<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
 
                                   FORM 10-K
 
<TABLE>
<C>              <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, 1998
 
                                              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)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                           75-2575229
       (State or other jurisdiction of                             (I.R.S. Employer
        incorporation or organization)                          Identification Number)
</TABLE>
 
                          3333 LEE PARKWAY, SUITE 100
                              DALLAS, TEXAS 75219
                    (Address of principal executive offices)
 
      (Registrant's telephone number, including area code): (214) 765-4000
                         ------------------------------
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                              TITLE OF EACH CLASS
                                ---------------
 
               Class A Common Stock, par value $0.0001 per share
                         ------------------------------
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.  Yes [X]   No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Class A Common Stock on
January 29, 1999 as reported on the Nasdaq National Market System, was
approximately $55,951,992. Shares of Common Stock held by each executive officer
and director and by each person who owns 5% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status for this purpose is not necessarily a
conclusive determination for other purposes.
 
     As of January 29, 1999, there were 34,536,512; 3,809,363; 1,428,472 and
623,945 shares of the Registrant's Class A, Class B, Class C and Class D common
stock outstanding, respectively.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
     Portions of the Registrant's Proxy Statement for its Annual Meeting of
Shareholders scheduled to be held on May 12, 1999 are incorporated by reference
into Part III (items 11, 12 and 13) hereof.
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<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Unless the context otherwise requires, references to "the Company" are to
PageMart Wireless, Inc. and its subsidiaries on a consolidated basis. References
to "PageMart Wireless" are to PageMart Wireless, Inc. on a non-consolidated
basis. References to "PageMart, Inc." are to PageMart, Inc., a wholly-owned
subsidiary of PageMart Wireless that was merged into PageMart Wireless on
January 28, 1998.
 
FORWARD LOOKING STATEMENTS
 
     This Form 10-K and the Annual Report to Stockholders contains statements
that constitute forward-looking statements. The words "estimate," "project,"
"plan," "expect," "believe" and similar expressions are intended to identify
forward-looking statements. Readers are cautioned that such forward-looking
statements involve risks and uncertainties, and are subject to change based on
various important factors. The factors set forth herein under "Risk Factors", in
other filings with the Securities Exchange Commission and the following factors,
among others, in some cases have affected and in the future could affect the
Company's financial performance and could cause actual results to differ
materially from those expressed in such forward-looking statements: economic
conditions and consumer confidence generally in the United States; the ability
of the Company to manage its high outstanding indebtedness; the impact of
technological change in the telecommunications industry; the future cost of
network infrastructure and subscriber equipment; the impact of competition and
pricing of paging and wireless messaging services; the timely development and
acceptance of new products; changes in regulation by the Federal Communications
Commission ("FCC") and various state regulatory agencies; potential technical
problems relating to the Company's transmission network for advanced messaging
services; and the cost and ability of the Company and third parties upon whose
products and services the Company depends to be Year 2000 ready in a timely
manner. See "Risk Factors."
 
GENERAL
 
     The Company is the sixth largest wireless messaging carrier in the United
States, based on 2,651,004 units in service at December 31, 1998. In recent
years the Company has been one of the fastest growing providers of traditional
one-way paging and messaging services nationwide. During 1998, the Company
focused its attention on constructing the network infrastructure necessary to
add narrowband personal communications services ("PCS") capabilities to its
existing one-way network. Narrowband PCS permits the delivery of advanced
messaging services such as two-way messaging and guaranteed or assured
messaging. This effort achieved a significant milestone in December 1998 with
the introduction of nationwide guaranteed messaging service.
 
     Since the founding of the Company in 1989, it has been an innovative leader
in the traditional paging business. The Company built its strategy around the
concepts of exclusive nationwide frequencies, flexible network architecture, and
centralized control of the network and administrative functions. The strategy
was aimed at providing efficient and flexible traditional paging services on a
single frequency nationwide and internationally. This strategy put the Company
in a position to capitalize on distribution channels that demanded
single-frequency nationwide service and centralized customer service and
distribution. The result was rapid subscriber growth that was generated
internally rather than through the acquisition of other paging carriers.
 
     As the market for traditional paging services matures, the Company is
moving aggressively to become a leader in the market for advanced messaging
services, an arena that the Company believes will be the next growth market for
wireless messaging carriers. The Company is only the second wireless messaging
carrier to deploy a nationwide narrowband PCS network for advanced messaging
services. The Company invested approximately $128 million in 1998 to construct
and deploy its nationwide narrowband PCS network, which the Company believes is
the wireless industry's most comprehensive. The Company expects to spend
approximately $40 million in 1999 to complete the addition of narrowband PCS
capabilities to its network, expand its network geographically and make other
enhancements. The Company's operations now comprise of
 
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<PAGE>   3
 
a highly efficient nationwide network delivering traditional one-way paging and
state of the art advanced messaging services. Because both types of services are
delivered on the same network, references in this report to the traditional
one-way paging network or the narrowband PCS network are used to distinguish
when the network is used for delivery of one-way paging services or advanced
messaging services, respectively.
 
     The Company now is composed of two businesses at very different points in
their business life cycle. Through its PageMart Paging division, the Company
offers traditional one-way local, multi-city, statewide, regional and nationwide
paging and other wireless services in all 50 states, covering approximately 90%
of the population of the United States. At December 31, 1998, the Company had
approximately 2,618,527 traditional paging service subscribers in the United
States. This is a maturing business generating free cash flow (i.e. cash flow in
excess of capital expenditures) and not requiring further significant capital
investments.
 
     In contrast, through its PageMart PCS division, the Company offers local
and nationwide guaranteed messaging service covering over 70% of the United
States population at December 31, 1998. In the first four months of 1999, the
Company expects to expand its service to all 50 states covering approximately
90% of the population. Later in the year, the Company expects to introduce
additional advanced messaging services, including full two-way messaging. See
"Products and Services." This is a business in the early stage of its
development, and the Company expects it to be a consumer of cash for the next
several years as it goes through a period of rapid growth.
 
     The Company also provides its U.S. domestic customers with seamless
traditional one-way paging services across the Americas, including Canada,
Mexico, much of the Caribbean and Central America, and parts of South America.
Through direct ownership in Canada and network affiliation agreements with
owners of foreign networks, the Company's network is interconnected with foreign
networks operating on a common frequency, thus providing roaming capabilities
for the Company's customers in the foreign countries and for the customers of
the foreign network in the United States. In 1998, the Company expanded services
into Guatemala, Costa Rica, Haiti, the Cayman Islands and the Dominican Republic
through network affiliation agreements with leading telecommunications companies
in those countries. The Company expects to expand services into Colombia,
Trinidad and Tobago, Honduras, Peru and Venezuela in 1999.
 
     The Company charges subscribers a fee that covers the paging and messaging
services purchased by the subscriber. The amount of the fee varies, based
primarily on the type of service provided, the amount of usage and the
geographic area covered. The Company charges higher rates for service options
providing more than local coverage.
 
BUSINESS AND OPERATING STRATEGY
 
     The Company has experienced increased demand for alphanumeric messaging
services and wide area coverage. These are trends that the Company believes span
the entire industry. Narrowband PCS networks are designed to efficiently deliver
nationwide alphanumeric messaging services at lower operating costs relative to
the current costs of delivering similar one-way alphanumeric messages at
comparable network utilization levels. See "Transmission Network." The Company
expects strategies employing narrowband PCS networks to capture significant
amounts of the projected paging and messaging industry growth because of their
anticipated ability to deliver greater network capacity, new services, higher
quality and improved reliability compared to existing one-way networks.
 
     The Company believes it is well positioned to take advantage of this
projected growth. In the narrowband PCS auctions conducted by the FCC, the
Company acquired licenses for a total of 100kHz of forward frequency and 50kHz
of return frequency nationwide (the "narrowband PCS Licenses"). The Company is
one of three companies in the United States with 150kHz or more of narrowband
PCS frequency nationwide. The Company's narrowband PCS network employs the
ReFLEX25(R) protocol, which is a second generation ReFLEX(R) technology
developed by Motorola, Inc. ("Motorola") that is compatible with the FLEX(TM)
protocol employed in the Company's existing one-way network. This has enabled
the Company to integrate narrowband PCS capabilities into its existing one-way
network, allowing the Company to build its narrowband PCS network rapidly and
substantially increase its network capacity in the most cost effective manner.
When
 
                                        2
<PAGE>   4
 
completed, the Company's narrowband PCS network will cover substantially the
same "footprint", or geographic coverage area, as its existing one-way network.
 
     The Company believes that the industry growth rate for traditional paging
services is slowing. As a result, the Company expects its future growth will
come principally from the advanced messaging services business rather than its
traditional one-way paging business. The Company expects that the six following
operating principles, to which the Company attributes the significant growth of
its traditional paging business, will be equally important as the market for
advanced messaging services continues to develop. The Company has positioned
itself to utilize these principles in its advanced messaging business.
 
     DIVERSIFIED DISTRIBUTION CHANNELS. The Company utilizes a number of
distribution channels to market its current products and services, including
marketing directly to individuals, corporations and other organizations through
its national accounts sales force and the sales force in the Company's sales
offices, and indirectly through strategic alliances with large communications
providers, national and regional retailers, and regional and local resellers.
See "Sales and Marketing."
 
     Management believes that a diversified approach to distribution is
important to sustain growth as messaging services more deeply penetrate the
United States population, especially the consumer market. This diversification
is a key element of the Company's strategy of expanding its subscriber base to
increase profitability and cash flow through greater utilization of its
nationwide wireless communication network.
 
     NATIONWIDE, NAFTA AND BEYOND COMMON FREQUENCY. The Company has constructed
its network on common one-way and narrowband PCS frequencies nationwide. Use of
common frequencies provides the Company with a number of important strategic
advantages not available to many of its competitors, which operate on multiple
frequencies across markets. The use of a common frequency across the United
States enables the Company's customers to travel throughout the United States
while continuing to use the same subscriber unit. In addition, the use of a
common one-way frequency has been expanded NAFTA-wide and beyond into Canada,
Mexico, Central and South America, the Caribbean and the Bahamas. Through the
use of network affiliation agreements, the Company is able to provide multi-city
coverage customized to accommodate the customers' needs throughout North and
Central America and in parts of South America.
 
     The common frequency approach also provides a competitive advantage to the
Company when marketing its services to regional and national retailers and
private brand telecommunications carriers. The Company's subscriber units can be
sold in any retail store located in the Company's nationwide coverage area
because they operate on a common nationwide frequency. By contrast, competitors
that use multiple frequencies across markets require retailers to maintain many
more stock keeping units to serve each local market that utilizes a different
frequency.
 
     EFFICIENT NETWORK ARCHITECTURE. The Company is an industry leader in the
implementation of advanced telecommunications technologies, including pioneering
the use of direct broadcast satellite ("DBS") technology for paging. The
Company's nationwide network is 100% controlled by DBS technology, which gives
the Company a flexible, 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 used its efficient one-way
network as the outbound transmission infrastructure for the narrowband PCS
network, which allowed the Company to add narrowband PCS capabilities rapidly
and substantially increase its network capacity in the most cost effective
manner. As it constructed the narrowband PCS network, the Company installed very
small aperture satellite terminal ("VSAT") equipment in the network in order to
permit two-way communication using DBS technology.
 
     The Company's one-way network covers the top 300 MSAs across the United
States, or approximately 90% of the total population in the United States. The
Company's network is 100% FLEX(R) enabled, allowing the use of the high speed
FLEX(R) protocol to transmit one-way paging messages and maximize system
capacity. The one-way networks included in the Company's NAFTA and beyond
coverage are also 100% FLEX(R) enabled. The Company's narrowband PCS network is
integrated into the one-way network. The design of the narrowband PCS network is
based upon Motorola's ReFLEX25(R) technology. At December 31,
 
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1998, the Company's nationwide narrowband PCS network covered over 70% of the
population in the United States.
 
     SPECTRUM-RICH FREQUENCY POSITION. The Company ranks among the top four
paging carriers in the United States in licensed nationwide frequencies. The
Company's exclusive frequency licenses include two nationwide one-way paging
frequencies and 150 kHz of nationwide NPCS frequency. The Company believes that
this frequency position has important strategic value because it enables the
Company to grow its subscriber base by introducing advanced messaging and other
value-added services to its subscribers. As a result, the Company believes its
spectrum-rich frequency position enables it to attract and retain national
retail and private brand strategic alliance partners.
 
     CENTRALIZED ADMINISTRATION. The Company has centralized information
systems, inventory control, distribution, customer service, finance and
marketing functions, which can support both the Company's traditional paging and
advanced messaging services. This centralized administration has enabled the
Company to become one of the lowest cost providers of paging and other wireless
communications services in the United States relative to the services it
provides. In addition, the administrative infrastructure is designed to support
a 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 which are designed to be used for
both one-way and advanced messaging services and can be expanded as the customer
base grows. At December 31, 1998, the Company employed approximately 940 highly
trained customer service personnel operating in state of the art call center
facilities. Management believes that high-quality customer service capabilities
are an important factor in supporting and retaining its strategic alliance
partners, retailers and subscribers.
 
PRODUCTS AND SERVICES
 
     TRADITIONAL ONE-WAY MESSAGING SERVICES. The Company currently offers the
following two basic types of one-way paging and messaging services.
 
<TABLE>
<CAPTION>
               SERVICE                                      DESCRIPTION
               -------                                      -----------
<S>                                    <C>
Numeric paging.......................  Provides the subscriber with the telephone number of
                                       the person who is seeking to contact the subscriber.
                                       Numeric pagers can store and retrieve up to 40
                                       numeric messages, which are displayed on a liquid
                                       crystal display.
Alphanumeric paging..................  Offers the subscriber the ability to receive a text
                                       message rather than simply a numeric message.
                                       Alphanumeric pagers can store and retrieve up to 40
                                       messages of up to 80 characters each, which are
                                       displayed on a liquid crystal display.
</TABLE>
 
     Numeric Paging Services. Although most subscribers select local coverage,
the number of subscribers who select extended city coverage options continues to
increase. Monthly fees for regional and nationwide paging coverage are
substantially higher than the fees charged for single local area coverage.
 
     Alphanumeric Paging Services. The Company provides alphanumeric paging
services under the tradenames InfoPage(R) and InfoNow(SM), and the number of
subscribers utilizing the service represented 6.2% of the Company's total
subscribers at December 31, 1998. The Company has not focused a significant
portion of its selling and marketing efforts on alphanumeric paging services,
primarily because technology has inhibited the Company's ability to deliver the
services in a cost-effective manner. With the introduction of advanced messaging
services, most of the Company's efforts to market alphanumeric services will be
focused on advanced messaging services. See "-- Guaranteed or Assured
Messaging."
 
     Roaming Services. OmniRoam(SM) services allow customers the flexibility to
change their local coverage through a simple phone call. Using a touch-tone
phone, the customer need only 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
 
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<PAGE>   6
 
automatically sent to the customer's "roaming" city until coverage is
transferred back to the "home" city. With these services, the customer does not
pay for paging coverage that is not needed (i.e., nationwide coverage). These
services are available due to the Company's unique network architecture. These
products give the Company's customers the ability to take local coverage with
them when they travel to major communities in the United States, Canada, Mexico,
Central and South America, U.S. Virgin Islands, Puerto Rico, the Cayman Islands
and the Bahamas.
 
     GUARANTEED OR ASSURED MESSAGING. The Company's initial advanced messaging
service offering is guaranteed or assured messaging. If a subscriber with
guaranteed messaging service travels outside the coverage area or turns off the
subscriber unit, the network stores incoming messages for up to 96 hours until
the subscriber returns to the network's coverage area or turns on the subscriber
unit. When a subscriber is within the network's coverage area the subscriber
unit displays a message that it is in message receiving mode. If a subscriber
leaves the coverage area, the subscriber unit indicates that the network is
storing the subscriber's messages. Upon returning to a coverage area or turning
on the subscriber unit, the subscriber unit registers with the network and the
stored messages are automatically transmitted to the subscriber unit. The
Company currently offers both local alphanumeric guaranteed messaging and
nationwide auto-roam alphanumeric guaranteed messaging services.
 
     Local Alphanumeric Messaging. The Company's local alphanumeric guaranteed
messaging service enables 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 are input by
either (i) a computer or other software enabled device and a modem that can
access the Company's network directly or via the Internet or (ii) a dispatch
operator.
 
     Nationwide Auto-Roam Alphanumeric Messaging. On December 15, 1998, the
Company introduced nationwide auto-roam alphanumeric guaranteed messaging
service. This service allows a subscriber to receive an alphanumeric message
anywhere within the coverage of the Company's network in the U.S. The service
uses the location identification capabilities of the narrowband PCS network to
automatically identify, without any action on the part of the subscriber, the
network zone in which to transmit the subscriber's messages.
 
     The 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 narrowband PCS frequency
spectrum and the ReFLEX25(R) technology offer significant increases in capacity
over the one-way spectrum and technology currently delivering alphanumeric
messaging services with regional or nationwide coverage. The Company believes
that its nationwide auto-roam alphanumeric service improves upon traditional
alphanumeric service by permitting longer messages and guaranteed delivery.
Management believes that these service enhancements, along with its competitive
pricing, will appeal to subscribers of traditional alphanumeric messaging
services and to cost-conscious customers who have not previously subscribed to
nationwide services. The Company expects the migration of many current one-way
alphanumeric service subscribers to guaranteed or assured messaging service will
create additional capacity for numeric service on the Company's one-way network,
a service that can be very efficiently delivered on that network.
 
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<PAGE>   7
 
     PLANNED ADVANCED MESSAGING SERVICES. The Company's planned future advanced
messaging service offerings include the following:
 
                      PLANNED ADVANCED MESSAGING SERVICES
 
<TABLE>
<CAPTION>
TYPE OF SERVICE                                     DESCRIPTION                           BENEFIT
---------------                                     -----------                           -------
<S>                                    <C>                                     <C>
Message Acknowledgment...............  When the message is received and/or     Lets the sender know the
                                       read, an alert is triggered and sent    message has been received
                                       back through the network.               and/or read.
Multiple-choice Response.............  Presents subscriber with a choice of    Eliminates need for a return
                                       responses embedded in the message.      phone call and completes the
                                       Sender can create custom response on    messaging loop.
                                       a PC, embed it in the message, and
                                       transmit it to the device.
Preprogrammed Response...............  Presents subscriber with a list of      Provides a simple response
                                       preprogrammed messages for response.    method.
Full Two-way.........................  Subscriber can create custom            Allows messages to be sent
                                       responses or initiate messages, also    and information to be
                                       known as free form messaging.           requested on demand.
Telemetry............................  Fully customized, integrated,           Provides wireless
                                       end-to-end solutions with software      connectivity to machines such
                                       applications that allow                 as security systems,
                                       computer-based devices to transmit      environmental control systems
                                       and receive data wirelessly.            and vehicles.
</TABLE>
 
     Message Acknowledgment Service. The Company plans to introduce message
acknowledgment service in 1999. This service will provide the sender of a
message confirmation that the message was delivered accurately to the subscriber
unit. The sender can receive the acknowledgment through the same mechanism that
was used to create the original message or by designating another communication
path for the acknowledgment.
 
     Response and Full Two-way Service. The Company plans to introduce response
and full two-way messaging services in 1999. Response messaging allows a
subscriber to respond back to the sender of a message. A subscriber can either:
 
     - Select from a custom set of multiple choice responses sent with the
       message, or
 
     - Send a response chosen from a set of predefined responses stored in the
       subscriber unit.
 
     Multiple responses can be made to the same message. The sender is expected
to be able to receive responses through the same mechanism that was used to
create the original message or by designating another communication path for the
response.
 
     Two-way messaging will allow a subscriber to originate and receive messages
and other communications. Subscribers could be notified of the receipt of
electronic mail, voice mail and faxes. Similarly, subscribers can originate
messages which are delivered to a target recipient over several alternative
communications networks.
 
     Using two-way messaging, a subscriber is expected to be able to stay in
touch while in transit, using a portable and relatively inexpensive device and
service. In addition to these benefits, this service will also have the
traditional benefits of one-way paging: broad geographic coverage; good building
penetration; small,
 
                                        6
<PAGE>   8
 
disposable-battery powered subscriber units, which allows the device to be
carried continuously; long battery life, which allows the device to be used
continuously without servicing; and low costs of ownership and usage.
 
     Telemetry. The Company plans to introduce telemetry services in the second
half of 1999. Telemetry services allow computer-based devices to transmit and
receive data wirelessly over the Company's nationwide narrowband PCS network.
See "Sales and Marketing -- Telemetry."
 
     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 message retrieval service which allows a one-way service 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 operator dispatch
services, nationwide toll-free access numbers for paging subscribers, a
customized voice prompt that allows subscribers to record a personal greeting,
maintenance agreements and loss protection programs. During 1998, approximately
21% of the Company's recurring revenues were derived from these additional
services.
 
     The Company also offers wireless connectivity to the Internet for message
transfer and information requests through the "PageMart Wireless Web" service
utilizing the Company's wireless communications network. These services include
electronic mail, news and other information delivered to subscriber units.
 
     SUBSCRIBER UNITS. The Company's messaging services are delivered to
pocket-sized subscriber units which the Company sells or leases to its
subscribers. One-way subscriber units are available from a number of
manufacturers. Guaranteed messaging subscriber units are currently available
from Motorola and Wireless Access, a subsidiary of Glenayre Technologies, Inc.
Subscriber units with the capabilities to utilize more sophisticated advanced
messaging services are expected to be available in 1999.
 
     The Company's operating model for one-way wireless messaging emphasizes a
strategy of selling rather than leasing subscriber units. As of December 31,
1998, approximately 94% of the Company's one-way subscriber units were customer
owned and maintained ("COAM"). The Company believes that by following a COAM
strategy for one-way wireless messaging it can achieve significantly better
capital efficiency than if it were to follow a lease strategy, which is
reflected in its relatively low capital employed per subscriber of $27 at
December 31, 1998. Capital employed per subscriber represents total assets, less
narrowband PCS assets, cash, non-debt current liabilities and international
investments divided by domestic units in service. The Company believes that its
COAM strategy for one-way wireless messaging provides additional benefits,
including reduced risk of technological obsolescence and avoidance of the credit
risk associated with leasing subscriber units to end-users. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
     In contrast to the Company's operating model for traditional one-way
messaging, the Company expects that it will lease rather than sell a majority of
its advanced messaging subscriber units. The higher price per unit for advanced
messaging subscriber units is expected to make leasing an attractive alternative
to purchasing the units. In addition, the Company expects that the strongest
market demand for advanced messaging services will come initially from corporate
and business customers, which often prefer to lease subscriber units.
 
     PRODUCT DEVELOPMENT. The Company anticipates that growth in advanced
messaging services will be enhanced through new wireless alliances with software
companies and electronic equipment manufacturers to develop additional text
messaging products and services. Computers, personal organizers and personal
digital assistants ("PDAs") are being equipped with built-in RF capability. In
October 1997, the Company, Motorola and 3Com entered into a development and
supply agreement to develop, produce and market a pager card providing one-way
paging services for 3Com's PalmPilot PDA. In July 1998, the Company initiated
shipments of the Synapse(TM) Pager Card, branded by the Company, for integration
into the PalmPilot. The Synapse(TM) Pager Card adds wireless messaging
capability to the PalmPilot PDA. A PalmPilot equipped with the Synapse(TM) Pager
Card can receive and store wireless messages in substantially the same manner as
a traditional pager, including text messages originated over any PC connected to
the Internet. The Synapse(TM) Pager Card also provides a user of a PalmPilot
with new messaging features such as sender identification,
 
                                        7
<PAGE>   9
 
wireless schedule updates and missed message alerts. The Company plans to
continue to explore new alliances with software companies and equipment
manufacturers for the development of messaging solutions utilizing its wireless
messaging network.
 
SALES AND MARKETING
 
     The Company's messaging 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 marketing directly through its national
accounts sales force and the sales force in the Company's sales offices, and
indirectly through strategic alliances with large communications providers,
national and regional retailers, and regional and local resellers. The Company
also anticipates expanded distribution of messaging services through the
development of telemetry applications and additional product development.
Management believes that a diversified approach to distribution is important to
sustain growth as demand for messaging 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
single customer or a few customers, the loss of one or more of which would have
a material adverse effect on the Company.
 
