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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
 
                                   FORM 10-K
 
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<S>              <S>
   (MARK ONE)
        X              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
      ----            THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                         FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                              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>
 
                    6688 NORTH CENTRAL EXPRESSWAY, SUITE 800
                              DALLAS, TEXAS 75206
                    (Address of principal executive offices)
 
      (Registrant's telephone number, including area code): (214) 750-5809
                         ------------------------------
        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 such
filing requirements for the past 90 days.  Yes [X]   No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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.  [ ]
 
     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
February 28, 1997 as reported on the NASDAQ National Market System, was
approximately $45,391,200. 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 February 28, 1997, 33,946,152 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
Shareholders scheduled to be held on May 20, 1997, are incorporated by reference
into Part III (items 10, 11, 12 and 13) hereof.
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<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     PageMart Wireless, Inc. (hereinafter referred to together with its
subsidiaries as the "Company") is one of the fastest growing providers of
wireless messaging services in the United States. The Company has grown to
become the sixth largest paging carrier in the United States, based on 1,859,407
subscribers at December 31, 1996. The Company's number of subscribers has
increased at annual growth rates of 136%, 60% and 50% in 1994, 1995 and 1996,
respectively. The Company has made no acquisitions, and all subscriber growth
has been internally generated.
 
     The Company offers local, multi-city, 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 services in Puerto Rico, the
U.S. Virgin Islands and the Bahamas, and Canada. On February 25, 1997, the
Company announced an expansion of services into Mexico and most of Central
America through its affiliation with Buscatel, a subsidiary of Telefonos de
Mexico ("TelMex"), Mexico's largest telecommunications company, as well as other
firms in Central America. The Company employs a digital, state of the art
transmission network that is 100% FLEX(R) enabled, allowing the use of high
speed messaging technology thereby providing increased transmission capacity.
 
     The Company was incorporated in Delaware on November 29, 1994 as a
wholly-owned subsidiary of PageMart, Inc. ("PageMart"). Effective January 19,
1995, PageMart merged with a wholly-owned subsidiary of the Company, 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 the right to receive one share of common stock of the Company.
Upon consummation of the Reorganization, the stockholders of PageMart had the
same ownership interest in the Company as they had in PageMart, and the Company
owned all of the capital stock of PageMart. On December 28, 1995, the name of
the Company was changed from PageMart Nationwide, Inc. to PageMart Wireless,
Inc.
 
OPERATING STRATEGY
 
     The Company attributes the significant growth of its 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.
 
          DIVERSIFIED DISTRIBUTION CHANNELS. 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.
 
             Retail Marketing. The Company believes that it is a leading
        supplier of paging units to consumers through retail distribution
        channels. The Company has been selected as the pager supplier for a
        number of leading retail chains, including Office Depot Inc.,
        RadioShack, a division of Tandy Corporation, Federated Department
        Stores, Inc., 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, Ameritech
        Mobile Services, Inc., EXCEL Communications, Inc. and Puerto Rico
        Telephone Company.
 
             National Sales Offices. The Company's national sales offices sell
        equipment and services through four distribution channels: direct sales,
        agents, third-party resellers and local retailers. The Company has a
        direct sales force presence in approximately 80 Metropolitan Statistical
        Areas ("MSAs") through 65 offices.
 
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          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 as rapidly as possible to increase profitability and cash
     flow through greater utilization of its nationwide wireless communication
     network.
 
          NATIONWIDE AND NAFTA-WIDE COMMON FREQUENCY. The Company has
     constructed its nationwide messaging network on a common frequency. Use of
     a common frequency 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 messaging
     device. In addition, the use of a common frequency has been expanded to
     encompass the countries that are parties to the North American Free Trade
     Agreement ("NAFTA"), which enables customers to travel to Canada, the
     Bahamas and, by the third quarter of 1997, Mexico and Central America. As a
     result, the Company is able to provide multi-city coverage customized to
     accommodate the customer's needs ("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. These distributors are able to buy the paging
     unit without being limited by where they can distribute the product or by
     the service they sell with the unit. This allows retailers and strategic
     partners to offer customers all service options while minimizing the number
     of stock keeping units ("SKUs") that the distributor must carry, thus
     reducing inventory carrying costs. In addition, the flexibility of the
     Network enables the Company to address many of the reasons for customer
     disconnections, such as a move to another city or a desire to expand
     coverage. The Company's average monthly disconnection rates for the twelve
     months ended December 31, 1995 and 1996 were 2.5% and 2.4%, respectively.
 
          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 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 network covers the top 300
     MSAs across the United States, or approximately 90% of the total population
     in the United States and is designed to serve a larger subscriber base than
     the one currently served by the Company. The Company's wireless
     transmission network is 100% FLEX(R) enabled, allowing the use of the high
     speed FLEX(R) protocol to transmit messages and maximize system capacity.
 
          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 paging
     frequencies and 150 kHz of nationwide Narrowband Personal Communications
     Service ("NPCS") frequency (the "NPCS Licenses"). The Company believes that
     this frequency has important strategic value because it may enable the
     Company to grow its one-way subscriber base and to provide two-way
     messaging and other value-added services to its subscribers. As a result,
     the Company believes its spectrum-rich frequency position enables it to
     attract private brand strategic alliance partners.
 
          CENTRALIZED ADMINISTRATION. The Company has centralized customer
     service, information systems, inventory control and distribution, finance
     and marketing functions. This centralized administration has enabled the
     Company to become one of the lowest cost providers of paging and other
     one-way wireless communications services in the United States. 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.
 
          CUSTOMER SERVICE CAPABILITIES. Management has focused on developing
     industry-leading customer service capabilities. The Company employs
     approximately 600 highly trained customer service personnel
 
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     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.
 
INTERNATIONAL EXPANSION
 
     The Company plans to provide messaging services in selected countries on a
seamless international network. Management believes that its technology,
operational structure and distribution strategies can be replicated in foreign
countries to establish nationwide wireless networks. In each country in which
the Company plans to offer paging and messaging services, the Company will seek
to obtain or have a local affiliate obtain 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. The Company
expects to pursue international opportunities through minority interests in
joint venture arrangements or network affiliation agreements whereby the Company
would contribute its expertise in designing and managing messaging services with
minimal incremental capital investments.
 
     The Company's international strategy is initially to pursue opportunities
in North America, Central America and South America. One of the Company's
affiliates, PageMart Canada Limited ("PageMart Canada"), has obtained a
nationwide license in Canada 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 subscribers in March 1996
and to Canadian subscribers in April 1996. The Company also provides paging
coverage in the Bahamas, Puerto Rico and the U.S. Virgin Islands.
 
     The Company has entered into an exclusive ten year network affiliation
agreement with Telefonos de Mexico 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. The agreement provides for the linking
of these respective systems so as to provide generally similar services
including local, regional, nationwide and international coverage options all on
the same frequency. The companies will also facilitate roaming between systems.
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, 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 the Panama Canal to Canada.
 
     The common frequency allows the Company's 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.
 
NPCS MESSAGING STRATEGY
 
     One of the Company's principal strategies is to become a leading provider
of two-way messaging services in the United States. Management believes that the
introduction of two-way messaging services may present significant future growth
opportunities to the Company by enabling it to provide a new generation of
advanced messaging services, to new and existing subscribers.
 
     The Company's NPCS messaging strategy is founded on four principal
competitive advantages: (i) nationwide spectrum, (ii) incremental introduction
of technology, (iii) established diversified distribution channels and (iv)
operating efficiency.
 
     NATIONWIDE SPECTRUM. With the acquisition of the NPCS Licenses, the Company
became one of four companies in the United States with 150 kHz or more of
nationwide NPCS frequency. As a result, the
 
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Company is positioned to create a nationwide network capable of delivering
local, multi-city, regional, or nationwide data or stored voice messaging
services to a large number of subscribers.
 
     INCREMENTAL INTRODUCTION OF TECHNOLOGY. When ready, the Company intends to
deploy NPCS data messaging technology by building upon its one-way transmission
network, enabling the Company to minimize the level of capital expenditures and
investments. The Company will continue to monitor voice paging opportunities and
technologies and may introduce one-way and /or two-way stored voice service
depending on market demand for such services.
 
     ESTABLISHED DIVERSIFIED DISTRIBUTION CHANNELS. The Company plans to
leverage its established diversified distribution channels to achieve efficient
market penetration of its advanced messaging services.
 
     OPERATING EFFICIENCY. The Company expects to utilize its existing one-way
network and centralized administration to minimize incremental costs of product
and service expansion. Management believes that the Company's centralized
customer service, information systems, inventory control and distribution,
finance and marketing organizations will be capable of supporting the Company's
two-way strategy.
 
     As a result of these operating advantages, the Company plans to offer an
array of advanced messaging services at affordable prices that the Company
believes should appeal to a large number of potential subscribers and to its
current distribution channels.
 
     In 1996, the Company began testing both NPCS data and stored voice
messaging services. Upon successful completion of testing, the two-way data
messaging network is expected to be deployed on a city-by-city basis. Advanced
data messaging services include guaranteed alphanumeric message delivery with
acknowledgment and message with response capabilities.
 
ONE-WAY MESSAGING OPERATIONS
 
COAM STRATEGY
 
     The Company's operating model is unique in the industry in that it follows
a strategy of selling rather than leasing messaging equipment to subscribers. As
of December 31, 1996, approximately 98% of the Company's messaging units were
COAM, which compares to an industry average of approximately 62%. The Company
believes that by following a COAM strategy 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 $43 at
December 31, 1996. Capital employed per subscriber represents total assets, less
NPCS Licenses, cash, non-debt current liabilities and international investments
divided by units in service. The Company believes that its COAM strategy
provides additional benefits, including reduced risk of technological
obsolescence and avoidance of the credit risk associated with leasing pagers to
end-users. In addition, management believes that this strategy minimizes its
disconnection rates in the retail channel. See Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
 
PAGERS
 
     The Company does not manufacture any of the pagers used in its paging
operations. Currently, the Company buys approximately 60% of its pagers from
Motorola with the remainder purchased from other manufacturers. The Company is
dependent on such manufacturers to obtain sufficient pager inventory for new
subscriber units and replacement needs.
 
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. The Company is not
dependent on any
 
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single customer or a few customers, the loss of one or more of whom would have a
material adverse effect on the Company.
 
  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, 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 SKUs 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 Office Depot, Inc., RadioShack, a division of
Tandy Corporation, Federated Department Stores, Inc., 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 national retail
sales to continue to be an important channel of distribution for pagers. The
number of national retail store locations has increased to 5,530 stores from
3,411 stores and 2,200 stores at December 31, 1996, 1995 and 1994, respectively.
Approximately 25% of the Company's units in service were sold through the
national retail channel.
 
  PRIVATE BRAND STRATEGIC ALLIANCES
 
     The Company has established numerous strategic relationships with large
communications providers. These companies utilize their brand awareness and
billing efficiencies to market private brand pagers and services using the
Company's transmission network. Approximately 18% of the Company's units in
service were sold through private brand strategic alliances, and the Company
expects this proportion to increase over the next several years.
 
     GTE CORPORATION ("GTE"). During 1993 and 1994, the Company and GTE 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 agreed to
purchase up to 250 new transmitters to be 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 Telephone Operations, GTE Phone Mart
Stores, GTE Mobilnet and authorized GTE agents.
 
     SOUTHWESTERN BELL MOBILE SYSTEMS ("SBMS"). In May 1995, the Company and
SBMS signed an agreement for the sale and marketing through SBMS of SBMS-labeled
services. After a successful test in several Texas markets in the third quarter
of 1995, SBMS has expanded marketing of the service into all SBMS markets. In
the fourth quarter of 1996, SBMS initiated direct marketing programs to
Southwestern Bell residential telephone customers.
 
     AT&T WIRELESS SERVICES ("AT&T WIRELESS"). In November 1995, the Company and
AT&T Wireless entered into a three-year agreement for the sale and marketing
through AT&T Wireless of AT&T Wireless-labeled services.
 
     AMERITECH MOBILE SERVICES, INC. ("AMERITECH"). In February 1996, the
Company and Ameritech signed an agreement for the sale and marketing through
Ameritech of Ameritech-labeled services.
 
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     EXCEL COMMUNICATIONS, INC. ("EXCEL"). In March 1996, the Company and EXCEL,
a long distance reseller, signed an agreement for the sale and marketing through
EXCEL of EXCEL-labeled services.
 
     PUERTO RICO TELEPHONE COMPANY ("PRTC"). In December 1996, the Company and
PRTC, the largest provider of telephone and wireless services in Puerto Rico,
signed a ten-year agreement for the resale of PRTC-labeled PageMart services,
and for the sharing of network infrastructure and marketing of United States and
Puerto Rico coverage to existing PageMart and PRTC customers.
 
     NATIONAL SALES OFFICES
 
     The Company's national sales offices sell equipment and services through
four distribution channels: direct sales, agents, third-party resellers and
local retailers. The Company has a direct sales force of 552 personnel located
in approximately 80 MSAs through 65 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. Approximately 22% of the Company's units in service were sold
through its direct sales force.
 
     AGENTS. The Company markets its equipment and services through agents.
Agents establish customers which are billed directly by the Company. Agents earn
a commission and a share of future revenues for the customers they establish.
 
     THIRD-PARTY RESELLERS. In addition to offering paging and messaging
services directly to end-users, the Company also provides services under
marketing agreements with third-party resellers. Typically, the Company offers
third-party resellers paging services in bulk quantities at a wholesale monthly
rate that is lower than the Company's regular retail rates. Approximately 35% of
the Company's units in service were sold through third-party resellers.
 
