction and operation of the transmission network for advanced
messaging services.
 
GENERAL
 
     The Company is one of the fastest growing providers of wireless messaging
services in the United States. The Company is the sixth largest paging carrier
in the United States, based on 2,530,737 subscribers at December 31, 1997. The
Company's number of subscribers has increased at annual growth rates of 60%, 50%
and 36% in 1995, 1996, and 1997, respectively. The Company has made no
acquisitions, and all subscriber growth has been internally generated.
 
     The Company offers local, multi-city, statewide, regional and nationwide
paging and other one-way wireless services in all 50 states, covering 90% of the
population of the United States. The Company also provides paging services to
the countries that are parties to NAFTA and beyond, including Canada, Puerto
Rico, the U.S. Virgin Islands and the Bahamas. In October 1997, the Company
expanded services into Mexico through its network affiliation with Buscatel, a
subsidiary of Telefonos de Mexico ("TelMex"), Mexico's largest
telecommunications company, and into Panama and El Salvador through network
affiliation agreements with leading telecommunications companies in those
countries. In January 1998, the Company expanded services into Guatemala and
Costa Rica, and expects to expand services into Nicaragua and Honduras in the
first half of 1998.
 
RECENT EVENTS
 
     On January 28, 1998 PageMart Wireless completed the offering (the
"Offering") of its 11 1/4% Senior Subordinated Discount Notes due 2008 (the
"11 1/4% Notes"), raising approximately $249.7 million in gross proceeds.
Simultaneously with the closing of the Offering, the Company refinanced certain
of its outstanding indebtedness (the "Refinancing"), and modified its corporate
structure. The Refinancing consisted of: (i) purchasing all of the outstanding
12 1/4% Senior Discount Notes due 2003 (the "12 1/4% Notes") of PageMart ($136.5
million principal amount at maturity); (ii) amending certain terms of the
covenants and agreements in the indenture relating to the 15% Senior Discount
Exchange Notes due 2005 (the 15% Notes") of PageMart Wireless; and (iii) merging
PageMart into PageMart Wireless with PageMart Wireless as the surviving
corporation. Approximately $130.7 million of the net proceeds of the Offering of
11 1/4% Notes was
 
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used to finance the purchase of the 12 1/4% Notes. The proceeds remaining after
offering expenses and refinancing were approximately $107.8 million, which will
be used to construct the Company's narrowband personal communications services
network and for other general corporate purposes.
 
ADVANCED MESSAGING SERVICES
 
     The Company has experienced increased demand for alphanumeric and wide area
coverage services and believes that its nationwide narrowband personal
communications services ("NPCS") spectrum may present significant future growth
opportunities. NPCS spectrum will provide additional capacity, as well as the
opportunity to introduce a new generation of wireless messaging services,
including advanced alphanumeric messaging with guaranteed message delivery,
automatic confirmation of receipt of messages and subscriber response to and
origination of messages. The Company believes that initially the majority of
demand for advanced messaging services will be from corporate and business users
seeking reasonably priced, wide area communication and information services.
 
     Alphanumeric and wide area coverage services use significantly more network
resources than numeric paging. The Company believes that growth in subscribers
and increased demand for alphanumeric and wide area coverage services will
create a shortage of industry capacity on existing one-way networks. However,
NPCS networks will be designed to efficiently deliver alphanumeric messaging and
wide area coverage services at lower operating costs relative to the current
costs of delivering similar one-way alphanumeric messages at comparable network
utilization levels. Therefore, the Company expects strategies employing NPCS
networks to capture significant amounts of the projected industry growth because
of their anticipated ability to deliver greater network capacity, higher quality
and improved reliability compared to existing one-way networks.
 
     The Company believes it is well positioned to take advantage of these
factors. In the NPCS auctions conducted by the FCC, the Company acquired
licenses for a total of 100kHz of forward frequency and 50kHz of return
frequency nationwide (the "NPCS Licenses"), becoming one of four companies in
the United States with 150kHz or more of NPCS frequency nationwide. The Company
has constructed NPCS networks in two cities in order to test several advanced
messaging technologies. Based on successful test results, the Company has
decided to employ ReFLEX25(TM) protocol in its NPCS network, which is a second
generation ReFLEX(TM) technology developed by Motorola, Inc. ("Motorola") that
is compatible with the FLEX(TM) protocol employed in the Company's existing
one-way network. This will permit the Company to integrate its NPCS network with
its existing one-way network, allowing the Company to build its NPCS network
rapidly and substantially increase its network capacity in the most cost
effective manner. The Company's objective is to ultimately have its NPCS network
cover the same "footprint", or geographic coverage area, as its existing one-way
network.
 
     The Company anticipates investing approximately $100 million in 1998 (which
will be funded primarily with the proceeds from the Offering) to construct and
deploy a NPCS network, which the Company expects to enable it to market advanced
messaging services nationwide by the end of 1998. The Company believes that its
operations will then comprise a highly efficient national one-way network and a
state of the art NPCS network delivering advanced messaging services, in each
case supported by common systems and infrastructure.
 
     NPCS networks employ both radio transmission and receiving equipment
throughout the network. Subscriber units will contain a transmitter that
broadcasts its identity and other data to the network receivers. As a result,
the network knows the subscriber's approximate location and is able to broadcast
messages from a limited number of transmitters in a zone rather than from all
transmitters in the subscriber's coverage area, which results in higher network
capacity due to efficient use of spectrum. The network can also determine
whether a subscriber is within range. If a subscriber travels outside the range
of the network, the network can store the message until the subscriber returns
within range and then transmit the message, thereby guaranteeing delivery. The
subscriber unit can provide simple automatic acknowledgment of receipt of a
message and can also be used by the subscriber to send messages through the
network ranging from a menu of predetermined responses to user created messages.
 
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<PAGE>   4
 
     In contrast, a one-way network only has radio transmitters at its base
stations. One-way subscriber units have no ability to send messages to the
network. When a message is sent to a subscriber, the one-way network broadcasts
the message simultaneously over all transmitters in the subscriber's coverage
area. This results in inefficient use of spectrum and limits the capacity of the
network to provide enhanced services, such as alphanumeric messaging. Because
the subscriber unit cannot communicate with the network, there is no ability to
confirm receipt of messages or determine whether the subscriber is actually
within range of the network when the message is sent.
 
     The Company expects that NPCS subscriber units will have dimensions,
battery life and building penetration capability similar to existing one-way
alphanumeric units. Based on its successful test results, the Company believes
that the superior technology and efficient use of spectrum of its NPCS network
will enable it to offer high quality, reliable, cost-effective nationwide
alphanumeric services.
 
OPERATING STRATEGY
 
     The Company attributes the significant growth of its existing paging
business to the successful implementation of its six operating principles: (i)
diversified distribution channels, (ii) nationwide and NAFTA-wide common
frequency, (iii) efficient network architecture, (iv) spectrum-rich frequency
position, (v) centralized administration, and (vi) customer service
capabilities. The Company expects these principles to be equally important in
the development of the market for advanced messaging services.
 
     DIVERSIFIED DISTRIBUTION CHANNELS. The Company utilizes a number of
distribution channels to market its current products and services, including
retail marketing, private brand strategic alliances and national sales offices.
 
             Retail Marketing. The Company believes that it is a leading
        supplier of paging units to consumers through nationwide retail
        distribution channels. The Company has been selected as the pager
        supplier for a number of leading retail chains, including Eckerd Drug;
        Office Depot, Inc; OfficeMax, Inc.; RadioShack, a division of Tandy
        Corporation; Southland (7-Eleven); Target Stores, Inc. and Best Buy,
        Inc.
 
             Private Brand Strategic Alliances. The Company was one of the first
        paging companies to broaden its distribution reach by establishing
        strategic relationships with large communications providers. The Company
        has established strategic relationships with GTE Corporation,
        Southwestern Bell Mobile Systems, AT&T Wireless Services, WorldCom
        Network Services, Inc., Ameritech Mobile Services, Inc., EXCEL
        Communications, Inc., ALLTEL Communications, Inc. ("ALLTEL"), Bluegrass
        Cellular and First Cellular of Southern Illinois.
 
             National Sales Offices. The Company's national sales offices sell
        and lease equipment and services through four distribution channels:
        direct sales, agents, third-party resellers and local retailers. At
        December 31, 1997, the Company had a direct sales force presence
        covering approximately 80 of the top 100 Metropolitan Statistical Areas
        ("MSAs"), through 58 sales offices.
 
     The Company intends to use its existing distribution channels and sales and
marketing organizations as the basis for marketing and sales of advanced
messaging services. The Company expects that sales of advanced messaging
services will initially be dominated by business and corporate customers because
of the growing need of business customers for mobile, reasonably priced
communication and information services with wide area coverage and the higher
cost of advanced messaging subscriber units compared to one-way units. As a
result, the Company believes that its national sales offices and private brand
strategic alliance distribution channels will initially be best suited for
marketing and selling these services.
 
     Management believes that a diversified approach to distribution is
important to sustain growth as paging services more deeply penetrate the United
States population, especially the consumer market. This diversification is a key
element of the Company's strategy of expanding its subscriber base to increase
profitability and cash flow through greater utilization of its nationwide
wireless communication network.
 
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<PAGE>   5
 
     NATIONWIDE AND NAFTA-WIDE COMMON FREQUENCY. The Company has constructed its
nationwide one-way messaging network on a common frequency and its nationwide
NPCS network will also be constructed on common frequencies. Use of common
frequencies provides the Company with a number of important strategic advantages
not available to many of its competitors, which operate on multiple frequencies
across markets. The use of a common frequency across the United States enables
the Company's customers to travel throughout the United States while continuing
to use the same subscriber unit. In addition, the use of a common one-way
frequency has been expanded NAFTA-wide and beyond, into Canada, Puerto Rico, the
U.S. Virgin Islands and the Bahamas. In October 1997, the Company expanded
services into Mexico, Panama and El Salvador through network affiliation
agreements with leading telecommunications companies in those countries. In
January 1998, the Company expanded services into Guatemala and Costa Rica, and
expects to expand services into Nicaragua and Honduras in the first half of
1998. As a result, through the use of joint venture arrangements or network
affiliation agreements, the Company is able to provide multi-city coverage
customized to accommodate the customer's needs throughout North and Central
America ("coverage on demand").
 
     The common frequency also provides a competitive advantage to the Company
when marketing its services to regional and national retailers and private brand
strategic alliance partners. Because the Company's subscriber units operate on a
common nationwide frequency, they can be sold in any retail store located in the
Company's nationwide coverage area. By contrast, competitors that use multiple
frequencies across markets require retailers to maintain many more stock keeping
units to serve each local market that utilizes a different frequency.
 
     EFFICIENT NETWORK ARCHITECTURE. The Company is an industry leader in the
implementation of advanced telecommunications technologies, including pioneering
the use of direct broadcast satellite ("DBS") technology for paging. The
Company's nationwide one-way wireless transmission network is 100% controlled by
DBS technology, which gives the Company a flexible, highly reliable and
efficient network architecture. The use of DBS technology eliminates the need
for expensive terrestrial radio frequency ("RF") control links and repeater
equipment while enabling the Company to provide a wide range of coverage
options. The Company's efficient one-way network will be used as the outbound
transmission infrastructure for the NPCS network, allowing the Company to build
its NPCS network rapidly and substantially increase its network capacity in the
most cost effective manner. The Company will implement very small aperture
satellite terminal ("VSAT") equipment during construction of the NPCS network in
order to permit two-way communication using DBS technology.
 
     The Company's one-way network covers the top 300 MSAs across the United
States, or approximately 90% of the total population in the United States. The
Company's one-way network is 100% FLEX(R) enabled, allowing the use of the high
speed FLEX(R) protocol to transmit messages and maximize system capacity. The
one-way networks included in the Company's NAFTA-wide coverage are also 100%
FLEX(R) enabled.
 
     SPECTRUM-RICH FREQUENCY POSITION. The Company ranks among the top four
paging carriers in the United States in licensed nationwide frequencies. The
Company's exclusive frequency licenses include two nationwide one-way paging
frequencies and 150 kHz of nationwide NPCS frequency. The Company believes that
this frequency position has important strategic value because it enables the
Company to grow its one-way subscriber base and introduce advanced messaging and
other value-added services to its subscribers. As a result, the Company believes
its spectrum-rich frequency position enables it to attract and retain national
retail and private brand strategic alliance partners.
 
     CENTRALIZED ADMINISTRATION. The Company has centralized information
systems, inventory control and distribution, finance and marketing functions,
which can support both the Company's existing one-way network and, in the
future, its NPCS network. This centralized administration has enabled the
Company to become one of the lowest cost providers of paging and other wireless
communications services in the United States relative to the services it
provides. In addition, the administrative infrastructure is designed to support
a significantly larger customer base than that currently served by the Company,
which will allow it to realize additional operating efficiency as the Company
continues to grow.
 
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     CUSTOMER SERVICE CAPABILITIES. Management has focused on developing
industry-leading customer service capabilities which are designed to be used for
both one-way and advanced messaging services and can be expanded as the customer
base grows. At December 31, 1997, the Company employed approximately 950 highly
trained customer service personnel operating in state of the art call center
facilities. Management believes that these services are an important factor in
supporting and retaining its strategic partners, retailers and subscribers.
 
ONE-WAY MESSAGING SERVICES
 
     The Company charges subscribers a fee which covers the paging and messaging
services subscribed for and any additional services purchased by the subscriber.
The amount of the fee varies primarily based on the type of service provided and
the geographic area covered. The Company charges higher rates for service
options providing more than local coverage.
 
     The Company currently offers the following two basic types of one-way
paging and messaging services.
 
<TABLE>
<CAPTION>
               SERVICE                                        FUNCTIONS
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<S>                                     <C>
Numeric paging........................  Provides the subscriber with the telephone number of
                                        the person who is seeking to contact the subscriber.
                                        Numeric pagers can store and retrieve up to 40
                                        numeric messages, which are displayed on a liquid
                                        crystal display.
Alphanumeric paging...................  Offers the subscriber the ability to receive a text
                                        message rather than simply a numeric message.
                                        Alphanumeric pagers can store and retrieve up to 40
                                        messages of up to 80 characters each, which are
                                        displayed on a liquid crystal display.
</TABLE>
 
     NUMERIC PAGING SERVICES. Although most subscribers select local coverage,
the number of subscribers who select multi-city coverage has been increasing.
Monthly fees for regional and national paging coverage are substantially higher
than the fees charged for single local area coverage.
 
     ALPHANUMERIC PAGING SERVICES. The Company provides alphanumeric paging
services under the tradenames InfoPage(R) and InfoNowSM , and the number of
subscribers utilizing the service represented 5.4% of the Company's total
subscribers at December 31, 1997. The Company has not focused a significant
portion of its selling and marketing efforts on alphanumeric paging service,
primarily because technology has inhibited the Company's ability to deliver the
service in a cost-effective manner. With the Company's introduction of high
speed FLEX(R) protocols, the Company anticipates alphanumeric paging service
will continue to become a larger portion of its subscriber base and its selling
and marketing efforts. The ability of alphanumeric pagers to receive text
messages, in addition to numeric messages, allows the Company to charge higher
monthly fees for its InfoPage(R) and InfoNowSM services than for numeric display
paging services.
 
     ROAMING SERVICES. infoRoamSM and OmniRoamSM services allow customers the
flexibility to change their local coverage through a simple phone call. Using a
touch-tone phone, the customer needs only to enter the area code of the city to
which he or she is traveling and the local coverage is changed. Numeric and text
messages are automatically sent to the customer's "roaming" city until coverage
is moved back to the "home" city. With these services, the customer does not pay
for paging coverage that is not needed (i.e., nationwide). These services are
available due to the Company's unique network architecture. These products give
the Company's customers the ability to take local coverage with them when they
travel to major communities in the United States, Canada, Mexico, El Salvador,
Panama, U.S. Virgin Islands, Puerto Rico and the Bahamas.
 
     ADDITIONAL VALUE-ADDED SERVICES. In addition to paging services, the
Company offers subscribers a number of additional value-added services,
including voice mail services that allow subscribers to retrieve voice messages
from persons attempting to contact the subscriber. In addition, the Company
offers a numeric message retrieval service which allows a subscriber to retrieve
messages that were sent at a time when the subscriber was outside of his or her
service area. Other optional services include a nationwide toll-free
 
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800 access number for paging subscribers, a customized voice prompt that allows
subscribers to record a personal greeting, maintenance agreements and loss
protection programs. During 1997, approximately 24% of the Company's recurring
revenues are derived from these additional services.
 
     The Company also offers wireless connectivity to the Internet for message
transfer and information requests through the "PageMart Wireless Web" service
utilizing the Company's wireless communications network. These services include
electronic mail, news and other information delivered to subscriber units.
 
  COAM STRATEGY
 
     The Company's operating model for one-way wireless messaging emphasizes a
strategy of selling rather than leasing subscriber units. As of December 31,
1997, approximately 96% of the Company's subscriber units were customer owned
and maintained ("COAM"), which compares to an industry average of approximately
62% at December 31, 1996. The Company believes that by following a COAM strategy
for one-way wireless messaging it can achieve significantly better capital
efficiency than if it were to follow a lease strategy, which is reflected in its
relatively low capital employed per subscriber of $34 at December 31, 1997.
Capital employed per subscriber represents total assets, less NPCS assets, cash,
non-debt current liabilities and international investments divided by domestic
units in service. The Company believes that its COAM strategy for one-way
wireless messaging provides additional benefits, including reduced risk of
technological obsolescence and avoidance of the credit risk associated with
leasing subscriber units to end-users. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
 
  SALES AND MARKETING
 
     The Company's customers include individuals, corporations and other
organizations that desire affordable communication services offering substantial
mobility, accessibility and the ability to receive timely information. The
Company utilizes a number of distribution channels to market its products and
services, including retail marketing, private brand strategic alliances and
national sales offices. Management believes that a diversified approach to
distribution is important to sustain growth as demand for paging services more
deeply penetrates the United States population, especially the consumer market.
This diversification is a key element of the Company's strategy of expanding its
subscriber base to increase profitability and cash flow through greater
utilization of its nationwide wireless communication network. There is no single
customer to which sales are made in an amount equal to 10% or more of the
Company's consolidated revenues.
 
     RETAIL MARKETING. Since early 1993, the Company has been an industry
pioneer in developing the national retail distribution channel through sales
arrangements with regional and national retail chains that sell electronic and
business equipment or consumer goods. The Company provides equipment to a
retailer who then sells the equipment to potential users. Once the unit is
purchased, the customer can activate it and subscribe for local, multi-city,
statewide, regional or nationwide paging coverage with the Company by simply
calling the toll-free number identified on the unit. Because the Company's
pagers operate on a common nationwide frequency, they can be sold in any retail
store located in the Company's nationwide coverage area. By contrast,
competitors that use multiple frequencies across markets require retailers to
maintain many more stock keeping units to serve each local market that utilizes
a different frequency.
 
     The Company has entered into sales arrangements with a number of large
national retail chains such as Eckerd Drug; Office Depot, Inc.; OfficeMax, Inc.;
RadioShack, a division of Tandy Corporation; Southland (7-Eleven); Target
Stores, Inc. and Best Buy, Inc. Retail distribution also allows the Company to
sell pagers in markets that would not support a direct sales office but in which
it has installed the necessary equipment required for providing paging services.
The Company can thus enter new markets by capitalizing on its existing
infrastructure of transmitters with the only incremental expense being the
procurement of local access phone lines. The Company expects retail sales to
continue to be an important channel of distribution for pagers. The number of
retail store locations has increased to 12,924 stores at December 31, 1997 from
5,530 stores, 3,411 stores and 2,200 stores at December 31, 1996, 1995 and 1994,
respectively. At December 31, 1997, approximately 26% of the Company's units in
service are represented by the national retail channel.
 
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<PAGE>   8
 
     PRIVATE BRAND STRATEGIC ALLIANCES. The Company has established numerous
strategic relationships with large communications providers. These companies
utilize their brand awareness and billing and distribution efficiencies to
market private brand pagers and services using the Company's transmission
network. At December 31, 1997, approximately 33% of the Company's units in
service had been added through private brand strategic alliances, and the
Company expects this proportion to increase over the next several years.
 
     GTE Corporation ("GTE"). Since 1993, the Company and GTE have signed a
series of agreements providing for the sale and marketing through GTE of
GTE-labeled services throughout the United States. In addition, several of these
agreements provide for joint cooperation in the deployment of paging network
facilities for the provision of wireless messaging and data transmission in the
United States. Pursuant to the terms of one of the agreements, GTE purchased
approximately 250 new transmitters which have been deployed throughout the
Company's nationwide network. The Company leases, operates and maintains the
transmitters and will provide wireless services to GTE customers, as well as
customers of the Company via the Company's nationwide network. The Company's
services are sold across the United States through GTE Phone Mart Stores and
certain GTE affiliates and authorized agents.
 
     Southwestern Bell Mobile Systems ("SBMS"). In May 1995, the Company and
SBMS signed an agreement for SBMS' sale and marketing of SBMS-labeled services
in all SBMS markets.
 
     AT&T Wireless Services ("AT&T Wireless"). In November 1995, the Company and
AT&T Wireless entered into a three-year agreement for AT&T Wireless' sale and
marketing of AT&T Wireless-labeled services. AT&T has recently announced an
intention to sell its paging operations. No assurance can be given that the
Company's arrangement with AT&T Wireless will continue if such sale occurs.
 
     Ameritech Mobile Services, Inc. ("Ameritech"). In February 1996, the
Company and Ameritech signed an agreement for Ameritech's sale and marketing of
Ameritech-labeled services.
 
     EXCEL Communications, Inc. ("EXCEL"). In March 1996, the Company and EXCEL,
a long distance reseller, signed an agreement for EXCEL's sale and marketing of
EXCEL-labeled services.
 
     ALLTEL, Bluegrass Cellular and First Cellular of Southern Illinois ("First
Cellular"). In 1997, the Company signed separate agreements with each of ALLTEL,
Bluegrass Cellular and First Cellular for their sale and marketing of private
branded services. These agreements provide for each of ALLTEL, Bluegrass
Cellular and First Cellular to purchase new transmitters to be deployed in their
respective areas of operation. The Company will operate and maintain the
transmitters as part of its nationwide network and will provide wireless
services to ALLTEL, Bluegrass Cellular and First Cellular customers as well as
customers of the Company via the Company's nationwide network.
 
     WorldCom Network Services, Inc. ("WorldCom"). In November 1997, the Company
and WorldCom signed an agreement for WorldCom's sale and marketing of
WorldCom-labeled services.
 