     CARRIER SERVICES. Through its Carrier Services Strategic Business Unit
("Carrier Services SBU"), the Company has established numerous strategic
alliance relationships with large communications providers, such as GTE
Corporation, Southwestern Bell Mobile Systems, BellSouth Cellular Corp.,
Ameritech Mobile Services, Inc., WorldCom Network Services, Inc., EXCEL
Communications, Inc., ALLTEL Communications, Bluegrass Cellular, Inc. and First
Cellular of Southern Illinois. These companies utilize their brand awareness and
billing and distribution efficiencies to market private brand pagers and
services using the Company's transmission network. The business unit is
positioned to support carriers in the bundling and integration of messaging
services into an extended portfolio of communications services. At December 31,
1998, approximately 37% of the Company's units in service had been added through
the Carrier Services SBU. The Company expects this proportion to increase over
the next several years in part due to the introduction of the Company's
nationwide narrowband PCS network.
 
     As market demand for advanced messaging services continues to develop, the
Company expects its carrier services distribution channel to grow in
significance. The Company believes that a limited number of narrowband PCS
networks will be built nationwide. The Company believes that its narrowband PCS
network is a low cost, high functionality network compared to the networks of
its initial competitors, which will make reselling of the Company's services
attractive to other paging companies and communications providers. These
companies will resell such services under their own brand names.
 
     In addition, the Company has entered into agreements with Metrocall, Inc.
("Metrocall") and AirTouch Paging ("AirTouch"), the second and fourth largest
paging carriers, respectively, in the United States as of year end 1998. The
agreements are organized into two phases. Initially, Metrocall and AirTouch will
market their switch-based narrowband PCS services utilizing the Company's
narrowband PCS network. During the second phase, Metrocall and AirTouch will
install their own narrowband PCS networks leveraging the Company's
infrastructure and sites. Under these agreements, the companies will share
certain capital and operating expenses, which will significantly lower costs for
all companies. The Company anticipates that it may enter into similar
arrangements with other major paging carriers. However, there can be no
assurance of the success of the arrangements with Metrocall and AirTouch or of
similar arrangements with other paging carriers, if any.
 
     NATIONAL ACCOUNTS. In 1998, the Company formed its National Accounts
Strategic Business Unit ("National Accounts SBU") for the purpose of selling and
leasing traditional and advanced messaging products and services to major
corporate accounts.
 
     The Company expects that initially the strongest market demand for advanced
messaging services will be from large, geographically dispersed corporate
accounts because of the growing need of business customers for
                                        8
<PAGE>   10
 
mobile, reasonably priced access to communication and information services with
wide area coverage; the ability of business customers to pay the higher cost of
advanced messaging subscriber units compared to one-way subscriber units; and
the lack of sales personnel in retail stores trained to sell the new services.
The National Accounts SBU emphasizes sales of advanced messaging services as a
solution to business messaging needs. As a result, the Company believes that its
National Accounts SBU, along with the Company sales offices and Carrier Services
SBU distribution channels are initially best suited for marketing and selling
these services.
 
     The Company divided its direct sales force into a unit focusing on national
accounts and a unit focusing on local markets. This enables the direct sales
force personnel to personalize and specialize their approach to their target
market. The Company has embarked on a program to hire and train sales personnel
for its National Accounts SBU. In 1998, the Company increased its direct sales
force by approximately 60% to position itself to meet the anticipated demand for
advanced messaging services.
 
     COMPANY SALES OFFICES. The Company's Markets Strategic Business Unit
("Markets SBU") consists of Company-owned sales offices that sell and lease
equipment and messaging services through three distribution channels: direct
sales, agents and third-party resellers. At December 31, 1998, approximately 37%
of the Company's units had been added through the Markets SBU.
 
     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 compensated in large part by sales commissions for
each unit sold or placed in service.
 
     Agents. The Company markets its equipment and paging services through
agents. Agents establish customers which are billed directly by the Company.
Agents typically sell subscriber units for their own account and earn a
commission or fee on the sale of the service.
 
     Third-Party Resellers. In addition to offering paging and messaging
services directly to end-users, the Company also offers paging services to third
party resellers in bulk quantities at wholesale monthly rates that are lower
than the Company's regular retail rates.
 
     RETAIL MARKETING. Since early 1993, the Company has been an industry
pioneer in developing the retail distribution channel through sales arrangements
with regional and national retail chains that sell electronic and business
equipment or consumer goods. The Company's National Retail Strategic Business
Unit ("National Retail SBU") sells subscriber units to a retailer who then sells
the subscriber units to potential users. The purchaser can activate the
subscriber unit and subscribe for service with the Company by simply calling the
toll-free number identified on the unit. Because the Company's subscriber units
operate on a common nationwide frequency, they can be sold in any retail store
located in the Company's nationwide coverage area. By contrast, competitors that
use multiple frequencies across markets require retailers to maintain many more
stock keeping units to serve each local market that utilizes a different
frequency.
 
     The Company has entered into sales arrangements with a number of large
national retail chains such as OfficeMax, RadioShack, Eckerd's, Bradlees,
7-Eleven, Fry's Electronics and Target Stores. Retail distribution also allows
the Company to sell subscriber units in markets that would not support a direct
sales office but in which it has installed the necessary network equipment
required for providing paging services. The Company can thus enter new markets
by capitalizing on its existing infrastructure of transmitters with the only
incremental expense being the procurement of local access phone lines.
 
     The Company expects retail sales to continue to be an important channel of
distribution. In addition, in 1998 the Company tested the retail marketing of
prepaid paging service cards, a program which the Company expects to expand in
1999. The number of retail store locations has increased to 15,744 stores at
December 31, 1998 from 12,924 stores, 5,530 stores and 3,411 stores at December
31, 1997, 1996 and 1995, respectively. However, the Company believes that the
rate of growth in the number of stores will level off in 1999 and years
thereafter. At December 31, 1998, approximately 26% of the Company's units in
service are represented by the national retail channel.
 
                                        9
<PAGE>   11
 
     TELEMETRY. In the third quarter of 1998, the Company announced the
formation of its Telemetry Strategic Business Unit ("Telemetry SBU"). The
Telemetry SBU was chartered to develop cutting-edge, standards-based,
cost-effective technology for any industry, business or consumer with the need
to transport machine originated data over a wireless network. The Telemetry SBU
will offer customized, integrated, end-to-end solutions with software
applications that allow computer-based devices to transmit and receive data
wirelessly over the Company's nationwide narrowband PCS network.
 
     The Company plans to provide telemetry services over its network utilizing
the ReFLEX25(R) protocol and "transceiver" two-way devices such as the
Creatalink2XT being developed by Motorola. In September 1998, the Company
announced a strategic alliance with Interactive Technologies, Inc. to provide
wireless telemetry connectivity to home security systems. In October 1998, the
Company announced strategic alliances with RoadTrac(TM), LLC and Pentech Energy
Solutions, Inc. to provide telemetry solutions for vehicle location technology
and environmental control systems, respectively. In November 1998, Monitel
Products Corp. and the Company entered into a strategic agreement under which
the Company will provide telemetry services to be utilized in Monitel's remote
monitoring diagnostic products within the photocopying and imaging industry.
Although the Company does not expect the Telemetry SBU to originate any units in
service until the second half of 1999, as market demand for wireless telemetry
services develops, the Company expects its Telemetry SBU to grow in
significance. However, there can be no assurance that wireless telemetry
services over narrowband PCS networks will be commercially viable or that the
proposed telemetry solutions will be possible, and the success of wireless
telemetry services could be affected by matters beyond the Company's control
such as the availability and viability of transceiver devices.
 
TRANSMISSION NETWORK
 
     GENERAL. The Company developed an innovative satellite-based transmission
network that gives the Company a flexible, highly reliable network architecture
and an efficient operating structure. The Company began using direct broadcast
satellite ("DBS") technology in 1990 and was the first one-way wireless
communications carrier to use DBS technology to control all of its transmitters.
With a DBS paging system, the satellite broadcasts messages directly to each
transmitter in the Company's paging system, which then broadcasts the messages
to pagers on the Company's nationwide broadcast frequency. DBS eliminates the
expensive terrestrial radio link and repeater equipment that many paging
companies have employed to control simulcast transmissions in large metropolitan
markets. In addition, the satellite system can selectively address one or any
combination of the Company's transmitters, thereby providing a wide range of
coverage options and permitting efficient use of paging frequencies in each
market.
 
     The Company has utilized its existing one-way paging network infrastructure
as the basis for its nationwide narrowband PCS network. A narrowband PCS network
employs both radio transmission and receiving equipment throughout the network.
Subscriber units contain not only a receiver, but also a transmitter that
broadcasts its identity and other data, such as acknowledgement of receipt of a
message, to the network receivers. The network can determine whether a
subscriber is within range. If a subscriber travels outside the range of the
network, the network stores the message for up to 96 hours until the subscriber
returns to the coverage area and then transmits the message.
 
     In contrast, a one-way network employs only radio transmitters. One-way
subscriber units contain only receivers and have no ability to send messages to
the network. Because the subscriber unit cannot communicate with the network,
there is no ability to confirm receipt of messages or determine whether the
subscriber is actually within the coverage of the network when the message is
sent.
 
     The one-way network broadcasts messages simultaneously over all
transmitters in the subscriber's coverage area. This results in inefficient use
of spectrum and limits the capacity of the network to provide enhanced services,
such as alphanumeric messaging. The narrowband PCS network is expected to have
the capability to identify the subscriber's approximate location and to
broadcast messages from a limited number of transmitters in a zone rather than
from all transmitters in the subscriber's coverage area, which will result in
higher network capacity due to efficient use of spectrum.
 
                                       10
<PAGE>   12
 
     NARROWBAND PCS NETWORK BUILDOUT. During 1998, the Company deployed
receivers and other network equipment to add narrowband PCS capabilities to the
existing one-way paging network to facilitate provisioning of advanced messaging
services. The Company chose Glenayre Technologies, Inc. ("Glenayre") and
Motorola as the primary providers of the infrastructure equipment. The Company
began commercial operation of local guaranteed messaging service in the Austin
and San Antonio, Texas areas in June 1998. In the third quarter of 1998, the
Company continued the roll-out of its narrowband PCS network introducing
guaranteed messaging service in more than 250 cities throughout the country. On
December 15, 1998, the Company announced nationwide guaranteed messaging over
its narrowband PCS network. The Company's narrowband PCS network covered
approximately 70% of the population of the United States as of December 31,
1998. The Company plans to continue to build out its network and expand its
coverage area during 1999. The key elements of the narrowband PCS network are as
follows:
 
     Design. The design of the Company's nationwide narrowband PCS network is
based upon Motorola's ReFLEX25(R) technology. Existing transmitters and
transmitter sites are used for the outbound portion of the network. The inbound
or receive portion of the network required that new infrastructure equipment
(i.e., receivers) be added to both existing sites and to new sites. The exact
number of new receive sites required beyond those to be located on existing
sites is a function of the amount of available space on existing sites and the
local RF characteristics of the particular market being built out. By primarily
utilizing the Company's existing transmission sites, the Company was able to
build-out the narrowband PCS network with significantly less capital than other
newly constructed networks.
 
     Equipment. The infrastructure of the Company's network consists of a home
terminal, encoders, satellite access controllers ("SACs"), radio transmitters
and receivers, switches, RF controllers and ancillary equipment, such as coaxial
cable and antennas.
 
     The home terminal is a key component of a network that defines and controls
the types of services that can be provided by the network. The advanced
messaging services that can be provided on the narrowband PCS network are more
varied and complex than services provided on the Company's one-way network. In
addition, because the market for advanced messaging services is relatively
immature and undeveloped, the Company cannot predict with certainty how the
market will adopt and use the advanced messaging services that are potentially
available for commercial development. The Company believes that the ability to
react quickly to developing market demand for advanced messaging services will
be a critical element in successfully implementing its advanced messaging
services strategy. As a result, the Company developed its proprietary home
terminal, called the Advanced Cross Media Information Server ("AXIS(TM)"),
rather than purchase it from an outside vendor. As of December 31, 1998, the
Company had invested approximately $9.8 million in the development of AXIS(TM)
over a period of three years.
 
     The Company purchases infrastructure equipment (other than the AXIS(TM)
home terminal, SACs and ancillary equipment) from industry leading equipment
suppliers, Motorola and Glenayre. Glenayre was chosen as the primary provider of
the narrowband PCS network infrastructure equipment. The Company believes that
currently these are the only two qualified suppliers of such infrastructure
equipment and subscriber units and, as a result, the Company is dependent on
these two suppliers for much of its infrastructure equipment and subscriber unit
needs. The Company understands that Motorola and Glenayre have cross-licensed
the relevant protocols. The Company purchases infrastructure equipment from
Glenayre and Motorola under existing volume purchase agreements. The Company's
guaranteed messaging requires an AccessMate(TM) advanced messaging device. The
AccessMate(TM) is manufactured by Wireless Access, a subsidiary of Glenayre. The
Company purchases AccessMates(TM) under a supply agreement executed in early
1998. The Company expects to purchase advanced messaging subscriber units from
Motorola under an existing volume purchase agreement. The Company has entered
into a volume purchase agreement with AvData to purchase SACs, VSATs and related
equipment for its narrowband PCS network. The Company would be adversely
affected if it were unable to obtain additional infrastructure equipment and
subscriber units on satisfactory terms by planned delivery dates.
 
     SATELLITE SERVICES. The Company leases satellite services pursuant to
agreements with AvData Systems, Inc. ("AvData") and SpaceCom Systems, Inc.
("SpaceCom"). The agreements subject the Company to
                                       11
<PAGE>   13
 
monthly service charges based on the amount and types of services used and
expire on July 1, 2003 and July 31, 2003, respectively. The agreements may be
terminated upon certain failures of the Company to pay monthly service fees. The
agreements do not include any renewal provisions. Management believes that the
services provided by AvData and SpaceCom are sufficient to meet the Company's
foreseeable needs and that there are alternative satellite resources available
to the Company on comparable terms and conditions. As a result, the Company does
not believe the loss of its relationship with its current satellite suppliers
would have a material adverse long-term effect on its business and operations.
 
INTERNATIONAL STRATEGY
 
     The Company is implementing a systematic plan to provide messaging services
in selected countries on a seamless international network. The Company's
international strategy is initially to pursue opportunities in North America,
Central America, the Caribbean and South America. The Company pursues
international opportunities through direct ownership in Canada, and through
network affiliation agreements between the Company and the owners of foreign
networks. Network affiliation agreements provide, with minimal incremental
capital investment by the Company, interconnection between the Company's network
and the foreign network and capabilities for the Company's subscribers to roam
to the foreign country and the foreign owner's subscribers to roam to the U.S.
In each country in which the Company offers paging and messaging services, such
services are offered on a nationwide frequency common to at least one of the
Company's nationwide frequencies in the United States in order to allow a single
messaging device to be used in multiple countries. There can be no assurance,
however, that in each country in which the Company seeks to expand coverage that
a frequency will be available that is common to one of the Company's U.S.
nationwide frequencies.
 
     One of the Company's international investments is in Canadian companies,
PageMart Canada Limited and PageMart Canada Holding Corporation ("Canada
Holding") (collectively "PageMart Canada"). PageMart Canada, obtained a
nationwide license in Canada in 1995 for a frequency common to one of its
frequencies in the United States. PageMart Canada began providing service in the
largest metropolitan areas in Canada to United States and Canadian subscribers
beginning in April 1996. On November 26, 1998 the Company received notification
from the third party Canadian investors, which represent the controlling
shareholder interest in PageMart Canada, of its intent to exchange its 1,000,000
shares of Class A Common Stock in Canada Holding for 714,286 shares of PageMart
Wireless pursuant to rights contained in the Agreement Among Stockholders of
PageMart Canada, dated July 28, 1995. The Agreement Among Stockholders permits
the Company to find a replacement for the Canadian investors in order to comply
with Canadian regulations governing ownership of Canadian paging licenses. The
Company is currently examining alternative arrangements in Canada including the
replacement of the Canadian investors or the ultimate transfer of PageMart
Canada to another entity. The Company may consider selling its interest in
PageMart Canada in exchange for a network affiliation arrangement similar to
those utilized by the Company in other countries.
 
     In 1997, the Company entered into an exclusive ten-year network affiliation
agreement with TelMex through its wholly owned subsidiary, Buscatel. TelMex has
acquired, in Mexico, the same nationwide frequency the Company uses nationwide
in the United States and Canada and has installed such frequencies in all 33
markets where Buscatel operates. Under the terms of the agreement, the Company
and Buscatel 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 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.
 
     The Company also provides paging coverage on the Company's nationwide
frequency in Puerto Rico and the U.S. Virgin Islands through affiliation
agreements. In September 1998, the Company enhanced its Caribbean coverage by
adding the Cayman Islands through a network affiliation agreement with Island
Electronics (Paging) Limited, the Cayman Islands' premier paging company.
 
                                       12
<PAGE>   14
 
     PageMart has also signed network affiliation agreements with leading paging
companies in El Salvador, Guatemala, Honduras, Costa Rica, Panama, Venezuela,
Peru and Haiti. 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 allows PageMart to offer its domestic customers paging service from
Canada into South America. The Company expanded services into Guatemala, Costa
Rica, Haiti, the Cayman Islands and the Dominican Republic in 1998. The Company
expects to expand services into Colombia, Honduras, Trinidad and Tobago Peru and
Venezuela in 1999. With the addition of Trinidad and Tobago to its international
FLEX(TM) paging network, the Company expanded its network to include seventeen
countries in North, Central and South America and the Caribbean.
 
     The common frequency allows the Company and its network affiliates in each
country to provide customized coverage that extends beyond the borders of the
serving country, using the same pager. For example, a subscriber in New York
could choose New York and Toronto or Mexico City coverage.
 
COMPETITION
 
     The Company competes primarily on the basis of its equipment and wireless
services prices, quality of service, and 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.
("PageNet"), Metrocall, Inc., MobileMedia Communications, Inc., AirTouch
Communications, Inc., Arch Communications Group, Inc. and SkyTel Communications,
Inc. ("SkyTel"). Certain of these companies have substantially greater
financial, technical and other resources than the Company. In addition, a number
of telecommunications carriers (including providers of broadband PCS) have
constructed or are in the process of constructing nationwide wireless networks
that will compete with the Company's services, including the provision of
advanced messaging services. SkyTel introduced the first nationwide advanced
messaging network and other carriers, such as PageNet have announced plans to
provide services over their own nationwide narrowband PCS networks in 1999.
Management believes that the Company's low cost structure and service offerings
will enable it to continue to compete effectively.
 
     A number of competing technologies, including cellular telephone service,
broadband and narrowband personal communication services, specialized mobile
radio, low speed data networks and mobile satellite services, are used in, or
projected to be used for, advanced messaging services. Cellular telephone
technology and broadband personal communications services provide an alternative
communications system for customers who are frequently away from fixed-wire
communications systems (i.e., ordinary telephones). Compared to cellular
telephone service and broadband service, paging services are generally less
expensive, offer longer battery life, provide better in-building penetration,
extend over wider coverage areas, and are more transportable. For those cellular
customers for whom convenience and price are considerations, paging and
narrowband PCS can compete successfully by complementing their cellular usage.
Management believes that paging will remain one of the lowest-cost forms of
wireless messaging due to the low cost infrastructure associated with paging
systems, as well as advances in technology that are expected to reduce paging
costs. Broadband personal communications services technologies currently being
offered commercially in some cities and under development in other areas of the
United States, are similar to cellular technology and offer paging services in a
single handset. This technology will offer greater capacity for advanced
messaging services and, accordingly, is expected to result in greater
competition.
 
     Technological advances in the telecommunications industry have created, and
are expected to continue to create, new services and products competitive with
the wireless services currently provided by the Company. In addition, certain
companies are developing one-way and advanced messaging services which may
compete with the one-way and advanced messaging services which the Company
expects to provide. There can be no assurance that the Company will not be
adversely affected as new competitive technologies become available and are
implemented in the future. In addition, the Company may be adversely affected if
cellular telephone companies or broadband personal communications service
providers begin to provide other wireless services or enter into partnerships
with other companies to provide wireless services that complement cellular or
broadband PCS services.
                                       13
<PAGE>   15
 
GOVERNMENT REGULATION
 
     Wireless messaging operations are subject to regulation by the FCC under
the Communications Act of 1934, as amended (the "Communications Act"), including
recent amendments contained in the Telecommunications Act of 1996 (the "1996
Act").
 
     The Company provides one-way messaging services directly to subscribers
over its own transmission facilities. The Company (through subsidiaries) holds
two exclusive nationwide one-way licenses, as well as exclusive licenses on
various one-way frequencies in certain metropolitan areas, including New York,
Los Angeles and Chicago. Additionally, the Company holds a 50kHz unpaired
nationwide narrowband PCS license (the "Nationwide Narrowband License") and five
50/50kHz paired regional narrowband PCS licenses (the "Regional Narrowband
Licenses"); the latter five licenses authorize the Company to operate regional
narrowband systems on the same frequencies throughout the continental United
States. The Nationwide Narrowband License was granted on September 29, 1994, and
the Regional Narrowband Licenses were granted on January 27, 1995. The
Nationwide Narrowband License and the Regional Narrowband Licenses will be
utilized in connection with its narrowband PCS networks.
 
     Under FCC rules governing regulation of commercial mobile radio services
("CMRS"), licensees such as the Company must provide interconnection upon
reasonable request, must not engage in any unreasonably discriminatory practices
and are subject to complaints regarding any unlawful practices. The Company is
also subject to provisions that authorize the FCC to provide remedial relief to
an aggrieved party upon finding a violation of the Communications Act and
related customer protection provisions.
 
     The Company's CMRS Licenses (the "Licenses") authorize the Company to use
the radio frequencies necessary to conduct its operations. The Licenses
prescribe the technical parameters, such as power output and tower height, under
which the Company is authorized to use those frequencies. The Licenses are for
varying terms of up to 10 years, at the end of which time renewal applications
must be submitted to the FCC for approval. Several of the Company's Licenses
expire in 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"). 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 messaging network. There are separate FCC buildout
requirements with respect to the Company's narrowband PCS Licenses. As a
nationwide narrowband PCS 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
narrowband PCS 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 (in February 1998, the
FCC amended its rules to exempt pro forma transactions from this requirement).
The
                                       14
<PAGE>   16
 
FCC has approved each transfer of control for which the Company has sought
approval. The Communications Act also requires prior approval by the FCC of
acquisitions of paging companies. The Company also regularly applies for FCC
authority to use frequencies, modify the technical parameters of existing
licenses, expand its service territory and provide new services. Although there
can be no assurance that any requests for approval or applications filed by the
Company will be approved or acted upon in a timely manner by the FCC, or that
the FCC will grant the relief requested, the Company has no reason to believe
any such requests, applications or relief will not be approved or granted.
 
     The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees which the Company is required to pay with respect
to its Licenses. The FCC increased these fees for fiscal year 1998. The Company
believes that these regulatory fees will not have a material adverse effect on
the Company's business.
 
     The FCC, on April 23, 1997, released a Report and Order establishing
competitive bidding rules for the remaining narrowband PCS spectrum as well as a
Further Notice of Proposed Rulemaking seeking commentary on a proposal to
license narrowband PCS spectrum that had previously been held in reserve and on
a proposal to modify the existing spectrum allocation plan to aggregate smaller
geographic license areas and create additional nationwide narrowband PCS
licenses. Adoption of either of these two proposals would increase the amount of
nationwide narrowband PCS spectrum available to the public and might negatively
impact the value of the nationwide narrowband PCS licenses held by the Company.
 
     On February 24, 1997, the FCC released its Second Report and Order, which
sets a system of competitive bidding ("auctions") to issue licenses for
frequencies for which there are mutually exclusive applications. Under the FCC
proposal, licenses for individual paging channels for which there are mutually
exclusive applications would be auctioned on a geographic basis. In defining the
area within which existing users would be protected from interference from the
auction winners or neighboring licensees (an area known as an "interference
contour"), the FCC created a new methodology that in many instances reduces the
size of the area within existing licensees' interference contours. This change,
however, does not have an impact on licensees with nationwide exclusivity (such
as the Company), because no other operator has the right to apply for such
licensees' exclusive frequencies.
 
     The FCC's Second Report and Order contains a Further Notice of Proposed
Rulemaking in which the FCC seeks commentary on whether it should impose
coverage requirements on licensees with nationwide exclusivity (such as the
Company), whether these coverage requirements should be imposed on a nationwide
or regional basis, and whether -- if such requirements are imposed -- failure to
meet the requirements should result in a revocation of the entire nationwide
license or just a portion of the license. If the FCC were to impose stringent
coverage requirements on licensees with nationwide exclusivity, the Company
might have to accelerate the build-out of its system in certain areas.
 