     LOCAL RETAILERS. The Company markets its services under sales arrangements
with local retailers located in the MSAs where national sales offices are
present.
 
MESSAGING SERVICES
 
  PAGING SERVICES
 
     The Company charges subscribers a monthly fee which covers the paging and
messaging services subscribed for and any additional services purchased by the
subscriber. The amount of the monthly fee varies primarily based on the type of
service provided and the geographic area covered. The Company charges higher
rates for multi-city and nationwide service options.
 
     The Company currently offers the following two basic types of one-way
paging and messaging services.
 
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               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>
 
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     NUMERIC PAGING. Among the Company's subscribers who use a numeric display
pager, a high percentage select local coverage, although the percentage 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. The Company's revenues from multi-city
coverage increased to approximately 37% of airtime revenues for the month ended
December 31, 1996 from approximately 28% during the month ended December 31,
1995.
 
     ALPHANUMERIC PAGING. The Company launched its alphanumeric paging services
in July 1993 under the tradenames InfoPage(R) and InfoNowSM, and the number of
subscribers utilizing this service represented approximately 2.8% of the
Company's total subscribers as of December 31, 1996. The percentage of paging
industry subscribers utilizing alphanumeric pagers at the end of 1996 was
reported to be approximately 12%. 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
becoming a larger portion of its selling and marketing efforts. The ability of
alphanumeric pagers to deliver longer text messages, including the ability to
store messages received for playback when desired by the subscriber, 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
touchtone 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 the more than 1,500 PageMart communities in the United States, Canada,
U.S. Virgin Islands, Puerto Rico and the Bahamas. In 1997, the Company's
customers using these services will be able to roam throughout NAFTA and most
major cities in Central America.
 
     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 800 access number for paging subscribers, a
customized voice prompt that allows subscribers to record a personal greeting,
maintenance agreements and loss protection programs. Approximately 22% of the
Company's recurring revenues during the fiscal quarter ended December 31, 1996
were derived from these additional services.
 
     The Company also plans to offer 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
will include electronic mail, news and other information delivered to messaging
devices.
 
     NPCS SERVICES
 
     One of the Company's principal strategies is to become a leading provider
of advanced messaging services in the United States utilizing its NPCS two-way
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 provide a new generation of advanced messaging
services, including two-way data messaging and other services, to new and
existing subscribers.
 
     In 1996, the Company began testing both NPCS data and stored voice
messaging services. Upon successful completion of testing, the two-way data
messaging network is expected to be deployed on a city-by-
 
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city basis. Advanced data messaging services include guaranteed alphanumeric
message delivery with acknowledgment and message with response capabilities.
 
     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 identifying its location to the Company's network. Management estimates
that the Company's enhanced alphanumeric services will be offered to customers
at monthly prices competitive with current one-way alphanumeric paging services
in similar service areas. The Company's service offerings are expected to
include:
 
     ENHANCED ALPHANUMERIC MESSAGING. The Company's enhanced 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 with the proper software
and a modem that can access the Company's network directly or via the Internet
or (ii) a dispatch operator. The service is expected to be based on Motorola
Inc.'s ("Motorola") ReFLEX25(TM) technology. This technology will permit the
network to verify that the subscriber unit has obtained the message ("guaranteed
delivery"), that the subscriber has read the message ("read acknowledgement")
and to store the message for later delivery if the subscriber's unit is not
currently available.
 
     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 and
delivery speed over the spectrum and technology currently delivering
alphanumeric messaging services. The Company expects that its enhanced
alphanumeric service will improve upon traditional service by permitting longer
messages, by guaranteeing and acknowledging delivery and, eventually, by
permitting the subscriber to initiate responses. 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 services.
 
     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 expects 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.
 
     ONE-WAY TRANSMISSION NETWORK
 
     The Company utilizes DBS technology exclusively in its one-way transmission
network. Although the Company's one-way transmission network is substantially
built out, the Company continues to make expenditures to improve and expand its
coverage into new areas. The Company's use of the DBS system has certain cost
and performance advantages over traditional paging systems and traditional
satellite paging systems.
 
     Traditional Paging Systems. The traditional method of controlling paging
transmitters in local and regional simulcasting systems is to use terrestrial RF
control links that originate from one broadcast transmitter that is controlled
by a local paging terminal. At the paging terminal, the messages are received
and assembled for transmission via RF or wireline control link to each
transmitter. Once a message is received by each transmitter in a simulcast
market, it in turn broadcasts the paging information using the paging broadcast
frequency. The RF control link frequency is different from the paging broadcast
frequency.
 
     In order to simulcast the paging signal, a traditional system must be
fine-tuned ("optimized") so that each transmitter broadcasts the paging signal
at the same time. Optimization becomes more complex and expensive as the service
area expands. In addition, since a traditional system requires line-of-site
transmission of the RF control link signal, repeater stations must be used to
re-broadcast this RF signal in a large system
 
                                        9
<PAGE>   10
 
such as the New York or Los Angeles metropolitan areas. The more distant the
transmitter sites are from the central RF control link transmitter, the more
repeaters are necessary. Repeater stations make optimization more difficult and
increase equipment and recurring tower rental costs. For non-contiguous regional
coverage either telephone lines or microwave communication links are typically
used in lieu of RF control links.
 
     Traditional Satellite Paging Systems. Some paging system operators have
adopted an alternative approach using satellites, rather than telephone lines,
to communicate between the paging terminal and the traditional RF control link
systems. Numeric and alphanumeric messages are processed by a central paging
terminal that uplinks the messages to a satellite, which then broadcasts the
messages to the destination cities. The satellite signal is received by one
central RF radio control transmitter paging dish in each city and broadcast via
traditional RF control link transmitters to the paging transmitters in that
city.
 
     With this infrastructure, the satellite is used only in place of other long
distance communication options. Both an RF control link frequency and a paging
signal frequency must be employed as with a traditional system. The current
broadcast configuration employed by many other leading nationwide carriers has
the added inefficiency of satellite transmissions that address their entire
nationwide system or entire regions whenever a page transmission is sent, thus
limiting the total number of subscribers on the system.
 
     The Company's Direct Broadcast Satellite Paging System. The Company has
developed an innovative satellite-based transmission network that gives the
Company a flexible, highly reliable network architecture and an efficient
operating structure. The Company's network is comprised of three primary
components: network access, a nationwide network linking the Company's paging
terminals and a satellite network which controls the Company's transmitters.
 
     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 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 can broadcast messages
directly to each transmitter in the Company's paging system, which then
broadcasts the message 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 Company's
satellite system can selectively address one or any combination of its
transmitters, thereby providing a wide range of coverage options and permitting
efficient use of paging frequencies in each market. The Company leases its
satellite services pursuant to the Satellite Service and Space Segment Lease
Agreement, dated January 2, 1995, with SpaceCom Systems, Inc. ("SpaceCom"). The
agreement subjects the Company to monthly service charges based on the amount
and types of services used and expires on January 31, 2002. The agreement may be
terminated by SpaceCom upon certain failures of the Company to pay monthly
service fees. The agreement does not include any renewal provisions. Although
the Company is currently party to only one satellite service agreement,
management believes that the services provided by SpaceCom are sufficient to
meet the Company's foreseeable needs and that there are numerous alternate
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 supplier would have a material adverse effect on its business
and operations.
 
     Benefits of the Direct Broadcast Satellite. The use of a DBS broadcast
system provides a number of benefits to the Company including:
 
     - Selectively addresses one or all markets to provide a wide range of
       local, multi-city, regional or nationwide coverage options. The Company's
       system configuration employs a high degree of spectrum
 
                                       10
<PAGE>   11
 
       efficiency with regard to the paging frequency because only the coverage
       area the customer has selected will be activated with each page.
 
     - Replaces terrestrial RF control link equipment with satellite based
       equipment and signaling. This eliminates capital expenditures associated
       with terrestrial RF control link equipment and the associated
       telecommunications expenses, utilities and ongoing site rent and requires
       much lower expenditures for satellite receivers and satellite service.
 
     - Suffers significantly less degradation in performance due to building
       reflection and simulcasting problems, such as the overlapping of two
       independently controlled markets.
 
     - Allows for rapid deployment of the network system because the
       transmitters are operational immediately upon installation, while
       terrestrial RF control links need to be optimized, which can take up to
       three months in some large urban markets.
 
     - Supports the high data rates that will be required in order to
       effectively provide enhanced services such as two-way messaging services.
       Management believes that this will allow the Company to implement higher
       speed signal technologies quickly and in a cost effective manner.
 
     TWO-WAY MESSAGING NETWORK
 
          NARROWBAND PCS PROTOCOLS
 
     Paging networks use various "protocols" to provide seamless communications
between the various components which make up a paging network. Protocols
regulate the format and flow of messages which are transmitted over the network.
As such, protocols facilitate the orderly and efficient flow of message traffic
over the network. Motorola has developed, and licensed to Glenayre Technologies,
Inc. ("Glenayre"), several protocols, including FLEX(R), ReFLEX25TM, ReFLEX 50TM
and InFLEXionTMVoice. Of these protocols, ReFLEX25TM and ReFLEX50TM support
two-way alphanumeric messaging, and InFLEXionTMVoice supports stored voice
messaging.
 
     These various protocols have different transmission speeds and capacity
characteristics. Consequently, the ability to deliver various types of wireless
messaging services, including stored voice messaging, on a cost-efficient basis
is dependent upon the protocol used. The following table illustrates certain
characteristics of various protocols based on current publicly available
information.
 
<TABLE>
<CAPTION>
                                                        INFLEXION(TM) VOICE   REFLEX50(TM)  REFLEX25(TM)
                                                        -------------------   ------------  ------------
<S>                                                     <C>                   <C>           <C>
Technology............................................       Analog             Digital       Digital
Outbound Message Transmission Speed per Channel(1)....         --              6,400 bits    6,400 bits
                                                                               per second    per second
Number of Channels(1).................................          7                  4             3
Outbound Throughput(1)................................         --              25,600 bps    19,200 bps
                                                                                per area      per area
Frequency Reuse.......................................         Yes                Yes          Yes(2)
Message Acknowledgement...............................         Yes                Yes           Yes
Limited Alphanumeric Message Response.................         No                 Yes           Yes
Stored Voice Messaging(3).............................         Yes                 No            No
Advanced Text Messaging(4)............................         No                 Yes           Yes
</TABLE>
 
---------------
 
(1) Bits per second (bps) gross rate including message overhead. Based on NPCS
    networks with 50 kHz outbound frequency. InFLEXion(TM) Voice does not
    transmit voice messages digitally.
 
(2) Motorola states that ReFLEX25(TM) protocol will in the future support
    cellular-like frequency reuse within a city/zone if the Company requires it
    for additional capacity.
 
(3) Although the ReFLEX50(TM) and ReFLEX25(TM) protocols technically have the
    ability to support digital voice service offerings, management believes that
    neither of these protocols can cost-effectively support these service
    offerings.
 
(4) InFLEXion(TM) Voice does not support text messaging. The Company understands
    that Motorola may modify the protocol in the future to support data
    services.
 
                                       11
<PAGE>   12
 
     NPCS NETWORK BUILDOUT
 
          The Company expects to design and construct its nationwide NPCS
     network to provide advanced messaging services and currently expects to
     complete substantially its network buildout by the end of 1999. The key
     elements of the network buildout are as follows:
 
          Design. The design of the Company's nationwide NPCS network is
     currently expected to be based upon Motorola's ReFLEX25(TM) technology in
     order to achieve cost effective sharing of the existing FLEX(R) network,
     efficient use of the Company's spectrum and to accommodate a greater number
     of subscribers. The design process requires extensive RF planning, which
     involves the selection of specific sites for the placement of transmitters
     and receivers as well as functioning infrastructure equipment from
     manufacturers. 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.
 
          Equipment. The infrastructure of the Company's network will consist of
     radio transmitters and receivers, switches, RF controllers and ancillary
     equipment, such as coaxial cable and antennas. The Company plans to
     purchase this infrastructure equipment (other than the ancillary equipment)
     from industry leading equipment suppliers, Motorola and Glenayre. The
     Company believes that currently there is only a limited number of suppliers
     of terminals and transmitters and as a result the Company is dependent on
     such suppliers for its infrastructure equipment needs. The Company
     currently has no agreements with Motorola and Glenayre that require it to
     purchase infrastructure equipment or messaging units beyond its two test
     networks for its two-way services. The Company has entered into a five year
     agreement with AvData Systems, Inc. to purchase VSAT equipment and
     satellite capacity for its NPCS network.
 
          Development of Technology. Motorola and Glenayre are still developing
     and conducting over-the-air testing of ReFLEX25TM technology,
     infrastructure equipment and subscriber units. The vendor tests do not take
     into account certain factors prevalent in the design of the Company's
     two-way network buildout such as terrain topography, building penetration
     and population density, hence the Company has constructed its own networks
     for the purpose of evaluating these factors as well as the performance of
     the infrastructure equipment. The Company believes that Motorola and
     Glenayre will establish that the technology and equipment can deliver a
     wireless voice message to subscriber unit under controlled circumstances.
     The Company also understands that Motorola's ReFLEX50TM technology has been
     introduced and is being used commercially by another paging company.
     However, there can be no assurance that two-way service will be
     commercially viable, and the success of two-way service could be affected
     by matters beyond the Company's control.
 
     The Company expects to purchase a significant portion of its subscriber
messaging units from Motorola, with the remainder expected to be purchased from
other manufacturers. The Company understands that Motorola has licensed to other
wireless equipment manufacturers the relevant protocol, as Motorola has done
with its FLEX(R) protocols. Although the Company believes that sufficient
alternative sources of two-way messaging units will exist, the Company would be
adversely affected if it were unable to obtain the units on satisfactory terms.
 