     NATIONAL SALES OFFICES. The Company's national sales offices sell and lease
equipment and services through four distribution channels: direct sales, agents,
third-party resellers and local retailers. At December 31, 1997, approximately
41% of the Company's units had been added through the national sales offices. At
December 31, 1997, the Company had a direct sales force of approximately 500
persons covering approximately 80 of the top 100 MSAs through 58 offices.
 
     Direct Sales. The Company markets its equipment and services through its
direct sales force and related marketing activities such as telemarketing and
advertisements in radio, print media and telephone company yellow pages. Direct
sales representatives are paid in part by commission (which varies depending on
the type of service subscribed for and other factors) for each unit sold or
placed in service.
 
     Agents. The Company markets its equipment and services through agents.
Agents establish customers which are billed directly by the Company. Agents earn
a markup or margin on the initial sale and a share of future revenues for the
customers they establish.
 
                                        8
<PAGE>   9
 
     Third-Party Resellers. In addition to offering paging and messaging
services directly to end-users, the Company also offers third-party resellers
paging services in bulk quantities at wholesale monthly rates that are lower
than the Company's regular retail rates.
 
     Local Retailers. The Company markets its services under sales arrangements
with local retailers located in the MSAs where national sales offices are
present.
 
  ONE-WAY TRANSMISSION NETWORK
 
     The Company developed an innovative satellite-based transmission network
that gives the Company a flexible, highly reliable network architecture and an
efficient operating structure. The Company began using DBS technology in 1990
and was the first one-way wireless communications carrier to use DBS technology
to control all of its transmitters. With a DBS paging system, the satellite
broadcasts messages directly to each transmitter in the Company's paging system,
which then broadcasts the messages to pagers on the Company's nationwide
broadcast frequency. DBS eliminates the expensive terrestrial radio link and
repeater equipment that many paging companies have employed to control simulcast
transmissions in large metropolitan markets. In addition, the satellite system
can selectively address one or any combination of the Company's transmitters,
thereby providing a wide range of coverage options and permitting efficient use
of paging frequencies in each market.
 
     The Company's numeric and alphanumeric paging services can be accessed via
local telephone numbers or 800 numbers using a touch-tone key pad or personal
computer messaging software. Local numbers are provided by regional telephone
companies and 800 number service is provided by long distance telecommunications
services providers. The Company uses a nationwide data network to carry all
paging traffic from local telephone markets to its satellite uplink facilities
in Illinois. This network configuration allows the Company to add new lines
quickly and efficiently and provides the Company with back-up power, fire
protection and diverse routing capabilities.
 
     The Company leases satellite services pursuant to agreements with AvData
Systems, Inc. ("AvData") and SpaceCom Systems, Inc. ("SpaceCom"). The agreements
subject the Company to monthly service charges based on the amount and types of
services used and expire on July 1, 2001 and January 31, 2002 respectively. The
agreements may be terminated upon certain failures of the Company to pay monthly
service fees. The agreements do not include any renewal provisions. Management
believes that the services provided by AvData and SpaceCom are sufficient to
meet the Company's foreseeable needs and that there are alternative satellite
sources available to the Company on comparable terms and conditions. As a
result, the Company does not believe the loss of its relationship with its
current satellite suppliers would have a material adverse long-term effect on
its business and operations.
 
ADVANCED MESSAGING OPERATIONS
 
     One of the Company's principal objectives is to become a leading provider
of advanced messaging services in the United States utilizing its NPCS
technology and spectrum. Management believes that the introduction of advanced
messaging services may present significant future growth opportunities to the
Company by enabling it to offer a new generation of services presenting
sophisticated solutions for business and personal messaging needs, and by
providing it the opportunity to place more units in service because of
significantly increased network capacity.
 
     The Company expects that NPCS technology and spectrum will permit delivery
of a new generation of wireless messaging services, including acknowledgment of
receipt of messages, guaranteed delivery of messages, and subscriber response to
and origination of messages. The Company believes NPCS networks will deliver
higher network capacity, quality and reliability than existing one-way networks.
 
     Advanced messaging services will be delivered to a subscriber unit
containing a transmitter, enabling it to send signals to the network that
identifies its location and transmits other data. Advanced messaging services
use the location identification capabilities of the NPCS network to
automatically identify, without any action on the part of the subscriber, the
network zone in which to transmit the subscriber's messages. Messages can
 
                                        9
<PAGE>   10
 
be transmitted from a limited number of transmitters rather than every
transmitter in the subscriber's coverage area, permitting frequency reuse
resulting in increased system capacity and reduced operating costs. Depending on
the design of the subscriber unit, the subscriber will be able to respond to or
originate messages with varying levels of sophistication when the network is
fully developed.
 
  RESEARCH AND PLANNING
 
     After the Company acquired the NPCS Licenses in 1994 and 1995, the Company
began a technical and market research program to evaluate the opportunities for
advanced messaging services. Based on its research, the Company expects that the
initial advanced messaging services offered will be designed to capitalize on
the market trends toward alphanumeric messaging and wide area coverage. See
"-- Planned Advanced Messaging Services."
 
     The Company's technical research focused on the identification and
development of equipment and protocols that would be best suited to constructing
a network to deliver the company's planned advanced messaging services at a
reasonable capital cost. Paging networks use various "protocols" to provide
seamless communications between the components which make up a paging network.
Protocols regulate the format and flow of messages which are transmitted over
the network. Motorola has developed several protocols, including FLEX(TM),
ReFLEX25(TM), ReFLEX50(TM) and InFLEXion(TM) Voice. Of these protocols,
ReFLEX25(TM) and ReFLEX50(TM) support advanced messaging, including two-way
alphanumeric messaging, and InFLEXion(TM) Voice supports stored voice messaging.
 
     In 1996 and 1997, the Company constructed and tested two NPCS networks, one
in Dallas and one in Austin, Texas. Each network is based on the network
infrastructure equipment of a different vendor using subscriber units supplied
by Motorola. The test networks were developed not only to evaluate the
performance of the infrastructure equipment, but to evaluate factors such as
terrain topography, building penetration, population density, protocol
stability, equipment interfaces, and antennae technologies which the vendors
were unable to adequately test independently. Test results from one of these
networks indicated that an NPCS network using ReFLEX25(TM) protocols can be
integrated with the Company's existing FLEX(TM) network.
 
     As a result of its technical evaluation, the Company determined to base its
NPCS network on the ReFLEX25(TM) protocol technology. Unlike other NPCS
protocols, ReFLEX25(TM) permits cost-effective sharing of equipment with its
existing FLEX(TM) network and efficient use of the Company's spectrum to
accommodate a greater number of subscribers.
 
  NPCS NETWORK BUILDOUT
 
     Using the proceeds of the Offering, the Company expects to deploy receivers
and other equipment on a city-by-city basis. The Company expects to begin
commercial operation of local coverage in the Austin/San Antonio and Dallas-Fort
Worth areas in the second quarter of 1998. The Company plans to add other cities
to the network during 1998 until there are a sufficient number to begin
marketing nationwide coverage, which the Company expects to occur by the end of
1998. The Company plans to continue to build out its network and expand its
coverage area during 1999. There is no assurance however, that the buildout will
proceed as planned or be successfully completed. The key elements of the network
buildout are as follows:
 
          DESIGN. The design of the Company's nationwide NPCS network is based
     upon Motorola's ReFLEX25(TM) technology. Existing transmitters and
     transmitter sites will be used for the outbound portion of the network. The
     Company's engineers have tested the outbound characteristics of
     ReFLEX25(TM) and have determined that they are sufficiently similar to
     FLEX(TM) that the existing transmitter infrastructure will successfully
     deliver ReFLEX25(TM) outbound services. The inbound or receive side of the
     network requires that new infrastructure equipment (i.e., receivers) be
     added to both existing sites and to new sites. The exact number of new
     receive sites required beyond those to be located on existing sites is a
     function of the amount of available space on existing sites and the local
     RF characteristics of the particular market being built out. As part of the
     design process, the Company's engineers are identifying sites using the
     Company's database (as well as other sources), which contains specific
     information about available sites throughout the nation. Sites are chosen
     on the basis of their coverage and on frequency propagation
     characteristics, such as terrain, topography, building penetration and
     population density.
 
                                       10
<PAGE>   11
 
          EQUIPMENT. The infrastructure of the Company's network will consist of
     a home terminal, encoders, satellite access controllers ("SAC's"), radio
     transmitters and receivers, switches, RF controllers and ancillary
     equipment, such as coaxial cable and antennas.
 
          The home terminal is a key component of a network that defines and
     controls the types of services that can be provided by the network. The
     Company purchased the paging terminals for its one-way transmission network
     from an outside vendor. When the Company wanted to add or change a feature
     of its service offerings, the Company had to request the vendor to make the
     required modifications to the terminals. If the vendor agreed to make the
     modifications, the time required to implement the modifications was often
     unacceptable to the Company. Once the modifications were made, the Company
     had no proprietary interest in them so they were usually released to
     competitors. As a result, the Company is developing the home terminal that
     will be used in its NPCS network.
 
          The advanced messaging services that can be provided on the NPCS
     network are more varied and complex than services provided on the Company's
     one-way network. In addition, because the market for advanced messaging
     services is relatively immature and undeveloped, the Company cannot predict
     with certainty how the market will adopt and use the advanced messaging
     services that are potentially available for commercial development. The
     Company believes that the ability to react quickly to developing market
     demand for advanced messaging services will be a critical element in
     successfully implementing its advanced messaging services strategy. As a
     result, the Company developed its proprietary home terminal, called the
     Advanced Cross Media Information Server ("AXIS(TM)"). As of December 31,
     1997, the Company had invested approximately $6.3 million in the
     development of AXIS(TM) over a period of two years.
 
          AXIS(TM) contains an object-oriented software system that the Company
     believes will enable it to more rapidly develop new services as the market
     for them emerges, and more easily integrate wireless messaging into all
     types of information systems such as the Internet, intranets, e-mail, voice
     mail, fax in-boxes and other wireless communications systems. AXIS(TM) is
     currently being beta-tested for one-way messaging applications. The Company
     expects AXIS(TM) support for the planned local alphanumeric advanced
     messaging service to be ready for commercial release in the second quarter
     of 1998.
 
          The Company plans to purchase infrastructure equipment (other than the
     home terminal, SAC's and ancillary equipment) from industry leading
     equipment suppliers, Motorola and Glenayre Technologies, Inc. ("Glenayre").
     The Company believes that currently these are the only two qualified
     suppliers of such infrastructure equipment and subscriber units and, as a
     result, the Company is dependent on these two suppliers for much of its
     infrastructure equipment and subscriber unit needs. The Company understands
     that Motorola and Glenayre have cross-licensed the relevant protocols. The
     Company expects to purchase infrastructure equipment from Motorola under an
     existing volume purchase agreement, and from Glenayre under a recently
     signed volume purchase agreement. The Company expects to purchase
     subscriber units from Motorola under a volume purchase agreement that the
     Company expects to amend in 1998 to cover advanced messaging subscriber
     units, and from Wireless Access, a subsidiary of Glenayre, under a recently
     signed supply agreement. The Company has entered into a volume purchase
     agreement with AvData to purchase VSAT and related equipment for its NPCS
     network. The Company believes that the satellite services available under
     its agreement with AvData are sufficient for both the one-way and advanced
     messaging services networks. The Company would be adversely affected if it
     were unable to obtain the infrastructure equipment and subscriber units on
     satisfactory terms by planned delivery dates.
 
          DEVELOPMENT OF TECHNOLOGY. The ReFLEX25(TM) technology has operated
     successfully in the test network environment and the Company is prepared to
     implement this technology throughout its existing network. However, the
     Company must complete the development of its AXIS(TM) terminal and the
     integration of the terminal with Glenayre equipment before commercial
     operations can begin. In addition, the Company, Motorola and Glenayre are
     still developing and conducting testing of ReFLEX25(TM) technology,
     infrastructure equipment and subscriber units to improve operational
     efficiency. The Company does not believe that any of these issues will
     affect the ultimate ability of the network to operate
 
                                       11
<PAGE>   12
 
     in a commercially viable manner, although there can be no assurance of
     this. If any of these issues are not resolved on a timely basis, the
     Company's scheduled commercial introduction of advanced messaging services
     could be delayed, which could adversely affect the Company's results of
     operations.
 
  PLANNED ADVANCED MESSAGING SERVICES
 
     The Company's planned service offerings are expected to be delivered to a
pocket-sized subscriber unit containing a transmitter, enabling it to send a
signal to the Company's network that identifies its location and transmits other
data. Advanced messaging subscriber units are currently available from Motorola
and Wireless Access. These subscriber units make possible the following five
levels of advanced messaging service:
 
                  POTENTIAL ADVANCED MESSAGING SERVICE LEVELS
 
<TABLE>
<CAPTION>
                                                 DESCRIPTION                                BENEFIT
                                                 -----------                                -------
<S>                                 <C>                                      <C>
Guaranteed Delivery...............  Passive acknowledgment between the       Identifies location of subscriber
                                    subscriber unit and the network.         unit, guarantees message delivery and
                                                                             ensures message integrity.
Message Acknowledgment............  When the message is received and/or      Lets the sender know the message has
                                    read, an alert is triggered and sent     been received and/or read.
                                    back through the network.
Multiple-choice Response..........  Presents subscriber with a choice of     Eliminates need for a return phone
                                    responses embedded in message. Sender    call and complete the messaging loop.
                                    can create custom response on a PC,
                                    embed it in the message, and transmit
                                    it to the device.
Preprogrammed Response............  Presents subscriber with a list of       Provides a simple response method.
                                    preprogrammed messages for response.
Message Origination...............  Subscriber can create custom             Allows messages to be sent and
                                    responses or initiate messages, also     information to be requested on
                                    known as free form messaging.            demand.
</TABLE>
 
     Reported industry growth rates for alphanumeric service significantly
exceed the growth rate for traditional local numeric service. The Company's
initial advanced messaging services are designed to take advantage of these
trends. However, there can be no assurance that advanced messaging services will
be commercially viable or that the advanced messaging service levels will be
possible, and the success of advanced messaging service could be affected by
matters beyond the Company's control.
 
     The Company's advanced messaging service offerings are expected to include
the following:
 
          LOCAL ALPHANUMERIC MESSAGING. When the NPCS network is completed and
     tested in each city, the Company plans to introduce local alphanumeric
     messaging service in the city. The Company's local alphanumeric messaging
     service will enable the subscriber to receive alphanumeric messages up to
     several hundred characters in length (compared to the approximately 80
     characters in traditional one-way alphanumeric messaging) which will be
     input by either (i) a computer or other software enabled device and a modem
     that can access the Company's network directly or via the Internet or (ii)
     a dispatch operator.
 
          This service will also provide store-and-forward delivery of messages
     so that messages are delivered later if the subscriber unit cannot be
     reached by the network on the initial attempt. The service takes
 
                                       12
<PAGE>   13
 
     advantage of the positive receipt acknowledgment of the ReFLEX25(TM)
     protocol and the ability of two-way subscriber units to register and
     transmit positive acknowledgment.
 
          AUTO-ROAM ALPHANUMERIC MESSAGING. When the Company's networks are
     operating commercially in a sufficient number of cities, the Company plans
     to introduce auto-roam alphanumeric messaging service. Auto-roam
     alphanumeric messaging service allows a subscriber to receive an
     alphanumeric message anywhere within the coverage of the Company's network
     in the U.S. The service uses the location identification capabilities of
     the ReFLEX25(TM) network to automatically identify, without any action on
     the part of the subscriber, the network zone in which to transmit the
     subscriber's messages. The messages can be transmitted from a limited
     number of transmitters rather than from every transmitter in the
     subscriber's requested coverage area, as is required in the one-way
     transmission network. An auto-roam alphanumeric message service subscriber
     will have nationwide service at a lower price than can be offered on the
     Company's current one-way paging network.
 
          The Company believes that penetration of alphanumeric service on a
     regional and nationwide basis has been limited to date due to the
     reluctance of many one-way paging operators to promote the service because
     of its relatively high use of system capacity during transmission. The NPCS
     Licenses and the ReFLEX25(TM) technology should offer significant increases
     in capacity over the one-way spectrum and technology currently delivering
     alphanumeric messaging services. The Company believes that its auto-roam
     alphanumeric service will improve upon traditional service by permitting
     longer messages and guaranteed delivery. Management believes that these
     service enhancements, along with its competitive pricing, will appeal to
     subscribers of traditional alphanumeric messaging services and to
     cost-conscious customers who have not previously subscribed to such
     nationwide services. The Company expects many current one-way alphanumeric
     service subscribers to migrate to auto-roam alphanumeric service, which
     will create additional capacity for numeric service on the Company's
     one-way network, a service that can be very efficiently delivered on that
     network.
 
          MESSAGE ACKNOWLEDGMENT MESSAGING. When market demand has reached a
     commercially viable level and the technical requirements for message
     acknowledgment have been implemented in the Company's network, the Company
     plans to introduce message acknowledgment service. This service will
     provide the sender of a message confirmation that the message was delivered
     accurately to the subscriber unit. The sender can receive the
     acknowledgment through the same mechanism which was used to create the
     original message or by designating another communication path for the
     acknowledgment.
 
          RESPONSE AND TWO-WAY MESSAGING. When market demand has reached a
     commercially viable level and the technical requirements for full two-way
     messaging have been implemented in the Company's network, the Company plans
     to introduce response and two-way messaging services. Response messaging
     allows a subscriber to respond back to the sender of a message. Depending
     on the subscriber's unit, a subscriber can:
 
          - Select from a custom set of multiple choice responses sent with the
            message,
 
          - Send a response chosen from a set of predefined responses stored in
            his unit,
 
          - Create a free form text response.
 
          Multiple responses can be made to the same message. The sender is
     expected to be able to receive responses through the same mechanism which
     was used to create the original message or by designating another
     communication path for the response.
 
          Two-way messaging will allow a subscriber to originate and receive
     messages and other communications. Subscribers could be notified of the
     receipt of electronic mail, voice mail and faxes. Similarly, subscribers
     can originate messages which are delivered to a target recipient over
     several alternative communications networks.
 
          Using two-way messaging, a subscriber is expected to be able to stay
     in touch while mobile, using a portable and relatively inexpensive device
     and service. In addition to these benefits, this service will also
 
                                       13
<PAGE>   14
 
     have the traditional benefits of one-way paging: broad geographic coverage;
     good building penetration; small disposable-battery powered subscriber
     units, which allows the device to be carried continuously; long battery
     life, which allows the device to be used continuously without servicing;
     and low costs of ownership and usage.
 
          OTHER SERVICES. Over time, the Company intends to participate in the
     growth of wireless data messaging services through new and existing
     strategic alliances, wireless data alliances with software companies and
     electronic equipment manufacturers to develop additional text messaging
     services. In addition to pocket-sized pagers, the Company believes that
     wireless text and data transmissions will be received by computers,
     organizers or a personal digital assistant equipped with two-way RF modems
     or built-in RF capability. It is anticipated that a limited response by the
     device will be possible.
 
          The Company will continue to monitor voice paging opportunities and
     technologies and may introduce one-way and/or two-way stored voice
     messaging service depending on market demand for such services. If the
     Company decides to introduce stored voice service, the Company expects to
     enter into agreements to provide the ability to resell the service of other
     wireless messaging service providers rather than incur the cost of
     developing its own network for stored voice messaging.
 
  SALES AND MARKETING
 
     Consistent with its strategy of utilizing existing resources to control the
cost of its network and service expansion, the Company intends to use its
existing distribution channels and sales and marketing organizations as the
basis for marketing and sales of advanced messaging services. The Company
expects that sales of advanced messaging services will initially be dominated by
business and corporate customers because of the growing need of business
customers for mobile, reasonably priced access to communication and information
services with wide area coverage, the higher cost of advanced messaging
subscriber units compared to one-way messaging units, and the lack of sales
personnel in retail stores trained to sell the new services. As a result, the
Company believes that its national sales offices and private brand strategic
alliance distribution channels will initially be best suited for marketing and
selling these services. Because of the higher cost of advanced messaging
subscriber units compared to one-way messaging units and because the initial
demand for advanced messaging services will likely be dominated by business and
corporate customers, the Company expects to lease a substantial portion of its
advanced messaging subscriber units.
 
     The Company expects that initially the strongest market demand for advanced
messaging services will be from large, geographically dispersed corporate
accounts. In preparation for the introduction of these services in 1998, the
Company has divided the direct sales force of its national sales offices into a
unit focusing on national accounts and a unit focusing on local markets. This
enables the direct sales force personnel to personalize and specialize their
approach to their target market. The national accounts unit will emphasize sales
of advanced messaging services as a solution to business messaging needs. The
Company has embarked on a program to hire and train sales personnel for its
national accounts unit.
 
     As market demand for advanced messaging services develops, the Company
expects its private brand strategic alliance distribution channel to grow in
significance. The Company believes that a limited number of NPCS networks will
be built nationwide. The Company believes that its NPCS network will be a low
cost, high functionality network compared to the networks of its initial
competitors, which will make reselling of the Company's services attractive to
other paging companies and communications providers. These companies will resell
such services under their own brand names.
 
     As the advanced messaging services become more prevalent, the Company
expects the price of subscriber units to decrease. As this happens, the
Company's retail distribution channel is expected to gain importance.
 
INTERNATIONAL STRATEGY
 
     The Company plans to provide messaging services in selected countries on a
seamless international network. The Company expects to pursue international
opportunities through foreign related entities, interests in joint venture
arrangements, or network affiliation agreements between the Company and the
owners of
                                       14
<PAGE>   15
 
foreign networks. Network affiliation agreements provide, with minimal
incremental capital investments by the Company, interconnection between the
Company's network and the foreign network and roaming capabilities for the
Company's and the foreign owner's subscribers. In each country in which the
Company plans to offer paging and messaging services, the Company will seek the
ability to offer such services on a nationwide frequency common to at least one
of the nationwide frequencies it holds in the United States in order to allow a
single messaging device to be used in multiple countries. There can be no
assurance, however, that in each country in which the Company seeks to expand
that a frequency will be available that is common to one of the Company's U.S.
nationwide frequencies.
 
     The Company's international strategy is initially to pursue opportunities
in North America, Central America and South America. One of the Company's
related companies, PageMart Canada, obtained a nationwide license in Canada in
1995 based on a frequency common to one of its frequencies in the United States.
PageMart Canada began providing service in the largest metropolitan areas in
Canada to United States and Canadian subscribers beginning in April 1996. The
Company also provides paging coverage on the Company's nationwide frequency in
the Bahamas, Puerto Rico and the U.S. Virgin Islands through affiliation
agreements. In October 1997, the Company expanded services in Mexico, Panama and
El Salvador.
 