     In a rulemaking proceeding pertaining to interconnection between local
exchange carriers ("LECs") and CMRS providers, the FCC has concluded that LECs
are required to compensate CMRS providers for the reasonable costs incurred by
such providers in terminating traffic that originates at LEC facilities, and
vice versa. With regard to the negotiation of these mutual compensation
arrangements, the FCC has concluded that states have the authority under certain
circumstances to mandate a "bill and keep" arrangement on negotiating parties
(i.e., the LEC and the CMRS provider would charge each other a rate of zero for
the termination of the other's traffic). The Company believes that "bill and
keep" arrangements, if applied to paging services, would not have a material
adverse effect on the Company's business.
 
     Consistent with this ruling mandating compensation for carriers terminating
LEC-originated traffic, the FCC has determined that LECs may not charge a CMRS
provider or other carrier for terminating LEC-originated traffic. Some LECs have
been reluctant to comply with the FCC orders and have threatened to terminate
interconnection arrangements with the Company if it does not agree to pay for
dedicated facilities used to terminate LEC-originated traffic. The Company has
made certain payments to the LECs under protest and has maintained reserves for
payments that the LECs were claiming were due. The FCC's staff recently made it
clear that under the FCC's current rules, LECs may not charge CMRS providers for
such facilities, although these rules are being reconsidered and may be modified
in the near future. Some LECs
                                       15
<PAGE>   17
 
continue to disagree with the FCC in regards to this issue, and are continuing
their refusal to comply with these rules.
 
     As a result of the enactment of the 1996 Act, the Company will face
additional financial obligations. In November 1996, in response to a directive
in the 1996 Act, the FCC adopted new rules that govern compensation to be paid
to pay phone providers. After these rules were vacated by the U.S. Court of
Appeals for the D.C. Circuit, the FCC released an order mandating that long
distance carriers compensate pay phone providers 28.4c for each 800 number,
similar toll-free-to-the-caller number and access code (collectively, "800
Number") call during a two-year interim period. The long distance carriers are
expected either to pass this cost through to the paging companies that provide
800 Number service to their subscribers or to block pay phone calls to 800
Numbers. This could increase the cost of providing certain 800 Number messaging
services or limit the utility of 800 Number service. Petitions for review and
stay of this order were filed with a federal appellate court. In May 1998, the
DC Circuit ordered the FCC to explain, by January 8, 1999, its deviation of the
28.4c rate.
 
     Also, in response to changes made by the 1996 Act, the FCC has adopted new
rules regarding payments by telecommunications firms into a revamped fund that
will provide for the widespread availability of telecommunications services,
including to low-income consumers ("Universal Service"). Prior to the
implementation of the 1996 Act, Universal Service obligations largely were met
by local telephone companies. Under the new rules, all telecommunications
carriers, including paging companies, are required to contribute to the
Universal Service Fund. Payments into the fund will likely increase the cost of
doing business and could make the Company's service less competitive with the
other services. The mechanism to be used by paging providers in allocating
revenues between interstate and intrastate jurisdictions continues to be
debated. Pending the issuance of a final mechanism, the FCC recently established
a "safe harbor" percentage of 12% for paging carriers that the agency believes
reasonably approximates the percentage of interstate revenues generated by such
carriers.
 
     From time to time, legislation and regulations which could potentially
adversely affect the Company are proposed by federal and state legislators and
regulators. Legislation is currently in effect in Texas requiring paging
companies to contribute a portion of their taxable telecommunications revenues
to a Telecommunication Infrastructure Fund created by the state legislature.
Management does not believe that the Texas law will have a material adverse
effect on the Company's operations and is not aware of any other currently
pending legislation or regulations which will have a material adverse impact on
the Company's operations. However, there can be no assurance that Federal or
other state legislation will not be adopted, or that the FCC or the various
state agencies will not adopt regulations or take other actions that would
adversely affect the business of the Company.
 
INTELLECTUAL PROPERTY
 
     The Company has established an intellectual property program to protect its
investment in its messaging services and related proprietary technologies.
 
     The Company has obtained a United States service mark registration for its
PAGEMART word mark. The Company owns registrations for 14 of its other marks in
the United States. These federal registrations may be renewed as long as the
marks continue to be used in interstate commerce. At December 31, 1998, the
Company had 48 service mark/trademark applications pending before the United
States Patent and Trademark Office. The Company has also obtained, or is in
various stages of applying for, registrations for the PAGEMART mark and several
of its other marks in approximately 28 other countries or jurisdictions where
the Company conducts or anticipates expanding its international business. The
Company has also taken steps to reserve corporate names in certain foreign
countries where the Company anticipates expanding its international business.
 
     At December 31, 1998, the Company had seven United States patent
applications pending. The inventions claimed in those patent applications cover
aspects of the Company's current and possible future messaging systems and
related proprietary technologies. The Company is in the process of preparing
other United States patent applications. The Company's present intention is not
to rely primarily on intellectual
 
                                       16
<PAGE>   18
 
property rights to protect or establish further its market position; however,
the Company is committed to developing a portfolio of patents that it
anticipates may be of value in negotiating intellectual property rights with
others in the industry. The Company does not currently intend to broadly license
its intellectual property rights.
 
RISK FACTORS
 
     In this section, "we," "our" and "us" refer to the Company and its
subsidiaries.
 
     RISK OF LONG HISTORY OF OPERATING LOSSES. We have sustained consolidated
operating losses in each year of operations through the year ending December 31,
1997. We recognized a $2.5 million operating profit for the year ending December
31, 1998. However, we sustained an aggregate $12.7 million operating loss for
the three year period ended December 31, 1998. We expect to continue to incur
operating losses for the next several years. Although the Company had positive
EBITDA of $8.6 million for the year ended December 31, 1996, $27.3 million for
the year ended December 31, 1997 and $45.9 million for the year ended December
31, 1998, prior to 1996 the Company had negative EBITDA in each year of its
operations. EBITDA is earnings before interest, taxes, depreciation and
amortization. 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 Company's
operating losses and negative EBITDA resulted principally from expenditures
associated with the establishment of the Company's one-way operations
infrastructure and the growth of its subscriber base.
 
     Although we expect that our one-way operations will continue to generate
EBITDA, the Company will incur substantial additional operating losses and
negative EBITDA during the start-up phase for advanced messaging services.
EBITDA generated from the Company's one-way operations will be used primarily to
fund the Company's advanced messaging operations for the next several years. We
cannot assure you that the Company's consolidated operations will become
profitable or continue to generate EBITDA or that its one-way operations will
continue to generate positive EBITDA. If the Company cannot achieve operating
profitability or continue to generate EBITDA, we may not be able to make
required debt service payments and our common stock may have little or no value.
 
     RISKS OF HIGH LEVERAGE; DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES;
RESTRICTIVE COVENANTS. The Company is highly leveraged, primarily as a result of
debt financing incurred to fund the construction of the Company's nationwide
operations infrastructure, the growth of its subscriber base and the acquisition
of the narrowband PCS licenses it acquired in FCC auctions. At December 31,
1998, the Company's long-term debt was $462.1 million and its stockholders'
deficit was $90.0 million. In addition, the accretion of original issue discount
on the Company's outstanding indebtedness will cause a substantial increase in
indebtedness. The Company's deficiency of earnings before fixed charges to cover
fixed charges for each of the three years ended December 31, 1996, 1997, and
1998, was $48.6 million, $43.9 million and $70.5 million, respectively.
 
     The indentures pursuant to which the Company's 11 1/4% Senior Subordinated
Discount Notes due 2008 and 15% Senior Discount Notes due 2005 were issued and
the Company's credit facility contain restrictive covenants. The restrictions
affect, and in many respects significantly limit or prohibit the ability of the
Company to incur additional indebtedness, make prepayments of certain
indebtedness, pay dividends, make investments, engage in transactions with
affiliates, issue capital stock of certain subsidiaries, create liens, sell
assets and engage in mergers and consolidations. The limitations in the
indentures are subject to a number of important qualifications and exceptions.
In particular, while the indentures will generally restrict the Company's
ability to incur indebtedness by requiring compliance with specified leverage
ratios, they will permit the Company to incur an unlimited amount of additional
indebtedness to finance the acquisition of equipment, inventory and network
assets. However, one indenture prohibits the Company from securing more than
$175 million of indebtedness (other than intercompany indebtedness).
 
     RISKS OF IMPLEMENTATION AND FINANCING OF NARROWBAND PCS NETWORK. We cannot
assure you that advanced messaging services will be commercially viable or that
the advanced messaging service levels beyond guaranteed messaging will be
possible. The success of advanced messaging services could be affected by
                                       17
<PAGE>   19
 
matters beyond the Company's control. These matters include market acceptance,
the future cost of subscriber units, technological changes in wireless messaging
services, marketing and pricing strategies of competitors, regulatory
developments and general economic conditions.
 
     As the Company continues development and implementation of advanced
messaging services, we expect 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 additional investments. We anticipate that advanced
messaging operations will require approximately $40 million of additional
capital expenditures to complete the addition of narrowband PCS capabilities,
expand its network geographically and make other enhancements. In addition, we
expect the advanced messaging operations to require approximately $30 million to
fund operations and marketing in 1999 as the advanced messaging customer base
grows. The Company's ability to incur indebtedness is limited by the covenants
contained in its debt indentures, the Company's vendor financing arrangement and
the Company's credit facility. As a result, any additional financing may need to
be in the form of new equity capital. We cannot assure you that sufficient
financing will be available, and if available, on attractive terms. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
 
     OUR GROWTH STRATEGY MAY NOT BE ACHIEVED. The successful implementation of
our strategy to increase cash flow through the expansion of our subscriber base
and the marketing of advanced messaging services is necessary for the Company to
meet its capital expenditures, working capital and debt service requirements.
The Company expects to continue to incur operating losses for the next several
years. Our strategy assumes that the wireless messaging industry will continue
to grow rapidly, and that the Company will continue to grow substantially faster
than the industry. We do not expect to continue to grow at our historical rate.
We cannot assure you that the Company will be able to achieve the growth
contemplated by its business strategy. The Company may not be able to make
required payments on its outstanding indebtedness and may have to refinance its
outstanding indebtedness in order to repay such obligations. No assurance can be
given that the Company will be able to refinance its outstanding indebtedness.
 
     WE OPERATE IN A HIGHLY COMPETITIVE MARKET. We face significant competition
in all of our markets. Many of our competitors, which include regional and
national paging companies, providers of broadband PCS and certain regional
telephone companies, possess significantly greater financial, technical and
other resources than the Company. If any of such companies were to devote
additional resources to the paging or other wireless messaging businesses or
focus its strategy on the Company's marketing and product niches, the Company's
results of operations could be adversely affected. For competitive and marketing
reasons, the Company generally sells each new subscriber unit for less than its
acquisition cost. In addition, a number of telecommunications companies
(including PCS providers) have constructed or are in the process of constructing
nationwide networks that offer services similar to the Company's services,
including the provision of advanced messaging services and two-way messaging.
See "Competition."
 
     Industry reports indicate, and we believe, that the retail distribution of
subscriber units has become increasingly common in the paging industry. If the
Company is unable to maintain its current sales relationships with retail
distributors or obtain new sales relationships with other retail distributors,
we may not be able to achieve our projected growth.
 
     RISK OF ADVERSE EFFECT OF SUBSCRIBER DISCONNECTIONS. Our results of
operations are significantly affected by subscriber disconnections. In order to
realize net growth in units in service, disconnected users must be replaced, and
additional users must be added. However, the sales and marketing costs
associated with attracting new subscribers are substantial relative to the costs
of providing service to existing customers. Expenses associated with each new
unit placement exceed the sales price and service initiation fee. The Company's
average monthly disconnection rates increased during 1998. For the twelve months
ended December 31, 1996, 1997 and 1998, disconnection rates were 2.4%, 2.5% and
3.2%, respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations -- Fiscal Years
1996, 1997 and 1998 -- Units in Service." Average monthly disconnection rates
are calculated by dividing the sum of (i) direct subscriber disconnections, (ii)
negative subscriber additions from the local, regional and reseller channel,
taken as a whole and (iii) the cumulative negative subscriber
 
                                       18
<PAGE>   20
 
additions from each of the Carrier Services SBU's strategic alliance partners,
by the total number of units in service at the beginning of the period.
Disconnect rates are stated as the monthly average of each period presented.
Further increases in our rate of disconnections may adversely affect our results
of operations.
 
     WE DEPEND ON KEY PERSONNEL. Our success is dependent, to a significant
extent, upon the continued services of our key executive officers. We do not
have employment agreements with any of our current executive officers. All
current executive officers have entered into non-competition agreements with the
Company. The loss or unavailability of one or more of our executive officers or
the inability to attract or retain key employees in the future could have an
adverse effect upon our operations.
 
     RISK OF INABILITY TO MANAGE GROWTH. Our future performance will depend upon
our ability to manage our growth effectively. We need to improve and expand our
operating, financial, accounting, information and customer service systems, and
to expand, train and manage our employee base. Our inability to expand in
accordance with our plans or to manage our growth could have a material adverse
effect on our business, financial condition and results of operations.
 
     RISKS OF RAPID TECHNOLOGICAL CHANGES. The telecommunications industry is
characterized by rapid technological change. Future technology advances in the
industry may result in the availability of new services or products that could
compete directly with our paging and other wireless messaging services. Changes
in technology could also lower the cost of competitive products and service to a
level where our products and services become less competitive or we are required
to reduce the prices of our services.
 
     WE DEPEND ON KEY SUPPLIERS. We do not manufacture any of the subscriber
units or infrastructure equipment used in our operations. We buy subscriber
units primarily from Motorola as well as other manufacturers and are dependent
on such manufacturers to obtain sufficient inventory for new subscriber and
replacement needs. We purchase terminals, transmitters, receivers and other
infrastructure equipment primarily from Motorola and Glenayre, and are dependent
on such manufacturers for sufficient infrastructure equipment to meet our
expansion and replacement requirements. We cannot assure you that the Company
will obtain subscriber units and infrastructure equipment in the future as
needed. See "Business -- Transmission Network -- Narrowband PCS Network
Buildout -- Equipment".
 
     RISK OF CHANGE IN REGULATORY ENVIRONMENT. The Company and the wireless
communications industry are subject to regulation by the FCC and various state
regulatory agencies. From time to time, legislation and regulations which could
potentially adversely affect the Company are proposed by federal and state
legislators. We cannot assure you that federal or state legislation or
regulations will not be adopted that would adversely affect our business.
 
EMPLOYEES
 
     At December 31, 1998, the Company had 2,446 full-time employees. No
employees of the Company are covered by a collective bargaining agreement, and
management believes the Company's relationship with its employees is good.
 
                                       19
<PAGE>   21
 
EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT
 
     The Company's Board of Directors currently consists of eight members, which
number may be increased or decreased from time to time so long as there are no
fewer than three nor more than twelve members. The directors, executive officers
and other key officers of the Company, their positions with the Company, and
their ages as of January 31, 1998 are as follows:
 
<TABLE>
<CAPTION>
NAME                                    AGE                  POSITION
----                                    ---                  --------
<S>                                     <C>   <C>
John D. Beletic.......................  47    Chairman and Chief Executive Officer
N. Ross Buckenham.....................  41    President
Douglas H. Kramp......................  37    Executive V.P., Strategic Business
                                              Units
Frederick G. Anderson.................  47    V.P., General Counsel and Secretary
G. Clay Myers.........................  39    V.P., Finance, Chief Financial Officer
                                              and Treasurer
Allan D. Angus........................  48    V.P., Technical Strategy
Todd A. Bergwall......................  35    V.P., Law and Regulation
Bo Bernard............................  53    V.P., Market Sales
Jack D. Hanson........................  55    V.P., Network Services
Frances W. Hopkins....................  58    V.P., Customer Advocacy
Thomas C. Keys........................  40    V.P., Corporate Development
Bradley W. Kinzbach...................  43    V.P., Inventory and Distribution
Sandra D. Neal........................  50    V.P., Strategic Projects
Richard S. Nelson.....................  50    V.P., International; President of
                                              PageMart International, Inc.
Donna Regenbaum.......................  32    V.P., Marketing
W. Wayne Stargardt....................  46    V.P., Carrier Services Division
David Swift...........................  52    V.P., National Retail
Paul L. Turner........................  40    V.P., National Service Center
E. Russell Villemez...................  39    V.P., Information Systems and Chief
                                                Information Officer
Andrew R. Weisheit....................  39    V.P., National Accounts
Leigh J. Abramson(1)(2)...............  30    Director
Guy L. de Chazal(1)...................  51    Director
Steven B. Dodge.......................  53    Director
Michael C. Hoffman....................  37    Director
Arthur Patterson(1)...................  55    Director
Alejandro Perez Elizondo(2)...........  49    Director
Pamela D.A. Reeve(1)(2)...............  49    Director
</TABLE>
 
---------------
 
(1) Member of Compensation Committee
 
(2) Member of Audit Committee
 
     John D. Beletic, Chairman and Chief Executive Officer. Mr. Beletic joined
the Company as President and a director in March 1992. Mr. Beletic also became
Chief Executive Officer of the Company in February 1994 and Chairman of the
Company's Board in August 1994. In November 1997, Mr. Beletic continued as the
Chairman and Chief Executive Officer with Mr. Buckenham assuming the position of
President. Prior to joining the Company, Mr. Beletic spent a year in venture
capital, and he served for five years as President and Chief Executive Officer
of The Tigon Corporation ("Tigon"), a leading voice mail service provider. Tigon
was acquired by Ameritech Development Corporation, a wholly-owned subsidiary of
American Information Technologies Corporation in 1988. Before joining Tigon, Mr.
Beletic was Senior Vice President of Operations and Chief Financial Officer for
five years with VMX, Inc., a manufacturer of voice mail systems. Mr. Beletic
earned his bachelor's degree in finance from Cincinnati's Xavier University and
his MBA from the Harvard Business School. Mr. Beletic currently serves as a
director of Pulse Point Communications and Triton PCS Holdings, Inc. Within the
paging industry, Mr. Beletic currently serves as a director of the Personal
 
                                       20
<PAGE>   22
 
Communications Industry Association, the industry trade association, and
President of the Paging Leadership Association.
 
     N. Ross Buckenham, President. Mr. Buckenham joined the Company in January
1996 as Vice President, PCS Strategy, was promoted to Executive Vice President
and General Manager, PCS in September 1996, was promoted to Executive Vice
President, General Manager, PCS in May 1997 and was promoted to President in
November 1997. Prior to joining the Company, Mr. Buckenham was President of
Touchtone Solutions, Inc., a telecommunications and interactive voice response
software and services company from 1992 to 1996. From 1984 to 1991, Mr.
Buckenham was with Aquanautics Corporation, initially as Vice President of
Development then as its President. From 1981 to 1984, Mr. Buckenham was with
Bain & Co. as a senior consultant to companies in the voice processing,
technology, finance and health care industries. Mr. Buckenham holds an MBA
degree from Harvard Business School and a BS degree in Chemical Engineering from
Canterbury University, New Zealand.
 
     Douglas H. Kramp, Executive Vice President, Strategic Business Units. Mr.
Kramp joined the Company as a Vice President in August 1993, was promoted to
Executive Vice President, National Retail Business Unit in May 1997, and was
promoted to Executive Vice President, Strategic Business Units in November 1997.
Before joining PageMart, Mr. Kramp was President and co-founder of Artificial
Linguistics Inc. ("ALI"), a text management software company, from 1988 to 1993.
Before co-founding ALI, Mr. Kramp was responsible for starting up and managing
high technology companies for the Hart Group from 1984 to 1988.
 
     Frederick G. Anderson, Vice President, General Counsel and Secretary. Mr.
Anderson joined the Company in August 1997 as Vice President, General Counsel
and Secretary. Prior to joining the Company, Mr. Anderson was Senior Vice
President, General Counsel and Secretary of American Eagle Group, Inc., a public
specialty property and casualty insurance holding company, from March 1992
through July 1997. American Eagle's principal subsidiary, American Eagle
Insurance Company, was placed in receivership by the Texas Department of
Insurance in December 1997. Prior to joining American Eagle Group, Inc., Mr.
Anderson was engaged in the private practice of law as a partner in the
corporate and securities section of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
an international law firm.
 
     G. Clay Myers, Vice President, Finance, Chief Financial Officer and
Treasurer. Mr. Myers joined the Company in April 1993 as Vice President of
Finance and Chief Financial Officer. Prior to joining the Company, Mr. Myers was
Senior Operations Manager for Dell Computer Corporation from 1991 to 1993. Prior
to joining Dell Computer Corporation, Mr. Myers was with Ernst & Young, LLP from
1982 to 1991. Mr. Myers currently serves as Treasurer of the Paging Leadership
Association and Treasurer of the Personal Communication Wireless Alliance. Mr.
Myers is a certified public accountant.
 
     Allan D. Angus, Vice President, Technical Strategy. Mr. Angus joined the
Company in March 1996 as Director of Technology, and was promoted to Director of
PCS Technology in September, 1996. He was promoted to Vice President, Technology
in December 1997. Prior to joining the Company, Mr. Angus was Manager of
Regulatory and Standards for JRC International, Inc. and its predecessor,
NovAtel Communications, Ltd., for more than five years, where he served as a
representative to American and Canadian technology standards organizations and
was instrumental in developing many cellular standards.
 
     Todd A. Bergwall, Vice President, Law and Regulation. Mr. Bergwall joined
the Company as Corporate Counsel in June 1994. Mr. Bergwall was also Secretary
of the Company from April 1995 through August 1997. Mr. Bergwall was promoted to
Vice President, Law and Assistant General Counsel in August 1997. Mr. Bergwall
became Vice President of Law and Regulation in August 1998. From August 1989
until joining the Company, Mr. Bergwall was engaged in private practice with the
Dallas, Texas law firm Winstead Sechrest & Minick, P.C. specializing in
corporate and securities law.
 
     Bo Bernard, Vice President, Market Sales. Mr. Bernard joined the Company in
February 1997 as Vice President, Sales. In July 1997, he was promoted to Vice
President, Core Markets Sales, and in August 1998, he became Vice President of
Market Sales. Prior to joining the Company Mr. Bernard was Executive Vice
President and co-founder of ProNet, Inc., a publicly traded paging company, from
August 1982 to December 1996.
 
                                       21
<PAGE>   23
 
     Jack D. Hanson, Vice President, Network Services. Mr. Hanson joined the
Company in October 1993 as Vice President of Network Operations. Prior to
joining the Company, Mr. Hanson was Director of Engineering for Spectradyne,
Inc. from June 1992 to October 1993. Previously, he held senior engineering
positions with VMX, Inc. from December 1984 to June 1992, most recently as Vice
President of National Account Support.
 
     Frances W. Hopkins, Co-founder and Vice President, Customer Advocacy. Ms.
Hopkins co-founded the Company in 1989 and was Executive Vice President, Chief
Operations Officer until she left the Company in September 1990 to pursue other
business interests. Upon returning in July 1991, she was named Vice President,
Division General Manager. In 1995, Ms. Hopkins became Vice President, Customer
Advocacy. Before co-founding the Company, Ms. Hopkins was President of Multicom,
Inc., a subsidiary of PacTel Personal Communications for six years; President of
Gencell, the cellular subsidiary of Communications Industries; and founder of
TelPage, a regional paging company.
 
     Thomas C. Keys, Vice President, Corporate Development. Mr. Keys joined the
Company in January 1993 as Area Manager for the Company's largest West Coast
market. He became Sales Director and General Manager in April 1994. Mr. Keys was
promoted to Vice President of Arbitrage in September 1994, and to Vice President
of Market Development in August 1998. He was named Vice President of Corporate
Development in January 1999. Before joining the Company, Mr. Keys held the
position of Vice President of Sales at S.I.P., Inc., an industrial equipment
manufacturer, from December 1991 to December 1992. Previously, Mr. Keys held
several key management positions at Metromedia Corporation from August 1990 to
December 1991.
 
     Bradley W. Kinzbach, Vice President, Inventory and Distribution. Mr.
Kinzbach joined the Company in February 1994 as Manager, Inventory and
Distribution, was promoted to Vice President, Inventory and Distribution in
December 1997 and was named Vice President of Distribution in August 1998. Prior
to joining the Company, Mr. Kinzbach was Director of Distribution and held
various other management positions for Blockbuster Entertainment Corporation
from February 1986 to February 1994 and was President of BKCM Corporation, a
distributor of bottled water, from March 1992 until December 1993.
 
     Sandra D. Neal, Vice President, Strategic Projects. Ms. Neal joined the
Company as Vice President in July 1992. She was promoted to Executive Vice
President, Administration in January 1996 and became Executive Vice President,
Strategic Projects in January 1998. Prior to joining the Company, Ms. Neal was
Vice President of Customer Service for Tigon, a voice messaging service
provider, from 1989 to 1992. Previously, Ms. Neal held the positions of Vice
President of Finance and Controller at Tigon from 1986 to 1989. Before joining
Tigon, Ms. Neal was a practicing certified public accountant from 1979 to 1986.
 