     As the Company begins development and implementation of NPCS services, the
Company expects to incur significant additional operating losses during the
start-up phase for such services, and it will be necessary for the Company to
make substantial investments. The Company anticipates requiring additional
sources of capital to fund the construction of a two-way messaging network,
including expenditures relating to the build-out requirements of the Federal
Communications Commission ("FCC"). See "Government Regulation." The Company
anticipates investing $75 to $100 million to test and construct a two-way
transmission network. Thereafter, the Company anticipates that its two-way
operations may require up to $100 million of additional investment to add
capacity to the network as the Company's two-way customer base grows. The
Company expects to require additional financing to complete the buildout, which
may include entering into joint venture arrangements, however there can be no
assurance that sufficient financing will be available to the Company.
 
                                       12
<PAGE>   13
 
See Item 7. Management's Discussion of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.
 
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., AirTouch Communications, Inc. and Arch Communications
Group, Inc. Certain of these companies have substantially greater financial,
technical and other resources than the Company. In addition, a number of paging
carriers have constructed or are in the process of constructing nationwide
wireless networks that will compete with the Company's services, including the
provision of two-way messaging. Management believes that the Company's low cost
structure and service offerings will enable it to continue to compete
effectively in all markets.
 
     A number of competing technologies, including cellular telephone service,
broadband and narrowband personal communications services, specialized mobile
radio, low speed data networks and mobile satellite services, are used in, or
projected to be used for, two-way wireless messaging services. Cellular
telephone technology provides an alternative communications system for customers
who are frequently away from fixed-wire 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 will 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 and are similar to cellular technology. This technology will offer
greater capacity for two-way wireless 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 two-way wireless messaging services which
may compete with the one-way and two-way wireless 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"). At the present time, wireless messaging services are primarily offered
over radio frequencies that the FCC has allocated for either common carriage
(the licensees for which are known as radio common carriers ("RCCs")), or
private carriage (the licensees for which are known as private carrier paging
operators ("PCPs")). RCCs are granted an exclusive license to a particular radio
frequency in a particular locality or region. Certain qualified PCPs have been
granted such exclusive use of their frequencies as well. In addition, the FCC
has recently granted, by auction, regional and nationwide NPCS licenses that can
be used for advanced paging services, such as two-way paging.
 
     The Company provides one-way paging services directly to subscribers over
its own transmission facilities. The Company (through subsidiaries) holds
certain RCC licenses (the "RCC Licenses") and two
 
                                       13
<PAGE>   14
 
exclusive nationwide PCP licenses, as well as exclusive licenses on various PCP
frequencies in certain metropolitan areas, including New York, Los Angeles and
Chicago (the "PCP Licenses"). 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 may be utilized in connection with
various two-way NPCS services or to expand the Company's existing one-way
transmission network.
 
     The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") amended
the Communications Act by eliminating many of the regulatory distinctions
governing mobile service providers. The FCC implemented the new law by creating
a new regulatory category called "commercial mobile radio services" ("CMRS"),
which includes most paging providers previously operating as either RCCs or
PCPs, including the Company. The FCC has adopted new rules to govern regulation
of this new category, which became effective in August 1996. As a result of the
new rules, PCP licensees such as the Company have additional obligations. For
example, these licensees must provide connection upon reasonable request, must
not engage in any unreasonably discriminatory practices and will be subject to
complaints regarding any unlawful practices. PCP licensees also are 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 PCP, RCC and NPCS Licenses (collectively, 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 PCP and RCC Licenses expire between 1997 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 1,700
Operating Licenses, 317 require renewal in 1997 and 316 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 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 paging 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
 
                                       14
<PAGE>   15
 
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 Communications Act limits foreign ownership of entities that hold
certain licenses from the FCC, including licenses of the type held by the
Company. Because of this limitation, except pursuant to FCC discretion, no more
than 25% of the Company's stock may be owned, directly or indirectly, or voted
by non-United States citizens or their representatives, a foreign government or
its representatives, or a foreign corporation. Based on currently available
information, the Company estimates that its foreign ownership is approximately
22%. However, this percentage is subject to change at any time upon any transfer
of direct or indirect ownership of the Company's Common Stock. If the Company
obtains knowledge that the foreign ownership of its stock exceeds 25%, it would
be forced to either seek approval from the FCC for the additional foreign
ownership or redeem common stock at current market value (determined as set
forth in the Company's certificate of incorporation) from foreign shareholders
in an amount sufficient to reduce such ownership to below 25% (as permitted by
the Company's certificate of incorporation).
 
     The Budget Act imposed a structure of regulatory fees which the Company is
required to pay with respect to its Licenses. The FCC has proposed an increase
in these fees for fiscal year 1997. The Company believes that these regulatory
fees (either as in effect or as proposed) will not have any material adverse
effect on the Company's business.
 
     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 any 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
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 any 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 to
terminate
 
                                       15
<PAGE>   16
 
LEC-originated traffic. The Company has made certain payments to the LECs under
protest and has maintained reserves for payments that the LECs claim are due,
but that the Company is presently withholding.
 
     As a result of the enactment of the 1996 Act, the Company may 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. These rules are the subject of several judicial appeals.
If the FCC rules ultimately are upheld, however, the cost of providing certain
paging services, including 800 number paging, could increase. Also, in response
to changes made by the 1996 Act, the FCC currently is considering the adoption
of 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 proposed rules, all telecommunications
carriers, including paging companies, will be 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.
 
TRADEMARKS
 
     The Company owns certain intellectual property, including without
limitation, trademark and service mark rights associated with certain federal
and foreign trademark registrations and applications, common law trademark,
trade name and service mark rights, and other legal and equitable rights
connected with the Company's voice and data communication products and services
and, in particular, one-way and two-way paging systems and technologies and
related services. The Company markets its multiple city wireless service under
the name Pick-Your-Cities(R) and its nationwide service under the name
Page-Me-USA(R), both of which are federally registered service marks. The
Company has filed applications with the United States Patent and Trademark
Office as well as certain foreign trademark offices to register approximately
107 additional service and trademarks. The Company also has full use of the name
PageMart, as a mark.
 
EMPLOYEES
 
     At December 31, 1996, the Company had 1,833 full-time employees,
approximately 1,441 of whom were engaged in sales and customer service.
 
     No employees of the Company are covered by a collective bargaining
agreement, and management believes the Company's relationship with its employees
is good.
 
ITEM 2. PROPERTIES
 
     The principal tangible assets of the Company are its paging network
equipment. Paging network equipment utilized by the Company 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. To
date, it has not experienced any difficulty or delay in obtaining equipment as
needed.
 
                                       16
<PAGE>   17
 
     The Company acquired the NPCS Licenses in auctions held by the FCC. The
NPCS Licenses permit the nationwide operation of NPCS networks with 100 kHz of
outbound capacity and 50 kHz of response capacity.
 
     The Company generally leases the locations used for its transmission
facilities under operating leases. These leases, which are generally for five
years or less, currently provide for aggregate annual rental charges of
approximately $8.1 million. The Company does not anticipate difficulty in
renewing these leases or finding equally suitable alternate facilities on
acceptable terms. The Company also leases approximately 130,000 square feet of
office space for its corporate headquarters in Dallas, Texas, at an annual cost
of approximately $1.3 million and varying lesser amounts for local offices at
other locations. Aggregate annual rental charges under the Company's local
office leases are approximately $2.5 million. Effective February 1, 1998, the
Company's corporate headquarters lease, covering 130,000 square feet of office
space, will expire. On November 26, 1996, the Company entered into a lease
agreement for new facilities for its corporate headquarters. Under the terms of
the lease, the Company is committed to leasing 30,000 square feet of office
space by June 1, 1997 expanding to 120,000 square feet on May 1, 1998.
 
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 Company's financial position or
results of operations.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None
                                    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, was initially
offered to the public on June 14, 1996, and is listed on the Nasdaq National
Market System under the symbol PMWI. Prior to the offering (the "Offering"),
there was no public market for the Company's Class A Common Stock. 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. Set forth below are the high and low sales
prices for shares of the Company's Class A Common Stock in 1996 from June 13,
1996, the date of the Offering, through the end of the second quarter of 1996
and for each full quarterly period thereafter in 1996.
 
<TABLE>
<CAPTION>
                                                    HIGH          LOW
                                                    ----          ----
<S>                                                 <C>           <C>
1996:
  Second Quarter..................................  $13 1/4       $ 10
  Third Quarter...................................  $11 7/8       $  8 1/4
  Fourth Quarter..................................  $10 1/8       $  6
</TABLE>
 
     As of February 28, 1997, the Company's Class A, Class B, Class C and Class
D Common Stock was held by approximately 197, 8, 2 and 1 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.
 
                                       17
<PAGE>   18
 
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, 1996. 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," the Consolidated Financial Statements of
the Company and the notes thereto included elsewhere in this report.
 
<TABLE>
<CAPTION>
                                                           FISCAL YEAR ENDED DECEMBER 31,
                                       -----------------------------------------------------------------------
                                          1992          1993          1994           1995            1996
                                       -----------   -----------   -----------   -------------   -------------
                                        (IN THOUSANDS, EXCEPT UNIT, ARPU, PER SUBSCRIBER AND PER SHARE DATA)
<S>                                    <C>           <C>           <C>           <C>             <C>
STATEMENT OF OPERATIONS DATA:
Recurring revenues...................     $  6,668      $ 24,184      $ 56,648      $  101,503      $  153,041
Equipment sales and activation
  fees...............................        9,837        26,483        53,185          57,688          68,551
                                          --------      --------      --------      ----------      ----------
Total revenues.......................       16,505        50,667       109,833         159,191         221,592
Cost of equipment sold...............       10,044        28,230        57,835          63,982          78,896
Operating expenses...................       25,584        47,448        85,322         118,557         155,265
                                          --------      --------      --------      ----------      ----------
Operating loss.......................      (19,123)      (25,011)      (33,324)        (23,348)        (12,569)
Interest expense.....................       (2,456)       (6,538)      (12,933)        (30,720)        (35,041)
Interest income......................          529           428           858           1,997           1,140
Other................................           --            --          (414)         (1,042)         (2,128)
                                          --------      --------      --------      ----------      ----------
Net loss.............................      (21,050)      (31,121)      (45,813)        (53,113)        (48,598)
                                          ========      ========      ========      ==========      ==========
Net loss per common share............     $  (1.24)     $  (1.51)     $  (1.72)     $    (1.53)     $    (1.30)
Weighted average number of common
  shares and share equivalents
  outstanding........................       16,962        20,627        26,574          34,653          37,462
BALANCE SHEET DATA (AT PERIOD END):
Current assets.......................     $ 13,365      $ 51,279      $ 44,397      $   62,535      $   70,572
Total assets.........................       30,772        78,773       142,059         263,829         313,620
Current liabilities..................       14,754        20,198        37,966          56,508          62,503
Long-term debt, less current
  maturities.........................       25,059        78,359        92,632         219,364         240,687
Stockholders' equity (deficit).......       (9,041)      (19,784)       11,461         (12,043)         10,430
OTHER DATA:
Units in service -- domestic.........      117,034       327,303       772,730       1,240,024       1,851,445
Units in service -- international....           --            --            --              --           7,962
Net subscriber additions.............       64,909       210,269       445,427         467,294         619,383
ARPU(1)..............................     $   8.66      $   9.81      $   8.64      $     8.62      $     8.04
Operating profit (loss) before
  selling expenses per subscriber per
  month(2)...........................       (12.69)         (.98)          .90            2.11            2.25
Selling expenses per net subscriber
  addition(3)........................          157            91            81              91              87
EBITDA(4)............................      (16,499)      (19,930)      (25,219)        (10,076)          8,623
Capital expenditures.................       13,729        10,810        16,719          33,503          63,804
Depreciation and amortization........        2,624         5,081         8,105          13,272          21,192
</TABLE>
 
---------------
 
(1) Average monthly revenue per unit ("ARPU") is calculated by dividing (i)
    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 units in service for the quarter. ARPU is stated as the monthly
    average for the final quarter of the year.
 
(2) Operating profit (loss) before selling expenses (selling expenses include
    loss on sale of equipment) per subscriber for the Company's one-way
    operations is calculated by dividing (i) recurring revenues less technical
    expenses, general and administrative expenses, and depreciation and
    amortization for the final quarter of the period by (ii) the average number
    of units in service for the final quarter of the period. Stated as the
    monthly average for the fourth fiscal quarter of the period.
 
(3) Selling expenses per net subscriber addition for the Company's domestic
    one-way operations is calculated by dividing (i) selling expenses, including
    loss on sale of equipment for the year by (ii) the net domestic subscriber
    additions for the year.
 
(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 Item 7. 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.
 
                                       18
<PAGE>   19
 
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, 1996. 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,
including the timely development and acceptance of new products, the impact of
competitive products and pricing that could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.
 
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, customer service call centers and centralized 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, 1996, the
number of units in service increased from 52,125 to 1,859,407. None of the
Company's growth is attributable to acquisitions. Given its growth strategy and
the substantial associated selling and marketing expenses, the Company expects
to continue to generate operating losses in 1997 from its one-way wireless
communications business. In addition, the Company began testing and development
of two-way wireless messaging services in 1996 and plans to continue the
development and implementation in 1997 and 1998, and expects to incur additional
operating losses during the start-up phase for such services. The Company does
not anticipate any significant revenues from two-way services during 1997,
however, it expects to generate revenues with respect to two-way services in
1998. The Company's ability to generate operating income is primarily dependent
on its ability to attain a sufficiently large installed subscriber base that
generates recurring revenues which offset the fixed operating costs of its
wireless networks, administration and selling and marketing expenses. 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, private brand strategic alliances with GTE Corporation,
Southwestern Bell Mobile Systems, AT&T Wireless Services, Ameritech Mobile
Services, Inc. and long distance reseller EXCEL Communications, Inc., and
international expansion.
 