     The Company has entered into an exclusive ten-year network affiliation
agreement with TelMex through its wholly owned subsidiary, Buscatel. TelMex has
acquired in Mexico the same nationwide frequency the Company uses nationwide in
the United States and Canada and has installed it in all 33 markets where
Buscatel operates. Under the terms of the agreement, the Company and Buscatel
will integrate networks to enable efficient, user transparent messaging. The
companies will jointly expand coverage, concentrating initially on major cities
located along the 2,000-mile United States/Mexico border. The two companies will
also jointly market services and co-brand pagers where appropriate. With the
addition of Mexico via the TelMex agreement, PageMart offers true NAFTA-wide
coverage.
 
     PageMart has also signed network affiliation agreements with leading paging
companies in El Salvador, Nicaragua, Guatemala, Honduras, Costa Rica and Panama.
As in the case of Mexico, the same nationwide 900MHz frequency used by the
Company has been licensed by the Company's network affiliates in each country.
The extension of the companies' services, including roaming, to these areas will
allow the PageMart network to offer paging from Canada to the Panama Canal. The
Company expanded services into Guatemala and Costa Rica in January 1998, and
expects to launch services in Nicaragua, and Honduras in the first half of 1998.
 
     The common frequency allows the Company and its network affiliates in each
country to provide customized coverage that extends beyond the borders of the
serving country, using the same pager. For example, a subscriber in New York
could choose New York and Toronto or Mexico City coverage.
 
COMPETITION
 
     The Company competes primarily on the basis of the price of its equipment
and wireless services, quality of service, and its coverage capability. Its
competitors include both companies which provide paging or other mobile
communications services in local markets in which the Company operates and
regional and nationwide paging service providers. These include regional
telephone companies and both small and large paging service providers, such as
Paging Network, Inc., Metrocall, Inc., AirTouch Communications, Inc., Arch
Communications Group, Inc. and Mobile Telecommunications Technologies Corp.
Certain of these companies have substantially greater financial, technical and
other resources than the Company. In addition, a number of telecommunications
carriers (including providers of broadband PCS) have constructed or are in the
process of constructing nationwide wireless networks that will compete with the
Company's services, including the provision of advanced messaging services.
Management believes that the Company's low cost structure and service offerings
will enable it to continue to compete effectively.
 
     A number of competing technologies, including cellular telephone service,
broadband and narrowband personal communication services, specialized mobile
radio, low speed data networks and mobile satellite services, are used in, or
projected to be used for, advanced messaging services. Cellular telephone
technology provides an alternative communications system for customers who are
frequently away from fixed-wire
                                       15
<PAGE>   16
 
communications systems (i.e., ordinary telephones). Compared to cellular
telephone service, paging service is generally less expensive, offers longer
battery life, provides better in-building penetration, extends over wider
coverage areas, and is more transportable. For those cellular customers for whom
convenience and price are considerations, paging can compete successfully by
complementing their cellular usage. Management believes that paging will remain
one of the lowest-cost forms of wireless messaging due to the low cost
infrastructure associated with paging systems, as well as advances in technology
that are expected to reduce paging costs. Broadband personal communications
services technologies are currently being offered commercially in some cities,
are under development in other areas of the United States, are similar to
cellular technology and offer paging services in a single handset. This
technology will offer greater capacity for advanced messaging services and,
accordingly, is expected to result in greater competition.
 
     Technological advances in the telecommunications industry have created, and
are expected to continue to create, new services and products competitive with
the wireless services currently provided by the Company. In addition, certain
companies are developing one-way and advanced messaging services which may
compete with the one-way and advanced messaging services which the Company
expects to provide. There can be no assurance that the Company will not be
adversely affected as new competitive technologies become available and are
implemented in the future. In addition, the Company may be adversely affected if
cellular telephone companies or broadband personal communications service
providers begin to provide other wireless services or enter into partnerships
with other companies to provide wireless services that complement cellular or
broadband PCS services.
 
GOVERNMENT REGULATION
 
     Wireless messaging operations are subject to regulation by the FCC under
the Communications Act of 1934, as amended (the "Communications Act"), including
recent amendments contained in the Telecommunications Act of 1996 (the "1996
Act").
 
     The Company provides one-way messaging services directly to subscribers
over its own transmission facilities. The Company (through subsidiaries) holds
two exclusive nationwide one-way licenses, as well as exclusive licenses on
various one-way frequencies in certain metropolitan areas, including New York,
Los Angeles and Chicago. Additionally, the Company holds a 50 kHz unpaired
nationwide NPCS license (the "Nationwide Narrowband License") and five 50/50 kHz
paired regional NPCS licenses (the "Regional Narrowband Licenses"); the latter
five licenses authorize the Company to operate regional narrowband systems on
the same frequencies throughout the continental United States. The Nationwide
Narrowband License was granted on September 29, 1994, and the Regional
Narrowband Licenses were granted on January 27, 1995. The Nationwide Narrowband
License and the Regional Narrowband Licenses will be utilized in connection with
its NPCS networks.
 
     Under FCC rules governing regulation of commercial mobile radio services
("CMRS"), licensees such as the Company must provide interconnection upon
reasonable request, must not engage in any unreasonably discriminatory practices
and are subject to complaints regarding any unlawful practices. The Company is
also subject to provisions that authorize the FCC to provide remedial relief to
an aggrieved party upon finding a violation of the Communications Act and
related customer protection provisions.
 
     The Company's CMRS Licenses (the "Licenses") authorize the Company to use
the radio frequencies necessary to conduct its paging operations. The Licenses
prescribe the technical parameters, such as power output and tower height, under
which the Company is authorized to use those frequencies. The Licenses are for
varying terms of up to 10 years, at the end of which time renewal applications
must be submitted to the FCC for approval. Several of the Company's Licenses
expire in 1998 and 1999. In order to be granted the exclusive use of a
frequency, the Company is required to construct and maintain a specified minimum
number of transmission sites, depending upon the breadth of the exclusivity,
each of which is licensed by the FCC (the "Operating Licenses"). Of the
Company's approximately 1,800 Operating Licenses, approximately 320 require
renewal in 1998. The Nationwide Narrowband License will expire on September 29,
2004 unless renewed by the Company. The Regional Narrowband Licenses will expire
on January 27, 2005 unless otherwise renewed. FCC renewals are routinely granted
in most cases upon a demonstration of compliance
 
                                       16
<PAGE>   17
 
with FCC regulations and adequate service to the public. Although the Company is
unaware of the existence of any circumstances which would prevent the grant of
any pending or future renewal applications, no assurance can be given that the
Licenses will be renewed by the FCC in the future. Furthermore, although
revocation and involuntary modification of licenses are extraordinary regulatory
measures, the FCC has the authority to restrict the operation of licensed
facilities or to revoke or modify licenses. No License of the Company has ever
been revoked or modified involuntarily.
 
     The Company has complied with FCC requirements with respect to the buildout
of its existing one-way messaging network. There are separate FCC buildout
requirements with respect to the Company's NPCS Licenses. As a nationwide NPCS
licensee, the Company must construct base stations that provide coverage to a
composite area of 750,000 square kilometers or serve 37.5% of the United States
population within five years of the initial license grant date and must
construct base stations that provide coverage to a composite area of 1,500,000
square kilometers or serve 75% of the United States population within ten years
of the initial license grant date. Additionally, as a regional NPCS licensee,
the Company must construct base stations that provide coverage to a composite
area of 150,000 square kilometers or serve 37.5% of the population of the
service area within five years of its initial license grant date and must
construct base stations that provide coverage to a composite area of 300,000
square kilometers or serve 75% of its service area population within ten years
of the initial license grant date. Failure to meet the construction requirements
will result in forfeiture of the license and ineligibility to regain it.
 
     The Communications Act requires licensees such as the Company to obtain
prior approval from the FCC for the assignment of any station license or the
transfer of control of any entity holding such licenses. The FCC has approved
each transfer of control for which the Company has sought approval. The
Communications Act also requires prior approval by the FCC of acquisitions of
paging companies. The Company also regularly applies for FCC authority to use
frequencies, modify the technical parameters of existing licenses, expand its
service territory and provide new services. Although there can be no assurance
that any requests for approval or applications filed by the Company will be
approved or acted upon in a timely manner by the FCC, or that the FCC will grant
the relief requested, the Company has no reason to believe any such requests,
applications or relief will not be approved or granted.
 
     The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees which the Company is required to pay with respect
to its Licenses. The FCC increased these fees for fiscal year 1997. The Company
believes that these regulatory fees will not have a material adverse effect on
the Company's business.
 
     The FCC, on April 23, 1997, released a Report and Order establishing
competitive bidding rules for the remaining NPCS spectrum as well as a Further
Notice of Proposed Rulemaking seeking commentary on a proposal to license NPCS
spectrum that had previously been held in reserve and on a proposal to modify
the existing spectrum allocation plan to aggregate smaller geographic license
areas and create additional nationwide NPCS licenses. Adoption of either of
these two proposals would increase the amount of nationwide NPCS spectrum
available to the public and might negatively impact the value of the nationwide
NPCS licenses held by the Company.
 
     On February 24, 1997, the FCC released its Second Report and Order, which
sets a system of competitive bidding ("auctions") to issue licenses for
frequencies for which there are mutually exclusive applications. Under the FCC
proposal, licenses for individual paging channels for which there are mutually
exclusive applications would be auctioned on a geographic basis. In defining the
area within which existing users would be protected from interference from the
auction winners or neighboring licensees (an area known as an "interference
contour"), the FCC created a new methodology that in many instances reduces the
size of the area within existing licensees' interference contours. This change,
however, does not have an impact on licensees with nationwide exclusivity (such
as the Company), because no other operator has the right to apply for such
licensees' exclusive frequencies.
 
     The FCC's Second Report and Order contains a Further Notice of Proposed
Rulemaking in which the FCC seeks commentary on whether it should impose
coverage requirements on licensees with nationwide exclusivity (such as the
Company), whether these coverage requirements should be imposed on a nationwide
                                       17
<PAGE>   18
 
or regional basis, and whether -- if such requirements are imposed -- failure to
meet the requirements should result in a revocation of the entire nationwide
license or just a portion of the license. If the FCC were to impose stringent
coverage requirements on licensees with nationwide exclusivity, the Company
might have to accelerate the build-out of its system in certain areas.
 
     In a rulemaking proceeding pertaining to interconnection between local
exchange carriers ("LECs") and CMRS providers, the FCC has concluded that LECs
are required to compensate CMRS providers for the reasonable costs incurred by
such providers in terminating traffic that originates at LEC facilities, and
vice versa. With regard to the negotiation of these mutual compensation
arrangements, the FCC has concluded that states have the authority under certain
circumstances to mandate a "bill and keep" arrangement on negotiating parties
(i.e., the LEC and the CMRS provider would charge each other a rate of zero for
the termination of the other's traffic). The Company believes that "bill and
keep" arrangements, if applied to paging services, would not have a material
adverse effect on the Company's business.
 
     Consistent with this ruling mandating compensation for carriers terminating
LEC-originated traffic, the FCC has determined that LECs may not charge a CMRS
provider or other carrier for terminating LEC-originated traffic. Some LECs have
been reluctant to comply with the FCC orders and have threatened to terminate
interconnection arrangements with the Company if it does not agree to pay for
dedicated facilities used to terminate LEC-originated traffic. The Company has
made certain payments to the LECs under protest and has maintained reserves for
payments that the LECs were claiming were due. The FCC's staff recently made it
clear that under the FCC's current rules, LECs may not charge CMRS providers for
such facilities, although these rules are being reconsidered and may be modified
in the near future.
 
     As a result of the enactment of the 1996 Act, the Company will face
additional financial obligations. In November 1996, in response to a directive
in the 1996 Act, the FCC adopted new rules that govern compensation to be paid
to pay phone providers. After these rules were vacated by the U.S. Court of
Appeals for the D.C. Circuit, the FCC released an order mandating that long
distance carriers compensate pay phone providers 28.4c for each 800 number,
similar toll-free-to-the-caller number and access code (collectively, "800
Number") call during a two-year interim period. The long distance carriers are
expected either to pass this cost through to the paging companies that provide
800 Number service to their subscribers or to block pay phone calls to 800
Numbers. This could increase the cost of providing certain 800 Number messaging
services or limit the utility of 800 Number service. Petitions for review and
stay of this order have been filed with a federal appellate court. Also, in
response to changes made by the 1996 Act, the FCC has adopted new rules
regarding payments by telecommunications firms into a revamped fund that will
provide for the widespread availability of telecommunications services,
including to low-income consumers ("Universal Service"). Prior to the
implementation of the 1996 Act, Universal Service obligations largely were met
by local telephone companies. Under the new rules, all telecommunications
carriers, including paging companies, are required to contribute to the
Universal Service Fund. Payments into the fund will likely increase the cost of
doing business and could make the Company's service less competitive with the
other services.
 
     From time to time, legislation and regulations which could potentially
adversely affect the Company are proposed by federal and state legislators and
regulators. Legislation is currently in effect in Texas requiring paging
companies to contribute a portion of their taxable telecommunications revenues
to a Telecommunication Infrastructure Fund created by the state legislature.
Management does not believe that the Texas law will have a material adverse
effect on the Company's operations and is not aware of any other currently
pending legislation or regulations which will have a material adverse impact on
the Company's operations. However, there can be no assurance that Federal or
other state legislation will not be adopted, or that the FCC or the various
state agencies will not adopt regulations or take other actions that would
adversely affect the business of the Company.
 
INTELLECTUAL PROPERTY
 
     The Company has established an intellectual property program to protect its
investment in its messaging services and related proprietary technologies.
 
                                       18
<PAGE>   19
 
     The Company has obtained a United States service mark registration for its
PAGEMART word mark. The Company owns registrations for 14 of its other marks in
the United States. These federal registrations may be renewed as long as the
marks continue to be used in interstate commerce. At December 31, 1997, the
Company had 55 service mark/trademark applications pending before the United
States Patent and Trademark Office. The Company has also obtained, or is in
various stages of applying for, registrations for the PAGEMART mark and several
of its other marks in approximately 28 other countries or jurisdictions where
the Company conducts or anticipates expanding its international business. The
Company has also taken steps to reserve corporate names in certain foreign
countries where the Company anticipates expanding its international business.
 
     At December 31, 1997, the Company had three United States patent
applications pending. The inventions claimed in those patent applications cover
aspects of the Company's current and possible future messaging systems and
related proprietary technologies. The Company is in the process of preparing
other United States patent applications. The Company's present intention is not
to rely primarily on intellectual property rights to protect or establish
further its market position; however, the Company is committed to developing a
portfolio of patents that it anticipates may be of value in negotiating
intellectual property rights with others in the industry. The Company does not
currently intend to broadly license its intellectual property rights.
 
EMPLOYEES
 
     At December 31, 1997, the Company had 2,249 full-time employees. No
employees of the Company are covered by a collective bargaining agreement, and
management believes the Company's relationship with its employees is good.
 
                                       19
<PAGE>   20
 
EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT
 
     The Company's Board of Directors currently consists of seven members, which
number may be increased or decreased from time to time so long as there are no
fewer than three nor more than twelve members. The directors, executive officers
and other key officers of the Company, their positions with the Company, and
their ages as of January 31, 1998 are as follows:
 
<TABLE>
<CAPTION>
             NAME               AGE                      POSITION
             ----               ---                      --------
<S>                             <C>   <C>
John D. Beletic...............  46    Chairman and Chief Executive Officer
N. Ross Buckenham.............  40    President
Douglas H. Kramp..............  36    Executive V.P., Strategic Business Units
Douglas S. Glen...............  40    Executive V.P., Strategic Alliances Business
                                      Unit and President, Carrier Services Division
Sandra D. Neal................  49    Executive V.P., Strategic Projects
Frederick G. Anderson.........  46    V.P., General Counsel and Secretary
Allan D. Angus................  47    V.P., Technology
Todd A. Bergwall..............  34    V.P., Law and Assistant General Counsel
Bo Bernard....................  52    V.P., Core Markets Sales
Stephen D. Hansberry..........  50    V.P., Information Systems Operations
Jack D. Hanson................  54    V.P., Network Operations
Frances W. Hopkins............  57    V.P., Customer Advocacy
Thomas C. Keys................  39    V.P., Market Development
Bradley W. Kinzbach...........  42    V.P., Inventory and Distribution
G. Clay Myers.................  38    V.P., Finance, Chief Financial Officer and
                                      Treasurer
Richard S. Nelson.............  49    V.P., International and President of PageMart
                                        International
W. Wayne Stargardt............  45    V.P., Marketing
Paul L. Turner................  39    V.P., Customer Service
Robert H. Niehaus.............  42    Director
Guy L. de Chazal(1)...........  50    Director
Arthur Patterson(1)...........  54    Director
Alejandro Perez Elizondo(2)...  48    Director
Leigh J. Abramson(1)(2).......  29    Director
Pamela D.A. Reeve(1)(2).......  48    Director
</TABLE>
 
---------------
 
(1) Member of Compensation Committee
 
(2) Member of Audit Committee
 
     John D. Beletic, Chairman and Chief Executive Officer. Mr. Beletic joined
the Company as President and a director in March 1992. Mr. Beletic became Chief
Executive Officer of the Company in February 1994 and Chairman of the Company's
Board of Directors in August 1994. In November 1997, Mr. Beletic became the
Chairman and Chief Executive Officer when Mr. Buckenham assumed the position of
President. Prior to joining the Company, Mr. Beletic spent a year in venture
capital, and he served for five years as President and Chief Executive Officer
of The Tigon Corporation ("Tigon"), a leading voice mail service provider. Tigon
was acquired by Ameritech Development Corporation, a wholly-owned subsidiary of
American Information Technologies Corporation in 1988. Before joining Tigon, Mr.
Beletic was Senior Vice President of Operations and Chief Financial Officer for
five years with VMX, Inc. ("VMX"), a manufacturer of voice mail systems. Mr.
Beletic earned his bachelor's degree in finance from Cincinnati's Xavier
University and his master's degree in business administration from the Harvard
Business School. Mr. Beletic currently serves as a director of Digital Sound
Corporation. Within the paging industry, Mr. Beletic currently serves as a
director of PCIA, the industry trade association, and President of the Paging
Leadership Association.
 
     N. Ross Buckenham, President. Mr. Buckenham joined the Company in January
1996 as Vice President, PCS Strategy, was promoted to Vice President and General
Manager, PCS in September 1996, was promoted
 
                                       20
<PAGE>   21
 
to Executive Vice President, General Manager, PCS in May 1997 and was promoted
to President in November 1997. Prior to joining the Company, Mr. Buckenham was
President of Touchtone Solutions, Inc., a telecommunications and interactive
voice response software and services company from 1992 to 1996. From 1984 to
1991, Mr. Buckenham was with Aquanautics Corporation, initially as Vice
President of Development then as its President. From 1981 to 1984, Mr. Buckenham
was with Bain & Co. as a senior consultant to companies in the voice processing,
technology, finance and health care industries. Mr. Buckenham holds an MBA
degree from Harvard Business School and a BS degree in Chemical Engineering from
Canterbury University, New Zealand.
 
     Douglas H. Kramp, Executive Vice President, Strategic Business Units. Mr.
Kramp joined the Company as a Vice President in August 1993, was promoted to
Executive Vice President, National Retail Business Unit in May 1997, and was
promoted to Executive Vice President, Strategic Business Units in November 1997.
Before joining PageMart, Mr. Kramp was President and co-founder of Artificial
Linguistics Inc. ("ALI"), a text management software company, from 1988 to 1993.
Before co-founding ALI, Mr. Kramp was responsible for starting up and managing
high technology companies for the Hart Group from 1984 to 1988.
 
     Douglas S. Glen, Executive Vice President, Strategic Alliances Business
Unit and President, Carrier Services Division. Mr. Glen has been a Vice
President since July 1989 and was promoted to Executive Vice President,
Strategic Alliances Business Unit in May 1997, and to President of the newly
organized Carrier Services Division of the Company in December 1997. Formerly,
Mr. Glen was Regional Manager and Director of Finance and Administration for
Multicom, Inc., a subsidiary of PacTel Personal Communications, for three years.
Additionally, Mr. Glen was manager of financial control with PepsiCola Bottling
Group and a consultant with Arthur Andersen & Co. Mr. Glen served as a director
of PCIA, the industry trade association, and Chairman of the Paging and
Narrowband PCS Alliance from 1995 to 1997.
 
     Sandra D. Neal, Executive Vice President, Strategic Projects. Ms. Neal
joined the Company as Vice President in July 1992. She was promoted to Executive
Vice President, Administration in January 1996 and became Executive Vice
President, Strategic Projects in January 1998. Prior to joining the Company, Ms.
Neal was Vice President of Customer Service for Tigon, a voice messaging service
provider, from 1989 to 1992. Previously, Ms. Neal held the positions of Vice
President of Finance and Controller at Tigon from 1986 to 1989. Before joining
Tigon, Ms. Neal was a practicing certified public accountant from 1979 to 1986.
 
     Frederick G. Anderson, Vice President, General Counsel and Secretary. Mr.
Anderson joined the Company in August 1997 as Vice President, General Counsel
and Secretary. Prior to joining the Company, Mr. Anderson was Senior Vice
President, General Counsel and Secretary of American Eagle Group, Inc. from
March 1992 through July 1997. American Eagle Group, Inc. is a public specialty
property and casualty insurance holding company, and its principal subsidiary,
American Eagle Insurance Company, was placed in receivership by the Texas
Department of Insurance in December 1997. Prior to joining American Eagle Group,
Inc., Mr. Anderson was a partner in the corporate and securities section of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., an international law firm.
 
     Allan D. Angus, Vice President, Technology. Mr. Angus joined the Company in
March 1996 as Director of Technology, and was promoted to Director of PCS
Technology in September, 1996. He was promoted to Vice President, Technology in
December 1997. Prior to joining the Company, Mr. Angus was Manager of Regulatory
and Standards for JRC International, Inc. and its predecessor, NovAtel
Communications, Ltd., for more than five years, where he served as a
representative to American and Canadian technology standards organizations and
was instrumental in developing many cellular standards.
 