     Richard S. Nelson, Vice President, International; President of PageMart
International, Inc. Mr. Nelson joined the Company as Vice President, Marketing
in June 1992. Mr. Nelson was named Vice President of International in March
1996. Before joining the Company, Mr. Nelson was Vice President of Marketing for
American Eagle, at American Airlines, where he held various staff positions from
1972 to May 1992.
 
     Donna Regenbaum, Vice President, Marketing. Ms. Regenbaum joined the
Company in July 1994 as Director of Market Development, and in July 1997 she
became Director of Products and Services. She was promoted to Vice President of
Marketing in May 1998. Prior to joining the Company, Ms. Regenbaum was enrolled
in the graduate business program of Harvard Business School. She received her
MBA degree in 1994.
 
     W. Wayne Stargardt, Vice President, Carrier Services Division. Mr.
Stargardt joined the Company in May 1996 as Vice President, Marketing. Mr.
Stargardt has been Vice President of Carrier Services since May 1998. Prior to
joining the Company, Mr. Stargardt served as Vice President of Marketing for
Pinpoint Communications Inc., a venture-funded start-up company developing a
wireless radiolocation-based mobile data network, from 1991 to May 1996.
 
     David Swift, Vice President, National Retail. Mr. Swift joined the Company
in May 1997 as Director of National Retail Marketing. He was promoted to Vice
President of National Retail in May 1998. Prior to joining the Company, Mr.
Swift was President of Sampling Plus, Inc., a promotional marketing company,
from June 1994 until May 1997. He was Senior Vice President, Marketing of
Greyhound Lines, Inc., a
                                       22
<PAGE>   24
 
national bus line, from April 1993 through May 1994. Prior thereto Mr. Swift
held several marketing positions with Frito-Lay, most recently as Marketing
Director.
 
     Paul L. Turner, Vice President, National Service Center. Mr. Turner joined
the Company as Vice President, Customer Service March 1994. He was named Vice
President of National Service Center in August 1998. Before joining the Company,
Mr. Turner was with MCI from 1984 to 1994 in positions of increasing
responsibility. From 1990 to 1994 he held various management positions, the most
recent being Senior Manager, MCI Consumer Markets.
 
     E. Russell Villemez, Vice President, Information Systems and Chief
Information Officer. Mr. Villemez joined the Company in September 1998 as Vice
President of Information Systems and Chief Information Officer. From April 1996
to September 1998, Mr. Villemez was an independent consultant in the area of
information technology strategy for telecommunications companies such as AT&T
and Bell Atlantic. Prior to that, Mr. Villemez directed information technology
consulting in the telecommunications industry for A.T. Kearney from August 1993
to April 1996. Mr. Villemez has also been Director of Distributed Systems
Architecture for Sprint, and was employed at Andersen Consulting prior to that.
 
     Andrew R. Weisheit, Vice President, National Accounts. He joined the
Company in January 1995 as Director, Strategic Alliances and was promoted to
Vice President, Carrier Services Division in November 1997. Mr. Weisheit was
named Vice President of National Accounts in April 1998. Prior to joining the
Company, Mr. Weisheit was Branch Manager with Paging Network, Inc. for two
years. Previously, Mr. Weisheit was with Owens-Corning Fiberglas for nine years
where held various management positions of increasing responsibility.
 
     Leigh J. Abramson, Director. Mr. Abramson has been a Director of the
Company since August 1994. He is currently a Vice President of Morgan Stanley &
Co. Incorporated ("Morgan Stanley") and of Morgan Stanley Dean Witter Capital
Partners. Mr. Abramson has been with Morgan Stanley since 1990, first in the
Corporate Finance Division and, since 1992, in the Private Equity Division. Mr.
Abramson is also a Director of Silgan Holdings. Mr. Abramson was designated by
Morgan Stanley Capital Partners III, L.P. ("MSCP III") pursuant to the Amended
and Restated Stockholders Agreement among the Company and certain stockholders
of the Company dated as of May 10, 1996, as amended (the "Stockholders
Agreement").
 
     Guy L. de Chazal, Director. Mr. de Chazal has been a Director of the
Company since June 1989. Mr. de Chazal is a Managing Director of Morgan Stanley
and is President and a general partner of Morgan Stanley Dean Witter Venture
Partners. Mr. de Chazal joined Morgan Stanley in 1984. Mr. de Chazal is also a
director of several private companies. Mr. de Chazal was designated by Morgan
Stanley Venture Capital Fund, L.P. ("MSVCF") pursuant to the Stockholders
Agreement.
 
     Steven B. Dodge, Director. Mr. Dodge has been a Director of the Company
since November 1998. Mr. Dodge is Chairman and Chief Executive Officer of
American Tower Corporation ("ATC"), a leading independent owner and operator of
wireless communications towers in the United States. Prior to joining ATC, Mr.
Dodge founded and was the Chairman of the Board, President and CEO of American
Radio Systems Corporation ("ARS"), an independent owner and operator of radio
stations, a position he occupied from ARS' founding in November, 1993 until its
merger with CBS Corporation. In addition, Mr. Dodge founded Atlantic Radio, L.P.
in 1988, which was one of the predecessor entities of ARS. Prior to forming
Atlantic Radio, L.P., Mr. Dodge founded and served as Chairman and CEO of
American Cablesystems Corporation, a cable television company. Currently, Mr.
Dodge is also a Director of Sensitech, Inc. and Jobson Publishing, L.L.C.
 
     Michael C. Hoffman, Director. Mr. Hoffman has been a Director of the
Company since March 1999. Mr. Hoffman is a Managing Director of Morgan Stanley
and of Morgan Stanley Dean Witter Capital Partners. Mr. Hoffman joined Morgan
Stanley in 1986. Mr. Hoffman was designated by The Morgan Stanley Leveraged
Equity Fund II, L.P. ("MSLEF II") pursuant to the Stockholders Agreement.
 
     Arthur Patterson, Director. Mr. Patterson has been a Director of the
Company since June 1989 and a Managing Partner of Accel Partners, a venture
capital company since 1984. Mr. Patterson is also a director of
 
                                       23
<PAGE>   25
 
VIASOFT, Unify, Portal Software and the AIM Funds as well as several private
software and telecommunications companies. Mr. Patterson was designated by Accel
Partners pursuant to the Stockholders Agreement.
 
     Alejandro Perez Elizondo, Director. Mr. Perez has been a Director of the
Company since August 1994. Since 1987, Mr. Perez has been associated with
Pulsar, a diversified Mexican company with interests in the insurance,
agriculture, telecommunications, finance and other industries, and is currently
Vice President of Diversification of Pulsar Internacional, S.A. de C.V. Mr.
Perez is also a director of Ionica L3 Ltd. (a public telephone services company
located in the U.K.), Novaweb Technologies, Inc. (a California modem
manufacturing company), Encanto Networks Inc. (a California internet company),
Fomento Empresarial Regiomontano, S.A. de C.V. (a Mexico-based holding company
with investments in telecommunications companies), and Merkafon (a Mexico-based
communications engineering company). Mr. Perez was designated by Pulsar pursuant
to the Stockholders Agreement.
 
     Pamela D. A. Reeve, Director. Ms. Reeve has been a Director of the Company
since April 1996. Ms. Reeve is President, Chief Executive Officer and Director
of Lightbridge, Inc. ("Lightbridge") and has been with Lightbridge since 1989.
Lightbridge develops and manages software used by wireless telecommunications
companies across the United States to support sales and marketing applications.
Prior to joining Lightbridge, Ms. Reeve spent eleven years at The Boston
Consulting Group, with senior operating responsibility for the firm's Boston
office. Prior to joining The Boston Consulting Group, Ms. Reeve worked with the
National Endowment for the Humanities managing educational projects and with
real estate development and manufacturing firms, primarily in operations and
marketing. Ms. Reeve is also a director of Natural Microsystems, Inc.
 
CORPORATE STRUCTURE
 
     PageMart Wireless was incorporated in Delaware on November 29, 1994 as a
wholly-owned subsidiary of PageMart, Inc. Effective January 19, 1995, PageMart,
Inc. merged with a wholly-owned subsidiary of PageMart Wireless, pursuant to
which PageMart was the surviving corporation (the "Reorganization"). As part of
the Reorganization, each share of outstanding common stock of PageMart was
converted into one share of common stock of PageMart Wireless. Upon consummation
of the Reorganization, the stockholders of PageMart, Inc. had the same ownership
interest in PageMart Wireless as they had in PageMart, Inc., and PageMart
Wireless owned all of the capital stock of PageMart, Inc. On December 28, 1995,
the name of PageMart Wireless was changed from PageMart Nationwide, Inc. to
PageMart Wireless, Inc. On January 28, 1998, PageMart, Inc. was merged into
PageMart Wireless, which was the surviving corporation in the merger.
 
ITEM 2. PROPERTIES
 
     The principal tangible assets of the Company are its messaging network
equipment, which includes switching terminals, transmitters, receivers and a
host of related equipment such as satellite and digital link controllers,
satellite dishes, antennas, cable, etc. The Company continues to add equipment
to its messaging network as it expands to new service areas and completes the
buildout of its narrowband PCS network. To date, it has not experienced any
material difficulty or delay in obtaining network equipment as needed.
 
     The Company acquired the narrowband PCS Licenses in auctions held by the
FCC. The narrowband PCS Licenses permit the nationwide operation of the
narrowband PCS network with 100kHz of outbound capacity and 50kHz of return
capacity.
 
     The Company generally leases the locations used for its transmission and
receiving facilities under operating leases. These leases, which are generally
for five years or less, provide for aggregate annual rental charges of
approximately $18.3 million as of December 31, 1998. The Company does not
anticipate material difficulty in renewing these leases or finding equally
suitable alternate facilities on acceptable terms.
 
     The Company leases approximately 162,000 square feet of office space for
its corporate headquarters in Dallas, Texas. The lease will have an annual cost
of approximately $2.4 million in 1999, and is subject to annual escalations
during the term of the lease. The lease expires on January 31, 2008, and the
Company has the option to renew it for an additional five year term. The Company
leases varying amounts of space for local
 
                                       24
<PAGE>   26
 
offices, call centers and other facilities at various locations. Aggregate
annual rental charges under these leases were approximately $6.0 million as of
December 31, 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 results of operations or financial
condition of the Company.
 
     On October 27, 1997, an action against PageMart, Inc. and Paging Network,
Inc. was filed in Superior Court of the State of California, County of San
Francisco, by two customers of EconoPage, Inc. ("EconoPage"), a reseller of the
Company's services that had resold PageMart, Inc's paging services to
approximately 38,000 customers. PageMart, Inc. terminated the reseller agreement
due to monetary default by EconoPage. In the complaint, plaintiffs have
requested class action status on behalf of EconoPage customers and allege that
EconoPage was an agent of PageMart, Inc., that PageMart, Inc. was aware that
EconoPage's pricing would not permit it to sustain its business and PageMart,
Inc. permitted EconoPage to continue to enter into service contracts with
customers while EconoPage was having serious financial difficulties. The
complaint alleges violation of statute, fraud and negligent misrepresentation by
PageMart, Inc., and requested injunctive relief as well as compensatory,
punitive, special and incidental damages in an unspecified amount. PageMart,
Inc. denies all claims. Discovery has proceeded and plaintiffs filed a motion
for class certification. After briefing and oral arguments, the court denied
plaintiff's motion. Plaintiffs appealed the denial of class certification and
then withdrew the appeal. PageMart, Inc. filed a motion to transfer the case to
municipal court. The motion is currently pending. The Company will continue to
defend this action vigorously. The Company does not expect the ultimate outcome
of this suit to have a material adverse effect on its results of operations or
financial condition.
 
     On March 20, 1998, an action against the Company and Paging Network, Inc.
was filed in Superior Court of the State of California, County of Los Angeles,
by three customers of EconoPage of Southern California, Inc. ("EPSC"), a
reseller of the Company's services that had resold the Company's paging services
to approximately 12,000 customers. The Company terminated the reseller agreement
when EPSC ceased operations on March 4, 1998. In the complaint, plaintiffs
requested class action status on behalf of EPSC customers and allege that EPSC
was an agent of the Company, that the Company was aware that EPSC's pricing
would not permit it to sustain its business and the Company permitted EPSC to
continue to enter into service contracts with customers while EPSC was having
serious financial difficulties. The complaint alleged violation of statute,
fraud and negligent misrepresentation by the Company, and requested injunctive
relief as well as compensatory, punitive, special and incidental damages in an
unspecified amount. Paging Network, Inc. demurred to plaintiff's complaint on
the grounds that it did not state facts sufficient to constitute a cause of
action. The court sustained the demurrer without leave to amend the fraud and
negligent misrepresentation causes of action, and it sustained with leave to
amend the statutory violation cause of action if plaintiffs could allege that
defendants knew EPSC was going to fail but continued to allow their names to be
used to solicit customers. Plaintiffs filed a second amended complaint that
states only a statutory violation cause of action against defendants. The
Company has demurred to the second amended complaint on grounds similar to the
demurrer to the original complaint. Plaintiffs requested leave of the court to
file a third amended complaint adding a request to proceed with a representative
action under Section 17200 of the California Business and Professions Code. The
court granted the request for leave to amend and transferred the case to a court
that specialized in those types of cases. PageMart filed a demurrer and a motion
to transfer the case to municipal court, the jurisdictional amount of which is
$5,000, and the court granted the demurrer and the motion to transfer.
Plaintiffs filed a motion in the original court in an attempt to revive the
class action allegations, but the court denied the motion. The Company denies
all claims and will defend this action vigorously. The Company does not expect
the ultimate outcome of this suit to have a material adverse effect on its
results of operations or financial condition.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     None.
                                       25
<PAGE>   27
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
 
     The Company's Class A Common Stock, $0.0001 par value, is listed on the
Nasdaq National Market System under the symbol PMWI. There currently is no
public market for the Company's Class B, Class C or Class D Common Stock. Class
A Common Stock is convertible by certain holders thereof into either Class B or
C Common Stock. Classes B, C and D Common Stock are convertible into Class A
Common Stock. The following table indicates the high and low sales prices for
shares of the Company's Class A Common Stock for the last two years:
 
<TABLE>
<S>                                                           <C>           <C>
1997:
  First Quarter.............................................    $ 7 5/8        $4 3/8
  Second Quarter............................................    $ 9 1/2        $4 7/8
  Third Quarter.............................................    $11 3/8        $7
  Fourth Quarter............................................    $13 1/4        $7 1/2
1998:
  First Quarter.............................................    $10 7/16       $7
  Second Quarter............................................    $10 7/8        $8 7/16
  Third Quarter.............................................    $10 1/16       $6 1/4
  Fourth Quarter............................................    $ 8 3/4        $5
</TABLE>
 
     As of January 31, 1999, the Company's Class A, Class B, Class C and Class D
Common Stock was held by approximately 212, 8, 2 and 2 holders of record,
respectively. Management believes there were approximately 3,000 beneficial
holders at January 31, 1999.
 
     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.
 
                                       26
<PAGE>   28
 
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, 1998. The
financial information and operating data were derived from, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere in this Report.
 
<TABLE>
<CAPTION>
                                                                  FISCAL YEAR ENDED DECEMBER 31,
                                              ----------------------------------------------------------------------
                                                 1994          1995           1996           1997           1998
                                              ----------   ------------   ------------   ------------   ------------
                                               (IN THOUSANDS, EXCEPT UNIT, PER SHARE, ARPU AND PER SUBSCRIBER DATA)
<S>                                           <C>          <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Recurring revenues..........................   $ 56,648     $  101,503     $  153,041     $  206,907     $  254,814
Equipment sales and activation fees.........     53,185         57,688         68,551         70,871         56,838
                                               --------     ----------     ----------     ----------     ----------
Total revenues..............................    109,833        159,191        221,592        277,778        311,652
Cost of equipment sold......................     57,835         63,982         78,896         86,175         69,150
                                               --------     ----------     ----------     ----------     ----------
                                                 51,998         95,209        142,696        191,603        242,502
Operating expenses..........................     85,322        118,557        155,265        194,194        240,052
                                               --------     ----------     ----------     ----------     ----------
Operating income (loss).....................    (33,324)       (23,348)       (12,569)        (2,591)         2,450
Interest expense............................    (12,933)       (30,720)       (35,041)       (38,499)       (43,798)
Interest income.............................        858          1,997          1,140            501          3,187
Other.......................................       (414)        (1,042)        (2,128)        (3,298)        (3,549)
                                               --------     ----------     ----------     ----------     ----------
Loss before extraordinary item..............   $(45,813)    $  (53,113)    $  (48,598)    $  (43,887)    $  (41,710)
                                               ========     ==========     ==========     ==========     ==========
Loss before extraordinary item per common
  share.....................................   $  (1.72)    $    (1.53)    $    (1.30)    $    (1.10)    $    (1.03)
Weighted average number of common shares and
  share equivalents outstanding.............     26,574         34,653         37,462         39,922         40,246
BALANCE SHEET DATA (AT PERIOD END):
Current assets..............................   $ 44,397     $   62,535     $   70,572     $   84,133     $   74,537
Total assets................................    142,059        263,829        313,620        361,876        494,055
Current liabilities.........................     37,966         56,508         62,503        104,973        120,750
Long-term debt, less current maturities.....     92,632        219,364        240,687        289,344        462,079
Stockholders' equity (deficit)..............     11,461        (12,043)        10,430        (32,441)       (90,022)
OTHER DATA:
Units in service (at period end)............    772,730      1,240,024      1,859,407      2,530,737      2,651,004
Net subscriber additions....................    445,427        467,294        619,383        671,330        120,267
ARPU(1).....................................   $   8.64     $     8.62     $     8.04     $     7.80     $     8.06
EBITDA(2)...................................    (25,219)       (10,076)         8,623         27,261         45,870
Capital expenditures........................     16,719         33,503         63,804         67,506        168,546
Dividends Paid/Declared.....................         --             --             --             --             --
Depreciation and amortization...............      8,105         13,272         21,192         29,852         43,420
Deficiency of earnings to fixed
  charges(3)(4).............................    (45,813)       (53,113)       (48,598)       (43,887)       (70,511)
</TABLE>
 
---------------
 
(1) Average monthly revenue per unit ("ARPU") is calculated by dividing (i)
    domestic recurring revenues, consisting of fees for airtime, voice mail,
    customized coverage options, excess usage fees and other recurring revenues
    and fees associated with the subscriber base for the quarter by (ii) the
    average number of domestic units in service for the quarter. ARPU is stated
    as the monthly average for the final quarter of the period.
 
(2) EBITDA represents earnings (loss) before interest, taxes, depreciation,
    amortization, other expenses and extraordinary items. EBITDA is a financial
    measure commonly used in the paging industry. EBITDA is not derived pursuant
    to generally accepted accounting principles ("GAAP") and therefore should
    not be construed as an alternative to operating income, as an alternative to
    cash flows from operating activities (as determined in accordance with GAAP)
    or as a measure of liquidity. The calculation of EBITDA does not include the
    commitments of the Company for capital expenditures and payment of debt and
    should not be deemed to represent funds available to the Company. See
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations" for a discussion of the financial operations and liquidity of
    the Company as determined in accordance with GAAP.
 
(3) For purposes of calculating the deficiency of earnings to fixed charges, (i)
    earnings is defined as net loss plus fixed charges and (ii) fixed charges as
    interest expense plus amortization of debt issuance costs and the interest
    portion of rental and lease expense.
 
(4) The 1998 deficiency of earnings to fixed charges is increased by $17.6
    million in extraordinary items and $11.4 million of capitalized interest
    incurred during the year ended December 31, 1998.
 
                                       27
<PAGE>   29
 
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, 1998. This
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and the notes thereto included elsewhere in this report.
Certain prior year's amounts have been reclassified to conform with the current
year presentation.
 
     This Form 10-K contains statements that constitute forward-looking
statements. The words "estimate," "project," "plan," "expect," "believe" and
similar expressions are intended to identify forward-looking statements. Readers
are cautioned that such forward-looking statements involve risks and
uncertainties, and are subject to change based on various important factors. The
factors set forth in other filings with the Securities Exchange Commission and
the following factors, among others, in some cases have affected and in the
future could affect the Company's financial performance and could cause actual
results for 1999 and beyond to differ materially from those expressed in any
such forward-looking statements -- economic conditions and consumer confidence
generally in the United States; the ability of the Company to manage its high
outstanding indebtedness; the impact of technological change in the
telecommunications industry; the future cost of network infrastructure and
subscriber equipment; the impact of competition and pricing of paging and
wireless services; the timely development and acceptance of new products; change
in regulation by the FCC and various state regulatory agencies; potential
technical problems relating to the Company's transmission network for advanced
messaging services; and the cost and ability of the Company and third parties
upon whose products and services the Company depends to be Year 2000 ready in a
timely manner.
 
GENERAL
 
     Through its PageMart Paging division, 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. Through its
PageMart PCS division, the Company has constructed and operates an advanced
messaging network as an overlay of its one-way network. In June 1998, the
Company launched commercial advanced messaging services in its first two local
markets, Austin and San Antonio, Texas. On December 15, 1998, the Company
launched nationwide advanced messaging services covering approximately 70% of
the U.S. population. The Company has incurred significant capital expenditures
and expects to incur significant operating losses and additional capital
expenditures associated with the implementation and deployment of its advanced
messaging services.
 
     The Company sells and leases wireless messaging end-user devices 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.
 
     Since commencing operations in 1990, the Company has invested heavily in
its wireless communications network and administrative infrastructure in order
to establish nationwide coverage, sales offices in major metropolitan areas,
centralized customer service call centers and administrative support functions.
The Company incurs substantial fixed operating costs related to its 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. The Company has sustained consolidated operating losses in each year
of operations from inception through the period ending December 31, 1997.
Although the Company recognized a $2.5 million operating profit for the period
ending December 31, 1998, the Company has sustained an aggregate $12.7 million
operating loss for the three year period ended December 31, 1998. The Company
expects to continue to incur operating losses for the next several years.
 
     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, 1998, the
number of domestic one-way units in service increased from 52,125 to 2,618,527.
None of the Company's growth is attributable to acquisitions. The Company
intends to achieve unit growth by promoting its customized paging and other
wireless messaging services through its sales offices, national retail
distribution
                                       28
<PAGE>   30
 
channels, private brand strategic alliances with telecommunication companies
such as GTE Corporation, Southwestern Bell Mobile Systems, WorldCom Network
Services, Inc., Ameritech Mobile Services, Inc., EXCEL Communications, Inc.,
ALLTEL Communications, Inc., BellSouth Cellular Corp., Bluegrass Cellular, Inc.
and First Cellular of Southern Illinois, as well as international expansion.
Given the fixed operating costs of its wireless networks and administration and
selling and marketing expenses associated with its growth strategy, the Company
generated operating losses in 1997 from its PageMart Paging division. In the
third quarter of 1997, the Company began generating operating profits in its
PageMart Paging division. The PageMart Paging division generated operating
profits for each quarter in 1998 and management expects this trend to continue
in 1999.
 
     The Company has historically sold, rather than leased, substantially all
subscriber units used by its subscribers. As a result, the Company has had much
less capital invested in subscriber units than other paging carriers since it
has recouped a substantial portion of subscriber unit costs upon sale to
retailers and subscribers. This has resulted in significantly lower capital
expenditures and depreciation expense than if the Company had leased units to
its subscribers. In addition, the Company's financial results are much different
than other paging carriers that lease subscriber units to subscribers because
the Company recognizes the cost of subscriber units sold in connection with
adding new subscribers at the time of sale rather than capitalizing and
depreciating the cost of subscriber units over periods ranging from three to
four years, as occurs with paging carriers that lease subscriber units to
subscribers. In addition, the Company's retail distribution strategy results in
the recognition of expenses associated with subscriber unit sales and other
sales and marketing expenses in advance of new subscribers being added to the
base and generating revenues (as retailers carry inventory). However, the
Company expects to lease a substantial portion of its advanced messaging
subscriber units as initial sales of advanced messaging services are expected to
be dominated by business and corporate customers and because of the high cost of
advanced messaging subscriber units compared to one-way messaging units.
 
     The Company sells and leases its subscriber units through the following
distribution channels: (i) direct sales and third party resellers through its
Markets Strategic Business Unit ("SBU"), (ii) private brand strategic alliances
through its Carrier Services SBU, (iii) national retail stores through its
National Retail SBU and (iv) direct sales through its National Accounts SBU. At
December 31, 1998, 26% of the Company's total units in service originated from
the National Retail SBU, 37% originated from the Carrier Services SBU and 37%
originated from the Markets SBU.
 