     During the twelve months ended December 31, 1996, the Company's affiliate
PageMart Canada added 13,270 subscribers. 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 units at December 31, 1996.
 
     Unlike most other paging carriers, the Company sells, rather than leases,
substantially all of the messaging equipment used by its subscribers. As a
result, the Company has much less capital invested in messaging equipment than
other paging carriers since it recoups a substantial portion of messaging
equipment
 
                                       19
<PAGE>   20
 
costs upon sale to retailers and subscribers. This results in significantly
lower capital expenditures and depreciation expense than if the Company leased
such equipment to its subscribers. In addition, the Company's financial results
are much different than other paging carriers that lease messaging equipment to
subscribers because the Company recognizes the cost of messaging equipment sold
in connection with adding new subscribers at the time of sale rather than
capitalizing and depreciating the cost of messaging equipment over periods
ranging from three to five years as occurs with paging carriers that lease
messaging equipment to subscribers. In addition, the Company's retail
distribution strategy results in the recognition of expenses associated with
messaging equipment sales and other sales and marketing expenses in advance of
new subscribers being added to the base and generating revenues (as retailers
carry inventory).
 
     The Company sells its messaging equipment through multiple distribution
channels including direct sales, third-party resellers, private brand strategic
alliances and local and national retail stores. Selling and marketing expenses
are primarily attributable to compensation paid to the Company's sales force,
advertising and marketing costs and to losses resulting from the fact that, for
competitive and marketing reasons, the Company generally sells each new unit 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. 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,
1994, 1995 and 1996 were 3.4%, 2.5% and 2.4%, respectively.
 
     Approximately 90% of the Company's average monthly revenue per unit
("ARPU") is attributable to fixed fees for airtime, coverage options and
features. A portion of the remainder of additional ARPU is dependent on usage.
 
RESULTS OF OPERATIONS
 
     The Company's principal operations to date are its domestic one-way
wireless messaging division. The following discussion of results of operations
analyzes the results of the Company's one-way wireless messaging operations,
unless otherwise indicated.
 
     Certain of the following financial information is presented on a per unit
basis. Management of the Company believes that such a presentation is useful in
understanding the Company's results because it is 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.
 
  FISCAL YEARS 1994, 1995 AND 1996
 
     Units in Service
 
     Units in service were 772,730, 1,240,024 and 1,851,445 as of December 31,
1994, 1995 and 1996, respectively. This represents an annual growth rate of 60%
and 49% in 1995 and 1996, respectively. In addition, for the year ended December
31, 1996, PageMart Canada added 13,270 subscribers. 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 units at December 31, 1996. The Company has
experienced strong growth in units in
 
                                       20
<PAGE>   21
 
service due primarily to the success of its sales and marketing strategies in
the direct sales, national retail and third-party reseller channels, as well as
from private brand strategic alliance programs.
 
     Revenues
 
     Revenues for the fiscal years 1994, 1995 and 1996 were $109.8 million,
$159.2 million and $221.6 million, respectively. Recurring revenues for airtime,
voice mail and other services for the same periods were $56.6 million, $101.5
million and $153.0 million, respectively. Revenues from equipment sales and
activation fees for 1994, 1995 and 1996 were $53.2 million, $57.7 million and
$68.6 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 was
somewhat offset by a decline in the average price per unit sold. The Company
expects equipment prices per unit generally to remain constant or decline
slightly as sales volumes increase.
 
     The Company's ARPU was $8.64, $8.62 and $8.04 in the final quarter of 1994,
1995 and 1996, respectively. Over the past twelve months, the Company's ARPU has
decreased primarily as a result of an increase in subscribers added through
private brand strategic alliance and third party reseller channels. This
decrease in ARPU has been offset somewhat 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. 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. ARPU is lower for subscribers added through
private brand strategic alliances and third party resellers because these are
generally high volume customers that are charged wholesale airtime rates.
However, because third-party resellers and 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.
 
     Cost of Equipment Sold
 
     The cost of equipment sold in 1994, 1995 and 1996 was $57.8 million, $64.0
million and $78.9 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 Company expects pager costs generally to remain constant,
with modest reductions in cost to the Company as a result of volume purchases.
Management anticipates that loss on equipment sold will increase on a per unit
basis for the foreseeable future due to increased competition, especially in the
national retail channel.
 
     Operating Expenses
 
     Technical expenses were $16.2 million, $25.5 million and $36.7 million in
1994, 1995 and 1996, respectively. The increase resulted primarily from the
continued expansion of the Company's nationwide network infrastructure, which
resulted in greater expenses associated with the addition of new transmitter
sites, transmitter and terminal equipment and telecommunications expenses. On an
average monthly cost per unit in service basis, technical expenses were $2.45,
$2.11 and $1.98 in 1994, 1995 and 1996, 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. During 1996, the
Company incurred $297,000 in technical expenses associated with the development
of its two-way wireless messaging services.
 
     Selling expenses in 1994, 1995 and 1996 were $31.3 million, $36.1 million
and $42.6 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 new
and existing operating markets. During the years ended December 31, 1994, 1995
and 1996, the Company added 445,427, 467,294 and 611,421 net new domestic units
in service, respectively. Sales and marketing employees decreased from 450 at
December 31, 1994 to 445 at December 31, 1995 and then increased to 552 at
December 31, 1996. 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
 
                                       21
<PAGE>   22
 
marketing expenses per net subscriber addition (including loss on equipment
sales) were $81, $91 and $87 for the years ended December 31, 1994, 1995 and
1996, respectively. During the twelve months ended December 31, 1996, the
Company incurred $447,000 in selling expenses associated with international
operations (including loss on equipment sales).
 
     General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1994, 1995
and 1996 were, $29.8 million, $43.4 million and $53.7 million, respectively.
This increase was attributable to the Company's expansion of its customer
service call centers and continued expansion in new and existing markets 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 $4.52, $3.59 and $2.89 for fiscal years 1994, 1995, and 1996, 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.
During 1996, the Company incurred $341,000 in general and administrative
expenses associated with the development of its two-way wireless messaging
services.
 
     Depreciation and amortization in 1994, 1995 and 1996 was $8.1 million,
$13.3 million and $21.2 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 1995 and 1996. As an average cost per month per unit in
service, depreciation and amortization was $1.23, $1.10 and $1.14 for the years
ended December 31, 1994, 1995 and 1996, respectively.
 
     Interest Expense
 
     Consolidated interest expense increased from $12.9 million in 1994 to $30.7
million in 1995 and $35.0 million in 1996. The increase in 1995 was primarily
the result of the issuance of the Company's 15% Senior Discount Notes due 2005
(the "15% Notes") in January 1995, increased interest related to the 12 1/4%
Senior Discount Notes due 2003 issued by PageMart (the "12 1/4% Notes"), as well
as increased borrowings under vendor financing agreements. Interest expense
related to the 12 1/4% Notes was $10.8 million, $11.8 million and $13.3 million
in 1994, 1995 and 1996, respectively. Interest expense related to the 15% Notes
was $15.3 million and $18.4 million in 1995 and 1996 respectively.
 
     Net Loss
 
     The Company sustained net losses in 1994, 1995 and 1996 of $45.8 million,
$53.1 million and $48.6 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, operating expenses and
interest expense.
 
MANAGEMENT'S PRESENTATION OF RESULTS OF OPERATIONS
 
  COMPARISON WITH GAAP PRESENTATION
 
     The Company's audited Consolidated Financial Statements for the years ended
December 31, 1994, 1995 and 1996, 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
subscriber per month for the Company's one-way operations has grown from $(0.46)
during the first quarter of 1994 to $2.25 during the fourth quarter of 1996
 
                                       22
<PAGE>   23
 
due primarily to the Company's increase in subscribers, operating efficiency 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 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. In the fourth quarter of 1995, the
     Company's EBITDA from its one-way operations became positive for the first
     time.
 
                                       23
<PAGE>   24
 
  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
condensed 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,
                               1995         1995         1995         1995         1996         1996         1996         1996
                             ---------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                                         (UNAUDITED)
<S>                          <C>         <C>          <C>          <C>          <C>          <C>          <C>          <C>
OPERATING DATA:
Recurring revenues.........  $ 20,464    $   23,387   $   26,994   $   30,658   $   33,743   $   36,964   $   39,697   $   42,637
Technical expenses.........     5,459         6,141        6,842        7,015        7,943        8,783        9,725       10,273
General and administrative
  expenses.................     9,698        10,067       11,350       12,243       12,792       13,043       13,668       14,162
Depreciation and
  amortization.............     2,802         3,091        3,469        3,910        4,248        4,942        5,714        6,288
                             --------    ----------   ----------   ----------   ----------   ----------   ----------   ----------
Operating profit before
  selling expenses.........     2,505         4,088        5,333        7,490        8,760       10,196       10,590       11,914
Selling expenses(1)........     9,704        10,614       10,889       11,181       11,601       12,836       13,588       14,900
                             --------    ----------   ----------   ----------   ----------   ----------   ----------   ----------
Operating income (loss)....  $ (7,199)   $   (6,526)  $   (5,556)  $   (3,691)  $   (2,841)  $   (2,640)  $   (2,998)  $   (2,986)
                             ========    ==========   ==========   ==========   ==========   ==========   ==========   ==========
EBITDA.....................  $ (4,397)   $   (3,435)  $   (2,087)  $      219   $    1,407   $    2,302   $    2,716   $    3,302
                             ========    ==========   ==========   ==========   ==========   ==========   ==========   ==========
OTHER DATA:
Units in service(2)........   874,944     1,008,683    1,131,464    1,240,024    1,374,146    1,524,297    1,684,937    1,851,445
Net subscriber additions...   102,214       133,739      122,781      108,560      134,122      150,151      160,640      166,508
ARPU(3)....................  $   8.28    $     8.28   $     8.41   $     8.62   $     8.61   $     8.50   $     8.25   $     8.04
Operating profit before
  selling expenses per
  subscriber per
  month(4).................      1.01          1.45         1.66         2.11         2.23         2.35         2.20         2.25
Selling expenses per net
  subscriber
  addition(1)(5)...........        95            79           89          103           86           85           85           89
Capital employed per unit
  in service(6)............        45            39           39           40           41           49           49           43
</TABLE>
 
---------------
 
(1) Includes loss on sale of equipment.
 
(2) Stated as of the end of each period.
 
(3) Calculated by dividing recurring revenues for the quarter by the average
    number of 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 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 subscriber additions for the quarter.
 
(6) Calculated by dividing total assets (excluding cash, NPCS licenses and
    international investments) minus current liabilities (excluding current
    maturities of long-term debt) at the end of the period, by units in service
    at the end of the period.
 
                                       24
<PAGE>   25
 
  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, 1994
                                              -----------------------------------------------------
                                              PAGEMART    PAGEMART      PAGEMART       THE COMPANY
                                              ONE-WAY     TWO-WAY     INTERNATIONAL    CONSOLIDATED
                                              --------    --------    -------------    ------------
<S>                                           <C>         <C>         <C>              <C>
Revenues....................................  $109,833    $     --       $   --          $109,833
Operating loss..............................   (33,324)         --           --           (33,324)
EBITDA......................................   (25,219)         --           --           (25,219)
Total assets................................    81,470      58,885        1,704           142,059
Capital expenditures........................    16,719          --           --            16,719
</TABLE>
 
<TABLE>
<CAPTION>
                                                       FISCAL YEAR ENDED DECEMBER 31, 1995
                                              -----------------------------------------------------
                                              PAGEMART    PAGEMART      PAGEMART       THE COMPANY
                                              ONE-WAY     TWO-WAY     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
                                              ------------------------------------------------------
                                              PAGEMART    PAGEMART       PAGEMART       THE COMPANY
                                              ONE-WAY     TWO-WAY    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>
 
---------------
 
(1) 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.
 
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 messaging equipment and expansion into new 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 and the 15%
Notes, as well as borrowings under vendor financing agreements and revolving
credit agreements.
 
     Capital expenditures were $16.7 million, $33.5 million and $63.8 million
for the years ended December 31, 1994, 1995 and 1996, respectively. Capital
expenditures for 1996 include $34.4 million for the expansion and enhancement of
the Company's one-way network, $13.0 million related to the development of
two-way messaging services, and $6.4 million for the development of the
Company's new administrative system. During October 1996, the Company committed
to purchase network infrastructure equipment and related services for use in its
two-way network. During December 1995, the Company committed to purchase $40
million in network infrastructure equipment from a significant vendor from
December 1, 1995 to
 
                                       25
<PAGE>   26
 
October 31, 1999. Through December 31, 1996, the Company had purchased $19.9
million of network infrastructure under this purchase commitment.
 
     The Company's net cash used in operating activities for the years ended
December 31, 1994 and 1995 and provided by operating activities for the year
ended December 31, 1996 was $25.5 million, $2.9 million and $3.6 million,
respectively. The increased operating cash flow in 1996 was a result of improved
operating results from a larger subscriber base offset by a net investment in
working capital. Net cash used in investing activities was $69.1 million, $110.2
million and $64.0 million for the years ended December 31, 1994, 1995 and 1996,
respectively. Of the $64.0 million used in investing activities in 1996, $63.8
million was for capital expenditures. Net cash provided by financing activities,
including proceeds from borrowings and issuances of common and preferred stock
was $83.5 million, $125.5 million and $56 million for the years ended December
31, 1994, 1995 and 1996, respectively. Cash provided in 1995 resulted primarily
from the $100.1 million of net proceeds from the issuance of the 15% Notes and
non-voting common stock in January 1995. Cash provided 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 (the "Offering").
 