     Todd A. Bergwall, Vice President, Law and Assistant General Counsel. Mr.
Bergwall joined the Company as Corporate Counsel in June 1994. Mr. Bergwall was
also Secretary of the Company from April 1995 through August 1997. Mr. Bergwall
was named Vice President, Law and Assistant General Counsel in August 1997. From
August 1989 until joining the Company, Mr. Bergwall was engaged in private
practice with the Dallas, Texas law firm Winstead Sechrest & Minick, P.C.
specializing in corporate and securities law.
 
                                       21
<PAGE>   22
 
     Bo Bernard, Vice President, Core Markets Sales. Mr. Bernard joined the
Company in February 1997 as Vice President, Sales. In July 1997, he was promoted
to Vice President, Core Markets Sales. Prior to joining the Company, Mr. Bernard
was Executive Vice President and co-founder of ProNet, Inc., a formerly publicly
traded paging company, from August 1982 to December 1996.
 
     Stephen D. Hansberry, Vice President, Information Systems Operations. Mr.
Hansberry joined the Company in May 1997 as Vice President, Information Systems,
and became Vice President Information Systems Operations in January 1998. Prior
to joining the Company, Mr. Hansberry was Assistant Store Manager of K-Mart
Corporation from December 1995 until May 1997 and Senior Vice President of
Systems Development of Citicorp Diners Club from April 1993 until October 1994.
Mr. Hansberry was Senior Vice President of Systems Development of Citibank from
February 1990 until April 1993.
 
     Jack D. Hanson, Vice President, Network Operations. Mr. Hanson joined the
Company in October 1993. Prior to joining the Company in October 1993, Mr.
Hanson was Director of Engineering for Spectradyne, Inc. from June 1992 to
October 1993. Previously, he held senior engineering positions with VMX from
December 1984 to June 1992, the most recent being Vice President of National
Account Support.
 
     Frances W. Hopkins, Co-founder, Vice President, Customer Advocacy. Ms.
Hopkins co-founded the Company in 1989 and was Executive Vice President, Chief
Operations Officer until she left the Company in September 1990 to pursue other
business interests. Upon returning in July 1991, she was named Vice President,
Division General Manager. In 1995, Ms. Hopkins became Vice President, Customer
Advocacy. Before co-founding the Company, Ms. Hopkins was President of Multicom,
Inc., a subsidiary of PacTel Personal Communications for six years; President of
Gencell, the cellular subsidiary of Communications Industries; and founded
TelPage, a regional paging company.
 
     Thomas C. Keys, Vice President, Market Development. Mr. Keys was named Vice
President in September 1994. Previously, Mr. Keys was Sales Director and General
Manager from April 1994 to August 1994. Previously, Mr. Keys was the Area
Manager for the Company's largest West Coast market for over one year. Before
joining the Company, Mr. Keys held the position of Vice President of Sales at
S.I.P., Inc., an industrial equipment manufacturer, from December 1991 to
December 1992. Previously, Mr. Keys held several key management positions at
Metromedia Corporation from August 1990 to December 1991.
 
     Bradley W. Kinzbach, Vice President, Inventory and Distribution. Mr.
Kinzbach joined the Company in February 1994 as Manager, Inventory and
Distribution, and was promoted to Vice President, Inventory and Distribution in
December 1996. Prior to joining the Company, Mr. Kinzbach was President of BKCM
Corporation, a distributor of bottled water, from March 1992 until December 1993
and was Director of Distribution for Blockbuster Entertainment Corporation and
held various management positions from February 1986 to February 1992.
 
     G. Clay Myers, Vice President, Finance, Chief Financial Officer and
Treasurer. Mr. Myers joined the Company in April 1993 as Vice President of
Finance and Chief Financial Officer. Prior to joining the Company, Mr. Myers was
Senior Operations Manager for Dell Computer Corporation from 1991 to 1993. Prior
to joining Dell Computer Corporation, Mr. Myers was with Ernst & Young from 1982
to 1991. Mr. Myers is a certified public accountant.
 
     Richard S. Nelson, Vice President, International and President of PageMart
International. Mr. Nelson was named Vice President, International in March 1996.
Formerly, Mr. Nelson was Vice President, Marketing of the Company since June
1992. Before joining the Company, Mr. Nelson was Vice President of Marketing for
American Eagle, at American Airlines, where he held various staff positions from
1972 to May 1992.
 
     W. Wayne Stargardt, Vice President, Marketing. Mr. Stargardt joined the
Company in May 1996 as Vice President, Marketing. Prior to joining the Company,
Mr. Stargardt served as Vice President of Marketing for Pinpoint Communications
Inc., a venture-funded start-up company developing a wireless
radiolocation-based mobile data network, from 1991 to January 1996. Pinpoint
Communications, Inc. filed a petition in bankruptcy in January 1996 and was
subsequently liquidated.
 
                                       22
<PAGE>   23
 
     Paul L. Turner, Vice President, Customer Service. Mr. Turner has been Vice
President, Customer Service of the Company since March 1994. Before joining the
Company, Mr. Turner was with MCI from 1984 to 1994 in positions of increasing
responsibility. From 1990 to 1994 he held various management positions, the most
recent being Senior Manager, MCI Consumer Markets.
 
     Robert H. Niehaus, Director. Mr. Niehaus has been a Director of the Company
since February 1998. He has been a Managing Director of Morgan Stanley & Co.
Incorporated ("Morgan Stanley") since 1990. He serves as a director of numerous
companies including American Italian Pasta Company, Silgan Holdings, Inc., Fort
James Corporation, Waterford Wedgwood UK, plc (of which he is Chairman) and
several private companies. He is a Managing Director and a director of the
general partner of The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF
II") and the managing general partner of the general partner of Morgan Stanley
Capital Partners III, L.P. ("MSCP III"). Mr. Niehaus was designated by MSLEF II
pursuant to the Amended and Restated Stockholders Agreement among the Company
and certain stockholders of the Company dated as of May 10, 1996, as amended
(the "Stockholders Agreement").
 
     Guy L. de Chazal, Director. Mr. de Chazal has been a Director of the
Company since June 1989. Mr. de Chazal is President and a director of the
managing general partner of the general partner of Morgan Stanley Venture
Capital Fund, L.P. ("MSVCF") and Morgan Stanley Venture Capital Fund II, L.P.
("MSVCF II") and is a Managing Director of Morgan Stanley. Mr. de Chazal is also
a director of several private companies. Mr. de Chazal was designated by MSVCF
pursuant to the Stockholders Agreement.
 
     Arthur Patterson, Director. Mr. Patterson has been a Director of the
Company since June 1989 and a Managing Partner of Accel Partners, a venture
capital company since 1984. Mr. Patterson is also a director of VIASOFT and the
G.T. Global Group of Investment Companies as well as several private software
and telecommunications companies. Mr. Patterson was designated by Accel Partners
pursuant to the Stockholders Agreement.
 
     Alejandro Perez Elizondo, Director. Mr. Perez has been a Director of the
Company since August 1994. Since 1987, Mr. Perez has been associated with
Pulsar, a diversified Mexican company with interests in the insurance,
agriculture, telecommunications, finance and other industries, and is currently
Vice President of Diversification of Pulsar Internacional, S.A. de C.V. Mr.
Perez is also a director of Ionica L3 Ltd. (a public telephone services company
located in U.K.), Novaweb Technologies, Inc. (a California modem manufacturing
company), Encanto Networks Inc. (a California internet company), Fomento
Empresarial Regiomontano, S.A. de C.V. (a Mexico-based holding company with
investments in telecommunications companies), and Merkafon (a Mexico-based
communications engineering company). Mr. Perez was designated by Pulsar pursuant
to the Stockholders Agreement.
 
     Leigh J. Abramson, Director. Mr. Abramson has been a Director of the
Company since August 1994. He is currently a Vice President of Morgan Stanley
and an officer of the general partner of MSLEF II and of the general partner of
the general partner of MSCP III. Mr. Abramson has been with Morgan Stanley since
1990, first in the Corporate Finance Division and, since 1992, in the Merchant
Banking Division. Mr. Abramson is also a Director of Silgan Holdings and
Jefferson Smurfit Corporation. Mr. Abramson was designated by MSCP III pursuant
to the Stockholders Agreement.
 
     Pamela D. A. Reeve, Director. Ms. Reeve was elected Director of the Company
in April 1996. Ms. Reeve is currently President, Chief Executive Officer and
Director of Lightbridge, Inc. ("Lightbridge") and has been with Lightbridge
since 1989. Lightbridge develops and manages software used by wireless
telecommunications companies across the United States to support sales and
marketing applications. Prior to joining Lightbridge, Ms. Reeve spent eleven
years at The Boston Consulting Group, with senior operating responsibility for
the firm's Boston office. Prior to joining The Boston Consulting Group, Ms.
Reeve worked with the National Endowment for the Humanities managing educational
projects and with real estate development and manufacturing firms, primarily in
operations and marketing. Ms. Reeve is also a director of Natural Microsystems,
Inc.
 
CORPORATE STRUCTURE
 
     PageMart Wireless was incorporated in Delaware on November 29, 1994 as a
wholly-owned subsidiary of PageMart. Effective January 19, 1995, PageMart merged
with a wholly-owned subsidiary of PageMart
                                       23
<PAGE>   24
 
Wireless, pursuant to which PageMart was the surviving corporation (the
"Reorganization"). As part of the Reorganization, each share of outstanding
common stock of PageMart was converted into one share of common stock of
PageMart Wireless. Upon consummation of the Reorganization, the stockholders of
PageMart had the same ownership interest in PageMart Wireless as they had in
PageMart, and PageMart Wireless owned all of the capital stock of PageMart. On
December 28, 1995, the name of PageMart Wireless was changed from PageMart
Nationwide, Inc. to PageMart Wireless, Inc. On January 28, 1998, PageMart was
merged into PageMart Wireless, which was the surviving corporation in the
merger.
 
ITEM 2. PROPERTIES
 
     The principal tangible assets of the Company are its paging network
equipment, which includes paging switching terminals, paging transmitters and a
host of related equipment such as satellite and digital link controllers,
satellite dishes, antennas, cable, etc. The Company continues to add equipment
as it expands to new service areas and begins the buildout of its NPCS network.
To date, it has not experienced any material difficulty or delay in obtaining
equipment as needed.
 
     The Company acquired the NPCS Licenses in auctions held by the FCC. The
NPCS Licenses permit the nationwide operation of NPCS networks with 100kHz of
outbound capacity and 50kHz of response capacity.
 
     The Company generally leases the locations used for its transmission and
receiving facilities under operating leases. These leases, which are generally
for five years or less, provide for aggregate annual rental charges of
approximately $12.2 million as of December 31, 1997. The Company does not
anticipate material difficulty in renewing these leases or finding equally
suitable alternate facilities on acceptable terms.
 
     The Company leases approximately 140,000 square feet of office space for
its corporate headquarters in Dallas, Texas with an additional 30,000 square
feet to be added by May 1998. The lease will have an annual cost of
approximately $2.9 million in 1998, and is subject to annual escalations during
the term of the lease. The lease expires on January 31, 2008, and the Company
has the option to renew it for an additional five year term. The Company leases
varying amounts of space for local offices, call centers and other facilities at
various locations. Aggregate annual rental charges under these leases were
approximately $4.7 million as of December 31, 1997.
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is involved in various lawsuits arising in the normal course of
business. In management's opinion, the ultimate outcome of these lawsuits will
not have a material adverse effect on the results of operations or financial
condition of the Company.
 
     On October 27, 1997, an action against PageMart and Paging Network, Inc.
was filed in Superior Court of the State of California, County of San Francisco,
by two customers of EconoPage, Inc. ("EconoPage"), a reseller of the Company's
services that had resold PageMart's paging services to approximately 38,000
customers. PageMart terminated the reseller agreement due to monetary default by
EconoPage. In the complaint, plaintiffs have requested class action status on
behalf of EconoPage customers and allege that EconoPage was an agent of
PageMart, that PageMart was aware that EconoPage's pricing would not permit it
to sustain its business and PageMart permitted EconoPage to continue to enter
into service contracts with customers while EconoPage was having serious
financial difficulties. The complaint alleges violation of statute, fraud and
negligent misrepresentation by PageMart, and requests injunctive relief as well
as compensatory, punitive, special and incidental damages in an unspecified
amount. PageMart denies all claims and will vigorously defend itself. The
Company does not expect the ultimate outcome of this suit to have a material
adverse effect on its results of operations or financial condition.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     None.
 
                                       24
<PAGE>   25
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
        MATTERS
 
     The Company's Class A Common Stock, $0.0001 par value, is listed on the
Nasdaq National Market System under the symbol PMWI. There currently is no
public market for the Company's Class B, Class C or Class D Common Stock. Class
A Common Stock is convertible by certain holders thereof into either Class B or
C Common Stock. Classes B, C and D Common Stock are convertible to Class A
Common Stock. The following table indicates the high and low sales prices for
shares of the Company's Class A Common Stock for the periods from June 13, 1996,
the date of the company's initial public offering:
 
<TABLE>
<CAPTION>
                                                      HIGH      LOW
                                                      ----      ---
<S>                                                   <C>      <C>
1996:
  Second Quarter (from June 13, 1996)...............  $13 1/4  $10
  Third Quarter.....................................  $11 7/8  $ 8 1/4
  Fourth Quarter....................................  $10 1/8  $ 6
1997:
  First Quarter.....................................  $ 7 5/8  $ 4 3/8
  Second Quarter....................................  $ 9 1/2  $ 4 7/8
  Third Quarter.....................................  $11 3/8  $ 7
  Fourth Quarter....................................  $13 1/4  $ 7 1/2
</TABLE>
 
     As of January 31, 1998, the Company's Class A, Class B, Class C and Class D
Common Stock was held by approximately 216, 8, 2 and 2 holders of record,
respectively.
 
     The Company has not paid dividends on the common stock since its
organization in 1989. The Company currently intends to retain future earnings
for the development of its business and does not anticipate paying cash
dividends on its common stock in the foreseeable future. The Company's future
dividend policy will be determined by its Board of Directors on the basis of
various factors, including the Company's results of operations, financial
condition, capital requirements and investment opportunities. In addition, the
Company's debt instruments substantially restrict (and currently prohibit) the
payment of cash dividends.
 
                                       25
<PAGE>   26
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following table sets forth-summary historical financial information and
operating data for each of the five fiscal years ended December 31, 1997. The
financial information and operating data were derived from, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere in this Report.
 
<TABLE>
<CAPTION>
                                                                    FISCAL YEAR ENDED DECEMBER 31,
                                                 --------------------------------------------------------------------
                                                    1993         1994          1995           1996           1997
                                                 ----------   ----------   ------------   ------------   ------------
                                                 (IN THOUSANDS, EXCEPT UNIT, ARPU, PER SUBSCRIBER AND PER SHARE DATA)
<S>                                              <C>          <C>          <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Recurring revenues.............................   $ 24,184     $ 56,648     $  101,503     $  153,041     $  206,907
Equipment sales and activation fees............     26,483       53,185         57,688         68,551         70,871
                                                  --------     --------     ----------     ----------     ----------
Total revenues.................................     50,667      109,833        159,191        221,592        277,778
Cost of equipment sold.........................     28,230       57,835         63,982         78,896         86,175
Operating expenses.............................     47,448       85,322        118,557        155,265        194,194
                                                  --------     --------     ----------     ----------     ----------
Operating loss.................................    (25,011)     (33,324)       (23,348)       (12,569)        (2,591)
Interest expense...............................     (6,538)     (12,933)       (30,720)       (35,041)       (38,499)
Interest income................................        428          858          1,997          1,140            501
Other..........................................         --         (414)        (1,042)        (2,128)        (3,298)
                                                  --------     --------     ----------     ----------     ----------
Net loss.......................................   $(31,121)    $(45,813)    $  (53,113)    $  (48,598)    $  (43,887)
                                                  ========     ========     ==========     ==========     ==========
Net loss per common share......................   $  (1.51)    $  (1.72)    $    (1.53)    $    (1.30)    $    (1.10)
Weighted average number of common shares and
  share equivalents outstanding................     20,627       26,574         34,653         37,462         39,922
BALANCE SHEET DATA (AT PERIOD END):
Current assets.................................   $ 51,279     $ 44,397     $   62,535     $   70,572     $   84,133
Total assets...................................     78,773      142,059        263,829        313,620        361,876
Current liabilities............................     20,198       37,966         56,508         62,503        104,973
Long-term debt, less current maturities........     78,359       92,632        219,364        240,687        289,344
Stockholders' equity (deficit).................    (19,784)      11,461        (12,043)        10,430        (32,441)
OTHER DATA:
Units in service (at period end)...............    327,303      772,730      1,240,024      1,859,407      2,530,737
Net subscriber additions.......................    210,269      445,427        467,294        619,383        671,330
ARPU(1)........................................   $   9.81     $   8.64     $     8.62     $     8.04     $     7.80
Operating profit (loss) before selling expenses
  per domestic subscriber per month(2).........      (0.98)        0.90           2.11           2.25           2.54
Selling expenses per net domestic subscriber
  addition(3)..................................         91           81             91             87            100
EBITDA(4)......................................    (19,930)     (25,219)       (10,076)         8,623         27,261
Capital expenditures...........................     10,810       16,719         33,503         63,804         67,506
Dividends paid/declared........................         --           --             --             --             --
Depreciation and amortization..................      5,081        8,105         13,272         21,192         29,852
Deficiency of earnings to fixed charges(5).....    (31,121)     (45,813)       (53,113)       (48,598)       (43,887)
</TABLE>
 
---------------
 
(1) Average monthly revenue per unit ("ARPU") is calculated by dividing (i)
    domestic recurring revenues, consisting of fees for airtime, voice mail,
    customized coverage options, excess usage fees and other recurring revenues
    and fees associated with the subscriber base for the quarter by (ii) the
    average number of domestic units in service for the quarter. ARPU is stated
    as the monthly average for the final quarter of the period.
 
(2) Operating profit (loss) before selling expenses (selling expenses include
    loss on sale of equipment) per subscriber for the Company's domestic one-way
    messaging operations is calculated by dividing (i) recurring revenue less
    technical expenses, general and administrative expenses, and depreciation
    and amortization for the final quarter of the period by (ii) the average
    number of domestic units in service for the final quarter of the period.
    Stated as the monthly average for the final quarter of the period.
 
(3) Selling expenses per net domestic subscriber addition for the Company's
    domestic one-way messaging operations is calculated by dividing (i) selling
    expenses, including loss on sale of equipment, for the period by (ii) the
    net domestic subscriber additions for the period.
 
(4) EBITDA represents earnings (loss) before interest, taxes, depreciation and
    amortization. EBITDA is a financial measure commonly used in the paging
    industry. EBITDA is not derived pursuant to generally accepted accounting
    principles ("GAAP") and therefore should not be construed as an alternative
    to operating income, as an alternative to cash flows from operating
    activities (as determined in accordance with GAAP) or as a measure of
    liquidity. The calculation of EBITDA does not include the commitments of the
    Company for capital expenditures and payment of debt and should not be
    deemed to represent funds available to the Company. See "Management's
    Discussion and Analysis of Financial Condition and Results of Operations"
    for a discussion of the financial operations and liquidity of the Company as
    determined in accordance with GAAP.
 
(5) For purposes of calculating the deficiency of earnings to fixed charges, (i)
    earnings is defined as net loss plus fixed charges and (ii) fixed charges as
    interest expense plus amortization of debt issuance costs and the interest
    portion of rental and lease expense.
 
                                       26
<PAGE>   27
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     The following is a discussion of the results of operations and financial
condition of the Company for the three years ended December 31, 1997. This
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and the notes thereto included elsewhere in this report.
 
     When used in this discussion, the words "estimate," "project," "plan,"
"expect" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward-looking statements as
the assumptions or market conditions underlying the forward looking statements
may change or prove to be incorrect.
 
GENERAL
 
     The Company has constructed and operates a wireless messaging and
communications network and provides paging and other one-way wireless messaging
services to its subscribers. In addition, the Company sells and distributes
wireless messaging equipment to subscribers, retailers and resellers. The
Company earns recurring revenues from each subscriber in the form of fixed
periodic fees and incurs substantial operating expenses in offering its
services, including technical, customer service and general and administrative
expenses. See "-- Management's Presentation of Results of Operations."
 
     Since commencing operations in 1990, the Company has invested heavily in
its one-way wireless communications network and administrative infrastructure in
order to establish nationwide coverage, sales offices in major metropolitan
areas, centralized customer service call centers and administrative support
functions. The Company incurs substantial fixed operating costs related to its
one-way wireless communications infrastructure, which is designed to serve a
larger subscriber base than the Company currently serves in order to accommodate
growth. In addition, the Company incurs substantial costs associated with new
subscriber additions. As a result, the Company has generated significant net
operating losses for each year of its operations. See "-- Management's
Presentation of Results of Operations."
 
     The Company's strategy is to expand its subscriber base to increase
profitability and cash flow through greater utilization of its nationwide
wireless communications network. From January 1, 1992 to December 31, 1997, the
number of units in service increased from 52,125 to 2,530,737. None of the
Company's growth is attributable to acquisitions. The Company intends to achieve
this growth by promoting its customized paging and other wireless messaging
services through its national sales offices, retail distribution channels and
private brand strategic alliances with GTE Corporation, Southwestern Bell Mobile
Systems, AT&T Wireless Services, WorldCom Network Services, Inc., Ameritech
Mobile Services, Inc., EXCEL Communications, Inc., ALLTEL Communications, Inc.,
Bluegrass Cellular and First Cellular of Southern Illinois, as well as
international expansion. Given the fixed operating costs of its wireless
networks, administration and selling and marketing expenses associated with its
growth strategy, the Company generated operating losses in 1997 from its one-way
wireless communications business. In the third quarter of 1997, the Company
began generating operating profits in its one-way business and management
expects this trend to continue in 1998. In addition, the Company began testing
and development of advanced messaging services in 1996, and completed testing
and development in 1997. The Company plans to begin implementation in 1998, and
expects to incur additional operating losses and make significant capital
expenditures during 1998 and 1999. The Company does not anticipate any
significant revenues from advanced messaging services during 1998.
 