     For competitive and marketing reasons, the Company generally sells each new
unit to national retailers for less than its acquisition cost. Management
anticipates that the loss on equipment sold in the National Retail SBU will
generally remain constant on a per unit basis for the foreseeable future. The
Company's accounting practices result in selling and marketing expenses,
including loss on sales of equipment, being recorded at the time a unit is sold.
The Company expects its costs of subscriber units on a per unit basis generally
to remain constant or decline slightly as sales volumes increase. Units sold by
the Company during a given month may exceed units activated and in service due
to inventory stocking and distribution strategies of retailers.
 
     In the third quarter of 1998, the Company announced the formation of its
Telemetry SBU and the signing of a strategic alliance with Interactive
Technologies, Inc. for wireless connectivity to home security systems. During
the fourth quarter of 1998, the Company announced the signing of strategic
alliances with Pentech Energy Solutions, Inc. for wireless connectivity to
environmental control systems, Road Trac, LLC to provide telemetry solutions for
vehicle location technology and Monitel Products Corp. to provide remote
monitoring and diagnostic products for the photocopy and imaging industry. The
Company does not expect the Telemetry SBU to generate revenues until late in
1999.
 
     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
 
                                       29
<PAGE>   31
 
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 for service, dissatisfaction with service and switching to a
competing service provider. The Company's average monthly disconnection rates
for the years ended December 31, 1996, 1997, and 1998 were 2.4%, 2.5% and 3.2%,
respectively. Average monthly disconnect rates are calculated by dividing the
sum of (i) direct subscriber disconnections, (ii) negative subscriber additions
from the local, regional and reseller channel, taken as a whole and (iii) the
cumulative negative subscriber additions from each of the Carrier Services SBU's
strategic alliance partners, included in the Carrier Services SBU by the total
number of units in service at the beginning of the period. Disconnect rates are
stated as the monthly average of each period presented.
 
     Approximately 90% of the Company's average revenue per unit ("ARPU") is
attributable to fixed fees for airtime, coverage options and features. A portion
of the remainder is dependent on usage. Management anticipates that the
Company's one-way ARPU will remain constant or decline slightly in the
foreseeable future due to a continued higher mix of subscribers added through
private brand strategic alliance programs, which yield lower ARPU because
strategic alliance partners are generally high volume customers that are charged
wholesale airtime rates. However, because private brand strategic alliance
partners are responsible for selling and marketing costs, billing, collection
and other administrative costs associated with end-users, the Company incurs
substantially lower marketing and administrative costs with respect to such
subscribers. Management anticipates that the Company's consolidated ARPU will
increase as subscriber additions for its advanced messaging services increase,
since advanced messaging yields a significantly higher ARPU than one-way
messaging.
 
     On May 19, 1998, the Company and many other paging companies experienced an
unprecedented interruption of service when the PanAmSat Galaxy IV communications
satellite, on which the Company leased capacity, ceased to communicate with
paging uplink stations throughout the United States. Management believes that
this is the first event of its kind to affect the paging industry in the 35-year
history of satellite telecommunications. This event occurred when the
satellite's onboard control system and a back-up control system failed and
PanAmSat technicians were unable to restore the satellite's proper orientation
toward Earth.
 
     The Company initiated its recovery plan by re-orienting its satellite links
to its back-up satellites. In order to re-orient the satellite links, the
Company realigned satellite dish antennas on each of its approximately 2,000
transmission sites to receive the back-up satellites' signals. Although the
satellite failure was beyond the Company's control, the Company provided its
customers with a two-day airtime credit to compensate them for the period when
they were unable to receive messages. The Company incurred $3.8 million of costs
(including the airtime credit) during the three months ended June 30, 1998 and
has recorded these costs as an extraordinary charge.
 
RESULTS OF OPERATIONS
 
     The Company's principal operations to date are its domestic one-way
wireless operations of its PageMart Paging division. The following discussion of
results of operations analyzes the results of the Company's PageMart Paging
division (i.e., domestic one-way wireless messaging operations), unless
otherwise indicated.
 
     Certain of the following financial information is presented on a per
subscriber unit per month basis. Management of the Company believes that such a
presentation is useful in understanding the Company's results because it
provides a meaningful comparison period-to-period, given the Company's growth
rate and the significant differences in the number of subscribers of other
paging companies.
 
                                       30
<PAGE>   32
 
  FISCAL YEARS 1996, 1997 AND 1998
 
     Units in Service
 
     Units in service from domestic one-way paging operations were, 1,851,445,
2,513,337 and 2,618,527 as of December 31, 1996, 1997 and 1998, respectively.
This represents an annual growth rate of 49%, 36% and 4% in 1996, 1997 and 1998,
respectively. In addition, for the years ended December 31, 1996, 1997, and
1998, PageMart Canada's units in service were 13,270, 29,000 and 52,836,
respectively. As a result of its ownership interest in PageMart Canada, the
Company's proportional share of the units in service of PageMart Canada was
7,962, 17,400 and 31,702 units at December 31, 1996, 1997, and 1998. As of
December 31, 1998, the Company had 775 advanced messaging units in service.
 
     The Company experienced historically weak fiscal quarters in terms of net
subscriber additions in the third and fourth quarters of 1998, with the fourth
quarter resulting in net losses. Management believes that a majority of the
reasons are specific to the Company, however, a general slowing in the market
for traditional one-way paging services was also a contributing factor. In the
opinion of management, demand appears to be shifting away from traditional
one-way paging services to the higher quality and greater benefits of advanced
messaging services.
 
     Several things contributed to the Company specific reasons for the decline
in net subscriber additions in the third and fourth quarters of 1998. The
Company's primary pager supplier, Motorola, Inc., experienced significant
manufacturing problems in the production of the Synapse(TM) pager card for the
PalmPilot and delays in the introduction of a new pager product line that
negatively affected the Company's sales. Also contributing to reduced net
subscriber additions was an increase in the Company's composite churn rate from
2.8% in the second quarter to 3.1% in the third quarter and to 4.1% in the
fourth quarter of 1998. There were several reasons for this increase aside from
the general slowing of the market. Additional subscriber disconnects resulted
from a price increase implemented for direct bill customers that were below the
Company's standard pricing and profitability levels. The local reseller channel
continued to experience volatility. Also, higher volatility was experienced in
the strategic alliance distribution channel during the third and fourth quarters
of 1998, primarily as a result of a review and update of customer database
information by strategic alliance partners. Finally, the Company's National
Retail SBU experienced an increase in disconnect rates, which resulted in net
reductions in units in service in the fourth quarter of 1998. Management
believes that the current dynamics in the retail marketplace have resulted in
attracting new subscribers which have a higher propensity to disconnect. As a
consequence, several of the Company's national retail programs are being
modified to address these dynamics. These modifications are expected to reduce
the Company's overall costs of delivering products and services to the national
retail distribution channel during 1999.
 
     Historically, the Company has grown its subscriber base at a faster rate
than the overall paging industry's subscriber growth rate. Management does not
anticipate that the Company's one-way paging business will continue to grow at
rates that are significantly higher than the overall industry rate. Management
expects the one-way paging division to experience net subscriber losses in the
first quarter of 1999, offset somewhat by advanced messaging subscriber
additions. Certain factors may cause net subscriber additions to be negative in
any quarter of 1999, including more severe volatility in local reseller and
strategic alliance channels or an increase in disconnect rates.
 
     Revenues
 
     Revenues for the fiscal years 1996, 1997 and 1998 were $221.6 million,
$277.6 million and $311.5 million, respectively. Recurring revenues for airtime,
voice mail and other services for the same periods were $153.0 million, $206.9
million, and $254.8 million, respectively. Revenues from equipment sales and
activation fees for 1996, 1997 and 1998 were $68.6 million, $70.7 million and
$56.7 million, respectively. The increases in recurring revenues and revenues
from equipment sales from 1996 to 1997 and recurring revenues from 1997 to 1998
were primarily due to the increase in the total number of units in service. The
decrease in equipment sales during the year ended December 31, 1998, was
primarily due to a decline in the rate of growth in national retail outlets.
 
                                       31
<PAGE>   33
 
     The Company's ARPU was $8.04, $7.80 and $8.06 in the final quarter of 1996,
1997 and 1998, respectively. The decline in 1997 resulted primarily from an
increase in subscribers added through private brand strategic alliance channels.
This decrease in ARPU was offset partially by a higher mix of multi-city,
regional and nationwide services as well as increased sales of other value-added
services such as voice mail and toll-free numbers. The increase in ARPU in 1998
is primarily attributable to an increase in alphanumeric services in the
traditional one-way paging operation, as well as a decrease in the number of
subscriber units deployed in the local reseller distribution channel, which
generally has low ARPU. Over the past year, the Company's ARPU has varied by
less than 4 percent. Management expects ARPU to remain relatively stable in the
foreseeable future with minor variations from changes in distribution mix.
 
     Cost of Equipment Sold
 
     The cost of equipment sold in 1996, 1997 and 1998 was $78.9 million, $86.0
million and $68.9 million, respectively. The increase from 1996 to 1997 was
primarily due to an increase in the number of retail outlets along with an
increase in the number of units sold. The decrease in 1998 was primarily
attributable to a decline in the rate of growth in national retail outlets.
During the twelve months ended December 31, 1996, 1997 and 1998, the Company
added 2,119, 7,394 and 2,820 new national retail outlets, respectively. In 1997,
the Company made a concerted effort to expand its retail distribution
capabilities by aggressively increasing the number of retail outlets. However,
in 1998, the number of retail outlets has stabilized as a result of the Company
obtaining sufficient market share. The Company expects pager costs generally to
remain constant, with modest reductions in cost to the Company as a result of
volume purchase discounts. The loss on equipment sold (equipment revenue less
cost of equipment sold) is recognized when pagers are shipped to the retailers,
usually before the units are placed into service.
 
     Operating Expenses
 
     Technical expenses were $36.7 million, $46.5 million and $52.2 million in
1996, 1997 and 1998, respectively. The increases were primarily due to increased
telecommunications and site expenses associated with servicing the Company's
expanded network and larger subscriber base. Based on an average monthly cost
per unit in service, technical expenses were $1.98, $1.78 and $1.69 in 1996,
1997 and 1998, respectively. The per unit decreases were the result of increased
operating efficiencies and economies of scale achieved through the growth of the
Company's subscriber base. During the year ended December 31, 1998, the Company
incurred $4.4 million in technical expense associated with advanced messaging.
 
     Selling expenses in 1996, 1997 and 1998 were $42.6 million, $50.8 million
and $52.6 million, respectively. From 1996 to 1997, the increase resulted from
greater marketing and advertising costs related to the growth in units sold as
well as from increased sales compensation because of the addition of sales
personnel in existing business units. From 1997 to 1998, the increase resulted
from greater marketing and advertising costs related to a larger base of retail
outlets. During the year ended December 31, 1998, the Company incurred $2.0
million and $0.7 million in selling expenses associated with advanced messaging
and international operations, respectively.
 
     General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1996, 1997
and 1998 were $53.7 million, $66.4 million and $82.6 million, respectively. This
increase was attributable to the Company's expansion of its customer service
call centers, information systems and administrative capabilities to support the
domestic one-way subscriber base and anticipated growth of the advanced
messaging 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 $2.89, $2.54 and
$2.68 for fiscal years 1996, 1997, and 1998, respectively. For the year ended
December 31, 1998, the Company incurred $2.1 million in general and
administrative expenses associated with advanced messaging.
 
     Depreciation and amortization in 1996, 1997 and 1998 was $21.2 million,
$29.7 million and $37.6 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 computer hardware
and
 
                                       32
<PAGE>   34
 
software associated with the Company's administrative system in 1996, 1997 and
1998. As an average cost per month per unit in service, depreciation and
amortization was $1.14, $1.13 and $1.22 for the years ended December 31, 1996,
1997 and 1998, respectively. For the year ended December 31, 1998, the Company
incurred $5.8 million in depreciation and amortization associated with advanced
messaging.
 
     Interest Expense
 
     Consolidated interest expense increased from $35.0 million in 1996 to $38.5
million in 1997, and to $43.8 million in 1998. The increases in 1996 and 1997
were primarily the result of the increased interest related to the 15% Notes and
the 12 1/4% Senior Discount Notes (the "12 1/4% Notes"). The increase in 1998
was primarily the result of interest expense related to the 11 1/4% Notes and
increased interest expense related to the 15% Notes. Interest expense related to
the 12 1/4% Notes, which were retired in January 1998, was $13.3 million, $15.1
million and $1.2 million in 1996, 1997 and 1998, respectively. Interest expense
related to the 15% Notes was $18.4 million, $21.2 million and $24.7 million in
1996, 1997 and 1998, respectively. Interest expense related to the 11 1/4% Notes
was $27.0 million in 1998. Interest expense related to the vendor financing
arrangement was $0.9 million in 1997 and $0.6 million in 1998. Total interest
expense for the year ended December 31, 1998, was reduced by the capitalization
of $11.4 million of interest related to the construction of the Company's
advanced messaging network.
 
     Net Loss
 
     The Company sustained consolidated losses before extraordinary items in
1996, 1997 and 1998 of $48.6 million, $43.9 million and $41.7 million,
respectively, principally due to the cost of funding the growth rate of the
Company's subscriber base. A one-time extraordinary charge of $13.8 million was
recognized during the first quarter of 1998 related to the early retirement of
the 12 1/4% Notes. In addition, a one-time extraordinary charge of $3.8 million
was recognized during the second quarter of 1998 related to the interruption in
service experienced by the Company when the Galaxy IV satellite failed.
Including the extraordinary items, the Company's consolidated net loss for the
year ended December 31, 1998 was $59.3 million.
 
     Allocation of Debt to Divisions
 
     The Company has allocated long-term debt amongst its PageMart Paging and
PageMart PCS divisions. The methodology the Company has followed to date results
in the attribution of the proceeds of each equity and debt offering based on the
specific capital and operating requirements of each division. Positive free cash
flow generated by a division is utilized to reduce its respective debt
allocation. As of December 31, 1998, $155.9 million and $72.5 million of equity
and $125.0 million and $338.3 million of debt has been allocated to PageMart
Paging and PageMart PCS, respectively. For the twelve months ended December 31,
1998, interest expense of $18.6 million and $25.2 million was allocated to
PageMart Paging and PageMart PCS, respectively.
 
                                       33
<PAGE>   35
 
  SELECTED QUARTERLY RESULTS OF OPERATIONS
 
     The table below sets forth management's presentation of results of PageMart
Paging's operations and other data on a quarterly basis for the eight most
recent fiscal quarters. This presentation should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this report and the Company's quarterly reports on Form 10-Q for
the corresponding periods below, and should not be considered in isolation or as
an alternative to results of operations that are presented in accordance with
generally accepted accounting principles ("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,
                             1997         1997         1997         1997         1998         1998         1998         1998
                          ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                                       (UNAUDITED)
<S>                       <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
RECURRING REVENUE.......  $   46,475   $   50,004   $   53,593   $   56,828   $   60,872   $   63,537   $   65,205   $   65,154
Equipment revenue.......      15,183       15,867       19,142       20,513       16,289       13,164       13,546       13,702
                          ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                              61,658       65,871       72,735       77,341       77,161       76,701       78,751       78,856
  Cost of equipment
    sold................      18,054       20,234       24,008       23,735       20,590       15,915       16,416       15,976
                          ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
NET REVENUES............      43,604       45,637       48,727       53,606       56,571       60,786       62,335       62,880
Technical expenses......      10,765       11,385       11,963       12,397       12,359       13,464       13,364       12,993
General and
  administrative
  expenses..............      15,763       15,814       16,957       17,911       19,728       20,524       20,862       21,452
Selling expenses........      12,572       12,189       12,115       13,969       13,476       13,716       12,907       12,519
Depreciation and
  amortization
  expense...............       6,808        7,240        7,626        7,987        8,482        9,046        9,808       10,269
                          ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
OPERATING INCOME (LOSS):
  EBIT..................  $   (2,304)  $     (991)  $       66   $    1,342   $    2,526   $    4,036   $    5,394   $    5,647
                          ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========
EBITDA(1)...............  $    4,504   $    6,249   $    7,692   $    9,329   $   11,008   $   13,082   $   15,202   $   15,916
                          ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========
OTHER DATA:
EBIT MARGIN(2)..........        (5.3)%       (2.2)%        0.1%         2.5%         4.5%         6.6%         8.7%         9.0%
EBITDA MARGIN(3)........        10.3%        13.7%        15.8%        17.4%        19.5%        21.5%        24.4%        25.3%
Ending units in
  service...............   2,001,525    2,181,775    2,343,299    2,513,337    2,652,443    2,752,580    2,767,742    2,618,527
ARPU(4).................  $     8.04   $     7.97   $     7.90   $     7.80   $     7.86   $     7.84   $     7.87   $     8.06
Capital employed per
  unit in service(5)....  $       41   $       40   $       36   $       34   $       31   $       28   $       27   $       27
RETURN ON CAPITAL
  EMPLOYED(6)...........        22.0%        28.6%        36.5%        43.7%        53.6%        67.9%        81.4%        90.0%
</TABLE>
 
---------------
 
(1) EBITDA represents earnings (loss) before interest, taxes, depreciation,
    amortization, other expenses and extraordinary items. 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 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.
 
(2) Calculated by dividing quarterly EBIT by net revenues.
 
(3) Calculated by dividing quarterly EBITDA by net revenues.
 
(4) Calculated by dividing recurring revenues for the quarter by the simple
    average number of units in service during that quarter. Stated as the
    monthly average for the quarter.
 
(5) Calculated by dividing consolidated total assets (excluding cash, advanced
    messaging services assets and international investments) minus non-interest
    bearing current liabilities, at the end of the period by units in service at
    the end of the period.
 
(6) Calculated by multiplying quarterly EBITDA by four and dividing by total
    capital employed (capital employed per unit in service multiplied by
    domestic units in service.)
 
                                       34
<PAGE>   36
 
  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, 1996
                                         -----------------------------------------------------------
                                         PAGEMART      PAGEMART        PAGEMART
                                          PAGING         PCS         INTERNATIONAL      CONSOLIDATED
                                         --------      --------      -------------      ------------
<S>                                      <C>           <C>           <C>                <C>
Revenues...............................  $221,592      $     --         $    --           $221,592
Operating loss.........................   (11,465)         (657)           (447)           (12,569)
Interest expense.......................    16,137        18,904              --             35,041
Interest income........................       153           987              --              1,140
Net loss...............................   (27,638)      (18,574)         (2,386)           (48,598)
EBITDA.................................     9,727          (657)           (447)             8,623
Total assets...........................   160,719       151,108           1,793            313,620
Capital expenditures...................    50,838        12,966              --             63,804
</TABLE>
 
<TABLE>
<CAPTION>
                                                     FISCAL YEAR ENDED DECEMBER 31, 1997
                                         -----------------------------------------------------------
                                         PAGEMART      PAGEMART        PAGEMART
                                          PAGING         PCS         INTERNATIONAL      CONSOLIDATED
                                         --------      --------      -------------      ------------
<S>                                      <C>           <C>           <C>                <C>
Revenues...............................  $277,605      $     --         $   173           $277,778
Operating loss.........................    (1,887)         (207)           (497)            (2,591)
Interest expense.......................    18,679        19,820              --             38,499
Interest income........................        65           436              --                501
Net loss...............................   (20,987)      (19,591)         (3,309)           (43,887)
EBITDA.................................    27,774           (16)           (497)            27,261
Total assets...........................   175,359       185,943             574            361,876
Capital expenditures...................    32,169        35,337              --             67,506
</TABLE>
 
<TABLE>
<CAPTION>
                                                     FISCAL YEAR ENDED DECEMBER 31, 1998
                                         -----------------------------------------------------------
                                         PAGEMART      PAGEMART        PAGEMART
                                          PAGING         PCS         INTERNATIONAL      CONSOLIDATED
                                         --------      --------      -------------      ------------
<S>                                      <C>           <C>           <C>                <C>
Revenues...............................  $311,469      $     96         $    87           $311,652
Operating income (loss)................    17,603       (14,506)           (647)             2,450
Interest expense.......................    18,636        25,162              --             43,798
Interest income........................        42         3,145              --              3,187
Loss before extraordinary items........      (893)      (37,284)         (3,533)           (41,710)
EBITDA.................................    55,208        (8,691)           (647)            45,870
Total assets...........................   166,766       325,118           2,171            494,055
Capital expenditures...................    40,386       128,032             128            168,546
</TABLE>
 
SEASONALITY
 
     Pager usage is slightly higher during the spring and summer months, which
is reflected in higher incremental usage fees earned by the Company. The
Company's retail sales are subject to seasonal fluctuations that affect retail
sales generally. Otherwise, the Company's results are generally not
significantly affected by seasonal factors.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's operations have historically required substantial capital
investment for the development and installation of its wireless communications
network, the procurement of subscriber units and expansion into new and existing
markets. To date, these investments by the Company have been funded by the
proceeds from the issuance of common stock, preferred stock, the 12 1/4% Notes,
the 15% Notes and the 11 1/4% Notes, as well as borrowings under the Revolving
Credit Agreement and Vendor Financing Arrangement (as defined herein).
 
                                       35
<PAGE>   37
 
     Capital expenditures (excluding capitalized interest) were $63.8 million,
$67.5 million and $168.5 million for the years ended December 31, 1996, 1997 and
1998, respectively. Capital expenditures for 1996 include $44.4 million for the
Company's one-way messaging operations, $13.0 million related to the development
of advanced messaging services, and $6.4 million for the development of the
Company's new administrative system. Capital expenditures for 1997 include
approximately $35.3 million related to the development of advanced messaging
services, $22.7 million for the Company's one-way messaging operations and $9.5
million for the development of the Company's new administrative system. Capital
expenditures for the year ended 1998 include approximately $128.0 million
related to the development of its advanced messaging network, $8.8 million for
the Company's one-way messaging network, $18.4 million for computer hardware and
software, $2.3 million for corporate expansion and relocation and $8.1 million
for pagers. During December 1995, the Company committed to purchase $40 million
in network infrastructure equipment from Motorola from December 1, 1995 to
October 31, 1999. Through December 31, 1998, the Company had purchased $31.9
million of network infrastructure under this purchase commitment.
 
     The Company capitalized approximately $11.4 million of interest expense for
the narrowband PCS licenses and advanced messaging network costs for those
markets under construction during the twelve months ended December 31, 1998.
 
     The Company's net cash provided by operating activities for the years ended
December 31, 1996, 1997 and 1998 was $3.6 million, $37.2 million and $75.6
million, respectively. Net cash used in investing activities was $64.0 million,
$68.5 million and $168.7 million for the years ended December 31, 1996, 1997 and
1998, respectively and were primarily for capital expenditures. Net cash
provided by financing activities was $56.0 million, $17.0 million and $102.3
million for the years ended December 31, 1996, 1997 and 1998, respectively. Cash
provided by financing activities in 1996 resulted primarily from $70.5 million
in net proceeds received in connection with the initial public offering of the
Company's Class A Common Stock. Cash provided by financing activities in 1997
resulted from borrowings of $17.1 million under a vendor financing arrangement.
Cash provided by financing activities in 1998 resulted primarily from the
receipt of $107.8 million of net proceeds from the issuance of the 11 1/4% Notes
and the retirement of the 12 1/4% Notes.
 
     On January 28, 1998, the Company completed an offering of 11 1/4% Notes
(the "Offering") resulting in approximately $249.7 million in gross proceeds.
Simultaneously, with the closing of the Offering, the Company refinanced certain
of its outstanding indebtedness, and modified its corporate structure (the
"Refinancing"). The Refinancing consisted of the following: (i) purchasing all
of the outstanding 12 1/4% Notes ($136.5 million principal amount at maturity),
(ii) amending certain terms of the covenants and agreements in the indenture
relating to the 15% Notes; and (iii) merging PageMart, Inc. into PageMart
Wireless, Inc., with PageMart Wireless, Inc. as the surviving corporation.
 
     Approximately $130.7 million of the gross proceeds of the Offering was used
to purchase all of the outstanding 12 1/4% Notes. The proceeds remaining after
offering expenses and refinancing were approximately $107.8 million. The Company
has used the remaining proceeds to fund the construction of its advanced
messaging network and for general corporate purposes. In connection with the
Refinancing, the Company incurred an extraordinary charge of approximately $13.8
million related to the early retirement of debt.
 