     In June 1996, the Company sold an aggregate of 6.0 million shares of Class
A Common Stock in the 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 of December 31, 1996, the Company had no amounts outstanding under
vendor financing or revolving credit agreements, its indebtedness under the
12 1/4% Notes was $107.9 million and its indebtedness under the 15% Notes was
$132.7 million.
 
     The 12 1/4% Notes, which are unsecured senior obligations of PageMart,
mature in 2003 and were issued at a substantial discount from their principal
amount at maturity. The accretion of original issue discount on the 12 1/4%
Notes will cause an increase in indebtedness from December 31, 1996 to November
1, 1998 of $28.6 million. From and after November 1, 1998, interest on the
12 1/4% Notes will be payable semiannually, in cash.
 
     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, 1996 to February 1, 2000 of $74.5
million. From and after February 1, 2000, interest on the 15% Notes will be
payable semiannually, in cash.
 
     In 1992, PageMart entered into an equipment lease agreement with Glenayre
(the "Vendor Lease Financing Agreement"), providing for the financing of
transmitter equipment. On June 28, 1996, the Company retired $8.8 million of
debt outstanding under the Vendor Lease Financing Agreement and the Vendor Lease
Financing Agreement was terminated.
 
     In May 1994, PageMart entered into a vendor purchase financing agreement
with Motorola (the "Vendor Purchase Financing Agreement"), providing for the
financing of transmitter equipment. On June 28, 1996, the Company retired $4.1
million of debt outstanding under the Vendor Purchase Financing Agreement and
the Vendor Purchase Financing Agreement was terminated.
 
     In May 1995, the Company entered into a four year Revolving Credit
Agreement (the "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. As of December 31, 1996, 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) 80% of eligible accounts receivable plus 50%
eligible inventory owned by Wireless, and (ii) an amount equal to the service
contribution as defined in the Revolving Credit Agreement of Wireless and its
subsidiaries for the immediately preceding three-month period times 4.0. As of
December 31, 1996, the amount available under the Revolving Credit Agreement was
$23.7 million. Management anticipates borrowings under the Revolving Credit
Agreement during 1997.
 
                                       26
<PAGE>   27
 
     The indenture under which the 12 1/4% Notes were issued (the "12 1/4%
Indenture"), the indenture pursuant to which the 15% Notes were issued (the "15%
Indenture") 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. In addition, the 12 1/4% Indenture
prohibits PageMart from paying any dividends or making other distributions on
its capital stock, making loans to Wireless, merging or consolidating with
Wireless or assuming or guaranteeing any obligations of Wireless unless PageMart
is in compliance with certain interest coverage ratios and certain other
requirements. PageMart may, however, sell assets to Wireless in transactions
that are arm's-length in nature. Wireless is currently a holding company with no
business or operations of its own. Because all of Wireless's operations are
conducted through its subsidiaries, Wireless's cash flow and consequently its
ability to service debt, is almost entirely dependent upon the earnings of its
subsidiaries and the distribution of those earnings or upon loans or other
payment of funds by those subsidiaries to Wireless. Wireless's subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to Wireless's obligations or to make
any funds available therefor, whether by dividends, loans or other payments.
Until the maturity of the 12 1/4% Notes, which mature on November 1, 2003,
earlier repayment of such indebtedness or compliance with the requirements of
such debt instruments, Wireless will be unable to use any amount of cash
generated by the operations of PageMart and its subsidiaries. However, currently
Wireless does not have significant cash requirements until March 1999 when the
Revolving Credit Agreement matures.
 
     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 investment in Canada Holding and PageMart Canada
totals approximately $3.7 million.
 
     As of December 31, 1996, the Company had approximately $22.6 million in
cash and cash equivalents. The Company's cash balances and borrowings under the
Revolving Credit Agreement are expected to be sufficient to fund the Company's
one-way operations and related capital expenditures through 1997. The Company
anticipates its one-way messaging operations will generate sufficient cash flows
to fund one-way capital expenditures for 1998. The Company's two-way messaging
operations are expected to require additional capital in 1998. The Company
anticipates funding a portion of its two-way messaging operations with available
borrowings under the Revolving Credit Agreement, and from any excess cash
generated from the Company's one-way messaging operations.
 
     Significant additional financing will be required to complete the
construction of a transmission network for two-way services and other start-up
costs and selling and marketing expenses associated with the development and
implementation of two-way services. The Company anticipates investing $75 to
$100 million through fiscal 1998 to test and construct a two-way transmission
network. Thereafter, the Company anticipates that the two-way operations may
require up to $100 million of additional investment to substantially complete
the network buildout. The Company expects to lease rather than sell a portion of
its two-way messaging units. The Company expects to require additional financing
to complete the buildout, which may include new vendor financings or entering
into joint venture arrangements, however, there can be no assurance that
sufficient financing will be available to the Company. The Company's ability to
incur indebtedness is limited by the covenants contained in the 15% Indenture,
the 12 1/4% Indenture, the Revolving Credit Agreement, and as a result any
additional financing may need to be equity financing.
 
     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.
 
                                       27
<PAGE>   28
 
     The Company cautions readers that any forward-looking statements contained
in this Form 10-K or made by management of the Company involve risks and
uncertainties, and are subject to change based on various important factors. 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 for 1997 and beyond 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 debt levels; 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; changes in regulation by the FCC and various state regulatory
agencies; and the ability of the Company to obtain financing to construct,
operate and market the transmission network for two-way services.
 
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.
 
                                       28
<PAGE>   29
 
                                    PART III
 
     The information required by Items 10 through 13 are incorporated by
reference to the Registrant's definitive Proxy Statement for its 1997 annual
meeting of stockholders scheduled to be held on May 20, 1997.
 
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
            and Financial Statement Schedule on Page F-1 hereof.
 
        (2) Financial Statement Schedules. See Index to Consolidated Financial
            Statements and Financial Statement Schedule on Page F-1 hereof.
 
        (3) Exhibits Required by Item 601 of Regulation S-K.
 
           (a) EXHIBITS
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                DESCRIPTION OF EXHIBIT
        -------                              ----------------------
<S>                       <C>
           3(i)***        Restated Certificate of Incorporation of PageMart Wireless,
                          Inc.
           3(ii)*         By-laws of PageMart Wireless, Inc.
           3(iii)***      Certificate of Amendment to Restated Certificate of
                          Incorporation of PageMart Wireless, Inc.
           4.1**          Indenture, dated as of October 19, 1993, between PageMart,
                          Inc. and United States Trust Company of New York, as
                          Trustee, relating to the 12 1/4% Senior Discount Notes due
                          2003
           4.2**          Indenture dated as of January 17, 1995 between PageMart
                          Nationwide, Inc. and United States Trust Company of New
                          York, as Trustee, relating to the 15% Senior Discount Notes
                          due 2005
          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.
          10.2**          Telecommunications Service Agreement, dated May 29, 1992,
                          between PageMart, Inc. and WilTel, Inc.
          10.3**          Equipment Lease Agreement, dated May 20, 1992, between
                          PageMart, Inc. and Glenayre Electronics, Inc.
          10.4**          First Addendum to Equipment Lease Agreement, dated May 20,
                          1992, between PageMart, Inc. and Glenayre Electronics, Inc.
          10.5**          Amendment No. 2 to Equipment Lease Agreement, dated October
                          18, 1993, between PageMart, Inc. and Glenayre Electronics,
                          Inc.
          10.6**          Lease Agreement and Addendum, dated January 10, 1990,
                          between Kingston Houston Partners I, Ltd. and PageMart, Inc.
          10.7**          Expansion and Extension of Lease Agreement, dated April 7,
                          1993, between Kingston Houston Partners I, Ltd. and
                          PageMart, Inc.
          10.8**          Office Lease Agreement, dated January 29, 1992, between
                          Dallas Central Development Corp. and PageMart, Inc.
          10.9**          First Amendment to Office Lease Agreement, dated July 29,
                          1992, between Fulcrum Central Ltd., as successor in interest
                          to Dallas Central Development Corp., and PageMart, Inc.
          10.10**         Second Amendment to Office Lease Agreement, dated December
                          1, 1992, between Fulcrum Central Ltd., as successor in
                          interest to Dallas Central Development Corp., and PageMart,
                          Inc.
          10.11**         Third Amendment to Office Lease Agreement, dated December
                          29, 1992, between Fulcrum Central Ltd., as successor in
                          interest to Dallas Central Development Corp., and PageMart,
                          Inc.
</TABLE>
 
                                       29
<PAGE>   30
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                DESCRIPTION OF EXHIBIT
        -------                              ----------------------
<S>                       <C>
          10.12**         Fourth Amendment to Office Lease Agreement, dated July 21,
                          1993, between Fulcrum Central Ltd., as successor in interest
                          to Dallas Central Development Corp., and PageMart, Inc.
          10.13**         License Agreement, dated May 12, 1994, between PageMart,
                          Inc., licensee, and International Business Machines
                          Corporation, licensor
          10.14**         Sales Contract, dated January 21, 1994, between PageMart,
                          Inc., buyer, and Mitsui Comtek Corporation, seller
          10.15**         Resale Agreement, dated November 1, 1993, between PageMart,
                          Inc., licensor, and GTE Service Corporation, licensee
          10.16**         Financing and Security Agreement between Motorola and
                          Pagemart, Inc. dated May 18, 1994
          10.17**         Subscription Agreement, dated June 9, 1994, between
                          PageMart, Inc. and Fomento Empresarial Regiomontano, S.A. de
                          C.V.
          10.18**         Letter of Intent, dated June 9, 1994, between PageMart, Inc.
                          and Fomento Empresarial Regiomontano, S.A. de C.V.
          10.19*          Strategic Alliance Agreement No. 1, dated September 15,
                          1994, between GTE Service Corporation and PageMart, Inc.
          10.20*          Strategic Alliance Agreement No. 2, dated October 13, 1994,
                          between GTE Service Corporation and PageMart, Inc.
          10.21*          Secured promissory note of John D. Beletic, as Maker, in
                          favor of PageMart, Inc. dated January 28, 1994, in the
                          amount of $97,800
          10.22*          Secured promissory note of John D. Beletic, as Maker, in
                          favor of PageMart, Inc. dated November 29, 1994, in the
                          amount of $200,000
          10.23*          Agreement of Reorganization and Plan of Merger, dated as of
                          December 5, 1994, between PageMart, Inc., PageMart
                          Nationwide, Inc. and PM Merger Corp.
          10.24*          Registration Rights Agreement dated as of January 17, 1995
                          between PageMart Nationwide, Inc. and Morgan Stanley & Co.
                          Incorporated
          10.25++         PageMart Nationwide, Inc. Third Amended and Restated 1991
                          Stock Option Plan and Third Amended and Restated 1991 Stock
                          Issuance Plan(1)
          10.26**         Satellite Services and Space Segment Lease Agreement, dated
                          January 2, 1995, between PageMart, Inc. and SpaceCom
                          Systems, Inc.
          10.27**         Credit Agreement, dated as of May 11, 1995, by and among
                          PageMart Nationwide, Inc., the Lenders named therein, BT
                          Commercial Corporation, as Agent, and Bankers Trust Company,
                          as Issuing Bank
          10.28**         Subscription Agreement, dated as of May 11, 1995, by and
                          among PageMart Nationwide, Inc. and the investors named
                          therein
          10.29+          Amended and Restated Agreement Among Certain Stockholders of
                          PageMart Nationwide, Inc. dated as of September 19, 1995
          10.30***        Secured promissory note of John D. Beletic, as Maker, in
                          favor of PageMart Nationwide, Inc. dated May 11, 1995, in
                          the amount of $21,000.
          10.31***        Subscription Agreement dated as of July 7, 1995 among
                          PageMart Nationwide, Inc., PageMart Canada Holding
                          Corporation and TD Capital Group Ltd.
          10.32***        Agreement Among Stockholders among PageMart Nationwide,
                          Inc., PageMart International, Inc., TD Capital Group Ltd.,
                          PageMart Canada Holding Corporation and PageMart Canada
                          Limited.
          10.33****       Equipment Purchase Agreement between Motorola, Inc. and
                          PageMart Wireless, Inc. (2)
          10.34****       Technology Asset Agreement dated as of December 1, 1995
                          between Motorola, Inc. and PageMart Wireless, Inc.(2)
          10.35***        PageMart Wireless, Inc. Employee Stock Purchase Plan(1)
          10.36***        PageMart Wireless, Inc. Nonqualified Formula Stock Option
                          Plan for Non-Employee Directors(1)
</TABLE>
 
                                       30
<PAGE>   31
 
<TABLE>
<S>                       <C>
          10.37*****      Office Lease Agreement date as of November 26, 1996 between Crescent Real Estate
                          Equities Limited and PageMart Wireless, Inc.
          10.38(3)        PageMart Wireless, Inc. Fourth Amended and Restated 1991 Stock Option Plan.
          11.1*****       Computation of earnings (loss) per share
          21.1***         PageMart Wireless, Inc. Subsidiaries
          27.1*****       Financial Data Schedule for the year ended December 31, 1996.
</TABLE>
 
---------------
 
*      Each of these exhibits is hereby incorporated by reference to the Form
       10-K of the Company for the fiscal year ended December 31, 1994.
 
**     Each of these exhibits is hereby incorporated by reference to the
       Registration Statement on Form S-1 of the Company (Reg. No. 33-91142).
 