     The Company has historically sold, rather than leased, substantially all of
the subscriber units used by its subscribers. As a result, the Company has had
much less capital invested in subscriber units than other paging carriers since
it has recouped a substantial portion of subscriber unit costs upon sale to
retailers and subscribers. This has resulted in significantly lower capital
expenditures and depreciation expense than if the Company had leased units to
its subscribers. In addition, the Company's financial results are much different
than other paging carriers that lease subscriber units to subscribers because
the Company recognizes the cost of subscriber units sold in connection with
adding new subscribers at the time of sale rather than capitalizing and
depreciating the cost of subscriber units over periods ranging from three to
five years as occurs with paging carriers that lease subscriber units to
subscribers. In addition, the Company's retail distribution strategy results
                                       27
<PAGE>   28
 
in the recognition of expenses associated with subscriber unit sales and other
sales and marketing expenses in advance of new subscribers being added to the
subscriber base and generating recurring revenues (as retailers carry
inventory). The Company expects, however, to lease a substantial portion of its
advanced messaging subscriber units because sales of advanced messaging services
will initially be dominated by business and corporate customers and because of
the higher cost of advanced messaging subscriber units compared to one-way
messaging units. The Company may require up to $50 million of financing in order
to fund the purchase of such subscriber units and intends to seek
off-balance-sheet structures to accomplish such financing. See "-- Liquidity and
Capital Resources."
 
     The Company sells its subscriber units through multiple distribution
channels, including direct sales, third party resellers, private brand strategic
alliances and local and national retail stores. At December 31, 1997, the
Company's total subscriber base was comprised of 26% from the National Retail
strategic business unit ("SBU"), 33% from the Private Brand Strategic Alliance
SBU and 41% from the National Sales Offices SBU. Selling and marketing expenses
are primarily attributable to compensation paid to the Company's sales force,
advertising and marketing costs and losses resulting from the fact that, for
competitive and marketing reasons, the Company generally sells each new unit to
national retailers for less than its acquisition cost. The Company's accounting
practices result in selling and marketing expenses, including loss on sale of
equipment, being recorded at the time a unit is sold. The Company expects its
cost of subscriber units on a per unit basis generally to remain constant or
decline only slightly as sales volumes increase. Management anticipates that
loss on equipment sold will generally remain constant on a per unit basis for
the foreseeable future. Units sold by the Company during a given month may
exceed units activated and in service due to inventory stocking and distribution
strategies of the retailers. As a result, selling and marketing expenses per net
subscriber addition may fluctuate from period to period.
 
     The Company derives its recurring revenue primarily from fixed periodic
fees for services that are not generally dependent on usage. Consequently, the
Company's ability to recoup its initial selling and marketing costs, to meet
operating expenses and to achieve profitability is dependent on the average
length of each customer's subscription period. As long as a subscriber continues
to utilize the Company's service, operating results benefit from the recurring
payments of the fixed fees without the incurrence of additional selling expenses
by the Company. Conversely, operating results are adversely affected by customer
disconnections. Each month a percentage of the Company's existing customers have
their service terminated for a variety of reasons, including failure to pay,
dissatisfaction with service and switching to a competing service provider. The
Company's average monthly disconnection rates for the years ended December 31,
1995, 1996, and 1997 were 2.5%, 2.4% and 2.5%, respectively.
 
     Approximately 90% of the Company's average revenue per unit ("ARPU") is
attributable to fixed fees for airtime, coverage options and features. A portion
of the remainder is dependent on usage. Management anticipates that the
Company's ARPU will decline in the foreseeable future due to a continued higher
mix of subscribers added through private brand strategic alliance programs,
which yield lower ARPU because strategic alliance partners are generally high
volume customers that are charged wholesale airtime rates. However, because
private brand strategic alliance partners are responsible for selling and
marketing costs, billing, collection and other administrative costs associated
with end-users, the Company incurs substantially lower marketing and
administrative costs with respect to such subscribers.
 
RESULTS OF OPERATIONS
 
     The Company's principal operations to date are its domestic one-way
wireless operations. The following discussion of results of operations analyzes
the results of the Company's domestic one-way wireless messaging operations,
unless otherwise indicated.
 
     Certain of the following financial information is presented on a per
subscriber unit basis. Management of the Company believes that such a
presentation is useful in understanding the Company's results because it
provides a meaningful comparison period-to-period, given the Company's growth
rate and the significant differences in the number of subscribers of other
paging companies.
 
                                       28
<PAGE>   29
 
  FISCAL YEARS 1995, 1996 AND 1997
 
     Units in Service
 
     Units in service were 1,240,024, 1,851,445 and 2,513,337 as of December 31,
1995, 1996 and 1997, respectively. This represents a domestic annual growth rate
of 49% and 36% in 1996 and 1997, respectively. In addition, for the years ended
December 31, 1996 and 1997, PageMart Canada's units in service were 13,270 and
29,000, respectively. As a result of its ownership interest in PageMart Canada,
the Company's proportional share of the units in service of PageMart Canada was
7,962 and 17,400 units at December 31, 1996 and 1997. The Company has
experienced strong growth in units in service due primarily to the success of
its sales and marketing strategies in national retail and private brand
strategic alliance programs.
 
     Revenues
 
     Revenues for the fiscal years 1995, 1996 and 1997 were $159.2 million,
$221.6 million and $277.6 million, respectively. Recurring revenues for airtime,
voice mail and other services for the same periods were $101.5 million, $153.0
million and $206.9 million, respectively. Revenues from equipment sales and
activation fees for 1995, 1996 and 1997 were $57.7 million, $68.6 million and
$70.7 million, respectively. The increases in recurring revenues and revenues
from equipment sales and activation fees were primarily due to rapid growth in
the number of units in service. The increase in equipment sales during 1996 and
1997 was partially offset by a decline in the average price per unit sold.
 
     The Company's ARPU was $8.62, $8.04 and $7.80 in the final quarter of 1995,
1996 and 1997, respectively. The decline in 1996 and 1997 resulted primarily
from an increase in subscribers added through private brand strategic alliance
channels. This decrease in ARPU has been offset partially by a higher mix of
multi-city, regional and nationwide services as well as increased sales of other
value-added services such as voice mail and toll-free numbers.
 
     Cost of Equipment Sold
 
     The cost of equipment sold in 1995, 1996 and 1997 was $64.0 million, $78.9
million and $86.0 million, respectively. The change in 1996 was a combination of
an increase in the number of units sold and slightly lower average pager prices
paid to suppliers. The change in 1997 was primarily due to an increase in the
number of units sold. The Company expects pager costs generally to remain
constant, with modest reductions in cost to the Company as a result of volume
purchases.
 
     Operating Expenses
 
     Technical expenses were $25.5 million, $36.7 million and $46.5 million in
1995, 1996 and 1997, respectively. The increases were primarily due to increased
telecommunications and site expenses associated with servicing the Company's
expanded network and larger subscriber base. On an average monthly cost per unit
in service basis, technical expenses were $2.11, $1.98 and $1.78 in 1995, 1996
and 1997, respectively. The per unit decreases were the result of increased
operating efficiencies and economies of scale experienced with the growth of the
Company's subscriber base.
 
     Selling expenses in 1995, 1996 and 1997 were $36.1 million, $42.6 million
and $50.8 million, respectively. This increase resulted from greater marketing
and advertising costs related to the growth in units sold as well as from
increased sales compensation because of the addition of sales personnel in
existing business units during 1996. During the years ended December 31, 1995,
1996 and 1997, the Company added 467,294, 611,421 and 661,892 net new domestic
units in service, respectively. Sales and marketing employees increased from 445
at December 31, 1995 to 552 at December 31, 1996 and then decreased to 505 at
December 31, 1997. Management views the net loss on equipment sold to be a
component of selling and marketing expenses incurred to add new subscribers. See
"-- Management's Presentation of Results of Operations." Selling and marketing
expenses per net domestic subscriber addition (including loss on equipment
sales) were $91, $87 and $100 for the years ended December 31, 1995, 1996 and
1997, respectively. The increase in 1997 was due to losses recognized on the
sale of pagers due to stocking new retail outlets. The Company added 7,394
 
                                       29
<PAGE>   30
 
additional retail outlets during the year including additions from Radio Shack,
Eckerd Drug, OfficeMax and Southland (7-Eleven) stores. The losses on equipment
sold are recognized when pagers are shipped to the retailers, usually before the
units are placed into service, thus increasing selling expenses (including loss
on sale of equipment) per net subscriber addition. During the year ended
December 31, 1997, the Company incurred $526,000 in selling expenses associated
with international operations.
 
     General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1995, 1996
and 1997 were $43.4 million, $53.7 million and $66.4 million, respectively. This
increase was attributable to the Company's expansion of its customer service
call centers, information systems and administrative capabilities to support the
growing subscriber base which required additional office space, administrative
personnel and customer service representatives. On an average cost per month per
unit in service basis, general and administrative expenses were $3.59, $2.89 and
$2.54 for fiscal years 1995, 1996, and 1997, respectively. The per unit
decreases were a result of increased operating efficiencies and economies of
scale achieved through the growth of the Company's subscriber base.
 
     Depreciation and amortization in 1995, 1996 and 1997 was $13.3 million,
$21.2 million and $29.7 million, respectively. The increases resulted from the
expansion of the Company's network infrastructure including transmitter and
terminal equipment, as well as the purchase and development of a new centralized
administrative system in 1996 and 1997. As an average cost per month per unit in
service, depreciation and amortization was $1.10, $1.14, $1.13 for the years
ended December 31, 1995, 1996 and 1997, respectively.
 
  Interest Expense
 
     Consolidated interest expense increased from $30.7 million in 1995 to $35.0
million in 1996 and to $38.5 million in 1997. The increases in 1996 and 1997
were primarily the result of the increased interest related to the 15% Notes and
the 12 1/4% Notes. Interest expense related to the 12 1/4% Notes was $11.8
million, $13.3 million and $15.1 million in 1995, 1996 and 1997, respectively.
Interest expense related to the 15% Notes was $15.3 million, $18.4 million and
$21.2 million in 1995, 1996 and 1997, respectively. Interest expense related to
vendor financing was $0.9 million in 1997.
 
 Net Loss
 
     The Company sustained consolidated net losses in 1995, 1996 and 1997 of
$53.1 million, $48.6 million and $43.9 million, respectively, principally due to
the cost of funding the growth rate of the Company's subscriber base which
resulted in an increase in units sold, selling and marketing expenses and
operating expenses.
 
MANAGEMENT'S PRESENTATION OF RESULTS OF OPERATIONS
 
  COMPARISON WITH GAAP PRESENTATION
 
     The Company's audited Consolidated Financial Statements for the years ended
December 31, 1995, 1996 and 1997, included elsewhere in this report have been
prepared in accordance with generally accepted accounting principles ("GAAP").
For internal management purposes, the Company prepares statements of operations
that are derived from the Company's GAAP financial statements but are reordered
in a format that management uses for its internal review of the Company's
performance and that management believes are useful in understanding the
Company's results.
 
     Management believes that operating profit before selling expenses is a
meaningful indicator of the profitability of the Company's installed base of
units in service because it measures the recurring revenues received for
services less the costs (including depreciation and amortization) associated
with servicing that installed base. Operating profit before selling expenses per
domestic subscriber per month for the Company's one-way operations has grown
from $1.01 during the first quarter of 1995 to $2.54 during the fourth quarter
of 1997 due primarily to the Company's increase in subscribers and resulting
benefits in economies of scale.
 
     In addition, selling and marketing expenses (including loss on equipment
sold) provide a measure of the costs associated with obtaining new subscribers
that the Company needs to generate the incremental recurring
 
                                       30
<PAGE>   31
 
revenue necessary to achieve profitability. Under the GAAP presentation,
recurring revenues and equipment and activation revenues are aggregated and are
not separately compared to the costs associated with each.
 
     The items included in Management's Presentation of the Results of
Operations and their derivation from financial information presented in
accordance with GAAP are described below.
 
          Recurring Revenues. Recurring revenues include periodic fees for
     airtime, voice mail, customized coverage options, toll-free numbers, excess
     usage fees and other recurring revenues and fees associated with the
     subscriber base. Recurring revenues do not include equipment sales revenues
     or initial activation fees. Recurring revenues are the same under both the
     management and GAAP presentations.
 
          Technical Expenses. This item is the same under the management and
     GAAP presentations.
 
          General and Administrative Expenses. This item is the same under the
     management and GAAP presentations.
 
          Depreciation and Amortization. This item is the same under the
     management and GAAP presentations.
 
          Operating Profit Before Selling Expenses. Operating profit before
     selling expenses under the management presentation is equal to recurring
     revenues less technical expenses, general and administrative expenses and
     depreciation and amortization. Operating profit before selling expenses is
     not derived pursuant to GAAP.
 
          Selling Expenses. Selling expenses under the management presentation
     represent the cost to the Company of selling pagers and other messaging
     units to a customer, and are equal to selling costs (sales compensation,
     advertising, marketing, etc.) plus costs of units sold less revenues from
     equipment sales and activation fees. As described above, the Company sells
     rather than leases substantially all of the one-way messaging equipment
     used by subscribers. Selling expenses under the management presentation are
     not derived pursuant to GAAP. Net loss on equipment sales is not included
     in the GAAP presentation of selling expenses.
 
          Operating Income (Loss). This item is the same under the management
     and GAAP presentations.
 
          EBITDA. EBITDA represents earnings (loss) before interest, taxes,
     depreciation and amortization. EBITDA is a financial measure commonly used
     in the paging industry. EBITDA is not derived pursuant to GAAP and
     therefore should not be construed as an alternative to operating income, as
     an alternative to cash flows from operating activities (as determined in
     accordance with GAAP) or as a measure of liquidity. The calculation of
     EBITDA does not include the commitments of the Company for capital
     expenditures and payment of debt and should not be deemed to represent
     funds available to the Company.
 
                                       31
<PAGE>   32
 
  SELECTED QUARTERLY RESULTS OF OPERATIONS
 
     The table below sets forth management's presentation of results of one-way
domestic operations and other data on a quarterly basis for the eight most
recent fiscal quarters. This presentation should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this report and the Company's quarterly reports on Form 10-Q for
the corresponding periods below, and should not be considered in isolation or as
an alternative to results of operations that are presented in accordance with
GAAP (in thousands, except other data).
 
<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                            -----------------------------------------------------------------------------------------------------
                            MARCH 31,     JUNE 30,    SEPT. 30,     DEC. 31,    MARCH 31,     JUNE 30,    SEPT. 30,     DEC. 31,
                               1996         1996         1996         1996         1997         1997         1997         1997
                            ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                                         (UNAUDITED)
<S>                         <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
OPERATING DATA:
Recurring revenues........  $   33,743   $   36,964   $   39,697   $   42,637   $   46,475   $   50,004   $   53,593   $   56,828
Technical expenses........       7,943        8,783        9,725       10,273       10,765       11,385       11,963       12,397
General and administrative
  expenses................      12,792       13,043       13,668       14,162       15,763       15,814       16,957       17,911
Depreciation and
  amortization............       4,248        4,942        5,714        6,288        6,808        7,240        7,626        7,987
                            ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
Operating profit before
  selling expenses........       8,760       10,196       10,590       11,914       13,139       15,565       17,047       18,533
 
Selling expenses(1).......      11,601       12,836       13,588       14,900       15,443       16,556       16,981       17,191
                            ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
Operating income (loss)...  $   (2,841)  $   (2,640)  $   (2,998)  $   (2,986)  $   (2,304)  $     (991)  $       66   $    1,342
                            ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========
EBITDA....................  $    1,407   $    2,302   $    2,716   $    3,302   $    4,504   $    6,249   $    7,692   $    9,329
                            ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========
OTHER DATA:
Units in service(2).......   1,374,146    1,524,297    1,684,937    1,851,445    2,001,525    2,181,775    2,343,299    2,513,337
Net subscriber
  additions...............     134,122      150,151      160,640      166,508      150,080      180,250      161,524      170,038
ARPU(3)...................  $     8.61   $     8.50   $     8.25   $     8.04   $     8.04   $     7.97   $     7.90   $     7.80
National retail outlets...       3,690        4,286        5,025        5,530        7,388       10,412       12,171       12,924
Operating profit before
  selling expenses per
  domestic subscriber per
  month(4)................  $     2.23   $     2.35   $     2.20   $     2.25   $     2.27   $     2.48   $     2.51   $     2.54
Selling expenses per net
  domestic subscriber
  addition(5).............          86           85           85           89          103           92          105          101
Capital employed per unit
  in service(6)...........          41           49           49           43           41           40           36           34
</TABLE>
 
---------------
 
(1) Includes loss on sale of equipment.
 
(2) Stated as of the end of each period.
 
(3) Calculated by dividing domestic recurring revenues for the quarter by the
    average number of domestic units in service during that quarter. Stated as
    the monthly average for the quarter.
 
(4) Calculated by dividing operating profit before selling expenses (selling
    expenses include loss on sale of equipment) for the quarter by the average
    number of domestic units in service during that quarter. Stated as the
    monthly average for the quarter.
 
(5) Calculated by dividing selling expenses, including loss on sale of
    equipment, for the quarter by the net domestic subscriber additions for the
    quarter.
 
(6) Calculated by dividing consolidated total assets (excluding cash, NPCS
    assets and international investments) minus current liabilities (excluding
    current maturities of long-term debt) at the end of the period, by domestic
    units in service at the end of the period.
 
                                       32
<PAGE>   33
 
  SUPPLEMENTARY INFORMATION
 
     The following table sets forth-supplementary financial information related
to the Company's various operations (in thousands):
 
<TABLE>
<CAPTION>
                                                               FISCAL YEAR ENDED DECEMBER 31, 1995
                                                    ---------------------------------------------------------
                                                     ONE-WAY     ADVANCED
                                                    MESSAGING    MESSAGING     INTERNATIONAL     CONSOLIDATED
                                                    ---------    ---------     -------------     ------------
<S>                                                 <C>          <C>           <C>               <C>
Revenues..........................................  $159,191     $     --         $   --           $159,191
Operating loss....................................   (22,972)        (376)            --            (23,348)
EBITDA............................................    (9,700)        (376)            --            (10,076)
Total assets .....................................   120,004      140,235          3,590            263,829
Capital expenditures..............................    32,486        1,017             --             33,503
</TABLE>
 
<TABLE>
<CAPTION>
                                                              Fiscal Year Ended December 31, 1996
                                                   ----------------------------------------------------------
                                                    ONE-WAY     ADVANCED
                                                   MESSAGING    MESSAGING    International(1)    Consolidated
                                                   ---------    ---------    ----------------    ------------
<S>                                                <C>          <C>          <C>                 <C>
Revenues.........................................  $221,592     $     --          $   --           $221,592
Operating loss...................................   (11,465)        (657)           (447)           (12,569)
EBITDA...........................................     9,727         (657)           (447)             8,623
Total assets ....................................   160,858      151,108           1,654            313,620
Capital expenditures.............................    50,838       12,966              --             63,804
</TABLE>
 
<TABLE>
<CAPTION>
                                                              Fiscal Year Ended December 31, 1997
                                                   ----------------------------------------------------------
                                                    ONE-WAY     ADVANCED
                                                   MESSAGING    MESSAGING    International(1)    Consolidated
                                                   ---------    ---------    ----------------    ------------
<S>                                                <C>          <C>          <C>                 <C>
Revenues.........................................  $277,605     $     --         $   173           $277,778
Operating loss...................................    (1,887)        (207)           (497)            (2,591)
EBITDA...........................................    27,774          (16)           (497)            27,261
Total assets ....................................   177,090      185,943          (1,157)           361,876
Capital expenditures.............................    32,169       35,337              --             67,506
</TABLE>
 
---------------
 
(1) Expenses reflected in this column are for the Company's international
    headquarters operations. The Company accounts for its investments in Canada
    under the equity method. Consequently, the Company's share of expenses from
    its Canadian operations are not reflected in this table.
 
SEASONALITY
 
     Pager usage is slightly higher during the spring and summer months, which
is reflected in higher incremental usage fees earned by the Company. The
Company's retail sales are subject to seasonal fluctuations that affect retail
sales generally. Otherwise, the Company's results are generally not
significantly affected by seasonal factors.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's operations have historically required substantial capital
investment for the development and installation of its wireless communications
network, the procurement of subscriber units and expansion into new and existing
markets. To date, these investments by the Company have been funded by the
proceeds from the issuance of common stock, preferred stock, the 12 1/4% Notes,
the 15% Notes, as well as borrowings under vendor financing arrangements and the
Revolving Credit Agreement (as defined herein).
 
     Capital expenditures were $33.5 million, $63.8 million and $67.5 million
for the years ended December 31, 1995, 1996 and 1997, respectively. Capital
expenditures for 1995 related entirely to the Company's one-way messaging
operation. Capital expenditures for 1996 include $44.4 million for the Company's
one-way messaging operations, $13.0 million related to the development of
advanced messaging services, and $6.4 million for the development of the
Company's new administrative system. Capital expenditures for 1997 include
approximately $35.3 million related to the development of advanced messaging
services, $22.7 million
 
                                       33
<PAGE>   34
 
for the Company's one-way messaging operations and $9.5 million for the
development of the Company's new administrative system. During December 1995,
the Company committed to purchase $40 million in network infrastructure
equipment from Motorola from December 1, 1995 to October 31, 1999. Through
December 31, 1997, the Company had purchased $21.9 million of network
infrastructure under this purchase commitment.
 
     The Company's net cash used in operating activities for the year ended
December 31, 1995 was $2.9 million and net cash provided by operating activities
for the years ended December 31, 1996 and 1997 was $3.6 million and $37.2
million, respectively. The increased operating cash flow in 1997 was a result of
improved operating results from a larger subscriber base. Net cash used in
investing activities was $110.2 million, $64.0 million and $68.5 million for the
years ended December 31, 1995, 1996 and 1997, respectively. Of the $110.2
million used in investing activities in 1995, $74.1 million was for the
acquisition of NPCS Licenses and the remainder was primarily for capital
expenditures. The $64.0 million and the $68.5 million used in investing
activities in 1996 and 1997, respectively, were primarily for capital
expenditures. Net cash provided by financing activities, including borrowings
and equity issuances was $125.5 million, $56.0 million and $17.0 million for the
years ended December 31, 1995, 1996 and 1997, respectively. Cash provided by
financing activities in 1995 resulted primarily from $100.1 million of net
proceeds from the issuance of the 15% Notes and non-voting common stock. Cash
provided by financing activities in 1996 resulted primarily from $70.5 million
in net proceeds received in connection with the initial public offering of the
Company's Class A Common Stock. Cash provided by financing activities in 1997
resulted from borrowings of $17.1 million under a vendor financing arrangement.
Net increases in borrowings were $128.7 million, $15.8 million and $51.4 million
for the years ended 1995, 1996 and 1997, respectively. The net increase in 1995
resulted from the issuance of the 15% Notes, the accretion of the 12 1/4% Notes
and borrowings under vendor financing arrangements. The net increases in
borrowings for 1996 and 1997 resulted primarily from the accretion of the
12 1/4% Notes and the 15% Notes. In addition, net increases in borrowings for
1997 resulted from borrowings under vendor financing arrangements.
 