     The 11 1/4% Notes, which are unsecured senior obligations of the Company,
mature in 2008 and were issued at a substantial discount from their principal
amount at maturity. The accretion of original issue discount on the 11 1/4%
Notes will cause an increase in indebtedness from December 31, 1998 to February
1, 2003 of $155.6 million. From and after August 1, 2003, interest on the
11 1/4% Notes will be payable semiannually, in cash.
 
     The 15% Notes, which are unsecured senior obligations of the Company,
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, 1998 to February 1,
2000 of $30.0 million. From and after February 1, 2000, interest on the 15%
Notes will be payable semiannually, in cash.
 
                                       36
<PAGE>   38
 
     In March 1997, PageMart entered into a vendor financing arrangement with an
infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of one-way or advanced messaging services infrastructure equipment
over a period of 60 months up to a maximum aggregate amount of $30 million.
Borrowings under the Vendor Financing Arrangement are secured by the equipment
purchased. The interest rate applicable to such financing is equal to the sum of
7% and the London interbank offered rate ("LIBOR") as published in The Wall
Street Journal for three-month maturities or the sum of 4.25% and the U.S. prime
rate of interest as published in The Wall Street Journal. During the first
quarter ended March 31, 1998, the Company repaid the total amount outstanding of
$21.2 million on the Vendor Financing Arrangement and modified the agreement to
provide $30 million of available financing, in aggregate, during the period from
September 1, 1998 through December 31, 2000. The Company has borrowed $9.8
million under the Vendor Financing Arrangement as of December 31, 1998. The
weighted average interest rate in effect on December 31, 1998 with respect to
the Vendor Financing Arrangement was 12.56%.
 
     In May 1995, the Company entered into a four year Revolving Credit
Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company,
as Issuing Bank, which provided for a $50 million revolving line of credit (the
"Revolving Credit Agreement"). As of December 31, 1998 there were no loans
outstanding under the Revolving Credit Agreement.
 
     In March 1999, the Company entered into a four year credit agreement with
Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which provides for
a $100 million credit facility (the "Credit Facility"). The Credit Facility
replaces the Revolving Credit Agreement, which was simultaneously terminated.
The Credit Facility provides for $75 million of multi-draw term loans (the "Term
Loans") and $25 million of revolving loans (the "Revolving Loans"). As of March
23, 1999, $50 million was immediately available to the Company, $10 million of
which was Revolving Loans. On March 24, 1999, the Company borrowed $25 million
in Term Loans pursuant to the terms of the Credit Facility. Approximately $12
million of the initial borrowing was used to repay amounts outstanding under the
Vendor Financing Arrangement and to fund the fees and expenses of the Credit
Facility.
 
     The Credit Facility bears interest at the U.S. prime rate plus 2.75% or at
LIBOR plus 3.75%. Further availability of the Credit Facility beyond the initial
$50 million is based on the Company's achievement of certain minimum targets for
advanced messaging subscriber units in service.
 
     As of December 31, 1998, the Company had $9.7 million outstanding under the
Vendor Financing Arrangement and its indebtedness under the 11 1/4% Notes was
$276.4 million and its indebtedness under the 15% Notes was $177.3 million.
 
     In June 1996, the Company sold an aggregate of 6.0 million shares of Class
A Common Stock in an initial public offering at a price to the public of $13 per
share. The Company received net proceeds of approximately $70.5 million of which
approximately $12.9 million was used to retire vendor debt and $11.9 million was
used to repay outstanding loans under the Company's Revolving Credit Agreement.
 
     The indenture under which the 15% Notes were issued, the indenture under
which the 11 1/4% Notes were issued, the Vendor Financing Arrangement and the
Credit Facility 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 Credit Facility requires the Company to maintain
certain operating and financial performance measures and limits the ability of
the Company to make capital expenditures.
 
     On November 15, 1995, the Company purchased through PageMart International,
Inc., 200,000 voting shares of common stock of PageMart Canada, which represents
20% of the ownership of PageMart Canada. PageMart International, Inc. also owns
33% of the voting common stock of the holding company parent of PageMart Canada
("Canada Holding"), which owns the remaining 80% of the voting common stock of
PageMart Canada. The Company's initial investment in Canada Holding and PageMart
Canada totaled approximately $3.7 million. The Company expects to make further
investments in Canada to upgrade the network to advanced messaging and fund
working capital requirements.
 
                                       37
<PAGE>   39
 
     During the first quarter of 1998, the Company began the implementation of
its advanced messaging services network. The Company has incurred significant
capital expenditures and expects to incur significant operating losses and
additional capital expenditures associated with the implementation and
deployment of its advanced messaging services. The Company has incurred capital
expenditures of approximately $128.0 million in 1998 to construct and deploy its
advanced messaging network. In addition, the Company funded negative cash flow
of $8.7 million to support operations and marketing in 1998. On December 15,
1998, the Company launched nationwide advanced messaging services covering
approximately 70% of the U.S. population. The Company anticipates that the
advanced messaging operations will require approximately $40 million of
additional capital expenditures in 1999 to complete the addition of narrowband
PCS capabilities, expand its network geographically and make other enhancements.
In addition, the Company expects the advanced messaging operations to require
approximately $30 million to fund operations and marketing in 1999 as the
Company's advanced messaging customer base grows.
 
     As of December 31, 1998, the Company had approximately $18.5 million in
cash, cash equivalents and short-term investments. On March 24, 1999, the
Company borrowed $25 million in Term Loans pursuant to the terms of the Credit
Facility. On March 29, 1999, the Company repaid all amounts outstanding under
the Vendor Financing Arrangement. At March 29, 1999 the borrowings available
under the Vendor Financing Arrangement were approximately $30 million. As of
March 29, 1999, the borrowings available under the Credit Facility were $25
million. Additional availability under the Credit Facility is based on certain
minimum targets on advanced messaging subscriber units in service. The Company
anticipates that its cash balance and amounts available under the Credit
Facility and Vendor Financing Arrangement, combined with anticipated excess cash
flows from the Company's PageMart Paging division, will be sufficient to fund
the Company's consolidated operations and capital expenditures through 1999.
 
     From time to time, the Company will selectively consider potential
opportunities to make acquisitions intended to enhance its strategic position in
the wireless messaging industry. If the Company were to pursue any such
acquisitions, the Company would expect to obtain any necessary financing through
additional borrowings and/or equity financing and would need to successfully
integrate the acquired business into the existing operations.
 
     Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. No assurance can be given that the Company's
strategy will be implemented as currently planned or that the Company's
operations will generate positive cash flows.
 
YEAR 2000 READINESS DISCLOSURE
 
     In 1997, the Company began an evaluation of its computer systems and
network infrastructure for Year 2000 readiness. The Year 2000 issue stems from
the use of two-digit dates in computer programs. Programs that use the two-digit
dates may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system malfunctions or failures causing disruptions
in operations. The Company is currently in the process of assessing the impact
of the Year 2000 on its operations and is upgrading, modifying or replacing
software or equipment where necessary. To support the Company's assessment,
executive management has appointed a cross-functional steering committee to
address potential Year 2000 problems and to formulate and guide the Company's
Year 2000 enterprise readiness plans.
 
     The Company has divided its Year 2000 efforts into two primary areas: its
administrative and network systems, and third party suppliers and vendors.
 
     The Company's administrative and network systems consist of software and
hardware systems that are a combination of internally developed software and
third party software and hardware. The Company's approach is to:
 
     - Create an inventory of items that must be assessed and prioritize the
       items by how critical they are to the operations of the Company;
 
     - Assess their readiness through testing;
 
                                       38
<PAGE>   40
 
     - Plan and implement corrective actions;
 
     - Develop contingency plans.
 
     The Company intends to include third party software and hardware in this
assessment process to the extent practicable, even though it may have obtained
Year 2000 readiness information from the vendor or supplier of the software or
hardware. As of the date of this report, the Company has materially completed
the inventory and prioritization of items. Certain administrative software that
was not Year 2000 ready had to be upgraded before extensive testing could begin.
The upgraded software was installed in October 1998. Testing plans have been
completed and testing is proceeding. Testing of the Company's information
systems is scheduled to be substantially completed in April 1999. Certain
network software is not Year 2000 ready, but the vendor of the software has
informed the Company that a Year 2000 ready version will be released in the
second quarter of 1999. Testing of the Company's network systems is scheduled to
be substantially completed by the end of the second quarter of 1999. After
remediation of any problems discovered during testing, the Company expects that
critical hardware and software systems that are within its ability to test will
be Year 2000 ready in mid-1999. The Company then plans to conduct
enterprise-wide, end-to-end testing of its systems during the third quarter of
1999. Although, the Company's contingency plans are not fully developed, the
Company expects to develop contingency plans to mitigate, to the extent
possible, the effects of any significant Year 2000 problem that is not
corrected.
 
     The Company uses hardware, software and services supplied by third party
vendors in most of its operations. The Company's approach has been to:
 
     - Create a list of suppliers and vendors;
 
     - Communicate with each supplier and vendor to try to obtain information
       about the Year 2000 readiness of its products and services;
 
     - Work cooperatively with vendors and suppliers whose products or services
       are not Year 2000 ready to resolve the problems.
 
     Some third party products can be tested by the Company for Year 2000
readiness and will be included in the assessment described above. Other third
party products and services cannot be independently tested by the Company, some
of which are critical to the operations of the Company, such as satellite and
other third party telecommunications services and electric utility services.
Although the Company has received or expects to receive Year 2000 readiness
certification or information regarding most of these third party products and
services, the Company can make no representation that all third party products
and services will be Year 2000 ready.
 
     The Company believes that its Year 2000 readiness effort will significantly
reduce the level of uncertainty about the Company's Year 2000 readiness.
Throughout the remainder of 1999, the Company will continue to assess its Year
2000 readiness. However, due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000 readiness
of third party suppliers and vendors, the Company cannot currently determine
whether all Year 2000 problems material to its operations will be corrected. A
failure to correct a material Year 2000 problem could result in the interruption
or failure of certain normal business operations, such as the Company's paging
and messaging services, customer activations and services, or customer invoicing
and collections. Such failures, if prolonged, could materially and adversely
affect the Company's results of operations, liquidity or financial condition.
 
     The Company's program to upgrade, modify or replace software and hardware
has two objectives, to increase functionality and efficiency and to make the
Company Year 2000 ready. In 1998, the Company spent approximately $18.4 million
to upgrade, modify or replace hardware and software, most of which relates to
the increased functionality and efficiency. An ancillary benefit of these
upgrades was Year 2000 readiness, the cost of which was not significant. The
Company has not fully determined the final aggregate costs of its Year 2000
readiness activities.
 
                                       39
<PAGE>   41
 
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.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
 
     The information required by this item is contained in this report under the
caption "Item 1. Business -- Executive Officers and Directors of the
Registrant."
 
ITEM 11. EXECUTIVE COMPENSATION
 
     See "Executive Compensation" in the Company's definitive proxy statement
related to the Company's annual meeting of stockholders to be held on May 12,
1999, which is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     See "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement related to the Company's annual meeting of
stockholders to be held on May 12, 1999, which is incorporated herein by
reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     See "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement related to the Company's annual meeting of
stockholders to be held on May 12, 1999, which is incorporated herein by
reference.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (a) The following documents are filed as part of this 10-K:
 
          (1) Financial Statements. See Index to Consolidated Financial
     Statements and Financial Statement Schedule on Page F-1 hereof.
 
          (2) Financial Statement Schedules. See Index to Consolidated Financial
     Statements and Financial State Schedule on Page F-1 hereof.
 
          (3) Exhibits Required by Item 601 of Regulation S-K. See Exhibit Index
     on Page E-1 hereof.
 
     (b) Reports on Form 8-K
 
        The following current report on Form 8-K was filed by PageMart Wireless,
        Inc. during the quarter ended December 31, 1998:
 
        Current Report on Form 8-K dated December 11, 1998 disclosing under Item
        5 "Other Events" the Company's expected financial results for fourth
        quarter 1998.
 
                                       40
<PAGE>   42
 
                                   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 30, 1999                        PAGEMART WIRELESS, INC.
                                            (Registrant)
 
                                            By:     /s/ JOHN D. BELETIC
                                              ----------------------------------
                                                       John D. Beletic
                                                 Chairman and Chief Executive
                                                            Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<C>                                                     <S>                             <C>
 
                 /s/ JOHN D. BELETIC                    Chairman and Chief Executive    March 30, 1999
-----------------------------------------------------   Officer (Principal Executive
                   John D. Beletic                      Officer)
 
                  /s/ G. CLAY MYERS                     Vice President, Finance,        March 30, 1999
-----------------------------------------------------   Chief Financial Officer and
                    G. Clay Myers                       Treasurer (Principal
                                                        Financial and Accounting
                                                        Officer)
 
                /s/ LEIGH J. ABRAMSON                   Director                        March 30, 1999
-----------------------------------------------------
                  Leigh J. Abramson
 
                /s/ GUY L. DE CHAZAL                    Director                        March 30, 1999
-----------------------------------------------------
                  Guy L. De Chazal
 
                 /s/ STEVEN B. DODGE                    Director                        March 30, 1999
-----------------------------------------------------
                   Steven B. Dodge
 
               /s/ MICHAEL C. HOFFMAN                   Director                        March 30, 1999
-----------------------------------------------------
                 Michael C. Hoffman
 
                /s/ ARTHUR PATTERSON                    Director                        March 30, 1999
-----------------------------------------------------
                  Arthur Patterson
 
            /s/ ALEJANDRO PEREZ ELIZONDO                Director                        March 30, 1999
-----------------------------------------------------
              Alejandro Perez Elizondo
 
                /s/ PAMELA D.A. REEVE                   Director                        March 30, 1999
-----------------------------------------------------
                  Pamela D.A. Reeve
</TABLE>
 
                                       41
<PAGE>   43
 
                    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, 1997 and
  1998......................................................  F-3
 
Consolidated Statements of Operations for the Years Ended
  December 31, 1996, 1997 and 1998..........................  F-4
 
Consolidated Statements of Stockholders' (Deficit) Equity
  for the Years Ended December 31, 1996, 1997 and 1998......  F-5
 
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1996, 1997 and 1998..........................  F-6
 
Notes to Consolidated Financial Statements..................  F-7
</TABLE>
 
                                       F-1
<PAGE>   44
 
                    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, 1997
and 1998, and the related consolidated statements of operations, stockholders'
(deficit) equity and cash flows for each of the three years in the period ended
December 31, 1998. 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, 1997 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
 
                                            /s/ ARTHUR ANDERSEN LLP
 
Dallas, Texas,
February 3, 1999
(except with respect to the matter
discussed in Note 18, as to
which the date is March 26, 1999)
 
                                       F-2
<PAGE>   45
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1998
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1997         1998
                                                              ---------    ---------
<S>                                                           <C>          <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $   8,337    $  17,476
  Short-term investments....................................         --        1,000
  Accounts receivable (net of allowance for doubtful
     accounts of $7,170 and $2,580 at December 31, 1997 and
     1998, respectively)....................................     61,394       38,304
  Inventories...............................................      5,359        6,747
  Other current assets......................................      9,043       11,010
                                                              ---------    ---------
          Total current assets..............................     84,133       74,537
PROPERTY AND EQUIPMENT (net of accumulated depreciation of
  $76,388 and $116,326 at December 31, 1997 and 1998,
  respectively).............................................    136,727      274,179
NARROWBAND LICENSES (net of accumulated amortization of $510
  at December 31, 1998).....................................    133,065      132,555
OTHER ASSETS (net of accumulated amortization of $6,077 and
  $5,391 at December 31, 1997 and 1998, respectively).......      7,951       12,784
                                                              ---------    ---------
          Total assets......................................  $ 361,876    $ 494,055
                                                              =========    =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
  Accounts payable..........................................  $  28,009    $  38,703
  Deferred revenue..........................................     53,469       57,512
  Current maturities of long-term debt......................      2,755        1,238
  Other current liabilities.................................     20,740       23,297
                                                              ---------    ---------
          Total current liabilities.........................    104,973      120,750
LONG-TERM DEBT..............................................    289,344      462,079
OTHER LONG-TERM LIABILITIES.................................         --        1,248
COMMITMENTS AND CONTINGENCIES (SEE NOTE 8)
STOCKHOLDERS' (DEFICIT) EQUITY:
  Common stock, $.0001 par value per share, 75,000,000
     shares authorized:
     Class A Convertible Common Stock, 34,115,157 shares
      issued and outstanding at December 31, 1997;
      34,536,512 shares issued and outstanding at December
      31, 1998..............................................          3            3
     Class B Convertible Non-Voting Common Stock, 3,809,363
      shares issued and outstanding at December 31, 1997 and
      December 31, 1998.....................................          1            1
     Class C Convertible Non-Voting Common Stock, 1,428,472
      shares issued and outstanding at December 31, 1997 and
      December 31, 1998.....................................         --           --
     Class D Convertible Non-Voting Common Stock, 679,945
      shares issued and outstanding at December 31, 1997;
      623,945 shares issued and outstanding at December 31,
      1998..................................................         --           --
  Additional paid-in capital................................    226,622      228,438
  Accumulated deficit.......................................   (258,575)    (317,891)
  Stock subscriptions receivable............................       (492)        (573)
                                                              ---------    ---------
          Total stockholders' (deficit) equity..............    (32,441)     (90,022)
                                                              ---------    ---------
          Total liabilities and stockholders' (deficit)
            equity..........................................  $ 361,876    $ 494,055
                                                              =========    =========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-3
<PAGE>   46
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1996       1997       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUES:
  Recurring revenue.........................................  $153,041   $206,907   $254,814
  Equipment revenue.........................................    68,551     70,871     56,838
                                                              --------   --------   --------
          Total revenues....................................   221,592    277,778    311,652
COST OF EQUIPMENT SOLD......................................    78,896     86,175     69,150
                                                              --------   --------   --------
                                                               142,696    191,603    242,502
OPERATING EXPENSES:
  Technical.................................................    37,021     46,513     56,584
  Selling...................................................    43,046     51,371     55,305
  General and administrative................................    54,006     66,458     84,743
  Depreciation and amortization.............................    21,192     29,852     43,420
                                                              --------   --------   --------
          Total operating expenses..........................   155,265    194,194    240,052
                                                              --------   --------   --------
          Operating (loss) income...........................   (12,569)    (2,591)     2,450
OTHER (INCOME) EXPENSE:
  Interest expense..........................................    35,041     38,499     43,798
  Interest income...........................................    (1,140)      (501)    (3,187)
  Other.....................................................     2,128      3,298      3,549
                                                              --------   --------   --------
          Total other (income) expense......................    36,029     41,296     44,160
                                                              --------   --------   --------
LOSS BEFORE EXTRAORDINARY ITEMS:............................   (48,598)   (43,887)   (41,710)
                                                              ========   ========   ========
EXTRAORDINARY ITEMS:
  Early retirement of debt..................................        --         --    (13,808)
  Satellite failure.........................................        --         --     (3,798)
                                                              --------   --------   --------
NET LOSS....................................................  $(48,598)  $(43,887)  $(59,316)
                                                              ========   ========   ========
NET LOSS PER SHARE (Basic and Diluted)
LOSS BEFORE EXTRAORDINARY ITEMS.............................  $  (1.30)  $  (1.10)  $  (1.03)
EXTRAORDINARY ITEMS.........................................        --         --      (0.44)
                                                              --------   --------   --------
NET LOSS....................................................  $  (1.30)  $  (1.10)  $  (1.47)
                                                              ========   ========   ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (Basic and
  Diluted)..................................................    37,462     39,922     40,246
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-4
<PAGE>   47
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                          COMMON STOCK
                                                      --------------------    ADDITIONAL                     STOCK
                                                      NUMBER OF                PAID-IN     ACCUMULATED   SUBSCRIPTIONS
                                                        SHARES      AMOUNT     CAPITAL       DEFICIT      RECEIVABLE      TOTAL
                                                      ----------    ------    ----------   -----------   -------------   --------
<S>                                                   <C>           <C>       <C>          <C>           <C>             <C>
BALANCE, December 31, 1995..........................  33,710,053     $ 3       $154,601     $(166,090)       $(557)      $(12,043)
  Common stock issued under the stock option/stock
    issuance plan/employee stock purchase plan......     94,879       --            561            --           --            561
  Repayment of stock subscriptions receivable.......         --       --             --            --           10             10
  Common stock issued in initial public offering....  6,000,000        1         70,499            --           --         70,500
  Net loss..........................................         --       --             --       (48,598)          --        (48,598)
                                                      ----------     ---       --------     ---------        -----       --------
BALANCE, December 31, 1996..........................  39,804,932       4        225,661      (214,688)        (547)        10,430
  Common stock issued under the stock option/stock
    issuance plan/employee stock purchase plan......    179,705       --            804            --          (45)           759
  Exercise of common stock warrants.................     48,300       --            157            --           --            157
  Repayment of stock subscriptions receivable.......         --       --             --            --          100            100
  Net loss..........................................         --       --             --       (43,887)          --        (43,887)
                                                      ----------     ---       --------     ---------        -----       --------
BALANCE, December 31, 1997..........................  40,032,937       4        226,622      (258,575)        (492)       (32,441)
  Common stock issued under the stock option/stock
    issuance plan/employee stock purchase plan......    364,205       --          1,813            --         (139)         1,674
  Exercise of common stock warrants.................      1,150       --              3            --           --              3
  Repayment of stock subscriptions receivable.......         --       --             --            --           58             58
  Net loss..........................................         --       --             --       (59,316)          --        (59,316)
                                                      ----------     ---       --------     ---------        -----       --------
BALANCE, December 31, 1998..........................  40,398,292     $ 4       $228,438     $(317,891)       $(573)      $(90,022)
                                                      ==========     ===       ========     =========        =====       ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-5
<PAGE>   48
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1996       1997       1998
                                                              --------   --------   ---------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(48,598)  $(43,887)  $ (59,316)
  Adjustments to reconcile net loss to net cash provided by
    operating activities:
    Extraordinary items.....................................        --         --      17,606
    Depreciation and amortization...........................    21,192     29,852      43,420
    Provision for bad debts.................................     6,986     10,910      11,130
    Accretion of discount on Senior Discount Notes..........    30,871     35,431      40,284
    Amortization of deferred debt issuance costs............     2,083        846       2,489
    Changes in certain assets and liabilities:
      (Increase) decrease in accounts receivable............   (18,929)   (38,858)     11,960
      (Increase) decrease in inventories....................      (523)     6,343      (1,388)
      Decrease (increase) in other current assets...........        59     (6,222)     (1,967)
      (Increase) decrease in other assets...................    (1,052)     3,105        (543)
      Increase in accounts payable..........................        92      4,823      10,694
      Increase in deferred revenue..........................     5,638     26,422       4,043
      Increase (decrease) in other current liabilities......     5,744      8,470      (2,820)
                                                              --------   --------   ---------
        Net cash provided by operating activities...........     3,563     37,235      75,592
                                                              --------   --------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment.......................   (63,804)   (67,506)   (168,546)
  Purchase of short-term investments........................        --         --      (1,000)
  Release of restricted cash................................       500         --          --
  Other.....................................................      (648)      (992)        801
                                                              --------   --------   ---------
        Net cash used in investing activities...............   (63,952)   (68,498)   (168,745)
                                                              --------   --------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock....................    70,500         --          --
  Proceeds from issuance of common stock under the stock
    option/stock issuance plan/employee stock purchase
    plan....................................................       561        759       1,674
  Retirement of 12 1/4% Senior Discount Notes...............        --         --    (130,689)
  Proceeds from issuance of 11 1/4% Senior Subordinated
    Discount Notes..........................................        --         --     249,700
  Offering Costs related to issuance of 11 1/4% Senior
    Subordinated Discount Notes and retirement of 12 1/4%
    Senior Discount Notes...................................        --         --     (12,158)
  Borrowings under Revolving Credit Agreement...............    31,100      3,000          --
  Payments under Revolving Credit Agreement.................   (31,100)    (3,000)         --
  Borrowings from vendor financing arrangements.............        --     17,053      15,097
  Payments on vendor financing arrangements.................   (15,027)    (1,072)    (21,393)
  Other.....................................................       (15)       257          61
                                                              --------   --------   ---------
        Net cash provided by financing activities...........    56,019     16,997     102,292
                                                              --------   --------   ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........    (4,370)   (14,266)      9,139
CASH AND CASH EQUIVALENTS, beginning of period..............    26,973     22,603       8,337
                                                              --------   --------   ---------
CASH AND CASH EQUIVALENTS, end of period....................  $ 22,603   $  8,337   $  17,476
                                                              ========   ========   =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest................................................  $  1,231   $  1,306   $     969
    Income taxes............................................  $     --   $     --   $      --
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-6
<PAGE>   49
 
                    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"). On January 28, 1998,
PageMart was merged into Wireless with Wireless as the surviving corporation.
Wireless and its subsidiaries are referred to herein as the "Company." The
consolidated financial statements of the Company include the accounts of
PageMart PCS, Inc., PageMart II, Inc., PageMart Operations, Inc., PageMart
International, Inc. and certain other direct and indirect subsidiaries of
Wireless. Each of these companies is a wholly-owned subsidiary of Wireless.
PageMart PCS, Inc. holds certain narrowband personal communications services
licenses. PageMart II, Inc. and PageMart Operations, Inc. hold certain Federal
Communications Commission ("FCC") licenses. PageMart International, Inc. holds
certain investments in an international operation in Canada. Other than these
licenses and international investments, the subsidiaries of Wireless have no
significant assets or liabilities.
 