***   Each of these exhibits is hereby incorporated by reference to the
      Registration Statement on Form S-1 of the Company (Reg. No. 33-03012).
 
****  Each of these exhibits is hereby incorporated by reference to the Form
      10-K of the Company for the fiscal year ended December 31, 1995.
 
***** Filed herewith.
 
+      Each of these exhibits is hereby incorporated by reference to the Form
       8-K of the Company dated October 6, 1995.
 
++     Each of these exhibits is hereby incorporated by reference to the
       Registration Statement on Form S-8 of the Company (Reg. No. 33-98116).
 
(1)   This exhibit is a "management contract or compensatory plan or
      arrangement" required to be filed as an exhibit to this report pursuant to
      Item 14(c) of Form 10-K.
 
(2)   The Company has requested confidential treatment for certain portions of
      this agreement.
 
(3)   Originally filed as Exhibit 10.1 in the Company's Form 10-Q for the
      quarterly period ended September 30, 1996.
 
     (b) REPORTS ON FORM 8-K
 
     None
 
                                       31
<PAGE>   32
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
Date: March 24, 1997                        PAGEMART WIRELESS, INC.
                                            (Registrant)
 
                                            By:      /s/ JOHN D. BELETIC
 
                                            ------------------------------------
                                                      John D. Beletic
                                               Chairman, President 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, President and Chief         March 24, 1997
-----------------------------------------------------     Executive Officer (Principal
                   John D. Beletic                        Executive Officer)
 
                 /s/  G. CLAY MYERS                     Vice President, Finance, Chief        March 24, 1997
-----------------------------------------------------     Financial Officer and Treasurer
                    G. Clay Myers                         (Principal Financial and
                                                          Accounting Officer)
 
                 /s/  FRANK V. SICA                     Director                              March 24, 1997
-----------------------------------------------------
                    Frank V. Sica
 
                /s/  GUY L. DE CHAZAL                   Director                              March 24, 1997
-----------------------------------------------------
                  Guy L. de Chazal
 
                /s/  ARTHUR PATTERSON                   Director                              March 24, 1997
-----------------------------------------------------
                  Arthur Patterson
 
               /s/  ROGER D. LINQUIST                   Director                              March 24, 1997
-----------------------------------------------------
                  Roger D. Linquist
 
               /s/  LEIGH J. ABRAMSON                   Director                              March 24, 1997
-----------------------------------------------------
                  Leigh J. Abramson
 
            /s/  ALEJANDRO PEREZ ELIZONDO               Director                              March 24, 1997
-----------------------------------------------------
              Alejandro Perez Elizondo
 
               /s/  PAMELA D.A. REEVE                   Director                              March 24, 1997
-----------------------------------------------------
                  Pamela D.A. Reeve
</TABLE>
<PAGE>   33
 
                    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, 1995 and
  1996......................................................  F-3
 
Consolidated Statements of Operations for the Years Ended
  December 31, 1994, 1995 and 1996..........................  F-4
 
Consolidated Statements of Stockholders' Equity (Deficit)
  for the Years Ended December 31, 1994, 1995 and 1996......  F-5
 
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1994, 1995 and 1996..........................  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, 1994, 1995 and 1996..............  S-2
</TABLE>
 
                                       F-1
<PAGE>   34
 
                    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, 1995
and 1996, 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, 1996. 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, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
 
Dallas, Texas,                              ARTHUR ANDERSEN LLP
January 31, 1997
 
                                       F-2
<PAGE>   35
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                               ---------------------
                                                                 1995        1996
                                                               ---------   ---------
<S>                                                            <C>         <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................   $  26,973   $  22,603
  Accounts receivable (net of allowance for doubtful
    accounts of $4,534 and $4,776 in 1995 and 1996,
    respectively)...........................................      21,503      33,446
  Inventories...............................................      11,179      11,702
  Prepaid expenses and other current assets.................       2,880       2,821
                                                               ---------   ---------
         Total current assets...............................      62,535      70,572
RESTRICTED INVESTMENTS......................................         500          --
PROPERTY AND EQUIPMENT (net of accumulated depreciation of
  $29,163 and $48,851 in 1995 and 1996, respectively).......      52,827      96,943
NARROWBAND LICENSES.........................................     133,065     133,065
DEFERRED DEBT ISSUANCE COSTS (net of accumulated
  amortization of $2,011 and $4,094 in 1995 and 1996,
  respectively).............................................       8,436       6,378
OTHER ASSETS................................................       6,466       6,662
                                                               ---------   ---------
         Total assets.......................................   $ 263,829   $ 313,620
                                                               =========   =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable..........................................   $  23,094   $  23,186
  Deferred revenue..........................................      21,409      27,047
  Current maturities of long-term debt......................       5,479          --
  Other current liabilities.................................       6,526      12,270
                                                               ---------   ---------
         Total current liabilities..........................      56,508      62,503
LONG-TERM DEBT..............................................     219,364     240,687
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...........................           2           3
    Class B Convertible Non-Voting Common Stock, 3,809,363
      shares issued at December 31, 1996....................           1           1
    Class C Convertible Non-Voting Common Stock, 1,428,472
      shares issued at December 31, 1996....................          --          --
    Class D Convertible Non-Voting Common Stock, 679,945
      shares issued at December 31, 1996....................          --          --
  Additional paid-in capital................................     154,601     225,661
  Accumulated deficit.......................................    (166,090)   (214,688)
  Stock subscriptions receivable............................        (557)       (547)
                                                               ---------   ---------
         Total stockholders' equity (deficit)...............     (12,043)     10,430
                                                               ---------   ---------
         Total liabilities and stockholders' equity.........   $ 263,829   $ 313,620
                                                               =========   =========
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-3
<PAGE>   36
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1994        1995        1996
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
REVENUES:
  Recurring revenue........................................  $ 56,648    $101,503    $153,041
  Equipment sales and activation fees......................    53,185      57,688      68,551
                                                             --------    --------    --------
          Total revenues...................................   109,833     159,191     221,592
COST OF EQUIPMENT SOLD.....................................    57,835      63,982      78,896
OPERATING EXPENSES:
  Technical................................................    16,155      25,679      37,021
  Selling..................................................    31,252      36,094      43,046
  General and administrative...............................    29,810      43,512      54,006
  Depreciation and amortization............................     8,105      13,272      21,192
                                                             --------    --------    --------
          Total operating expenses.........................    85,322     118,557     155,265
                                                             --------    --------    --------
          Operating loss...................................   (33,324)    (23,348)    (12,569)
OTHER (INCOME) EXPENSE:
  Interest expense.........................................    12,933      30,720      35,041
  Interest income..........................................      (858)     (1,997)     (1,140)
  Other....................................................       414       1,042       2,128
                                                             --------    --------    --------
          Total other (income) expense.....................    12,489      29,765      36,029
                                                             --------    --------    --------
NET LOSS...................................................  $(45,813)   $(53,113)   $(48,598)
                                                             ========    ========    ========
NET LOSS PER SHARE
  (Primary and Fully Diluted)..............................  $  (1.72)   $  (1.53)   $  (1.30)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
  (Primary and Fully Diluted)..............................    26,574      34,653      37,462
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-4
<PAGE>   37
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                   CONVERTIBLE
                                 PREFERRED STOCK         COMMON STOCK
                               --------------------   -------------------   ADDITIONAL                     STOCK
                                NUMBER OF             NUMBER OF              PAID-IN     ACCUMULATED   SUBSCRIPTIONS   TREASURY
                                 SHARES      AMOUNT     SHARES     AMOUNT    CAPITAL       DEFICIT      RECEIVABLE      STOCK
                               -----------   ------   ----------   ------   ----------   -----------   -------------   --------
<S>                            <C>           <C>      <C>          <C>      <C>          <C>           <C>             <C>
BALANCE, December 31, 1993...   15,310,943    $  2    2,671,074     $ --     $ 47,523     $ (67,164)       $(129)        $(16)
  11,242,857 shares of common
    stock issued in the 1994
    Stock Offerings..........           --      --    11,242,857       1       76,902            --           --           --
  Conversion of convertible
    preferred stock to common
    stock....................  (15,310,943)     (2)   15,310,943       2           --            --           --           --
  304,651 shares of common
    stock issued under the
    Stock option/Stock
    issuance plan............           --      --      304,651       --          269            --         (216)          --
  Repayment of stock
    subscriptions
    receivable...............           --      --           --       --           --            --          102           --
  Net loss...................           --      --           --       --           --       (45,813)          --           --
                               -----------    ----    ----------    ----     --------     ---------        -----         ----
BALANCE, December 31, 1994...           --      --    29,529,525       3      124,694      (112,977)        (243)         (16)
  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            --           --           --
  56,654 shares of common
    stock issued under the
    Stock option/Stock
    issuance plan............           --      --       56,654       --          156            --         (125)          --
  3,598,429 shares of common
    stock issued in the 1995
    Stock Offering...........           --      --    3,598,429       --       24,689            --         (189)          --
  Net loss...................           --      --           --       --           --       (53,113)          --           --
                               -----------    ----    ----------    ----     --------     ---------        -----         ----
BALANCE, December 31, 1995...           --      --    33,710,053       3      154,601      (166,090)        (557)          --
  94,879 shares of common
    stock issued under the
    Stock option/Stock
    issuance plan/Employee
    Stock Purchase Plan......           --      --       94,879       --          561            --           --           --
  Repayment of stock
    subscriptions
    receivable...............           --      --           --       --           --            --           10           --
  6,000,000 shares of common
    stock issued in initial
    public offering..........           --      --    6,000,000        1       70,499            --           --           --
  Net loss...................           --      --           --       --           --       (48,598)          --           --
                               -----------    ----    ----------    ----     --------     ---------        -----         ----
BALANCE, December 31, 1996...           --    $ --    39,804,932    $  4     $225,661     $(214,688)       $(547)        $ --
                               ===========    ====    ==========    ====     ========     =========        =====         ====
 
<CAPTION>
 
                                TOTAL
                               --------
<S>                            <C>
BALANCE, December 31, 1993...  $(19,784)
  11,242,857 shares of common
    stock issued in the 1994
    Stock Offerings..........    76,903
  Conversion of convertible
    preferred stock to common
    stock....................        --
  304,651 shares of common
    stock issued under the
    Stock option/Stock
    issuance plan............        53
  Repayment of stock
    subscriptions
    receivable...............       102
  Net loss...................   (45,813)
                               --------
BALANCE, December 31, 1994...    11,461
  Retirement of treasury
    stock....................        --
  725,445 shares of
    non-voting common stock
    issued in the Unit
    Offering.................     5,078
  56,654 shares of common
    stock issued under the
    Stock option/Stock
    issuance plan............        31
  3,598,429 shares of common
    stock issued in the 1995
    Stock Offering...........    24,500
  Net loss...................   (53,113)
                               --------
BALANCE, December 31, 1995...   (12,043)
  94,879 shares of common
    stock issued under the
    Stock option/Stock
    issuance plan/Employee
    Stock Purchase Plan......       561
  Repayment of stock
    subscriptions
    receivable...............        10
  6,000,000 shares of common
    stock issued in initial
    public offering..........    70,500
  Net loss...................   (48,598)
                               --------
BALANCE, December 31, 1996...  $ 10,430
                               ========
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-5
<PAGE>   38
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1994       1995        1996
                                                              --------   ---------   --------
<S>                                                           <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(45,813)  $ (53,113)  $(48,598)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization...........................     8,105      13,272     21,192
    Provision for bad debt..................................     6,590       6,135      6,986
    Accretion of discount on Senior Discount Exchange
       Notes................................................    10,034      26,322     30,871
    Amortization of deferred debt issuance costs............       800       1,052      2,083
    Changes in certain assets and liabilities:
       Increase in accounts receivable......................   (14,629)    (12,054)   (18,929)
       (Increase) decrease in inventories...................    (4,497)      1,630       (523)
       (Increase) decrease in prepaid expenses and other
         current assets.....................................    (1,091)     (1,383)        59
       Increase in other assets, net........................      (546)     (1,350)    (1,052)
       Increase in accounts payable.........................     8,491       6,643         92
       Increase in deferred revenue.........................     6,780       7,447      5,638
       Increase in other current liabilities................       248       2,486      5,744
                                                              --------   ---------   --------
         Net cash provided by (used in) operating
           activities.......................................   (25,528)     (2,913)     3,563
                                                              --------   ---------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments.......................    (2,480)         --         --
  Proceeds from sales of short-term investments.............    11,096          --         --
  Purchases of Narrowband Licenses..........................   (58,885)    (74,079)        --
  Purchases of property and equipment.......................   (16,719)    (33,503)   (63,804)
  Investment in international ventures......................    (1,902)     (2,174)        (4)
  Purchases of intangible assets............................      (195)       (403)      (644)
  Release of restricted cash................................        --          --        500
                                                              --------   ---------   --------
         Net cash used in investing activities..............   (69,085)   (110,159)   (63,952)
                                                              --------   ---------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock....................    76,903      29,578     70,500
  Proceeds from issuance of common stock under the stock
    option/stock issuance plan..............................        53          31        561
  Proceeds from issuance of Senior Discount Notes, net......        --      95,001         --
  Payment of stock subscriptions receivable.................       102          --         10
  Deferred debt issuance costs incurred for Revolving Credit
    Agreement...............................................        --      (1,447)       (25)
  Borrowings under Revolving Credit Agreement...............        --          --     31,100
  Payments under Revolving Credit Agreement.................        --          --    (31,100)
  Borrowings from vendor credit facilities..................     8,540       6,777         --
  Payments on vendor credit facilities......................    (2,052)     (4,402)   (15,027)
                                                              --------   ---------   --------
         Net cash provided by financing activities..........    83,546     125,538     56,019
                                                              --------   ---------   --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........   (11,067)     12,466     (4,370)
CASH AND CASH EQUIVALENTS, beginning of period..............    25,574      14,507     26,973
                                                              --------   ---------   --------
CASH AND CASH EQUIVALENTS, end of period....................  $ 14,507   $  26,973   $ 22,603
                                                              ========   =========   ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest................................................  $    998   $   2,146   $  1,231
    Income taxes............................................  $     --   $      --   $     --
NONCASH TRANSACTIONS:
  Common stock issued in exchange for stock subscriptions
    receivable..............................................  $    216   $     314   $     --
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                  of these consolidated financial statements.
 