     On January 28, 1998, the Company completed an offering resulting in
approximately $249.7 million in gross proceeds of 11 1/4% Senior Subordinated
Discount Notes due 2008 (the "Offering"). Simultaneously, with the closing of
the Offering, the Company refinanced certain of its outstanding indebtedness,
(the "Refinancing"), and modified its corporate structure. The Refinancing
consisted of the following: (i) purchasing all of the outstanding 12 1/4% Notes
($136.5 million principal amount at maturity), (ii) the amending of certain
terms of the covenants and agreements in the indenture relating to the 15%
Notes; and (iii) merging PageMart, Inc. into PageMart Wireless, Inc., with
PageMart Wireless, Inc. as the surviving corporation.
 
     Approximately $130.7 million of the gross proceeds of the Offering was used
to purchase all of the outstanding 12 1/4% Notes. The proceeds remaining after
offering expenses and refinancing were approximately $107.8 million. The Company
intends to use the remaining proceeds to fund the construction of its NPCS
network and for general corporate purposes. In connection with the Refinancing,
the Company expects to incur an extraordinary charge of approximately $13.9
million related to the early extinguishment of debt in the first quarter of
1998.
 
     The 11 1/4% Senior Subordinated Discount Notes due 2008 ("11 1/4% Notes"),
which are unsecured senior obligations of PageMart Wireless, mature in 2005 and
were issued at a substantial discount from their principal amount at maturity.
The accretion of original issue discount on the 11 1/4% Notes will cause an
increase in indebtedness from January 28, 1998 to February 1, 2008 of $182.3
million. From and after August 1, 2003 interest on the 11 1/4% Notes will be
payable semiannually, in cash.
 
     In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of one-way or advanced messaging infrastructure equipment over a
period of 60 months up to a maximum aggregate amount of $30 million. Borrowings
under the Vendor Financing Arrangement are secured by the equipment purchased.
The interest rate applicable to such financing is equal to the sum of 7.00% and
the London interbank offered rate ("LIBOR") as published in The Wall Street
Journal for three-month maturities or the sum of 4.25% and the
 
                                       34
<PAGE>   35
 
U.S. prime rate of interest as published in The Wall Street Journal. The
weighted average interest rate in effect on December 31, 1997 with respect to
the Vendor Financing Arrangement was 12.6%.
 
     In June 1996, the Company sold an aggregate of 6.0 million shares of Class
A Common Stock in an initial public offering at a price to the public of $13 per
share. The Company received net proceeds of approximately $70.5 million of which
approximately $12.9 million was used to retire vendor debt and $11.9 million was
used to repay outstanding loans under the Company's Revolving Credit Agreement
(as defined below).
 
     In May 1995, the Company entered into a four year Revolving Credit
Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company,
as Issuing Bank, which provides for a $50 million revolving line of credit (the
"Revolving Credit Agreement"). As of December 31, 1997 there were no loans
outstanding under the Revolving Credit Agreement.
 
     As of December 31, 1997, the Company had $16.0 million outstanding under
the Vendor Financing Arrangement and its indebtedness under the 12 1/4% Notes
was $122.7 million and its indebtedness under the 15% Notes was $153.4 million.
 
     The 15% Notes, which are unsecured senior obligations of Wireless, mature
in 2005 and were issued at a substantial discount from their principal amount at
maturity. The accretion of original issue discount on the 15% Notes will cause
an increase in indebtedness from December 31, 1997 to February 1, 2000 of $53.9
million. From and after August 1, 2000, interest on the 15% Notes will be
payable semiannually, in cash.
 
     The indenture under which the 15% Notes were issued (the "15% Indenture"),
the indenture pursuant to which the 11 1/4% Notes were issued (the "11 1/4%
Indenture"), the Vendor Financing Arrangement and the Revolving Credit Agreement
contain certain restrictive covenants that, among other things, limit the
ability of the Company to incur indebtedness, pay dividends, repurchase capital
stock, engage in transactions with stockholders and affiliates, create liens,
sell assets, enter into leases and engage in mergers and consolidations, and the
Revolving Credit Agreement requires the Company to maintain certain financial
ratios and limits the ability of the Company to make capital expenditures.
 
     On November 15, 1995, the Company purchased through PageMart International,
Inc., 200,000 voting shares of common stock of PageMart Canada, which represents
20% of the ownership of PageMart Canada. PageMart International, Inc. also owns
33% of the voting common stock of the holding company parent of PageMart Canada
("Canada Holding"), which owns the remaining 80% of the voting common stock of
PageMart Canada. The Company's initial investment in Canada Holding and PageMart
Canada totaled approximately $3.7 million.
 
     The Company plans to begin the implementation of advanced messaging
services during 1998. The Company expects to incur significant capital
expenditures and operating losses associated with the implementation and
start-up phase for advanced messaging services. The Company anticipates capital
expenditures of approximately $90 million in 1998 to construct and deploy an
NPCS network, which the Company expects to enable it to market advanced
messaging services nationwide by the end of 1998. In addition, the Company
expects to incur cash operating expenses of approximately $10 million in 1998.
Thereafter, the Company anticipates that the advanced messaging operations will
require up to $55 million of additional capital expenditures to complete
construction and to add capacity to the network in 1999. In addition, the
Company expects the advance messaging operation to require up to $45 million to
fund operations and marketing in 1999 and 2000 as the Company's advanced
messaging customer base grows. In addition, the Company may require up to $50
million of secured vendor financing to fund the purchase of subscriber units.
Although the Company does not currently have a source to fund the purchase of
the subscriber units, the Company believes that it will not require such
financing until 1999 and thereafter. The Company expects such financing to be
available.
 
     As of December 31, 1997, the Company had approximately $8.3 million in cash
and cash equivalents. On January 28, 1998 the Company received net proceeds of
approximately $107.8 million from the Offering. At December 31, 1997 the
Company's borrowings available under the Revolving Credit Agreement were
approximately $41.7 million and borrowings available under the Vendor Financing
Arrangement were
                                       35
<PAGE>   36
 
approximately $13 million. The Company anticipates its one-way messaging
operations will generate sufficient cash flows to fund one-way capital
expenditures and consolidated working capital requirements for 1998 and 1999.
The Company anticipates that its capital resources, combined with anticipated
excess cash flows from the Company's one-way messaging operations, will be
sufficient to fund the Company's consolidated operations and capital
expenditures through 1998 and 1999.
 
     In 1997, the Company began an evaluation of its computer systems and paging
networks for Year 2000 compliance. The Company is aware that it will be required
to upgrade certain software systems to a new commercial release that is
currently available. Although the Company's evaluation is not yet complete, the
Company currently believes that the cost of becoming Year 2000 compliant will
not be material to the Company.
 
     From time to time, the Company will selectively consider potential
opportunities to make acquisitions intended to enhance its strategic position in
the wireless messaging industry. If the Company were to pursue any such
acquisitions, the Company would expect to obtain any necessary financing through
additional borrowings and/or equity financing and would need to successfully
integrate the acquired business into the existing operations.
 
     Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. No assurance can be given that the Company's
strategy will be implemented as currently planned or that the Company's
operations will generate positive cash flows.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The financial statements and supplementary data are included in this report
beginning on Page F-1.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                       36
<PAGE>   37
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
 
     The information required by this item is contained in this report under the
caption "Item 1. Business -- Executive Officers and Directors of the
Registrant."
 
ITEM 11. EXECUTIVE COMPENSATION
 
     See "Executive Compensation" in the Company's definitive proxy statement
dated February 16, 1998, which is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     See "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement dated February 16, 1998, which is
incorporated herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     See "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement dated February 16, 1998, which is incorporated herein
by reference.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (a) The following documents are filed as part of this 10-K:
 
        (1) Financial Statements. See Index to Consolidated Financial Statements
        on Page F-1 hereof.
 
        (2) Financial Statement Schedules. See Index to Consolidated Financial
        Statements on Page F-1 hereof.
 
        (3) Exhibits Required by Item 601 of Regulation S-K. See Exhibit Index
        on Page E-1 hereof.
 
     (b) Reports on Form 8-K
 
     The following current report on Form 8-K was filed by PageMart Wireless,
Inc. during the quarter ended December 31, 1997:
 
        Current Report on Form 8-K dated November 3, 1997 reporting under Item
        5 "Other Events" the Company's proposal to refinance certain of its
        outstanding indebtedness and modify its corporate structure.
 
                                       37
<PAGE>   38
 
                                   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.
 
Date: February 16, 1998                     PAGEMART WIRELESS, INC.
                                            (Registrant)
 
                                            By:     /s/ JOHN D. BELETIC
                                              ----------------------------------
                                                       John D. Beletic
                                                 Chairman and Chief Executive
                                                            Officer
 
     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                                   TITLE                     DATE
                      ---------                                   -----                     ----
<C>                                                    <S>                            <C>
 
                 /s/ JOHN D. BELETIC                   Chairman and Chief Executive   February 16, 1998
-----------------------------------------------------  Officer (Principal Executive
                   John D. Beletic                     Officer)
 
                  /s/ G. CLAY MYERS                    Vice President, Finance,       February 16, 1998
-----------------------------------------------------  Chief Financial Officer and
                    G. Clay Myers                      Treasurer (Principal
                                                       Financial and Accounting
                                                       Officer)
 
                                                       Director                       February   , 1998
-----------------------------------------------------
                  Robert H. Niehaus
 
                /s/ GUY L. DE CHAZAL                   Director                       February 16, 1998
-----------------------------------------------------
                  Guy L. De Chazal
 
                /s/ ARTHUR PATTERSON                   Director                       February 16, 1998
-----------------------------------------------------
                  Arthur Patterson
 
                /s/ LEIGH J. ABRAMSON                  Director                       February 16, 1998
-----------------------------------------------------
                  Leigh J. Abramson
 
            /s/ ALEJANDRO PEREZ ELIZONDO               Director                       February 16, 1998
-----------------------------------------------------
              Alejandro Perez Elizondo
 
                /s/ PAMELA D.A. REEVE                  Director                       February 16, 1998
-----------------------------------------------------
                  Pamela D.A. Reeve
</TABLE>
 
                                       38
<PAGE>   39
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................  F-2
 
Consolidated Balance Sheets as of December 31, 1996 and
  1997......................................................  F-3
 
Consolidated Statements of Operations for the Years Ended
  December 31, 1995, 1996 and 1997..........................  F-4
 
Consolidated Statements of Stockholders' Equity (Deficit)
  for the Years Ended December 31, 1995, 1996 and 1997......  F-5
 
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1995, 1996 and 1997..........................  F-6
 
Notes to Consolidated Financial Statements..................  F-7
 
Report of Independent Public Accountants on Financial
  Statement Schedule........................................  S-1
 
Schedule II -- Valuation and Qualifying Accounts for the
  Years Ended December 31, 1995, 1996, and 1997.............  S-2
</TABLE>
 
                                       F-1
<PAGE>   40
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Board of Directors and Stockholders of PageMart Wireless, Inc.:
 
     We have audited the accompanying consolidated balance sheets of PageMart
Wireless, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996
and 1997, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PageMart Wireless, Inc. and
subsidiaries as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
 
                                            /s/ARTHUR ANDERSEN LLP
 
Dallas, Texas,
February 3, 1998
 
                                       F-2
<PAGE>   41
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                  1996        1997
                                                                --------    --------
<S>                                                             <C>         <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................    $ 22,603    $  8,337
  Accounts receivable (net of allowance for doubtful
     accounts of $4,776 and $7,170 at December 31, 1996 and
     1997, respectively)....................................      33,446      61,394
  Inventories...............................................      11,702       5,359
  Prepaid expenses and other current assets.................       2,821       9,043
                                                                --------    --------
          Total current assets..............................      70,572      84,133
PROPERTY AND EQUIPMENT (net of accumulated depreciation of
  $48,851 and $76,388 at December 31, 1996 and 1997,
  respectively).............................................      96,943     136,727
NARROWBAND LICENSES.........................................     133,065     133,065
DEFERRED DEBT ISSUANCE COSTS (net of accumulated
  amortization of $4,094 and $4,940 at December 31, 1996 and
  1997, respectively).......................................       6,378       5,532
OTHER ASSETS................................................       6,662       2,419
                                                                --------    --------
          Total assets......................................    $313,620    $361,876
                                                                ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable..........................................    $ 23,186    $ 28,009
  Deferred revenue..........................................      27,047      53,469
  Current maturities of long-term debt......................          --       2,755
  Other current liabilities.................................      12,270      20,740
                                                                --------    --------
          Total current liabilities.........................      62,503     104,973
LONG-TERM DEBT..............................................     240,687     289,344
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
  Common stock, $.0001 par value per share, 75,000,000
     shares authorized:
     Class A Convertible Common Stock, 33,887,152 shares
      issued at December 31, 1996; 34,115,157 shares issued
      at December 31, 1997..................................           3           3
     Class B Convertible Non-Voting Common Stock, 3,809,363
      shares issued at December 31, 1996 and December 31,
      1997..................................................           1           1
     Class C Convertible Non-Voting Common Stock, 1,428,472
      shares issued at December 31, 1996 and December 31,
      1997..................................................          --          --
     Class D Convertible Non-Voting Common Stock, 679,945
      shares issued at December 31, 1996 and December 31,
      1997..................................................          --          --
  Additional paid-in capital................................     225,661     226,622
  Accumulated deficit.......................................    (214,688)   (258,575)
  Stock subscriptions receivable............................        (547)       (492)
                                                                --------    --------
          Total stockholders' equity (deficit)..............      10,430     (32,441)
                                                                --------    --------
          Total liabilities and stockholders' equity
            (deficit).......................................    $313,620    $361,876
                                                                ========    ========
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-3
<PAGE>   42
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1995       1996       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUES:
  Recurring revenue.........................................  $101,503   $153,041   $206,907
  Equipment revenue.........................................    57,688     68,551     70,871
                                                              --------   --------   --------
          Total revenues....................................   159,191    221,592    277,778
COST OF EQUIPMENT SOLD......................................    63,982     78,896     86,175
OPERATING EXPENSES:
  Technical.................................................    25,679     37,021     46,513
  Selling...................................................    36,094     43,046     51,371
  General and administrative................................    43,512     54,006     66,458
  Depreciation and amortization.............................    13,272     21,192     29,852
                                                              --------   --------   --------
          Total operating expenses..........................   118,557    155,265    194,194
                                                              --------   --------   --------
          Operating loss....................................   (23,348)   (12,569)    (2,591)
OTHER (INCOME) EXPENSE:
  Interest expense..........................................    30,720     35,041     38,499
  Interest income...........................................    (1,997)    (1,140)      (501)
  Other.....................................................     1,042      2,128      3,298
                                                              --------   --------   --------
          Total other (income) expense......................    29,765     36,029     41,296
                                                              --------   --------   --------
NET LOSS....................................................  $(53,113)  $(48,598)  $(43,887)
                                                              ========   ========   ========
NET LOSS PER SHARE
  (Basic and Diluted).......................................  $  (1.53)  $  (1.30)  $  (1.10)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (Basic and
  Diluted)..................................................    34,653     37,462     39,922
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-4
<PAGE>   43
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                               COMMON STOCK
                                           --------------------    ADDITIONAL                     STOCK
                                           NUMBER OF                PAID-IN     ACCUMULATED   SUBSCRIPTIONS   TREASURY
                                             SHARES      AMOUNT     CAPITAL       DEFICIT      RECEIVABLE      STOCK      TOTAL
                                           ----------    ------    ----------   -----------   -------------   --------   --------
<S>                                        <C>           <C>       <C>          <C>           <C>             <C>        <C>
BALANCE, December 31, 1994...............  29,529,525     $ 3       $124,694     $(112,977)     $   (243)       $(16)    $ 11,461
  Retirement of treasury stock...........   (200,000)      --            (16)           --            --          16           --
  725,445 shares of non-voting common
    stock issued in the Unit Offering....    725,445       --          5,078            --            --          --        5,078
  56,654 shares of common stock issued
    under the stock option/stock issuance
    plan.................................     56,654       --            156            --          (125)         --           31
  3,598,429 shares of common stock issued
    in the 1995 stock offering...........  3,598,429       --         24,689            --          (189)         --       24,500
  Net loss...............................         --       --             --       (53,113)           --          --      (53,113)
                                           ----------     ---       --------     ---------      --------        ----     --------
BALANCE, December 31, 1995...............  33,710,053       3        154,601      (166,090)         (557)         --      (12,043)
  94,879 shares of common stock issued
    under the stock option/stock issuance
    plan/Employee stock purchase plan....     94,879       --            561            --            --          --          561
  Repayment of stock subscriptions
    receivable...........................         --       --             --            --            10          --           10
  6,000,000 shares of common stock issued
    in initial public offering...........  6,000,000        1         70,499            --            --          --       70,500
  Net loss...............................         --       --             --       (48,598)           --          --      (48,598)
                                           ----------     ---       --------     ---------      --------        ----     --------
BALANCE, December 31, 1996...............  39,804,932       4        225,661      (214,688)         (547)         --       10,430
  179,705 shares of common stock issued
    under the stock option/stock issuance
    plan/employee stock purchase plan....    179,705       --            804            --           (45)         --          759
  Exercise of common stock warrants......     48,300       --            157            --            --          --          157
  Repayment of stock subscriptions
    receivable...........................         --       --             --            --           100          --          100
  Net loss...............................         --       --             --       (43,887)           --          --      (43,887)
                                           ----------     ---       --------     ---------      --------        ----     --------
BALANCE, December 31, 1997...............  40,032,937     $ 4       $226,622     $(258,575)     $   (492)       $ --     $(32,441)
                                           ==========     ===       ========     =========      ========        ====     ========
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-5
<PAGE>   44
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1995       1996        1997
                                                              --------   ---------   --------
<S>                                                           <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(53,113)  $ (48,598)  $(43,887)
  Adjustments to reconcile net loss to net cash (used in)
    provided by operating activities:
    Depreciation and amortization...........................    13,272      21,192     29,852
    Provision for bad debt..................................     6,135       6,986     10,910
    Accretion of discount on Senior Discount Exchange
     Notes..................................................    26,322      30,871     35,431
    Amortization of deferred debt issuance costs............     1,052       2,083        846
    Changes in certain assets and liabilities:
      Increase in accounts receivable.......................   (12,054)    (18,929)   (38,858)
      (Increase) decrease in inventories....................     1,630        (523)     6,343
      (Increase) decrease in prepaid expenses and other
       current assets.......................................    (1,383)         59     (6,222)
      (Increase) decrease in other assets, net..............    (1,350)     (1,052)     3,105
      Increase in accounts payable..........................     6,643          92      4,823
      Increase in deferred revenue..........................     7,447       5,638     26,422
      Increase in other current liabilities.................     2,486       5,744      8,470
                                                              --------   ---------   --------
        Net cash (used in) provided by operating
        activities..........................................    (2,913)      3,563     37,235
                                                              --------   ---------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of Narrowband Licenses..........................   (74,079)         --         --
  Purchases of property and equipment.......................   (33,503)    (63,804)   (67,506)
  Release of restricted cash................................        --         500         --
  Other.....................................................    (2,577)       (648)      (992)
                                                              --------   ---------   --------
        Net cash used in investing activities...............  (110,159)    (63,952)   (68,498)
                                                              --------   ---------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock....................    29,578      70,500         --
  Proceeds from issuance of common stock under the stock
    option/stock issuance plan..............................        31         561        759
  Proceeds from conversion of common stock warrants.........        --          --        157
  Proceeds from issuance of Senior Discount Notes, net......    95,001          --         --
  Payment of stock subscriptions receivable.................        --          10        100
  Deferred debt issuance costs incurred for Revolving Credit
    Agreement...............................................    (1,447)        (25)        --
  Borrowings under Revolving Credit Agreement...............        --      31,100      3,000
  Payments under Revolving Credit Agreement.................        --     (31,100)    (3,000)
  Borrowings from vendor financing arrangements.............     6,777          --     17,053
  Payments on vendor financing arrangements.................    (4,402)    (15,027)    (1,072)
                                                              --------   ---------   --------
        Net cash provided by financing activities...........   125,538      56,019     16,997
                                                              --------   ---------   --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........    12,466      (4,370)   (14,266)
CASH AND CASH EQUIVALENTS, beginning of period..............    14,507      26,973     22,603
                                                              --------   ---------   --------
CASH AND CASH EQUIVALENTS, end of period....................  $ 26,973   $  22,603   $  8,337
                                                              ========   =========   ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest................................................  $  2,146   $   1,231   $  1,306
    Income taxes............................................  $     --   $      --   $     --
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-6
<PAGE>   45
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. GENERAL
 
     PageMart, Inc. ("PageMart") was incorporated as a Delaware corporation on
May 8, 1989, to provide wireless messaging products and services. In January
1995, PageMart effected a corporate reorganization pursuant to which PageMart
Nationwide, Inc., a Delaware corporation, became the holding company parent of
PageMart. In December 1995, the corporate name was changed from PageMart
Nationwide, Inc. to PageMart Wireless, Inc. ("Wireless"). Wireless and its
subsidiaries are referred to herein as the "Company." The consolidated financial
statements of the Company include the accounts of PageMart and PageMart PCS,
Inc., a wholly owned subsidiary of Wireless, ("PageMart PCS"). PageMart PCS
holds certain narrowband personal communications services licenses. The
consolidated financial statements of PageMart include the accounts of PageMart
II, Inc., PageMart Operations, Inc., PageMart of California, Inc., PageMart of
Virginia, Inc. and PageMart International, Inc. Each of these companies is a
wholly-owned subsidiary of PageMart. PageMart II, Inc. and PageMart Operations,
Inc. hold certain Federal Communications Commission ("FCC") licenses. PageMart
International, Inc., which has had no significant operations to date, holds
certain investments in an international venture in Canada. Other than these
licenses and international investments, the subsidiaries of PageMart have no
significant assets or liabilities.
 
     The Company has incurred substantial losses from consolidated operations
since inception and is highly leveraged. Management expects to continue to incur
consolidated operating losses in 1998. In the third quarter of 1997, the Company
began generating operating profits in its one-way business and management
expects this trend to continue into 1998. The Company's consolidated operating
losses will be driven by the Company's investments in new advanced messaging
capabilities and the associated investment in the growth of its subscriber base
for such services. The Company's business plan calls for substantial growth in
its subscriber base in order for the Company to achieve overall operating
profitability. There can be no assurance that the Company will meet its business
plan or achieve operating profitability. If the Company cannot achieve operating
profitability, it may not be able to make the required payments on existing or
future obligations or realize its cost in developing the advanced messaging
network.
 