     The Company has incurred substantial losses from consolidated operations
since inception and is highly leveraged. Although operating income was reported
in 1998, management expects to continue to incur consolidated operating losses
in 1999. In the third quarter of 1997, the Company began generating operating
profits in its one-way business and management expects this trend to continue
into 1999. The Company's consolidated operating losses will be driven by the
Company's investments in new advanced messaging capabilities and the associated
investment in the growth of its subscriber base for such services. The Company's
business plan calls for substantial growth in its subscriber base in order for
the Company to achieve overall operating profitability. There can be no
assurance that the Company will meet its business plan or achieve operating
profitability. If the Company cannot achieve operating profitability, it may not
be able to make the required payments on existing or future obligations or
realize its cost in developing the advanced messaging network.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
CONSOLIDATION
 
     The accompanying consolidated 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.
 
SHORT-TERM INVESTMENTS
 
     The Company includes as short-term investments, investments with maturities
greater than three months and less than one year.
 
INVENTORIES
 
     Inventories consist of pagers held for resale and are stated at the lower
of cost or market. Cost is determined by using the average cost method, which
approximates the first-in, first-out method. The Company purchases a majority of
its pagers from Motorola, Inc.
 
                                       F-7
<PAGE>   50
 
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 $19,688,000, $28,690,000
and $42,541,000 for the years ended December 31, 1996, 1997 and 1998,
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,
                                                              -------------------
                                                                1997       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Network equipment...........................................  $157,543   $306,503
Computer equipment..........................................    41,023     65,273
Furniture and equipment.....................................    14,549     18,729
                                                              --------   --------
                                                               213,115    390,505
Less: Accumulated depreciation..............................   (76,388)  (116,326)
                                                              --------   --------
                                                              $136,727   $274,179
                                                              ========   ========
</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 8). Patent
licensing revenues of $4,596,000 are included in recurring revenues in fiscal
years 1996, 1997 and 1998.
 
ADVERTISING EXPENSES
 
     Advertising expenses are expensed as incurred.
 
EARNINGS PER SHARE
 
     Net loss per share amounts as reflected on the statements of operations are
based upon the weighted average number of common shares outstanding.
 
     In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share," ("SFAS 128"). The Company adopted SFAS
128 for the fiscal year ending December 31, 1997. SFAS 128 replaces the primary
earnings per share calculation with a basic earnings per share calculation and
modifies the calculation of diluted earnings per share. Adoption of SFAS 128 did
not affect the calculation of earnings per share for the Company.
 
     Under the provisions of SFAS 128, dilutive securities are excluded from the
calculation of earnings per share when there is a net loss because their
inclusion would be anti-dilutive. The securities listed below were not included
in the computation of diluted loss per share, since the effect from the
conversion would be anti-dilutive.
 
<TABLE>
<CAPTION>
                                          DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                              1996           1997           1998
                                          ------------   ------------   ------------
<S>                                       <C>            <C>            <C>
  Stock Options.........................   3,498,292      4,300,496      5,700,971
  Warrants..............................     834,648        786,348        785,198
                                           ---------      ---------      ---------
                                           4,332,940      5,086,844      6,486,169
                                           =========      =========      =========
</TABLE>
 
                                       F-8
<PAGE>   51
 
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.
 
RECLASSIFICATIONS
 
     Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the current year presentation.
 
ACCOUNTING FOR LONG-LIVED ASSETS
 
     In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). The Company adopted SFAS 121 for the fiscal year ending December
31, 1996. SFAS 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS 121 requires that those assets
to be held and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable through future cash flows. SFAS 121 requires that those assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less cost to sell. Adoption of SFAS 121 did not affect the Company's results of
operations for the years ended December 31, 1996, 1997 and 1998. The Company
will continue to evaluate the effect of SFAS 121 in subsequent periods.
 
3. NARROWBAND PERSONAL COMMUNICATIONS SERVICES LICENSES
 
     During July and December 1994, the Company participated in auctions of
Narrowband Personal Communications Services ("NPCS") licenses 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 commenced in 1998 for those markets placed in service. The
NPCS licenses are amortized over a period of 40 years. Amortization expense for
the period ended December 31, 1998 was $510,000.
 
4. CAPITALIZED INTEREST
 
     In accordance with statement of Financial Accounting Standards No.
34 -- Capitalization of Interest Cost, the Company capitalizes interest on
certain qualifying assets during the construction period. Interest costs
attributable to the construction of the Company's advanced messaging network of
$11.4 million was capitalized for the period ended December 31, 1998. The
Company did not capitalize any interest costs for the period ended December 31,
1997.
 
5. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
 
     Effective November 15, 1995, PageMart International, Inc. purchased 200,000
shares of common stock of PageMart Canada Limited ("PageMart Canada") which
represents 20% of the ownership of PageMart Canada. The remaining 800,000 shares
(representing 80% of the ownership) is held by PageMart Canada Holding
Corporation ("Canada Holding"). Canada Holding is owned 50% (1,000,000 shares of
Class A Common Stock) by third-party Canadian investors unrelated to PageMart
and 50% (1,000,000 shares of Class B Common Stock) by PageMart International,
Inc. The common shares have identical economic rights. However, voting control
of Canada Holding is held by the Class A Common Stockholders as the Class A
shares have two votes per share. The Company accounts for its investments in
PageMart Canada and Canada Holding under the equity method. Such investments are
included in Other Current Assets in the Consolidated Balance Sheets.
 
                                       F-9
<PAGE>   52
 
     The agreement among stockholders contains provisions which restrict the
transfer of Canada Holding shares and PageMart Canada shares for periods ranging
from three to five years. During the two years following the third anniversary
of the transactions, the third-party Canadian investors may exchange the
1,000,000 Class A common shares they hold in Canada Holding for 714,286 shares
of voting common stock of Wireless, subject to certain United States and
Canadian ownership requirements. Wireless is ultimately responsible for
effectuating the exchange within the United States and Canadian ownership
regulations. Such exchange may be accelerated in the event Wireless enters into
an agreement to be acquired. After the third anniversary of the transactions,
Wireless will have the right to purchase the shares held by the third-party
Canadian investors at their fair market value provided regulatory ownership
requirements permit such purchase.
 
     On November 26, 1998, the Company received notification from the third
party Canadian investors, which represent the controlling shareholder interest
in Canada Holding, of its intent to exchange its 1,000,000 shares of Class A
Common Stock in Canada Holding for shares of PageMart Wireless, Inc. pursuant to
its rights contained in the Agreement Among Stockholders of PageMart Canada,
dated July 28, 1995. The Agreement Among Stockholders permits the Company to
find a replacement for the Canadian investors in order to comply with Canadian
regulations governing ownership of Canadian paging licenses. The Company is
currently examining alternative arrangements in Canada including the replacement
of the Canadian investors or the ultimate transfer of PageMart Canada to another
entity. The Company may consider selling its interest in PageMart Canada in
exchange for a network affiliation arrangement similar to those utilized by the
Company in other countries.
 
6. OTHER CURRENT LIABILITIES
 
     Other current liabilities consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1997       1998
                                                              -------    -------
<S>                                                           <C>        <C>
Accrued payroll and employee benefits.......................  $ 4,080    $ 6,572
Accrued taxes...............................................    1,623      6,829
Other current liabilities...................................   15,037      9,896
                                                              -------    -------
                                                              $20,740    $23,297
                                                              =======    =======
</TABLE>
 
7. LONG-TERM DEBT
 
     Long-term debt consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1997        1998
                                                              --------    --------
<S>                                                           <C>         <C>
12 1/4% Senior Discount Exchange Notes, face amount $136,500
  due November 1, 2003, at accreted value...................  $122,720    $     --
15% Senior Discount Exchange Notes, face amount $207,270 due
  February 1, 2005, at accreted value.......................   153,398     177,270
11 1/4% Senior Subordinated Discount Exchange Notes, face
  amount $432,000 due February 1, 2008, at accreted value...        --     276,362
Vendor Financing Arrangement of $30 million, bearing
  interest at the sum of 7.00% and the London interbank
  offered rate for three month maturities, or the sum of
  4.25% and the U.S. prime rate. (Based upon rates quoted by
  The Wall Street Journal, effective interest rates ranged
  from 12.31% to 12.69% at December 31, 1998.)..............    15,981       9,685
                                                              --------    --------
          Total debt........................................   292,099     463,317
          Less: Current maturities..........................    (2,755)     (1,238)
                                                              --------    --------
          Long-term debt....................................  $289,344    $462,079
                                                              ========    ========
</TABLE>
 
                                      F-10
<PAGE>   53
 
     On January 28, 1998, the Company received approximately $249.7 million in
gross proceeds from the sale of its 11 1/4% Senior Subordinated Discount Notes
due 2008 (the "Offering"). Simultaneously with the closing of the Offering, the
Company refinanced certain of its outstanding indebtedness and modified its
corporate structure (the "Refinancing"). The Refinancing consisted of: (i)
purchasing all of the Company's outstanding 12 1/4% Senior Discount Notes due
2003 (the "12 1/4% Notes"); (ii) amending certain terms of the covenants and
agreements in the indenture relating to the Company's 15% Senior Discount Notes
due 2005; and (iii) merging PageMart, Inc. into PageMart Wireless, Inc., with
PageMart Wireless, Inc. as the surviving corporation.
 
     Approximately $130.7 million of the net proceeds of the Offering was used
to finance the retirement of the 12 1/4% Notes. The proceeds remaining after
expenses of the Offering and Refinancing were approximately $107.8 million. In
connection with the Refinancing, the Company incurred an extraordinary charge of
approximately $13.8 million in the first quarter of 1998 related to the early
retirement of debt.
 
     The 11 1/4% Senior Subordinated Discount Notes due 2008 (the "11 1/4%
Notes") have a principal amount at maturity of $432.0 million with an initial
accreted value of $249.7 million. The 11 1/4% Notes mature on February 1, 2008.
From and after August 1, 2003, interest on the 11 1/4% Notes will be paid
semiannually in cash at the rate of 11 1/4% per annum. The 11 1/4% Notes are
redeemable at any time on or after February 1, 2003, at the option of the
Company in whole or in part, at 105.625% 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, 2006. In addition, at
any time prior to February 1, 2001, up to 35% of the accreted value of the
11 1/4% Notes may be redeemed at a redemption price of 111.25% of their accreted
value on the redemption date at the option of the Company in connection with a
public offering of its common stock, provided that at least $280.8 million
aggregate principal amount at maturity of the 11 1/4% Notes remains outstanding
after each redemption.
 
     In April 1998, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 11 1/4% Notes were
exchanged for the Company's 11 1/4% Senior Discount Exchange Notes due 2008 (the
"11 1/4% Exchange Notes"). The terms and conditions of the 11 1/4% Exchange
Notes are equivalent to the 11 1/4% Notes in all material respects.
 
     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 June 1995, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 15% Notes were
exchanged for the Company's 15% Senior Discount Exchange Notes due 2005 (the
"15% Exchange Notes"). The terms and conditions of the 15% Exchange Notes are
equivalent to the 15% Notes in all material respects.
 
     The 11 1/4% Exchange Notes and the 15% Exchange 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 was in
compliance with all such restrictive covenants at December 31, 1998.
 
     In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of infrastructure equipment over a period of 60 months up to a maximum
aggregate amount of $30 million. Borrowings under the Vendor Financing
 
                                      F-11
<PAGE>   54
 
Arrangement are secured by the equipment purchased. The interest rate applicable
to such financing is equal to the sum of 7.00% and the London interbank offered
rate ("LIBOR") as published in The Wall Street Journal for three-month
maturities or the sum of 4.25% and the U.S. prime rate of interest as published
in The Wall Street Journal. During the first quarter ended March 31, 1998, the
Company repaid the total amount outstanding of $21.2 million on the Vendor
Financing Arrangement and modified the agreement to provide $30 million of
available financing, in aggregate, during the period from September 1, 1998
through December 31, 2000. As of December 31, 1998, there are $9.7 million in
loans outstanding. The weighted average interest rate in effect on December 31,
1998 with respect to the Vendor Financing Arrangement was 12.56%.
 
     On May 11, 1995, the Company entered into a four year Revolving Credit
Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company,
as Issuing Bank, which provides for a $50 million revolving line of credit (the
"Revolving Credit Agreement"). As of December 31, 1998, there were no loans
outstanding under the Revolving Credit Agreement. The maximum amount available
under the Revolving Credit Agreement at any time is limited to a borrowing base
amount equal to the lesser of (i) a specified percentage of eligible accounts
receivable and inventory owned by Wireless, and (ii) an amount equal to the
service contribution of the Company as defined in the Revolving Credit Agreement
for the immediately preceding three-month period times 4.0. The interest rate
applicable to loans under the Revolving Credit Agreement is, at the option of
Wireless, either at a prime rate plus 1 1/4% or a Eurodollar rate plus 2 1/2%.
Commitments under the Revolving Credit Agreement expire and all loans thereunder
will be due and payable on March 31, 1999.
 
     The Revolving Credit Agreement contains certain covenants that, among other
things, limit the ability of the Company to incur indebtedness, make capital
expenditures and investments, pay dividends, repurchase capital stock, engage in
transactions with affiliates, create liens, sell assets, or engage in mergers
and consolidations, and also requires the Company to maintain certain financial
ratios.
 
     The Revolving Credit Agreement is secured by all trade receivables and
inventory owned by Wireless from time to time and by all of the capital stock of
PageMart owned by Wireless. As of December 31, 1998, the maximum amount
available under the Revolving Credit Agreement was $24.8 million.
 
     On January 15, 1998, the Company amended the Revolving Credit Agreement to
provide for the changes in debt and corporate structure that occurred with the
Refinancing and the Merger.
 
     Maturities of long-term debt, at accreted value, and amounts outstanding
under the Vendor Financing Agreement are as follows (in thousands):
 
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
   DECEMBER 31,
-------------------
<S>                 <C>                                                   <C>
      1999..............................................................  $  1,238
      2000..............................................................     2,071
      2001..............................................................     1,967
      2002..............................................................     2,230
      2003..............................................................     2,179
      Thereafter........................................................   453,632
                                                                          --------
                                                                          $463,317
                                                                          ========
</TABLE>
 
                                      F-12
<PAGE>   55
 
8. 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
1996, 1997 and 1998 was approximately $13,496,000, $18,379,000 and $26,749,000,
respectively.
 
     Future minimum lease payments related to the Company's operating leases are
as follows (in thousands):
 
<TABLE>
<CAPTION>
FOR THE YEAR ENDING                                                        OPERATING
   DECEMBER 31,                                                             LEASES
-------------------                                                        ---------
<S>                 <C>                                                    <C>
      1999...............................................................    $21,131
      2000...............................................................     17,871
      2001...............................................................     13,699
      2002...............................................................      9,924
      2003...............................................................      6,623
      Thereafter.........................................................     18,523
                                                                             -------
      Total minimum lease payments.......................................    $87,771
                                                                             =======
</TABLE>
 
     The Company is party to various legal proceedings arising out of the
ordinary course of business. The Company believes, based on the advice of legal
counsel, that there is no proceeding, either threatened 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, 1998, the Company had purchased
$31.9 million of network infrastructure under this purchase commitment.
 
9. 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, the estimated fair value is 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, 1997 and 1998, are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31, 1997     DECEMBER 31, 1998
                                                     -------------------   -------------------
                                                     CARRYING     FAIR     CARRYING     FAIR
                                                      AMOUNT     VALUE      AMOUNT     VALUE
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Cash and cash equivalents.........................   $  8,337   $  8,337   $ 17,476   $ 17,476
Long-term debt....................................   $292,099   $275,666   $463,317   $381,157
</TABLE>
 
10. STOCKHOLDERS' (DEFICIT) EQUITY
 
PREFERRED STOCK
 
     Under the Company's Certificate of Incorporation, the Board of Directors
has the power to authorize the issuance of one or more classes or series of
preferred stock and to fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any, with respect to each such class or
series of preferred stock. At December 31, 1997 and 1998, there were 10 million
shares of preferred stock authorized with a par value of $.0001 and none of the
authorized shares of preferred stock were issued and outstanding.
 
                                      F-13
<PAGE>   56
 
COMMON STOCK
 
     In October 1993 in connection with issuance of the 12 1/4% Notes (see Note
7), the Company issued warrants to purchase 627,900 shares of its common stock
for $3.26 per share. The warrants were valued at $5.50 per share at the date
issued. The warrants may be exercised at any time prior to December 31, 2003.
Warrants that are not exercised by such date will expire. As of December 31,
1998, 578,450 of the warrants were outstanding.
 
     In October 1995, the Company's Certificate of Incorporation was amended
(the "Amended Certificate") and at that time the Amended and Restated Agreement
Among Certain Stockholders of PageMart Nationwide, Inc. dated September 19, 1995
(the "Stockholders' Agreement"), became effective. The Amended Certificate
provides that the Company will have four classes of outstanding common stock,
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                           SHARES ISSUED AND
                                                                              OUTSTANDING
                                                                        -----------------------
                                                                             DECEMBER 31,
                                                             SHARES     -----------------------
                                                           AUTHORIZED      1997         1998
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Class A Convertible Common Stock, $.0001 par value per
  share (the "Class A Common Stock")....................   60,000,000   34,115,157   34,536,512
Class B Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class B Common Stock")..........   12,000,000    3,809,363    3,809,363
Class C Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class C Common Stock")..........    2,000,000    1,428,472    1,428,472
Class D Convertible Non-Voting Common Stock, $.0001 par
  value per share (the "Class D Common Stock")..........    1,000,000      679,945      623,945
                                                           ----------   ----------   ----------
                                                           75,000,000   40,032,937   40,398,292
                                                           ==========   ==========   ==========
</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.
 
     Class A Common Stock, Class B Common Stock and Class C Common Stock are
convertible by certain institutional investors subject to voting control and
regulatory restrictions at any time at the option of the holder, in accordance
with the terms of the Amended Certificate. Class A Common Stock is convertible
by certain holders thereof into either Class B or C Common Stock. Classes B, C
and D Common Stock are convertible to Class A Common Stock. During the year
ended December 31, 1998, certain holders of Class D Common Stock exercised their
right under the Stockholder's Agreement and converted 56,000 shares into Class A
Common Stock.
 
     The Stockholders' Agreement provides that the parties thereto ("Holders")
shall collectively have the right to "demand" registrations at any time.
Pursuant to these "demand" rights, Holders of common stock (the "Registrable
Securities") may request in writing that the Company file a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the registration of a number of shares equal to at least three million
shares or a lesser number if such number represents a majority of the
Registrable Securities then outstanding.
 
     On March 20, 1995, the Company granted to a strategic partner warrants to
purchase a total of 206,748 shares of the Company's common stock at an exercise
price of $10.00 all of which are outstanding at December 31, 1998. The warrants
may be exercised in whole or in part starting on March 20, 1997 and expire on
March 21, 2005.
 
                                      F-14
<PAGE>   57
 
     On June 19, 1996, the Company issued an aggregate of 6,000,000 shares of
Class A Common Stock in an initial public offering at a price of $13.00 per
share. The Company received proceeds from the initial public offering of
approximately $70.5 million after deducting underwriting discounts, commissions,
fees and expenses associated with the initial public offering. Upon receipt of
the net proceeds, the Company retired vendor debt of approximately $12.9 million
and repaid approximately $11.9 million of loans outstanding under the Company's
Revolving Credit Agreement.
 
     Following is a schedule of common stock reserved at December 31, 1998:
 
<TABLE>
<CAPTION>
                                                               SHARES
                                                              ---------
<S>                                                           <C>
Exercise of common stock warrants...........................    785,198
Exchange of Canada Holding shares...........................    714,286
Stock option/stock issuance plan............................  6,159,775
Employee Stock Purchase Plan................................    389,057
Non-Employee/Director Stock Option Plan.....................    100,000
                                                              ---------
                                                              8,148,316
                                                              =========
</TABLE>
 
11. STOCK OPTION/STOCK ISSUANCE/STOCK PURCHASE PLANS
 
                            STOCK COMPENSATION PLANS
 
     At December 31, 1998, 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" ("SFAS 123"), the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                          1996       1997       1998
                                                        --------   --------   --------
<S>                                       <C>           <C>        <C>        <C>
Net loss (in 000's).....................  As reported   $(48,598)  $(43,887)  $(59,316)
                                          Pro forma      (50,095)   (46,568)   (62,446)
Basic and diluted loss per share........  As reported   $  (1.30)  $  (1.10)  $  (1.47)
                                          Pro forma        (1.34)     (1.17)     (1.55)
</TABLE>
 
                            FIXED STOCK OPTION PLANS
 
     The Company has two fixed stock option plans. Under the Fifth Amended and
Restated 1991 Stock Option Plan, ("1991 Plan"), the Company may grant options to
its employees for up to 7,500,000 shares of Class A Common Stock. Under the 1996
Nonqualified Stock Option Plan for Non-Employee Directors, ("Directors Plan"),
the Company may grant options to its non-employee directors for up to 100,000
shares of common stock. Under both plans, the exercise price of each option
equals the market price of the Company's stock at the close of the market on the
date of grant and an option's maximum term is 10 years. Options are granted at
various times during the year and generally vest over a five year period under
the 1991 Plan and over a three year period under the Directors Plan. Both plans
are administered by the Board of Directors.
 
     Under the provisions of the Third Amended and Restated 1991 Stock Issuance
Plan, the Company may also issue stock to employees. The stock vests over a
period not to exceed forty-eight months. Additional vesting occurs upon death or
disability. Upon the termination of an officer, the Company can repurchase the
unvested stock at cost. Under the Plan, the Company issued 300,000 shares to an
officer during 1992 at $0.326 per share. All awards under the Plan have been
made at a price at or above the estimated fair value of the Company's common
stock at the date of grant.
 