                                       F-6
<PAGE>   39
 
                    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 operations and negative
cash flows from operations since inception and is highly leveraged. Management
expects to continue to incur operating losses in 1997 and 1998. These losses are
driven by the Company's investment in the growth of its subscriber base and
continued expansion into additional markets. The Company's business plan calls
for substantial growth in its subscriber base in order for the Company to
achieve operating profitability and positive cash flows from operations. There
can be no assurance that the Company will meet its business plan, achieve
operating profitability, or achieve positive cash flows from operations. If the
Company cannot achieve operating profitability, it may not be able to make the
required payments on existing or future obligations.
 
     The Company has made significant investments in Narrowband Personal
Communications Services ("NPCS") licenses through participation in auctions
conducted by the FCC. The Company plans to utilize these assets in connection
with two-way wireless messaging services. The Company's success in implementing
two-way services is dependent primarily upon market acceptance of proposed
two-way services and the ability of the Company to successfully develop and
construct a transmission network and market its two-way services. There can be
no assurance that two-way services offered will be accepted by the market or
that the Company will be successful in developing and constructing a
transmission network or marketing its two-way services.
 
     In management's opinion, the Company's current working capital combined
with borrowings expected to be available from the Revolving Credit Agreement
will be sufficient to support the planned growth for its one-way wireless
communications operations through 1997. As the Company begins implementation and
development of two-way services, the Company anticipates requiring additional
sources of capital to fund the construction and operation of a two-way messaging
network.
 
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.
 
                                       F-7
<PAGE>   40
 
INVENTORIES
 
     Inventories consist of pagers held for resale and are stated at the lower
of cost or market. Cost is determined by using the specific identification
method, which approximates the first-in, first-out method. The Company purchases
a majority of its pagers from Motorola, Inc.
 
RESTRICTED INVESTMENTS
 
     In 1995 the Company had Restricted investments which represented
certificates of deposit in the amount of $500,000 pledged as collateral on the
Company's notes payable to vendor. The Restricted investments were released upon
retirement of the note payable to the vendor.
 
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 $7,824,000, $12,683,000
and 19,688,000 for the years ended December 31, 1994, 1995 and 1996,
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,
                                                              -------------------
                                                                1995       1996
                                                              --------   --------
<S>                                                           <C>        <C>
Network equipment...........................................  $ 58,404   $109,856
Computer equipment..........................................    16,829     26,268
Furniture and equipment.....................................     6,757      9,670
                                                              --------   --------
                                                                81,990    145,794
Less: Accumulated depreciation..............................   (29,163)   (48,851)
                                                              --------   --------
                                                              $ 52,827   $ 96,943
                                                              ========   ========
</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 and $4,596,000 are included in recurring revenues
in fiscal 1995 and 1996, 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.
 
                                       F-8
<PAGE>   41
 
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
(see Note 1) 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.
 
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 Financial Accounting Standards Board ("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 1996 financial statements of the Company. 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 NPCS
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 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 two-way messaging network.
 
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
 
     Effective November 15, 1995, PageMart International, Inc. owns 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 Sheet.
 
     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
 
                                       F-9
<PAGE>   42
 
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.
 
5. LONG-TERM DEBT
 
     Long-term debt, including capital lease obligations, consisted of the
following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1995        1996
                                                              --------    --------
<S>                                                           <C>         <C>
12 1/4% Senior Discount Notes, face amount $136,500 due
  November 1, 2003, at accreted value.......................  $ 94,952    $107,947
15% Senior Discount Exchange Notes, face amount $207,270 due
  February 1, 2005, at accreted value.......................   114,865     132,740
Vendor Purchase Financing Facility of $8 million, bearing
  interest at 4% based upon the rate quoted by The Wall
  Street Journal from time to time 12.75% at December 31,
  1995......................................................     5,138          --
Capital lease obligations to a vendor up to $15 million,
  bearing interest ranging from 11.84% to 15.13% at December
  31, 1995..................................................     9,888          --
                                                              --------    --------
          Total debt........................................   224,843     240,687
            Less: Current maturities........................    (5,479)         --
                                                              --------    --------
          Long-term debt....................................  $219,364     240,687
                                                              ========    ========
</TABLE>
 
     During the fourth quarter of 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. From and after May 1, 1999, interest on the 12 1/4%
Notes will be payable semiannually in cash at the rate of 12 1/4% per annum. The
12 1/4% Notes represent senior indebtedness of the Company and are redeemable at
the option of the Company, in whole or in part, at any time after November 1,
1998, at $136.5 million plus accrued interest.
 
     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.
 
     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.
 
                                      F-11
<PAGE>   43
 
     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.
 
     On May 11, 1995, the Company entered into the Revolving Credit Agreement
which provides for a $50 million revolving line of credit. As of December 31,
1996, 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 (or 4.5, at all times prior to December 31, 1995). 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, 1996, the maximum amount
available under the Revolving Credit Agreement was $23.7 million.
 
     Maturities of long-term debt and capital lease obligations are as follows
(in thousands):
 
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
   DECEMBER 31,
-------------------
<S>                                                                       <C>
   1997.................................................................  $     --
   1998.................................................................        --
   1999.................................................................        --
   2000.................................................................        --
   2001.................................................................        --
   Thereafter...........................................................   240,687
                                                                          --------
                                                                          $240,687
                                                                          ========
</TABLE>
 
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
1994, 1995 and 1996 was $6,084,000, $8,471,000 and $13,496,000, 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>
   1997..................................................................   $11,309
   1998..................................................................      9,921
   1999..................................................................      8,106
   2000..................................................................      6,342
   2001..................................................................      4,178
   Thereafter............................................................      9,061
                                                                            -------
   Total minimum lease payments..........................................   $48,917
                                                                            =======
</TABLE>
 
                                      F-11
<PAGE>   44
 
     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, 1996, the Company had purchased
$19.9 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, 1995 and 1996, are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31, 1995     DECEMBER 31, 1996
                                                     -------------------   -------------------
                                                     CARRYING     FAIR     CARRYING     FAIR
                                                      AMOUNT     VALUE      AMOUNT     VALUE
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Cash and cash equivalents.........................   $ 26,973   $ 26,973   $ 22,603   $ 22,603
Long-term debt....................................   $224,843   $241,621   $240,687   $250,156
</TABLE>
 
8. STOCKHOLDERS' EQUITY (DEFICIT)
 
PREFERRED STOCK
 
     On August 5, 1994, in conjunction with the 1994 Stock Offerings and the
related stockholders' agreement, each outstanding share of preferred stock
converted into one share of common stock. In September 1994, the Company's
Certificate of Incorporation was amended to reduce the number of authorized
shares of preferred stock to 10,000,000. At December 31, 1995 and 1996, none of
the authorized shares of preferred stock were issued and outstanding.
 
     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.
 
COMMON STOCK
 
     During the fourth quarter 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.
 
     During the third quarter of 1994, the Company issued an aggregate of
11,242,857 shares of common stock in the 1994 Stock Offerings at a purchase
price of $7.00 per share. The aggregate net proceeds (after expenses) of the
1994 Stock Offerings were approximately $76.9 million. Of the total shares
issued, 714,287 shares were convertible non-voting common stock and the
remaining 10,528,570 shares were common stock. At the request of the holder, the
non-voting common stock was converted to common stock in January 1995.
 
     During the first quarter of 1995 in connection with the Unit Offering (see
Note 5), the Company issued 725,445 shares of non-voting common stock at a
purchase price of $7.00 per share. During the second quarter
 
                                      F-12
<PAGE>   45
 
of 1995, the Company completed a private offering of common stock to a group of
institutional investors and certain officers of the Company (the "1995 Stock
Offering"). In the 1995 Stock Offering, the Company sold 3,598,429 shares of
common stock for net proceeds (after expenses) of approximately $24.5 million.
 
     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
                                                                        -----------------------
                                                             SHARES          DECEMBER 31,
                                                           AUTHORIZED      1995         1996
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Class A Convertible Common Stock, $.0001 par value per
  share (the "Class A Common Stock")....................   60,000,000   23,277,293   33,887,152
Class B Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class B Common Stock")..........   12,000,000    8,975,469    3,809,363
Class C Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class C Common Stock")..........    2,000,000      731,846    1,428,472
Class D Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class D Common Stock")..........    1,000,000      725,445      679,945
                                                           ----------   ----------   ----------
                                                           75,000,000   33,710,053   39,804,932
                                                           ==========   ==========   ==========
</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 Stockholders' Agreement. Class D Common Stock is
convertible, at the option of the holder, at any time after the occurrence of an
initial public offering following which the common stock of the Company is
publicly traded. The Company had an initial public offering on June 13, 1996.
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 at least
six months after an initial public offering following which the common stock of
the Company is publicly traded. 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 (the "Offering") at a price
of $13.00 per share. The Company received proceeds from the Offering of
approximately $70.5 million after deducting underwriting discounts, commissions,
fees and expenses associated with the Offering. Upon receipt of the net
proceeds, the Company retired vendor debt of approximately $12.9 million and
repaid approximately $11.9 million of loans outstanding under the Company's
 
                                      F-13
<PAGE>   46
 
revolving credit facility. The remaining proceeds are expected to be used to
fund the initial construction of the Company's narrowband personal
communications service transmission network and for general corporate purposes.
 
     Following is a schedule of common stock reserved at December 31, 1996:
 
<TABLE>
<CAPTION>
                                                               SHARES
                                                              ---------
<S>                                                           <C>
Exercise of common stock warrants...........................    834,648
Stock option/stock issuance plan............................  3,674,017
Employee Stock Purchase Plan................................    468,725
Non-Employee/Director Stock Option Plan.....................     75,000
                                                              ---------
                                                              5,052,390
                                                              =========
</TABLE>
 
9. STOCK OPTION/STOCK ISSUANCE/STOCK PURCHASE PLANS
 
                            STOCK COMPENSATION PLANS
 
     At December 31, 1996, 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 income and earnings per share would have been
reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                                   1995         1996
                                                                 --------     --------
<S>                                              <C>             <C>          <C>
Net loss.......................................  As reported     $(53,113)    $(48,598)
                                                 Pro forma        (53,380)     (50,095)
Primary and fully diluted earnings per share...  As reported     $  (1.53)    $  (1.30)
                                                 Pro forma          (1.54)       (1.34)
</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 1991 Stock
Option/Issuance Plan, ("1991 Plan"), the Company may grant options to its
employees for up to 4,550,000 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 1991 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 and 1996: dividend
 
                                      F-14
<PAGE>   47
 
yield of 0 percent for all years; expected volatility of 40 percent, risk-free
interest rates average 6.44 percent in 1995 and 6.35 percent in 1996 for the
1991 Plan and 6.67 percent in 1996 for the Directors Plan; and expected lives of
8.23 years.
 
     A summary of the status of the Company's 1991 Plan as of December 31, 1994,
1995 and 1996; and the Directors Plan as of December 31, 1996 and changes during
the years ending on these dates is presented below:
 
                                   1991 PLAN
 
<TABLE>
<CAPTION>
                                                  1994                1995                1996
                                            -----------------   -----------------   -----------------
                                                     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..........   1,147    $2.02      1,597    $4.83      2,669    $6.59
Granted...................................     866     6.95      1,205     8.84      1,126     8.49
Exercised.................................    (304)    0.89        (37)    4.12        (64)    5.24
Forfeited.................................    (112)    3.23        (96)    5.82       (258)    8.51
                                             -----               -----               -----
Outstanding at end of year................   1,597    $4.83      2,669    $6.59      3,473    $7.09
                                             =====               =====               =====
 
Options exercisable at year-end...........     237                 583               1,077
                                             =====               =====               =====
 
Weighted-average fair value of options
  granted during the year.................              N/A               $5.07               $5.02
                                                      =====               =====               =====
</TABLE>
 
                                 DIRECTORS PLAN
 
<TABLE>
<CAPTION>
                                                                         1996
                                                              --------------------------
                                                                             WEIGHTED
                                                              SHARES         AVERAGE
                                                              (000)       EXERCISE PRICE
                                                              ------      --------------
<S>                                                           <C>         <C>
Outstanding at beginning of year............................      --          $   --
Granted.....................................................      25           12.00
Exercised...................................................      --              --
Forfeited...................................................      --              --
                                                               -----
Outstanding at end of year..................................      25          $12.00
                                                               =====
 
Options exercisable at year-end.............................       6
                                                               =====
 
Weighted-average fair value of options granted during the
  year......................................................                  $ 7.04
                                                                              ======
</TABLE>
 
                                      F-15
<PAGE>   48
 
     The following table summarized information about fixed stock options
outstanding at December 31, 1996:
 
<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
                  -----------------------------------------------   ----------------------------
                    NUMBER       WEIGHTED-AVG.                        NUMBER
   RANGE OF       OUTSTANDING      REMAINING       WEIGHTED-AVG.    EXERCISABLE   WEIGHTED-AVG.
EXERCISE PRICES   AT 12/31/96   CONTRACTUAL LIFE   EXERCISE PRICE   AT 12/31/96   EXERCISE PRICE
---------------   -----------   ----------------   --------------   -----------   --------------
<C>               <C>           <C>                <C>              <C>           <C>
1991 PLAN
 
$ 0.00 to  2.00      245,000           5.2             $ 0.92          212,000        $ 0.86
  2.01 to  4.00      443,000           6.5               3.26          295,000          3.26
  4.01 to  6.00       40,000           7.1               5.00           13,000          5.00
  6.01 to  8.00    1,660,000           8.7               6.94          411,000          7.12
  8.01 to 10.00      743,000           8.8               9.99          146,000          9.97
 10.01 to 12.00      342,000           8.8              11.12               --            --
                   ---------                                         ---------
                   3,473,000           8.2               7.09        1,077,000          5.19
                   =========                                         =========
 
DIRECTORS PLAN
 
$ 0.00 to 12.00       25,000           9.2             $12.00            6,000        $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.
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: dividend yield of 0 percent; an expected life of 0.5
years; expected volatility of 40 percent; and a risk-free interest rate of 6.27
percent. The weighted-average fair value of those purchased rights granted in
1996 was $2.14.
 