     In January 1998, the Company completed an offering of 11 1/4% Senior
Subordinated Discount Notes due 2008, (the "11 1/4% Notes") yielding gross
proceeds of approximately $249.7 million. In management's opinion, the remaining
proceeds from the Offering, current working capital, cash flow from operations,
borrowings expected to be available from the Revolving Credit Agreement,
(defined herein), and the Vendor Financing Arrangement, (defined herein), will
be sufficient to support the planned growth for its wireless communications
operations through 1998, including the planned construction and implementation
of a network capable of providing advanced messaging services.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
CONSOLIDATION
 
     The accompanying financial statements include the accounts of Wireless and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
 
CASH AND CASH EQUIVALENTS
 
     The Company includes as cash and cash equivalents cash on hand, cash in
banks and highly liquid investments with original maturities of three months or
less.
 
INVENTORIES
 
     Inventories consist of pagers held for resale and are stated at the lower
of cost or market. Cost is determined by using the average cost method, which
approximates the first-in, first-out method. The Company purchases a majority of
its pagers from Motorola, Inc.
 
                                       F-7
<PAGE>   46
 
PROPERTY AND EQUIPMENT
 
     Property and equipment are stated at cost and depreciated using the
straight-line method for financial reporting purposes and accelerated methods
for tax reporting purposes over estimated useful lives ranging from three to
seven years. Depreciation expense totaled approximately $12,683,000, $19,688,000
and $28,690,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. The Company purchases a majority of its network equipment from
Motorola, Inc. and Glenayre Technologies, Inc. Maintenance and repair costs are
charged to expense as incurred.
 
     Property and equipment consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1996       1997
                                                              --------   --------
<S>                                                           <C>        <C>
Network equipment...........................................  $109,901   $157,543
Computer equipment..........................................    26,268     41,023
Furniture and equipment.....................................     9,625     14,549
                                                              --------   --------
                                                               145,794    213,115
Less: Accumulated depreciation..............................   (48,851)   (76,388)
                                                              --------   --------
                                                              $ 96,943   $136,727
                                                              ========   ========
</TABLE>
 
REVENUE RECOGNITION
 
     The Company recognizes equipment revenue immediately upon the shipment of
pagers adjusted by allowances for normal returns. Recurring revenue, including
revenue from airtime charges and fees for other services such as voice mail,
customized coverage options and toll-free numbers are recognized in the month in
which the service is provided. All expenses related to the sale of equipment are
recognized at the time of sale. Deferred revenue represents advance billings for
services not yet performed. Such revenue is deferred and recognized in the month
in which the service is provided. Patent licensing revenues are recognized on a
straight-line basis over the term of the related agreement (see Note 6). Patent
licensing revenues of $383,000 are included in recurring revenues in 1995 and
$4,596,000 are included in recurring revenues in both fiscal 1996 and 1997,
respectively.
 
USE OF ESTIMATES
 
     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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
ADVERTISING EXPENSES
 
     Advertising expenses are expensed as incurred.
 
EARNINGS PER SHARE
 
     Net loss per share amounts as reflected on the statements of operations are
based upon the weighted average number of common shares outstanding. As required
by the Securities and Exchange Commission rules, all warrants, options and
shares issued during the year immediately preceding the initial public offering
in June 1996 are assumed to be outstanding prior to the closing of the initial
public offering for all periods presented. Shares issuable upon the exercise of
stock options and warrants granted before the year immediately preceding the
initial public offering were not included in the net loss per share calculation
as the effect from the exercise of those options would be antidilutive.
 
     In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share," ("SFAS 128"). The Company adopted SFAS
128 for the fiscal year ending
 
                                       F-8
<PAGE>   47
 
December 31, 1997. SFAS 128 replaces the primary earnings per share calculation
with a basic earnings per share calculation and modifies the calculation of
diluted earnings per share. Adoption of SFAS 128 did not affect the calculation
of earnings per share for the Company.
 
RECLASSIFICATIONS
 
     Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the current year presentation.
 
ACCOUNTING FOR LONG-LIVED ASSETS
 
     In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). The Company adopted SFAS 121 for the fiscal year ending December
31, 1996. SFAS 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS 121 requires that those assets
to be held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable through future cash flows. SFAS 121 requires that those assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less cost to sell. Adoption of SFAS 121 did not affect the Company's results of
operations for the years ended December 31, 1996 and 1997. The Company will
continue to evaluate the effect of SFAS 121 in subsequent periods.
 
3. NARROWBAND PERSONAL COMMUNICATIONS SERVICES LICENSES
 
     During July and December 1994, the Company participated in auctions of
Narrowband Personal Communications Services ("NPCS") licenses frequencies
conducted by the FCC. As a result of the auctions, the Company was awarded two
nationwide NPCS licenses for a total purchase price of approximately $133
million. Amortization of the NPCS licenses will commence when placed in service.
The NPCS licenses will be amortized over a period not to exceed 40 years. The
Company estimates that amortization of the NPCS licenses will commence in the
fourth quarter of 1998. The Company intends to follow the provisions of
Statement of Financial Accounting Standards No. 34 "Capitalization of Interest
Cost" with respect to its NPCS licenses and the related construction of its
advanced messaging network.
 
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
 
     Effective November 15, 1995, PageMart International, Inc. purchased 200,000
shares of common stock of PageMart Canada Limited ("PageMart Canada") which
represents 20% of the ownership of PageMart Canada. The remaining 800,000 shares
(representing 80% of the ownership) is held by PageMart Canada Holding
Corporation ("Canada Holding"). Canada Holding is owned 50% (1,000,000 shares of
Class A Common Stock) by third-party Canadian investors unrelated to PageMart
and 50% (1,000,000 shares of Class B Common Stock) by PageMart International,
Inc. The common shares have identical economic rights. However, voting control
of Canada Holding is held by the Class A Common Stockholders as the Class A
shares have two votes per share. The Company accounts for its investments in
PageMart Canada and Canada Holding under the equity method. Such investments are
included in Other Assets in the Consolidated Balance Sheets.
 
     The agreement among stockholders contains provisions which restrict the
transfer of Canada Holding shares and PageMart Canada shares for periods ranging
from three to five years. During the two years following the third anniversary
of the transactions, the third-party Canadian investors may exchange the
1,000,000 Class A common shares they hold in Canada Holding for 714,286 shares
of voting common stock of Wireless, subject to certain United States and
Canadian ownership requirements. Wireless is ultimately responsible for
effectuating the exchange within the United States and Canadian ownership
regulations. Such exchange may be accelerated in the event Wireless enters into
an agreement to be acquired. After the third anniversary of the transactions,
Wireless will have the right to purchase the shares held by the third-party
Canadian investors at their fair market value provided regulatory ownership
requirements permit such purchase.
 
                                       F-9
<PAGE>   48
 
5. LONG-TERM DEBT
 
     Long-term debt consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1996        1997
                                                              --------    --------
<S>                                                           <C>         <C>
12 1/4% Senior Discount Exchange Notes, face amount $136,500
  due November 1, 2003, at accreted value...................  $107,947    $122,720
15% Senior Discount Exchange Notes, face amount $207,270 due
  February 1, 2005, at accreted value.......................   132,740     153,398
Vendor Financing Arrangement of $30 million, bearing
  interest at the sum of 7.00% and the London interbank
  offered rate for three month maturities, or the sum of
  4.25% and the U.S. prime rate. (Based upon rates quoted by
  The Wall Street Journal, effective interest rates ranged
  from 12.44% to 12.72% at December 31, 1997.)..............        --      15,981
                                                              --------    --------
          Total debt........................................   240,687     292,099
          Less: Current maturities..........................        --      (2,755)
                                                              --------    --------
          Long-term debt....................................  $240,687    $289,344
                                                              ========    ========
</TABLE>
 
     On January 28, 1998, the Company, in a private offering, raised
approximately $249.7 million in gross proceeds of 11 1/4% Senior Subordinated
Discount Notes due 2008 (the "Offering"). Simultaneously, with the closing of
the Offering, the Company refinanced certain of its outstanding indebtedness,
(the "Refinancing"), and modified its corporate structure. The Refinancing
consisted of: (i) purchasing all of the outstanding 12 1/4% Notes (defined
below); (ii) amending certain terms of the covenants and agreements in the
indenture relating to the Company's 15% Notes (defined below); and (iii) merging
PageMart, Inc. into PageMart Wireless, Inc., with PageMart Wireless, Inc. as the
surviving corporation (the "Merger").
 
     Approximately $130.7 million of the net proceeds of the Offering was used
to finance the retirement of the 12 1/4% Notes (defined below). The proceeds
remaining after expenses of the Offering and Refinancing were approximately
$107.8 million. In connection with the Refinancing, the Company estimates that
an extraordinary charge of approximately $13.9 million related to the early
extinguishment of debt will be incurred in the first quarter of 1998.
 
     In October 1993, the Company completed an offering in which it issued
$136.5 million principal amount (at maturity) of 12 1/4% Senior Discount Notes
due 2003 (the "12 1/4% Notes") with an initial accreted value of $71.6 million
together with warrants to purchase 627,900 shares of its common stock for $3.26
per share.
 
     In July 1994, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 12 1/4% Notes were
exchanged for the Company's 12 1/4% Senior Discount Exchange Notes due 2003.
 
     In January 1995, the Company completed an offering of 15% Senior Discount
Notes due 2005 and 725,445 shares of non-voting common stock, par value $.0001
per share (the "Unit Offering"). Net proceeds from the Unit Offering were
approximately $100 million, of which approximately $5.1 million was allocated to
the non-voting common stock. The 15% Senior Discount Notes due 2005 (the "15%
Notes") have a principal amount at maturity of $207.3 million with an initial
accreted value of $100 million. The 15% Notes mature on February 1, 2005. From
and after August 1, 2000, interest on the 15% Notes will be payable semiannually
in cash at the rate of 15% per annum. The 15% Notes are redeemable at any time
on or after February 1, 2000, at the option of the Company in whole or in part,
at 105% of their principal amount at maturity, plus accrued and unpaid interest,
declining to 100% of their principal amount at maturity plus accrued interest on
and after February 1, 2002. In addition, at any time prior to February 1, 1998,
up to 35% of the accreted value of the 15% Notes may be redeemed at a redemption
price of 112.5% of their accreted value on the redemption date at the option of
the Company in connection with a public offering of its common stock.
 
                                      F-10
<PAGE>   49
 
     In June 1995, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 15% Notes were
exchanged for the Company's 15% Senior Discount Exchange Notes due 2005.
 
     The 11 1/4% Notes, the 12 1/4% Notes and the 15% Notes carry certain
restrictive covenants that, among other things, limit the ability of the Company
to incur indebtedness, pay dividends, prepay subordinated indebtedness,
repurchase capital stock, create liens, sell assets, engage in mergers and
consolidations, and enter into transactions with any holder of 5% or more of any
capital stock of the Company or any of its affiliates. The Company is in
compliance with all such restrictive covenants.
 
     In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of one-way or advanced messaging infrastructure equipment over a
period of 60 months up to a maximum aggregate amount of $30 million. Borrowings
under the Vendor Financing Arrangement are secured by the equipment purchased.
The interest rate applicable to such financing is equal to the sum of 7.00% and
the London interbank offered rate ("LIBOR") as published in The Wall Street
Journal for three-month maturities or the sum of 4.25% and the U.S. prime rate
of interest as published in The Wall Street Journal. The weighted average
interest rate in effect on December 31, 1997 with respect to the Vendor
Financing Arrangement was 12.63%.
 
     On May 11, 1995, the Company entered into a four year Revolving Credit
Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company,
as Issuing Bank, which provides for a $50 million revolving line of credit (the
"Revolving Credit Agreement"). As of December 31, 1997, there were no loans
outstanding under the Revolving Credit Agreement. The maximum amount available
under the Revolving Credit Agreement at any time is limited to a borrowing base
amount equal to the lesser of (i) a specified percentage of eligible accounts
receivable and inventory owned by Wireless, and (ii) an amount equal to the
service contribution of the Company as defined in the Revolving Credit Agreement
for the immediately preceding three-month period times 4.0. The interest rate
applicable to loans under the Revolving Credit Agreement is, at the option of
Wireless, either at a prime rate plus 1 1/4% or a Eurodollar rate plus 2 1/2%.
Commitments under the Revolving Credit Agreement expire and all loans thereunder
will be due and payable on March 31, 1999.
 
     The Revolving Credit Agreement contains certain covenants that, among other
things, limit the ability of the Company to incur indebtedness, make capital
expenditures and investments, pay dividends, repurchase capital stock, engage in
transactions with affiliates, create liens, sell assets, or engage in mergers
and consolidations, and also requires the Company to maintain certain financial
ratios.
 
     The Revolving Credit Agreement is secured by all trade receivables and
inventory owned by Wireless from time to time and by all of the capital stock of
PageMart owned by Wireless. As of December 31, 1997, the maximum amount
available under the Revolving Credit Agreement was $41.7 million.
 
     On January 15, 1998, the Company amended the Revolving Credit Agreement to
provide for the changes in debt and corporate structure that occurred with the
Refinancing and the Merger.
 
     Maturities of long-term debt and capital lease obligations are as follows
(in thousands):
 
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
   DECEMBER 31,
-------------------
<S>                 <C>                                                   <C>
   1998.................................................................  $  2,755
   1999.................................................................     3,123
   2000.................................................................     3,541
   2001.................................................................     4,015
   2002.................................................................     2,547
   Thereafter...........................................................   276,118
                                                                          --------
                                                                          $292,099
                                                                          ========
</TABLE>
 
                                      F-11
<PAGE>   50
 
6. COMMITMENTS AND CONTINGENCIES
 
     The Company has entered into various operating lease agreements for office
space, office equipment and transmission equipment sites. Total rent expense for
1995, 1996 and 1997 was approximately $8,471,000, $13,496,000 and $18,379,000,
respectively.
 
     Future minimum lease payments related to the Company's operating leases are
as follows (in thousands):
 
<TABLE>
<CAPTION>
FOR THE YEAR ENDING                                                        OPERATING
   DECEMBER 31,                                                             LEASES
-------------------                                                        ---------
<S>                 <C>                                                    <C>
   1998..................................................................   $14,446
   1999..................................................................     12,228
   2000..................................................................     10,038
   2001..................................................................      7,557
   2002..................................................................      5,086
   Thereafter............................................................     19,769
                                                                            -------
   Total minimum lease payments..........................................   $69,124
                                                                            =======
</TABLE>
 
     The Company is party to various legal proceedings arising out of the
ordinary course of business. The Company believes, based on the advice of legal
counsel, that there is no proceeding, either threatening or pending, against the
Company that could result in a material adverse effect on the results of
operations or financial condition of the Company.
 
     In December 1995, the Company transferred certain intellectual property to
a significant vendor in exchange for certain benefits which will be recognized
over a forty-seven month period. The Company also committed to purchase $40
million in network infrastructure equipment over a forty-seven month period as
part of this transaction. Through December 31, 1997, the Company had purchased
$21.9 million of network infrastructure under this purchase commitment.
 
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
 
     The following methods and assumptions were used by the Company in
estimating the fair value disclosures for its financial instruments. For cash
and cash equivalents, the carrying amounts reported in the Consolidated Balance
Sheets are equal to fair value. For debt, management estimated the fair value
based upon quoted market prices for publicly traded debt and based on the
appropriate interest rate at year-end for all other debt.
 
     The carrying amounts and fair values of the Company's financial instruments
at December 31, 1996 and 1997, are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31, 1996     DECEMBER 31, 1997
                                                     -------------------   -------------------
                                                     CARRYING     FAIR     CARRYING     FAIR
                                                      AMOUNT     VALUE      AMOUNT     VALUE
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Cash and cash equivalents.........................   $ 22,603   $ 22,603   $  8,337   $  8,337
Long-term debt....................................   $240,687   $250,156   $292,099   $263,281
</TABLE>
 
8. STOCKHOLDERS' EQUITY (DEFICIT)
 
PREFERRED STOCK
 
     Under the Company's Certificate of Incorporation, the Board of Directors
has the power to authorize the issuance of one or more classes or series of
preferred stock and to fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any, with respect to each such class or
series of preferred stock. At December 31, 1996 and 1997, there were 10 million
shares of preferred stock authorized with a par value of $.0001 and none of the
authorized shares of preferred stock were issued and outstanding.
 
                                      F-12
<PAGE>   51
 
COMMON STOCK
 
     In October 1993 in connection with issuance of the 12 1/4% Notes (see Note
5), the Company issued warrants to purchase 627,900 shares of its common stock
for $3.26 per share. The warrants were valued at $5.50 per share at the date
issued. The warrants may be exercised at any time prior to December 31, 2003.
Warrants that are not exercised by such date will expire. As of December 31,
1997, 579,600 of the warrants were outstanding.
 
     In October 1995, the Company's Certificate of Incorporation was amended
(the "Amended Certificate") and at that time the Amended and Restated Agreement
Among Certain Stockholders of PageMart Nationwide, Inc. dated September 19, 1995
(the "Stockholders' Agreement"), became effective. The Amended Certificate
provides that the Company will have four classes of outstanding common stock,
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                           SHARES ISSUED AND
                                                                              OUTSTANDING
                                                                        -----------------------
                                                                             DECEMBER 31,
                                                             SHARES     -----------------------
                                                           AUTHORIZED      1996         1997
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Class A Convertible Common Stock, $.0001 par value per
  share (the "Class A Common Stock")....................   60,000,000   33,887,152   34,115,157
Class B Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class B Common Stock")..........   12,000,000    3,809,363    3,809,363
Class C Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class C Common Stock")..........    2,000,000    1,428,472    1,428,472
Class D Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class D Common Stock")..........    1,000,000      679,945      679,945
                                                           ----------   ----------   ----------
                                                           75,000,000   39,804,932   40,032,937
                                                           ==========   ==========   ==========
</TABLE>
 
     Upon filing of the Amended Certificate, all shares of previously
outstanding common stock were automatically converted into shares of Class A
Common Stock, and all shares of previously outstanding non-voting common stock
issued in the Unit Offering were converted into shares of Class D Common Stock.
Additionally, pursuant to the Stockholders' Agreement, a number of shares of
Class A Common Stock owned by certain institutional investors were automatically
converted into shares of Class B Common Stock and Class C Common Stock, such
that voting control of the Company lies with the stockholders generally.
 
     Class A Common Stock, Class B Common Stock and Class C Common Stock are
convertible by certain institutional investors subject to voting control and
regulatory restrictions at any time at the option of the holder, in accordance
with the terms of the Amended Certificate. Class A Common Stock is convertible
by certain holders thereof into either Class B or C Common Stock. Classes B, C
and D Common Stock are convertible to Class A Common Stock.
 
     The Stockholders' Agreement provides that the parties thereto ("Holders")
shall collectively have the right to "demand" registrations at any time.
Pursuant to these "demand" rights, Holders of common stock (the "Registrable
Securities") may request in writing that the Company file a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the registration of a number of shares equal to at least three million
shares or a lesser number if such number represents a majority of the
Registrable Securities then outstanding.
 
     On March 20, 1995, the Company granted to a strategic partner warrants to
purchase a total of 206,748 shares of the Company's common stock at an exercise
price of $10.00.
 
     On June 19, 1996, the Company issued an aggregate of 6,000,000 shares of
Class A Common Stock in an initial public offering at a price of $13.00 per
share. The Company received proceeds from the initial public offering of
approximately $70.5 million after deducting underwriting discounts, commissions,
fees and expenses associated with the initial public offering. Upon receipt of
the net proceeds, the Company retired
 
                                      F-13
<PAGE>   52
 
vendor debt of approximately $12.9 million and repaid approximately $11.9
million of loans outstanding under the Company's Revolving Credit Agreement.
 
     Following is a schedule of common stock reserved at December 31, 1997:
 
<TABLE>
<CAPTION>
                                                               SHARES
                                                              ---------
<S>                                                           <C>
Exercise of common stock warrants...........................    786,348
Stock option/stock issuance plan............................  6,488,928
Employee Stock Purchase Plan................................    424,109
Non-Employee/Director Stock Option Plan.....................     75,000
                                                              ---------
                                                              7,774,385
                                                              =========
</TABLE>
 
9. STOCK OPTION/STOCK ISSUANCE/STOCK PURCHASE PLANS
 
                            STOCK COMPENSATION PLANS
 
     At December 31, 1997, the Company has three stock-based compensation plans,
the 1991 Stock Option/Issuance Plan, the 1996 Nonqualified Stock Option Plan for
Non-Employee Directors and the Employee Stock Purchase Plan. The Company applies
Accounting Principles Board Opinion 25 and related Interpretations to account
for expenses related to its plans. Accordingly, no compensation costs have been
recognized for its fixed option plans or its employee stock purchase plan. If
compensation costs for these plans had been determined based on the fair value
at the grant dates for awards under the plans consistent with the method of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation", the Company's net loss and loss per share would have been
increased to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                          1995       1996       1997
                                                        --------   --------   --------
<S>                                       <C>           <C>        <C>        <C>
Net loss (in 000's).....................  As reported   $(53,113)  $(48,598)  $(43,887)
                                          Pro forma      (53,380)   (50,095)   (46,568)
Basic and diluted earnings per share....  As reported   $  (1.53)  $  (1.30)  $  (1.10)
                                          Pro forma        (1.54)     (1.34)     (1.17)
</TABLE>
 
     As the Employee Stock Purchase Plan and the 1996 Nonqualified Stock Option
Plan for Non-Employee Directors were adopted in 1996, 1995 pro forma balances do
not include expenses for these plans.
 
                            FIXED STOCK OPTION PLANS
 
     The Company has two fixed stock option plans. Under the Fifth Amended and
Restated 1991 Stock Option Plan, ("1991 Plan"), the Company may grant options to
its employees for up to 7,500,000 shares of Class A Common Stock. Under the 1996
Nonqualified Stock Option Plan for Non-Employee Directors, ("Directors Plan"),
the Company may grant options to its non-employee directors for up to 100,000
shares of common stock. Under both plans, the exercise price of each option
equals the market price of the Company's stock at the close of the market on the
date of grant and an option's maximum term is 10 years. Options are granted at
various times during the year and vest over a five year period under the 1991
Plan and over a three year period under the Directors Plan. Both plans are
administered by the Board of Directors.
 