                                      F-15
<PAGE>   58
 
     The pro forma net loss and loss per share amounts disclosed above reflect
the SFAS 123 adjustment for pro forma compensation cost for the fair value of
each option grant, which was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
 
<TABLE>
<CAPTION>
                                                              1996    1997    1998
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
1991 PLAN:
  Dividend yield............................................    --      --      --
  Expected volatility.......................................  40.0%   47.3%   48.2%
  Average risk-free interest rate...........................   6.4%    6.3%    5.1%
  Expected term in years....................................   8.2     8.7     8.1
DIRECTORS PLAN:
  Dividend yield............................................    --      --      --
  Expected volatility.......................................  40.0%   40.0%   48.2%
  Average risk-free interest rate...........................   6.7%    6.7%    4.5%
  Expected term in years....................................   8.2     8.2    10.0
</TABLE>
 
     A summary of the status of the Company's 1991 Plan and Directors Plan as of
December 31, 1996, 1997 and 1998 and changes during the years ending on these
dates is presented below:
 
                                   1991 PLAN
 
<TABLE>
<CAPTION>
                                                 1996                1997                1998
                                           -----------------   -----------------   -----------------
                                                    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........   2,669     $6.59      3,473    $7.09     4,276     $7.12
Granted.................................   1,126      8.49      2,502     8.36     2,277      7.61
Exercised...............................     (64)     5.24       (135)    4.19      (329)     4.86
Forfeited...............................    (258)     8.51     (1,564)    9.28      (573)     8.57
                                           -----               ------              -----
Outstanding at end of year..............   3,473     $7.09      4,276    $7.12     5,651     $7.30
                                           =====               ======              =====
 
Options exercisable at year-end.........   1,077     $5.19      1,502    $5.26     1,892     $6.19
                                           =====               ======              =====
 
Weighted-average fair value of options
  granted during the year...............             $5.02               $4.74               $4.68
                                                     =====               =====               =====
</TABLE>
 
                                 DIRECTORS PLAN
 
<TABLE>
<CAPTION>
                                                 1996                1997                1998
                                           -----------------   -----------------   -----------------
                                                    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.........    --      $   --      25      $12.00      25      $12.00
Granted..................................    25       12.00      --          --      25        6.05
Exercised................................    --          --      --          --      --          --
Forfeited................................    --          --      --          --      --          --
                                             --                  --                  --
Outstanding at end of year...............    25      $12.00      25      $12.00      50      $ 9.03
                                             ==                  ==                  ==
 
Options exercisable at year-end..........     6      $12.00      15      $12.00      23      $12.00
                                             ==                  ==                  ==
 
Weighted-average fair value of options
  granted during the year................            $ 7.04              $   --              $ 3.93
                                                     ======              ======              ======
</TABLE>
 
                                      F-16
<PAGE>   59
 
     The following table summarized information about fixed stock options
outstanding at December 31, 1998:
 
<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
                  -----------------------------------------------   ----------------------------
                    NUMBER       WEIGHTED-AVG.                        NUMBER
   RANGE OF       OUTSTANDING      REMAINING       WEIGHTED-AVG.    EXERCISABLE   WEIGHTED-AVG.
EXERCISE PRICES   AT 12/31/98   CONTRACTUAL LIFE   EXERCISE PRICE   AT 12/31/98   EXERCISE PRICE
---------------   -----------   ----------------   --------------   -----------   --------------
<S>               <C>           <C>                <C>              <C>           <C>
 
      1991 PLAN
 
$ 0.00 to  2.00      122,317          3.0              $ 0.91          122,317        $ 0.91
  2.01 to  4.00      348,367          4.4                3.26          348,367          3.26
  4.01 to  6.00      112,967          7.7                5.60           49,670          5.42
  6.01 to  8.00    3,017,398          8.0                6.60        1,139,171          6.92
  8.01 to 10.00    2,039,572          9.1                9.49          227,337          9.93
 10.01 to 12.00       10,350          7.4               10.81            5,196         10.82

 DIRECTORS PLAN
 
$ 0.00 to 12.00       50,000          8.5              $ 9.03           22,915        $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,
44,616 shares in 1997 and 35,052 shares in 1998. The weighted-average fair value
of the purchased rights granted in 1996 was $2.14, $1.65 in 1997 and $2.06 in
1998. The pro forma net loss and loss per share amounts disclosed above reflect
the SFAS 123 adjustment for pro forma compensation cost for the fair value of
the employees' purchase rights, which was estimated using the Black-Scholes
model with the following assumptions:
 
<TABLE>
<CAPTION>
                                                              1996    1997    1998
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
EMPLOYEE STOCK PURCHASE PLAN:
  Dividend yield............................................    --      --      --
  Expected volatility.......................................  40.0%   47.3%   48.2%
  Average risk-free interest rate...........................   6.3%    5.4%    5.4%
  Expected term in years....................................   0.5     0.5     0.5
</TABLE>
 
12. FEDERAL INCOME TAXES
 
     Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). 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 $222.6 million of net operating loss carryforwards for
federal income tax purposes at December 31, 1998. The net operating loss
carryforwards will expire in the years 2004 through 2018 if not previously
utilized. The utilization of these carryforwards is subject to certain
limitations. Of the net operating loss carryforwards at December 31, 1998,
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
as management believes that it is more likely than not that such asset will not
be realized, 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
 
                                      F-17
<PAGE>   60
 
will evaluate the appropriateness of the reserve in the future based upon
historical and operating results of the Company.
 
     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,
                                                                1997        CHANGE        1998
                                                            ------------   --------   ------------
<S>                                                         <C>            <C>        <C>
Gross deferred tax asset:
  Net operating loss carryforwards........................    $ 53,545     $ 22,123    $  75,668
  Bad debt reserve........................................       4,209       (3,731)         478
  Inventory reserve.......................................       3,467       (3,528)         (61)
  Accretion of Senior Discount Notes......................      35,544       13,697       49,241
  Other...................................................       1,379         (120)       1,259
                                                              --------     --------    ---------
                                                                98,144       28,441      126,585
Gross deferred tax liability:
  Depreciation............................................     (11,289)       7,195       (4,094)
                                                              --------     --------    ---------
                                                                86,855       35,636      122,491
     Valuation allowance..................................     (86,855)     (35,636)    (122,491)
                                                              --------     --------    ---------
     Net deferred tax asset...............................    $     --     $     --    $      --
                                                              ========     ========    =========
</TABLE>
 
13. EXTRAORDINARY ITEMS
 
     In connection with the Refinancing (as discussed in Note 7), the Company
incurred an extraordinary charge of approximately $13.8 million in the first
quarter of 1998 related to the early retirement of debt.
 
     On May 19, 1998, the Company and many other paging companies experienced an
unprecedented interruption of service when the PanAmSat Galaxy IV communications
satellite, on which the Company leased capacity, ceased to communicate with
paging uplink stations throughout the United States. Management believes that
this is the first event of its kind to affect the paging industry in the 35 year
history of satellite telecommunications. This event occurred when the
satellite's onboard control system and a back-up control system failed and
PanAmSat technicians were unable to restore the satellite's proper orientation
toward Earth.
 
     The Company initiated its recovery plan by re-orienting its satellite links
to its back-up satellites. In order to re-orient the satellite links, the
Company realigned satellite dish antennas on each of its approximately 2,000
transmission sites to receive the back-up satellites' signals. Although the
satellite failure was beyond the Company's control, the Company provided its
customers with a two-day airtime credit to compensate them for the period when
they were unable to receive messages. The Company incurred $3.8 million of costs
(including the airtime credit)during the three months ended June 30, 1998 and
has recorded these costs as an extraordinary charge.
 
14. START-UP COSTS
 
     In April, 1998, the AICPA (AcSEC -- Accounting Standards Executive
Committee) issued Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"). The intent of SOP 98-5 is to have all
companies account for start-up costs consistently. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. The
initial application of this SOP is reported as the cumulative effect of change
in accounting principle as described in Accounting Principles Board Opinion No.
20, Accounting Changes.
 
     The Company has not capitalized "start-up" costs as defined by SOP 98-5.
Therefore, the adoption of SOP 98-5 will have no effect on the Company's
financial statements.
 
                                      F-18
<PAGE>   61
 
15. COMPREHENSIVE INCOME (LOSS)
 
     In January 1998, the Company adopted the Financial Accounting Standards
Board Statement No. 130 -- Reporting Comprehensive Income, which establishes
standards for reporting comprehensive income and its components within the
financial statements. Comprehensive income is defined as all changes in the
equity of a business enterprise from transactions and other events and
circumstances, except those resulting from investments by owners and
distributions to owners. The Company's comprehensive income components are
immaterial for the periods ended December 31, 1998 and 1997; therefore,
comprehensive income is the same as net income for both periods.
 
16. RELATED-PARTY TRANSACTIONS
 
     In connection with the Unit Offering completed in 1995 (see Note 7), the
Company incurred $3.8 million in fees to an affiliate of a shareholder. In
addition, an affiliate of a shareholder acted as an underwriter of the Company's
initial public offering in June 1996 and received $2.0 million in compensation
in the form of an underwriter's discount. An affiliate of a shareholder also
acted as placement agent for the 11 1/4% Notes offering and received
compensation from the Company in the amount of $8.1 million for acting in such
capacity.
 
     As of December 31, 1998, the president and certain other officers of the
Company are indebted to the Company in the aggregate amount of $573,000 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. Annual interest rates on the Notes range from
3.55% to 6.90%. Interest is due and payable annually beginning on the first
anniversary of the date of each Note. All Notes are included in Stock
Subscriptions Receivable in the Consolidated Balance Sheets.
 
17. SEGMENT REPORTING
 
     In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). The Company
adopted SFAS 131 for the fiscal year ending December 31, 1998. SFAS 131
establishes accounting standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.
 
     The Company's reportable segments are divisions that offer different
products and/or services. They are managed separately because each division
requires different technology and management strategies. The Company reports
segments based on these divisions as management makes operating decisions and
assesses individual performances based on the performance of these segments.
 
     The Company has three reportable segments: PageMart Paging, PageMart PCS
and PageMart International. Through its PageMart Paging division, 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. Through its PageMart PCS division, the Company has constructed and
operates an advanced messaging network as an overlay of its one-way network.
Advanced messaging service was first offered in Austin and San Antonio, Texas in
June of 1998. As of December 15, 1998, advanced messaging services are available
to approximately seventy percent of the U.S. population. Through PageMart
International, the Company provides messaging services in selected countries on
a seamless international network. The Company pursues international
opportunities through foreign related entities, interests in joint venture
arrangements, or network affiliation agreements between the Company and the
owners of foreign networks.
 
     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies except for the allocation of debt
by divisions.
 
                                      F-19
<PAGE>   62
 
     The Company has allocated proceeds from equity and debt offerings to its
PageMart Paging and PageMart PCS divisions. The methodology the Company has
followed to date results in the attribution of the proceeds of each offering
based on the specific capital and operating requirements of each division.
Positive free cash flow generated by a division is utilized to reduce its
respective debt allocation. As of December 31, 1998, $155.9 million and $72.5
million of equity and $125.0 million and $338.3 million of debt have been
allocated to PageMart Paging and PageMart PCS, respectively. For the twelve
months ended December 31, 1998, interest expense of $18.6 million and $25.2
million was allocated to PageMart Paging and PageMart PCS, respectively.
 
     The following table sets forth segment financial information related to the
Company's various operations (in thousands):
 
<TABLE>
<CAPTION>
                                                         FISCAL YEAR ENDED DECEMBER 31, 1996
                                                  --------------------------------------------------
                                                  PAGEMART   PAGEMART     PAGEMART
                                                   PAGING      PCS      INTERNATIONAL   CONSOLIDATED
                                                  --------   --------   -------------   ------------
<S>                                               <C>        <C>        <C>             <C>
Revenues........................................  $221,592   $     --     $     --        $221,592
Operating loss..................................   (11,465)      (657)        (447)        (12,569)
Interest expense................................    16,137     18,904           --          35,041
Interest income.................................       153        987           --           1,140
Net loss........................................   (27,638)   (18,574)      (2,386)        (48,598)
EBITDA(1).......................................     9,727       (657)        (447)          8,623
Total assets....................................   160,719    151,108        1,793         313,620
Capital expenditures............................    50,838     12,966           --          63,804
</TABLE>
 
<TABLE>
<CAPTION>
                                                         FISCAL YEAR ENDED DECEMBER 31, 1997
                                                  --------------------------------------------------
                                                  PAGEMART   PAGEMART     PAGEMART
                                                   PAGING      PCS      INTERNATIONAL   CONSOLIDATED
                                                  --------   --------   -------------   ------------
<S>                                               <C>        <C>        <C>             <C>
Revenues........................................  $277,605   $     --     $    173        $277,778
Operating loss..................................    (1,887)      (207)        (497)         (2,591)
Interest expense................................    18,679     19,820           --          38,499
Interest income.................................        65        436           --             501
Net loss........................................   (20,987)   (19,591)      (3,309)        (43,887)
EBITDA(1).......................................    27,774        (16)        (497)         27,261
Total assets....................................   175,359    185,943          574         361,876
Capital expenditures............................    32,169     35,337           --          67,506
</TABLE>
 
<TABLE>
<CAPTION>
                                                        FISCAL YEAR ENDED DECEMBER 31, 1998
                                                ----------------------------------------------------
                                                PAGEMART   PAGEMART      PAGEMART
                                                 PAGING      PCS       INTERNATIONAL    CONSOLIDATED
                                                --------   --------   ---------------   ------------
<S>                                             <C>        <C>        <C>               <C>
Revenues......................................  $311,469   $     96       $    87         $311,652
Operating income (loss).......................    17,603    (14,506)         (647)           2,450
Interest expense..............................    18,636     25,162            --           43,798
Interest income...............................        42      3,145            --            3,187
Loss before extraordinary items...............      (893)   (37,284)       (3,533)         (41,710)
EBITDA(1).....................................    55,208     (8,691)         (647)          45,870
Total assets..................................   166,766    325,118         2,171          494,055
Capital expenditures..........................    40,386    128,032           128          168,546
</TABLE>
 
---------------
 
(1) EBITDA represents earnings (loss) before interest, taxes, depreciation,
    amortization, other expenses and extraordinary items. 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 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.
 
                                      F-20
<PAGE>   63
 
18. SUBSEQUENT EVENT
 
     On March 23, 1999, the Company entered into a four year credit agreement
with Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which
provides for a $100 million credit facility (the "Credit Facility"). The Credit
Facility replaces the Revolving Credit Agreement (see Note 7), which was
simultaneously terminated. The Credit Facility provides for $75 million of
multi-draw term loans (the "Term Loans") and $25 million of revolving loans (the
"Revolving Loans"). As of March 23, 1999, $50 million was immediately available
to the Company, $10 million of which was Revolving Loans. On March 24, 1999, the
Company borrowed $25 million in Term Loans pursuant to terms of the Credit
Facility. Approximately $12 million of the initial borrowing was used to repay
amounts outstanding under the Vendor Financing Arrangement (see Note 7) and to
fund the fees and expenses of the Credit Facility.
 
     The Credit Facility bears interest at the U.S. prime rate plus 2.75% or at
LIBOR plus 3.75%. The interest rate on the amounts borrowed on March 24, 1998
was 11.0%. Further availability of the Credit Facility beyond the initial $50
million is based on the Company's achievement of certain minimum targets for
advanced messaging subscriber units in service.
 
     The Credit Facility contains certain restrictive covenants that, among
other things, limits 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 requires the Company to maintain certain
operating and financial performance measures and limits the ability of the
Company to make capital expenditures.
 
                                      F-21
<PAGE>   64
 
                    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 as of December 31, 1997 and 1998, and the related consolidated
statements of operations, stockholders' (deficit) equity and cash flows for each
of the three years in the period ended December 31, 1998, included in this Form
10-K and have issued our report thereon dated February 3, 1999 (except with
respect to the matter discussed in Note 18, as to which the date is March 26,
1999). These consolidated financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and schedule
based on our audits.
 
     Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II -- Valuation and
Qualifying Accounts is not a required part of the basic consolidated financial
statements but is supplementary information required by the Securities and
Exchange Commission. This information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
 
                                            /s/ ARTHUR ANDERSEN LLP
 
Dallas, Texas,
March 26, 1999
 
                                       S-1
<PAGE>   65
 
                    PAGEMART WIRELESS, INC. AND SUBSIDIARIES
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                            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, 1998..........    $7,170      $11,130        $ --       $15,720(a)     $2,580
Year Ended December 31, 1997..........    $4,776      $10,910        $ --       $ 8,516(a)     $7,170
Year Ended December 31, 1996..........    $4,534      $ 6,986        $ --       $ 6,744(a)     $4,776
</TABLE>
 
---------------
 
(a) Accounts written off as uncollectible, net of recoveries.
 
                                       S-2
<PAGE>   66
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          3.1            Restated Certificate of Incorporation of PageMart Wireless,
                            Inc. (filed as an exhibit to the Registration Statement
                            on Form S-1 of the Company (Reg. No. 33-03012), and
                            incorporated herein by reference).
          3.2            Certificate of Amendment to Restated Certificate of
                            Incorporation of PageMart Wireless, Inc. dated December
                            28, 1995 (filed as an exhibit to the Registration
                            Statement on Form S-1 of the Company (Reg. No. 33-03012),
                            and incorporated herein by reference).
          3.3            By-laws of PageMart Wireless, Inc. (filed as an exhibit to
                            the Form 10-K of the Company for the fiscal year ended
                            December 31, 1997, and incorporated herein by reference.)
          3.4            Certificate of Amendment to Restated Certificate of
                            Incorporation of PageMart Wireless, Inc. dated May 9,
                            1996 (filed as an exhibit to the Registration Statement
                            on Form S-1 of the Company (Reg. No. 33-03012), and
                            incorporated herein by reference).
          3.5            Certificate of Ownership and Merger merging PageMart, Inc.
                            into PageMart Wireless, Inc.
          4.1            Indenture, dated as of January 28, 1998, between PageMart
                            Wireless, Inc. and United States Trust Company of New
                            York, as Trustee, relating to the 11 1/4% Senior
                            Subordinated Discount Notes due 2008. (filed as an
                            exhibit to the Form 10-K of the Company for the fiscal
                            year ended December 31, 1997, and incorporated herein by
                            reference).
          4.2            Indenture, dated as of January 17, 1995, between PageMart
                            Wireless, Inc. and United States Trust Company of New
                            York, as Trustee, relating to the 15% Senior Discount
                            Notes due 2005. (filed as an exhibit to the Registration
                            Statement on Form S-1 of the Company (Reg. No. 33-91142),
                            and incorporated herein by reference).
          4.3            First Supplemental Indenture, dated as of December 31, 1997,
                            among PageMart Wireless, Inc. and United States Trust
                            Company of New York, as Trustee (filed as an exhibit to
                            the Form 8-K of the Company dated January 28, 1998, and
                            incorporated herein by reference).
         10.1            Warrant Agreement, dated as of October 19, 1993, between
                            PageMart, Inc. and United States Trust Company of New
                            York, as Warrant Agent, relating to the Warrants to
                            purchase Common Stock of the Company (filed as an exhibit
                            to the Form 10-K of the Company for the fiscal year ended
                            December 31, 1994, and incorporated herein by reference).
         10.2            Telecommunications Service Agreement, dated May 29, 1992,
                            between PageMart, Inc. and Wiltel, Inc. (filed as an
                            exhibit to the Registration Statement on Form S-1 of the
                            Company (Reg. No. 33-91142), and incorporated herein by
                            reference).
         10.3            Second Amended and Restated Satellite Services Supplemental
                            Agreement, dated as of July 1, 1998, between PageMart
                            Wireless, Inc. and AvData Systems, Inc.(1)
         10.4            Satellite Services and Space Segment Lease Agreement, dated
                            January 2, 1995, between PageMart, Inc. and SpaceCom
                            Systems, Inc. (filed as an exhibit to the Registration
                            Statement on Form S-1 of the Company (Reg. No. 33-91142),
                            and incorporated herein by reference).
</TABLE>
 
                                       E-1
<PAGE>   67
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         10.5            Credit Agreement, dated as of March 23, 1999, by and among
                            PageMart Wireless, Inc., and the Lenders and Agents named
                            therein.
         10.6            Security Agreement, dated as of March 23, 1999, among
                            PageMart Wireless, Inc., and the Lenders and Agent named
                            therein.
         10.7            Pledge Agreement, dated as of March 23, 1999 among PageMart
                            Wireless, Inc. and the Lenders and Collateral Agent named
                            therein.
         10.8            Promissory Note and Security Agreement, dated May 21, 1997,
                            between PageMart, Inc. and Glenayre Electronics, Inc.
                            (filed as an exhibit to the Form 10-Q of the Company for
                            the quarter ended June 30, 1997, and incorporated herein
                            by reference).
         10.9            Modification and Reaffirmation Agreement, dated March 12,
                            1998, between PageMart Wireless, Inc. and Glenayre
                            Electronics, Inc. (filed as an exhibit to the Form 10-Q
                            of the Company for the quarter ended March 31, 1998, and
                            incorporated herein by reference).
         10.10           Amended and Restated Agreement Among Certain Stockholders of
                            PageMart Nationwide, Inc. dated as of September 19, 1995
                            (filed as an exhibit to the Form 8-K of the Company dated
                            October 6, 1995, and incorporated herein by reference).
         10.11           Amendment No. 1 to Amended and Restated Agreement Among
                            Certain Stockholders, dated as of October 1, 1997, among
                            PageMart Wireless, Inc. and certain of its stockholders
                            (filed as an exhibit to the Form 10-K of the Company for
                            the fiscal year ended December 31, 1997, and incorporated
                            herein by reference).
         10.12           Subscription Agreement dated as of July 7, 1995 among
                            PageMart Nationwide, Inc., PageMart Canada Holding
                            Corporation and TD Capital Group Ltd. (filed as an
                            exhibit to the Registration Statement on Form S-1 of the
                            Company (Reg. No. 33-03012), and incorporated herein by
                            reference).
         10.13           Agreement Among Stockholders among PageMart Nationwide,
                            Inc., PageMart International, Inc., TD Capital Group
                            Ltd., PageMart Canada Limited. (filed as an exhibit to
                            the Registration Statement on Form S-1 of the Company
                            (Reg. No. 33-03012), and incorporated herein by
                            reference).
         10.14           Equipment Purchase Agreement, dated as of January 26, 1996,
                            between Motorola, Inc. and PageMart Wireless, Inc. (filed
                            as an exhibit to the Form 10-K of the Company for the
                            fiscal year ended December 31, 1995, and incorporated
                            herein by reference)(1).
         10.15           Technology Asset Agreement, dated as of December 1, 1995,
                            between Motorola, Inc. and PageMart Wireless, Inc. (filed
                            as an exhibit to the Form 10-K of the Company for the
                            fiscal year ended December 31, 1995, and incorporated
                            herein by reference)(1).
         10.16           PageMart Wireless, Inc. Employee Stock Purchase Plan (filed
                            as an exhibit to the Registration Statement on Form S-1
                            of the Company (Reg. No. 33-03012), and incorporated
                            herein by reference).
         10.17           PageMart Wireless, Inc. Nonqualified Formula Stock Option
                            Plan for Non-Employee Directors. (filed as an exhibit to
                            the Registration Statement on Form S-1 of the Company
                            (Reg. No. 33-03012), and incorporated herein by
                            reference).
</TABLE>
 
                                       E-2
<PAGE>   68
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         10.18           Office Lease Agreement, dated as of November 26, 1996,
                            between Crescent Real Estate Equities Limited and
                            PageMart Wireless, Inc. (filed as an exhibit to the
                            Company's Annual Report on Form 10-K for the fiscal year
                            ended December 31, 1996, and incorporated herein by
                            reference).
         10.19           PageMart Wireless, Inc. Fifth Amended and Restated 1991
                            Stock Option Plan (filed as an exhibit to the definitive
                            proxy statement of the Company dated April 18, 1997, and
                            incorporated herein by reference).
         10.20           Severance and Reimbursement Agreement, dated September 12,
                            1997, between PageMart Wireless, Inc. and N. Ross
                            Buckenham (filed as an exhibit to the Form 10-Q of the
                            Company for the quarter ended September 30, 1997, and
                            incorporated herein by reference).
         10.21           Resale Agreement, dated September 1, 1998, between PageMart
                            Wireless, Inc. and GTE Communications System
                            Corporation.(1)
         10.22           Strategic Alliance Agreement No. 1, dated September 15,
                            1994, between GTE Service Corporation and PageMart, Inc.
                            (filed as an exhibit to the Registration Statement on
                            Form S-1 of the Company (Reg. No. 33-91142), and
                            incorporated herein by reference).
         10.23           Strategic Alliance Agreement No. 2, dated October 13, 1994,
                            between GTE Service Corporation and PageMart, Inc. (filed
                            as an exhibit to the Form 10-K of the Company for the
                            fiscal year ended December 31, 1994, and incorporated
                            herein by reference).
         10.24           Resale Agreement, dated as of December 12, 1997, between
                            PageMart Wireless, Inc. and GTE Communications
                            Corporation (filed as an exhibit to the Form 10-K of the
                            Company for the fiscal year ended December 31, 1997, and
                            incorporated herein by reference).(1)
         10.25           Third Amended and Restated 1991 Stock Issuance Plan (filed
                            as an exhibit to the Registration Statement on Form S-8
                            (Reg. No. 33-98116), and incorporated herein by
                            reference).
         10.26           Resale Agreement between GTE MobileNet Service Corp.,
                            licensee and PageMart, Inc., licensor dated July 1, 1996
                            (filed as an exhibit to the Form 10-K of Company for the
                            fiscal year ended December 31, 1997, and incorporated
                            herein by reference).(1)
         11.1            Computation of per share earnings (loss) for the three
                            months ended December 31, 1998.
         11.2            Computation of per share earnings (loss) for the three
                            months ended December 31, 1997.
         11.3            Computation of per share earnings (loss) for the three
                            months ended December 31, 1996.
         11.4            Computation of per share earnings (loss) for the year ended
                            December 31, 1998.
         11.5            Computation of per share earnings (loss) for the year ended
                            December 31, 1997.
         11.6            Computation of per share earnings (loss) for the year ended
                            December 31, 1996.
</TABLE>
 
                                       E-3
<PAGE>   69
 
<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
         12.1            Computation of Ratio of Earnings to Fixed Charges for years
                            ended December 31, 1993, 1994, 1995, 1996, 1997 and 1998
                            and the three months ended December 31, 1998.
         21.1            PageMart Wireless, Inc. Subsidiaries.
         23.1            Consent of Arthur Andersen LLP.
         27.1            Financial Data Schedule for the year ended December 31,
                            1998.
</TABLE>
 
---------------
 
(1) The Company has requested confidential treatment for certain portions of
    this agreement.
 
                                       E-4