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 $126.8 million and $149.2 million of net operating
loss carryforwards for federal income tax purposes at December 31, 1995 and
1996, respectively. The net operating loss carryforwards will expire in the
years 2004 through 2011 if not previously utilized. The utilization of these
carryforwards is subject to certain limitations. Of the net operating loss
carryforwards at December 31, 1996, 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>   49
 
     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,
                                                              1995         CHANGE         1996
                                                          ------------    --------    ------------
<S>                                                       <C>             <C>         <C>
Gross deferred tax asset:
  Net operating loss carryforwards......................    $ 43,128      $  7,613      $ 50,741
  Bad debt reserve......................................       2,098         1,017         3,115
  Inventory reserve.....................................         828           699         1,527
  Accretion of Senior Discount Notes....................      13,002        10,495        23,497
  Other.................................................         943          (161)          782
                                                            --------      --------      --------
                                                              59,999        19,663        79,662
Gross deferred tax liability:
  Depreciation..........................................      (3,694)       (3,305)       (6,999)
                                                            --------      --------      --------
                                                              56,305        16,358        72,663
     Valuation allowance................................     (56,305)      (16,358)      (72,663)
                                                            --------      --------      --------
     Net deferred tax asset.............................    $     --      $     --      $     --
                                                            ========      ========      ========
</TABLE>
 
11. RELATED-PARTY TRANSACTIONS
 
     In connection with the Unit Offering completed in 1995 (see Note 5), the
Company incurred $3,805,000 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.
 
     As of December 31, 1996, the president and certain other officers of the
Company are indebted to the Company in the aggregate amount of $671,627 under
promissory notes issued in connection with the purchase of the Company's common
stock (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
7.00%. 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 in the Consolidated Balance Sheet.
 
                                      F-17
<PAGE>   50
 
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, 1994
                                                     --------------------------------------------------
                                                     PAGEMART   PAGEMART     PAGEMART
                                                     ONE-WAY    TWO-WAY    INTERNATIONAL   CONSOLIDATED
                                                     --------   --------   -------------   ------------
<S>                                                  <C>        <C>        <C>             <C>
Revenues...........................................  $109,833   $     --      $   --         $109,833
Operating loss.....................................   (33,324)        --          --          (33,324)
Total assets.......................................    81,470     58,885       1,704          142,059
Capital expenditures...............................    16,719         --          --           16,719
</TABLE>
 
<TABLE>
<CAPTION>
                                                            FISCAL YEAR ENDED DECEMBER 31, 1995
                                                     --------------------------------------------------
                                                     PAGEMART   PAGEMART     PAGEMART
                                                     ONE-WAY    TWO-WAY    INTERNATIONAL   CONSOLIDATED
                                                     --------   --------   -------------   ------------
<S>                                                  <C>        <C>        <C>             <C>
Revenues...........................................  $159,191   $     --      $   --         $159,191
Operating loss.....................................   (22,972)      (376)         --          (23,348)
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
                                                     --------------------------------------------------
                                                     PAGEMART   PAGEMART     PAGEMART
                                                     ONE-WAY    TWO-WAY    INTERNATIONAL   CONSOLIDATED
                                                     --------   --------   -------------   ------------
<S>                                                  <C>        <C>        <C>             <C>
Revenues...........................................  $221,592   $     --      $   --         $221,592
Operating loss.....................................   (11,465)      (657)       (447)         (12,569)
Total assets.......................................   160,858    151,108       1,654          313,620
Capital expenditures...............................    50,838     12,966          --           63,804
</TABLE>
 
                                      F-18
<PAGE>   51
 
                    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 January 31,
1997. 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.
 
Dallas, Texas,                              ARTHUR ANDERSEN LLP
January 31, 1997
 
                                       S-1
<PAGE>   52
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (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, 1996......    $4,534        $6,986         $--          $6,744(a)      $4,776
Year Ended December 31, 1995......    $1,388        $6,135         $--          $2,989(a)      $4,534
Year Ended December 31, 1994......    $1,172        $6,590         $--          $6,374(a)      $1,388
</TABLE>
 
---------------
 
(a) Accounts written off as uncollectible, net of recoveries.
 
                                       S-2
<PAGE>   53
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                DESCRIPTION OF EXHIBIT
        -------                              ----------------------
<S>                       <C>
           3(i)***        Restated Certificate of Incorporation of PageMart Wireless,
                          Inc.
           3(ii)*         By-laws of PageMart Wireless, Inc.
           3(iii)***      Certificate of Amendment to Restated Certificate of
                          Incorporation of PageMart Wireless, Inc.
           4.1**          Indenture, dated as of October 19, 1993, between PageMart,
                          Inc. and United States Trust Company of New York, as
                          Trustee, relating to the 12 1/4% Senior Discount Notes due
                          2003
           4.2**          Indenture dated as of January 17, 1995 between PageMart
                          Nationwide, Inc. and United States Trust Company of New
                          York, as Trustee, relating to the 15% Senior Discount Notes
                          due 2005
          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.
          10.2**          Telecommunications Service Agreement, dated May 29, 1992,
                          between PageMart, Inc. and WilTel, Inc.
          10.3**          Equipment Lease Agreement, dated May 20, 1992, between
                          PageMart, Inc. and Glenayre Electronics, Inc.
          10.4**          First Addendum to Equipment Lease Agreement, dated May 20,
                          1992, between PageMart, Inc. and Glenayre Electronics, Inc.
          10.5**          Amendment No. 2 to Equipment Lease Agreement, dated October
                          18, 1993, between PageMart, Inc. and Glenayre Electronics,
                          Inc.
          10.6**          Lease Agreement and Addendum, dated January 10, 1990,
                          between Kingston Houston Partners I, Ltd. and PageMart, Inc.
          10.7**          Expansion and Extension of Lease Agreement, dated April 7,
                          1993, between Kingston Houston Partners I, Ltd. and
                          PageMart, Inc.
          10.8**          Office Lease Agreement, dated January 29, 1992, between
                          Dallas Central Development Corp. and PageMart, Inc.
          10.9**          First Amendment to Office Lease Agreement, dated July 29,
                          1992, between Fulcrum Central Ltd., as successor in interest
                          to Dallas Central Development Corp., and PageMart, Inc.
          10.10**         Second Amendment to Office Lease Agreement, dated December
                          1, 1992, between Fulcrum Central Ltd., as successor in
                          interest to Dallas Central Development Corp., and PageMart,
                          Inc.
          10.11**         Third Amendment to Office Lease Agreement, dated December
                          29, 1992, between Fulcrum Central Ltd., as successor in
                          interest to Dallas Central Development Corp., and PageMart,
                          Inc.
          10.12**         Fourth Amendment to Office Lease Agreement, dated July 21,
                          1993, between Fulcrum Central Ltd., as successor in interest
                          to Dallas Central Development Corp., and PageMart, Inc.
          10.13**         License Agreement, dated May 12, 1994, between PageMart,
                          Inc., licensee, and International Business Machines
                          Corporation, licensor
          10.14**         Sales Contract, dated January 21, 1994, between PageMart,
                          Inc., buyer, and Mitsui Comtek Corporation, seller
          10.15**         Resale Agreement, dated November 1, 1993, between PageMart,
                          Inc., licensor, and GTE Service Corporation, licensee
          10.16**         Financing and Security Agreement between Motorola and
                          Pagemart, Inc. dated May 18, 1994
          10.17**         Subscription Agreement, dated June 9, 1994, between
                          PageMart, Inc. and Fomento Empresarial Regiomontano, S.A. de
                          C.V.
          10.18**         Letter of Intent, dated June 9, 1994, between PageMart, Inc.
                          and Fomento Empresarial Regiomontano, S.A. de C.V.
</TABLE>
<PAGE>   54
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                DESCRIPTION OF EXHIBIT
        -------                              ----------------------
<S>                       <C>
          10.19*          Strategic Alliance Agreement No. 1, dated September 15,
                          1994, between GTE Service Corporation and PageMart, Inc.
          10.20*          Strategic Alliance Agreement No. 2, dated October 13, 1994,
                          between GTE Service Corporation and PageMart, Inc.
          10.21*          Secured promissory note of John D. Beletic, as Maker, in
                          favor of PageMart, Inc. dated January 28, 1994, in the
                          amount of $97,800
          10.22*          Secured promissory note of John D. Beletic, as Maker, in
                          favor of PageMart, Inc. dated November 29, 1994, in the
                          amount of $200,000
          10.23*          Agreement of Reorganization and Plan of Merger, dated as of
                          December 5, 1994, between PageMart, Inc., PageMart
                          Nationwide, Inc. and PM Merger Corp.
          10.24*          Registration Rights Agreement dated as of January 17, 1995
                          between PageMart Nationwide, Inc. and Morgan Stanley & Co.
                          Incorporated
          10.25++         PageMart Nationwide, Inc. Third Amended and Restated 1991
                          Stock Option Plan and Third Amended and Restated 1991 Stock
                          Issuance Plan(1)
          10.26**         Satellite Services and Space Segment Lease Agreement, dated
                          January 2, 1995, between PageMart, Inc. and SpaceCom
                          Systems, Inc.
          10.27**         Credit Agreement, dated as of May 11, 1995, by and among
                          PageMart Nationwide, Inc., the Lenders named therein, BT
                          Commercial Corporation, as Agent, and Bankers Trust Company,
                          as Issuing Bank
          10.28**         Subscription Agreement, dated as of May 11, 1995, by and
                          among PageMart Nationwide, Inc. and the investors named
                          therein
          10.29+          Amended and Restated Agreement Among Certain Stockholders of
                          PageMart Nationwide, Inc. dated as of September 19, 1995
          10.30***        Secured promissory note of John D. Beletic, as Maker, in
                          favor of PageMart Nationwide, Inc. dated May 11, 1995, in
                          the amount of $21,000.
          10.31***        Subscription Agreement dated as of July 7, 1995 among
                          PageMart Nationwide, Inc., PageMart Canada Holding
                          Corporation and TD Capital Group Ltd.
          10.32***        Agreement Among Stockholders among PageMart Nationwide,
                          Inc., PageMart International, Inc., TD Capital Group Ltd.,
                          PageMart Canada Holding Corporation and PageMart Canada
                          Limited.
          10.33****       Equipment Purchase Agreement between Motorola, Inc. and
                          PageMart Wireless, Inc. (2)
          10.34****       Technology Asset Agreement dated as of December 1, 1995
                          between Motorola, Inc. and PageMart Wireless, Inc.(2)
          10.35***        PageMart Wireless, Inc. Employee Stock Purchase Plan(1)
          10.36***        PageMart Wireless, Inc. Nonqualified Formula Stock Option
                          Plan for Non-Employee Directors(1)
          10.37*****      Office Lease Agreement date as of November 26, 1996 between
                          Crescent Real Estate Equities Limited and PageMart Wireless,
                          Inc.
          10.38(3)        PageMart Wireless, Inc. Fourth Amended and Restated 1991
                          Stock Option Plan.
          11.1*****       Computation of earnings (loss) per share
          21.1***         PageMart Wireless, Inc. Subsidiaries
          27.1*****       Financial Data Schedule for the year ended December 31,
                          1996.
</TABLE>
 
---------------
 
*      Each of these exhibits is hereby incorporated by reference to the Form
      10-K of the Company for the fiscal year ended December 31, 1994.
 
**     Each of these exhibits is hereby incorporated by reference to the
      Registration Statement on Form S-1 of the Company (Reg. No. 33-91142).
 
***   Each of these exhibits is hereby incorporated by reference to the
      Registration Statement on Form S-1 of the Company (Reg. No. 33-03012).
 
****  Each of these exhibits is hereby incorporated by reference to the Form
      10-K of the Company for the fiscal year ended December 31, 1995.
 
***** Filed herewith.
<PAGE>   55
 
+      Each of these exhibits is hereby incorporated by reference to the Form
      8-K of the Company dated October 6, 1995.
 
++     Each of these exhibits is hereby incorporated by reference to the
      Registration Statement on Form S-8 of the Company (Reg. No. 33-98116).
 
(1)   This exhibit is a "management contract or compensatory plan or
      arrangement" required to be filed as an exhibit to this report pursuant to
      Item 14(c) of Form 10-K.
 
(2)   The Company has requested confidential treatment for certain portions of
      this agreement.
 
(3)   Originally filed as Exhibit 10.1 in the Company's Form 10-Q for the
      quarterly period ended September 30, 1996.