     Under the provisions of the Third Amended and Restated 1991 Stock Issuance
Plan, the Company may also issue stock to employees. The stock vests over a
period not to exceed forty-eight months. Additional vesting occurs upon death or
disability. Upon the termination of an officer, the Company can repurchase the
unvested stock at cost. Under the Plan, the Company issued 300,000 shares to an
officer during 1992 at $0.326 per share. All awards under the Plan have been
made at a price at or above the estimated fair value of the Company's common
stock at the date of grant.
 
     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995, 1996 and 1997:
 
                                      F-14
<PAGE>   53
 
dividend yield of 0 percent for all years; expected volatility of 40 percent for
1995 and 1996 and 47.3 percent for 1997 for the 1991 Plan and 40 percent for
1996 and 1997 for the Directors Plan, risk-free interest rates average 6.44
percent in 1995, 6.35 percent in 1996 and 6.31 percent in 1997 for the 1991 Plan
and 6.67 percent in 1996 and 1997 for the Directors Plan; and expected lives of
8.23 years for 1995 and 1996 and 8.69 for 1997 for the 1991 Plan and 8.23 years
for 1996 and 1997 for the Directors Plan.
 
     A summary of the status of the Company's 1991 Plan as of December 31, 1995,
1996 and 1997 and the Directors Plan as of December 31, 1996 and 1997 and
changes during the years ending on these dates is presented below:
 
                                   1991 PLAN
 
<TABLE>
<CAPTION>
                                                 1995                1996                1997
                                           -----------------   -----------------   -----------------
                                                    WEIGHTED            WEIGHTED            WEIGHTED
                                                    AVERAGE             AVERAGE             AVERAGE
                                           SHARES   EXERCISE   SHARES   EXERCISE   SHARES   EXERCISE
                                           (000)     PRICE     (000)     PRICE     (000)     PRICE
                                           ------   --------   ------   --------   ------   --------
<S>                                        <C>      <C>        <C>      <C>        <C>      <C>
Outstanding at beginning of year........   1,597     $4.83     2,669     $6.59      3,473    $7.09
Granted.................................   1,205      8.84     1,126      8.49      2,502     8.36
Exercised...............................     (37)     4.12       (64)     5.24       (135)    4.19
Forfeited...............................     (96)     5.82      (258)     8.51     (1,564)    9.28
                                           -----               -----               ------
Outstanding at end of year..............   2,669     $6.59     3,473     $7.09      4,276    $7.12
                                           =====               =====               ======
 
Options exercisable at year-end.........     583               1,077                1,502
                                           =====               =====               ======
 
Weighted-average fair value of options
  granted during the year...............             $5.07               $5.02               $4.74
                                                     =====               =====               =====
</TABLE>
 
                                 DIRECTORS PLAN
 
<TABLE>
<CAPTION>
                                                            1996                         1997
                                                 --------------------------   --------------------------
                                                                WEIGHTED                     WEIGHTED
                                                 SHARES         AVERAGE       SHARES         AVERAGE
                                                 (000)       EXERCISE PRICE   (000)       EXERCISE PRICE
                                                 ------      --------------   ------      --------------
<S>                                              <C>         <C>              <C>         <C>
Outstanding at beginning of year...............     --           $   --          25           $12.00
Granted........................................     25            12.00          --               --
Exercised......................................     --               --          --               --
Forfeited......................................     --               --          --               --
                                                 -----                        -----
Outstanding at end of year.....................     25           $12.00          25           $12.00
                                                 =====                        =====
 
Options exercisable at year-end................      6                           15
                                                 =====                        =====
 
Weighted-average fair value of options granted
  during the year..............................                  $ 7.04                       $   --
                                                                 ======                       ======
</TABLE>
 
                                      F-15
<PAGE>   54
 
     The following table summarized information about fixed stock options
outstanding at December 31, 1997:
 
<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
                  -----------------------------------------------   ----------------------------
                    NUMBER       WEIGHTED-AVG.                        NUMBER
   RANGE OF       OUTSTANDING      REMAINING       WEIGHTED-AVG.    EXERCISABLE   WEIGHTED-AVG.
EXERCISE PRICES   AT 12/31/97   CONTRACTUAL LIFE   EXERCISE PRICE   AT 12/31/97   EXERCISE PRICE
---------------   -----------   ----------------   --------------   -----------   --------------
<S>               <C>           <C>                <C>              <C>           <C>
1991 PLAN
 
$ 0.00 to  2.00      202,000           4.2             $ 1.01          202,000        $ 1.01
  2.01 to  4.00      412,000           5.4               3.26          365,000          3.26
  4.01 to  6.00      126,000           8.7               5.61           18,000          5.00
  6.01 to  8.00    2,279,000           8.5               6.89          904,000          6.95
  8.01 to 10.00    1,241,000           9.8               9.93            8,000         10.00
 10.01 to 12.00       16,000           8.4              10.83            5,000         10.85
                   ---------                                         ---------
                   4,276,000           8.4               7.12        1,502,000          5.27
                   =========                                         =========
 
DIRECTORS PLAN
 
$ 0.00 to 12.00       25,000           8.2             $12.00           15,000        $12.00
                   =========                                         =========
</TABLE>
 
                          EMPLOYEE STOCK PURCHASE PLAN
 
     Under the Employee Stock Purchase Plan, the Company is authorized to issue
up to 500,000 shares of common stock to its eligible employees. Under terms of
the Plan, employees can choose on January 1 and July 1 of each year to have a
portion of their earnings not to exceed $25,000 of market value per year
withheld to purchase the Company's common stock. The purchase price of the stock
is 90 percent of the lower of the market price on the grant date or the market
price on the June 30 or December 31 immediately following the grant date of an
option. Under the Plan, the Company sold 31,275 shares to employees in 1996 and
44,616 shares in 1997. Compensation cost is recognized for the fair value of the
employees's purchase rights, which was estimated using the Black-Scholes model
with the following assumptions for 1996 and 1997: dividend yield of 0 percent;
an expected life of 0.5 years; expected volatility of 40 percent in 1996 and
47.3 percent in 1997; and a risk-free interest rate of 6.27 percent in 1996 and
5.37 percent in 1997. The weighted-average fair value of those purchased rights
granted in 1996 was $2.14 and $1.65 in 1997.
 
10. FEDERAL INCOME TAXES
 
     Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS
109 requires an asset and liability approach which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events which have been recognized in the Company's financial statements. The
Company had approximately $149.2 million and $157.5 million of net operating
loss carryforwards for federal income tax purposes at December 31, 1996 and
1997, respectively. The net operating loss carryforwards will expire in the
years 2004 through 2012 if not previously utilized. The utilization of these
carryforwards is subject to certain limitations. Of the net operating loss
carryforwards at December 31, 1997, management has estimated that approximately
$38.9 million is subject to an annual utilization limit of $4.8 million.
 
     In connection with the adoption of SFAS 109, the Company has recorded a
valuation reserve equal to its net deferred tax asset at each reporting period,
due to historical and anticipated future operating losses. Accordingly, the
adoption of SFAS 109 did not have an effect on the Company's financial position
or results of operations. Management will evaluate the appropriateness of the
reserve in the future based upon historical and operating results of the
Company.
 
                                      F-16
<PAGE>   55
 
     Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis and the potential benefits of certain tax
carryforwards. The significant deferred tax assets and liabilities, as
determined under the provisions of SFAS 109, and the change in those assets and
liabilities are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                     DECEMBER 31,                DECEMBER 31,
                                                         1996         CHANGE         1997
                                                     ------------    --------    ------------
<S>                                                  <C>             <C>         <C>
Gross deferred tax asset:
  Net operating loss carryforwards.................    $ 50,741      $  2,804      $ 53,545
  Bad debt reserve.................................       3,115         1,094         4,209
  Inventory reserve................................       1,527         1,940         3,467
  Accretion of Senior Discount Notes...............      23,497        12,047        35,544
  Other............................................         782           597         1,379
                                                       --------      --------      --------
                                                         79,662        18,482        98,144
Gross deferred tax liability:
  Depreciation.....................................      (6,999)       (4,290)      (11,289)
                                                       --------      --------      --------
                                                         72,663        14,192        86,855
     Valuation allowance...........................     (72,663)      (14,192)      (86,855)
                                                       --------      --------      --------
     Net deferred tax asset........................    $     --      $     --      $     --
                                                       ========      ========      ========
</TABLE>
 
11. RELATED-PARTY TRANSACTIONS
 
     In connection with the Unit Offering completed in 1995 (see Note 5), the
Company incurred $3.8 million in fees to an affiliate of a shareholder. In
addition, an affiliate of a shareholder acted as an underwriter of the Company's
initial public offering in June 1996 and received $2.0 million in compensation
in the form of an underwriter's discount. An affiliate of a shareholder also
acted as placement agent for the Offering (see Note 5) and received compensation
from the Company in the amount of $8.1 million for acting in such capacity.
 
     As of December 31, 1997, the president and certain other officers of the
Company are indebted to the Company in the aggregate amount of $617,225 under
promissory notes issued in connection with the purchase of the Company's common
stock and for general purposes (the "Notes"). The Notes have terms ranging from
three to four years and are secured by common stock owned by the officers. The
Notes bear interest at the Applicable Federal Rate in effect on the date of
issuance as published by the Internal Revenue Service. Interest rates on the
Notes range from 3.55% to 6.90%. Interest is due and payable annually beginning
on the first anniversary of the date of each Note. All Notes are included in
Stock Subscriptions Receivable and Accounts Receivable in the Consolidated
Balance Sheets.
 
                                      F-17
<PAGE>   56
 
12. SUPPLEMENTARY INFORMATION
 
     The following table sets forth supplementary financial information related
to the Company's various operations (in thousands):
 
<TABLE>
<CAPTION>
                                                          FISCAL YEAR ENDED DECEMBER 31, 1995
                                                -------------------------------------------------------
                                                 ONE-WAY    ADVANCED
                                                MESSAGING   MESSAGING    INTERNATIONAL     CONSOLIDATED
                                                ---------   ---------    -------------     ------------
<S>                                             <C>         <C>         <C>                <C>
Revenues......................................  $159,191    $     --        $     --         $159,191
Operating loss................................   (22,972)       (376)             --          (23,348)
EBITDA(1).....................................    (9,700)       (376)             --          (10,076)
Total assets..................................   120,004     140,235           3,590          263,829
Capital expenditures..........................    32,486       1,017              --           33,503
</TABLE>
 
<TABLE>
<CAPTION>
                                                          FISCAL YEAR ENDED DECEMBER 31, 1996
                                                -------------------------------------------------------
                                                 ONE-WAY    ADVANCED
                                                MESSAGING   MESSAGING   INTERNATIONAL(2)   CONSOLIDATED
                                                ---------   ---------   ----------------   ------------
<S>                                             <C>         <C>         <C>                <C>
Revenues......................................  $221,592    $     --        $     --         $221,592
Operating loss................................   (11,465)       (657)           (447)         (12,569)
EBITDA(1).....................................     9,727        (657)           (447)           8,623
Total assets..................................   160,858     151,108           1,654          313,620
Capital expenditures..........................    50,838      12,966              --           63,804
</TABLE>
 
<TABLE>
<CAPTION>
                                                          FISCAL YEAR ENDED DECEMBER 31, 1997
                                                -------------------------------------------------------
                                                 ONE-WAY    ADVANCED
                                                MESSAGING   MESSAGING   INTERNATIONAL(2)   CONSOLIDATED
                                                ---------   ---------   ----------------   ------------
<S>                                             <C>         <C>         <C>                <C>
Revenues......................................  $277,605    $     --        $    173         $277,778
Operating loss................................    (1,887)       (207)           (497)          (2,591)
EBITDA(1).....................................    27,774         (16)           (497)          27,261
Total assets..................................   177,090     185,943          (1,157)         361,876
Capital expenditures..........................    32,169      35,337              --           67,506
</TABLE>
 
---------------
 
(1) EBITDA represents earnings (loss) before interest, taxes, depreciation and
    amortization.
 
(2) Expenses reflected in this table are for the Company's international
    headquarters operations. The Company accounts for its investments in Canada
    under the equity method. Consequently, the Company's share of expenses from
    its Canadian operations are not reflected in this table.
 
                                      F-18
<PAGE>   57
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                        ON FINANCIAL STATEMENT SCHEDULE
 
To the Board of Directors and Stockholders of PageMart Wireless, Inc.:
 
     We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of PageMart Wireless, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 3, 1998. Our audit was made for the purpose of forming an opinion on
those financial statements taken as a whole. Schedule II is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
 
                                            /s/ARTHUR ANDERSEN LLP
 
Dallas, Texas,
February 3, 1998
 
                                       S-1
<PAGE>   58
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
            COLUMN A                 COLUMN B             COLUMN C             COLUMN D       COLUMN E
                                                         ADDITIONS
                                                  ------------------------
                                    BALANCE AT    CHARGED TO    CHARGED TO
                                    BEGINNING     COSTS AND       OTHER                      BALANCE AT
           DESCRIPTION              OF PERIOD      EXPENSES      ACCOUNTS     DEDUCTIONS    END OF PERIOD
           -----------              ----------    ----------    ----------    ----------    -------------
<S>                                 <C>           <C>           <C>           <C>           <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 1997.....     $4,776       $10,910        $   --        $8,516(a)      $7,170
Year Ended December 31, 1996.....     $4,534       $ 6,986        $   --        $6,744(a)      $4,776
Year Ended December 31, 1995.....     $1,388       $ 6,135        $   --        $2,989(a)      $4,534
</TABLE>
 
---------------
 
(a) Accounts written off as uncollectible, net of recoveries.
 
                                       S-2
<PAGE>   59
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                 DESCRIPTION OF EXHIBIT
        -------                               ----------------------
<C>                        <S>
          3.1              Restated Certificate of Incorporation of PageMart Wireless,
                           Inc. (filed as an exhibit to the Registration Statement on
                           Form S-1 of the Company (Reg. No. 33-03012), and
                           incorporated herein by reference).
          3.2              Certificate of Amendment to Restated Certificate of
                           Incorporation of PageMart Wireless, Inc. (filed as an
                           exhibit to the Registration Statement on Form S-1 of the
                           Company (Reg. No. 33-03012), and incorporated herein by
                           reference).
          3.3              By-laws of PageMart Wireless, Inc.
          4.1              Indenture, dated as of January 28, 1998, between PageMart
                           Wireless, Inc. and United States Trust Company of New York,
                           as Trustee, relating to the 11 1/4% Senior Subordinated
                           Discount Notes due 2008.
          4.2              Indenture, dated as of January 17, 1995, between PageMart
                           Wireless, Inc. and United States Trust Company of New York,
                           as Trustee, relating to the 15% Senior Discount Notes due
                           2005. (filed as an exhibit to the Registration Statement on
                           Form S-1 of the Company (Reg. No. 33-91142), and
                           incorporated herein by reference).
          4.3              First Supplemental Indenture, dated as of December 31, 1997,
                           among PageMart Wireless, Inc. and United States Trust
                           Company of New York, as Trustee (filed as an exhibit to the
                           Form 8-K of the Company dated January 28, 1998, and
                           incorporated herein by reference).
         10.1              Warrant Agreement, dated as of October 19, 1993, between
                           PageMart, Inc. and United States Trust Company of New York,
                           as Warrant Agent, relating to the Warrants to purchase
                           Common Stock of the Company (filed as an exhibit to the Form
                           10-K of the Company for the fiscal year ended December 31,
                           1994, and incorporated herein by reference).
         10.2              Telecommunications Service Agreement, dated May 29, 1992,
                           between PageMart, Inc. and Wiltel, Inc. (filed as an exhibit
                           to the Registration Statement on Form S-1 of the Company
                           (Reg. No. 33-91142), and incorporated herein by reference).
         10.3              Amended and Restated Satellite Services Supplemental
                           Agreement, dated as of December 18, 1997, between PageMart
                           Wireless, Inc. and AvData Systems, Inc.(1)
         10.4              Satellite Services and Space Segment Lease Agreement, dated
                           January 2, 1995, between PageMart, Inc. and SpaceCom
                           Systems, Inc. (filed as an exhibit to the Registration
                           Statement on Form S-1 of the Company (Reg. No. 33-91142),
                           and incorporated herein by reference).
         10.5              Credit Agreement, dated as of May 11, 1995, by and among
                           PageMart Wireless, Inc. (formerly known as PageMart
                           Nationwide, Inc.), the Lenders named therein, BT Commercial
                           Corporation, as Agent, and Bankers Trust Company, as Issuing
                           Bank. (filed as an exhibit to the Registration Statement on
                           Form S-1 of the Company (Reg. No. 33-91142), and
                           incorporated herein by reference).
         10.6              Fourth Amendment to Credit Agreement, dated as of January
                           15, 1998, among PageMart Wireless, Inc., the Lenders named
                           therein, BT Commercial Corporation, as Agent, and Bankers
                           Trust Company, as Issuing Bank.
         10.7              Promissory Note and Security Agreement, dated May 21, 1997,
                           between PageMart, Inc. and Glenayre Electronics, Inc. (filed
                           as an exhibit to the Form 10-Q of the Company for the
                           quarter ended June 30, 1997, and incorporated herein by
                           reference).
</TABLE>
 
                                       E-1
<PAGE>   60
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                 DESCRIPTION OF EXHIBIT
        -------                               ----------------------
<C>                        <S>
         10.8              Amended and Restated Agreement Among Certain Stockholders of
                           PageMart Nationwide, Inc. dated as of September 19, 1995
                           (filed as an exhibit to the Form 8-K of the Company dated
                           October 6, 1995, and incorporated herein by reference).
         10.9              Amendment No. 1 to Amended and Restated Agreement Among
                           Certain Stockholders, dated as of October 1, 1997, among
                           PageMart Wireless, Inc. and certain of its stockholders.
         10.10             Subscription Agreement dated as of July 7, 1995 among
                           PageMart Nationwide, Inc., PageMart Canada Holding
                           Corporation and TD Capital Group Ltd. (filed as an exhibit
                           to the Registration Statement on Form S-1 of the Company
                           (Reg. No. 33-03012), and incorporated herein by reference).
         10.11             Agreement Among Stockholders among PageMart Nationwide,
                           Inc., PageMart International, Inc., TD Capital Group Ltd.,
                           PageMart Canada Limited. (filed as an exhibit to the
                           Registration Statement on Form S-1 of the Company (Reg. No.
                           33-03012), and incorporated herein by reference).
         10.12             Equipment Purchase Agreement, dated as of January 26, 1996,
                           between Motorola, Inc. and PageMart Wireless, Inc. (filed as
                           an exhibit to the Form 10-K of the Company for the fiscal
                           year ended December 31, 1995, and incorporated herein by
                           reference)(1).
         10.13             Technology Asset Agreement, dated as of December 1, 1995,
                           between Motorola, Inc. and PageMart Wireless, Inc. (filed as
                           an exhibit to the Form 10-K of the Company for the fiscal
                           year ended December 31, 1995, and incorporated herein by
                           reference)(1).
         10.14             PageMart Wireless, Inc. Employee Stock Purchase Plan (filed
                           as an exhibit to the Registration Statement on Form S-1 of
                           the Company (Reg. No. 33-03012), and incorporated herein by
                           reference).
         10.15             PageMart Wireless, Inc. Nonqualified Formula Stock Option
                           Plan for Non-Employee Directors. (filed as an exhibit to the
                           Registration Statement on Form S-1 of the Company (Reg. No.
                           33-03012), and incorporated herein by reference).
         10.16             Office Lease Agreement, dated as of November 26, 1996,
                           between Crescent Real Estate Equities Limited and PageMart
                           Wireless, Inc. (filed as an exhibit to the Company's Annual
                           Report on Form 10-K for the fiscal year ended December 31,
                           1996, and incorporated herein by reference).
         10.17             PageMart Wireless, Inc. Fifth Amended and Restated 1991
                           Stock Option Plan (filed as an exhibit to the definitive
                           proxy statement of the Company dated April 18, 1997, and
                           incorporated herein by reference).
         10.18             Severance and Reimbursement Agreement, dated September 12,
                           1997, between PageMart Wireless, Inc. and N. Ross Buckenham
                           (filed as an exhibit to the Form 10-Q of the Company for the
                           quarter ended September 30, 1997, and incorporated herein by
                           reference).
         10.19             Resale Agreement, dated November 1, 1993, between PageMart,
                           Inc., licensor, and GTE Service Corporation, licensee.
                           (filed as an exhibit to the Registration Statement on Form
                           S-1 of the Company (Reg. No. 33-91142), and incorporated
                           herein by reference).
         10.20             Strategic Alliance Agreement No. 1, dated September 15,
                           1994, between GTE Service Corporation and PageMart, Inc.
                           (filed as an exhibit to the Registration Statement on Form
                           S-1 of the Company (Reg. No. 33-91142), and incorporated
                           herein by reference).
</TABLE>
 
                                       E-2
<PAGE>   61
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                 DESCRIPTION OF EXHIBIT
        -------                               ----------------------
<C>                        <S>
         10.21             Strategic Alliance Agreement No. 2, dated October 13, 1994,
                           between GTE Service Corporation and PageMart, Inc. (filed as
                           an exhibit to the Form 10-K of the Company for the fiscal
                           year ended December 31, 1994, and incorporated herein by
                           reference).
         10.22             Resale Agreement, dated as of December 12, 1997, between
                           PageMart Wireless, Inc. and GTE Communications
                           Corporation.(1)
         10.23             Third Amended and Restated 1991 Stock Issuance Plan (filed
                           as an exhibit to the Registration Statement on Form S-8
                           (Reg. No. 33-98116), and incorporated herein by reference).
         10.24             Agreement between PageMart Incorporated and GTE
                           Communications Systems Corporation to assume and Amendment
                           No. 2 to Resale Agreement Number 999999-93-12 between
                           PageMart Incorporated and GTE Service Corporation, dated
                           October 2, 1997.(1)
         10.25             Resale Agreement between GTE MobileNet Service Corp.,
                           licensee and PageMart, Inc., licensor dated July 1, 1996.(1)
         11.1              Computation of per share earnings (loss) for the three
                           months ended December 31, 1997.
         11.2              Computation of per share earnings (loss) for the three
                           months ended December 31, 1996.
         11.3              Computation of per share earnings (loss) for the year ended
                           December 31, 1997.
         11.4              Computation of per share earnings (loss) for the year ended
                           December 31, 1996.
         21.1              PageMart Wireless, Inc. Subsidiaries.
         27.1              Financial Data Schedule for the year ended December 31,
                           1997.
</TABLE>
 
---------------
 
(1) The Company has requested confidential treatment for certain portions of
    this agreement.
 
                                       E-3