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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
(MARK ONE)
       /X/       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                            SECURITIES EXCHANGE ACT OF 1934
 
                      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
 
                            COMMISSION FILE NUMBER 0-28262
 
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                          AERIAL COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)
--------------------------------------------------------------------------------
 
<TABLE>
<S>                               <C>
            DELAWARE                         39-1706857
--------------------------------  --------------------------------
(State or other jurisdiction of     (IRS Employer Identification
 incorporation or organization)                 No.)
</TABLE>
 
        8410 WEST BRYN MAWR AVENUE, SUITE 1100, CHICAGO, ILLINOIS 60631
              (Address of principal executive offices) (Zip Code)
                 REGISTRANT'S TELEPHONE NUMBER: (773) 399-4200
        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
                          ---------------------------
 
                          Common Shares, $1 par value
                              -------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
                              Yes __X__  No ______
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.___X___
 
    As of February 26, 1999, the aggregate market value of registrant's Common
Shares held by nonaffiliates was approximately $88 million (based upon the
closing price of the Common Shares on February 26, 1998, of $7.00, as reported
by the NASDAQ).
 
    The number of shares outstanding of each of the registrant's classes of
common stock, as of February 26, 1999, is 31,794,240 Shares, $1 par value, and
40,000,000 Series A Common Shares, $1 par value.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Those sections or portions of the registrant's 1998 Annual Report to
Shareholders and of the registrant's Notice of Annual Meeting of Shareholders
and Proxy Statement for its Annual Meeting of Shareholders to be held May 7,
1999, described in the cross reference sheet and table of contents attached
hereto are incorporated by reference into Parts II and III of this report.
 
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<PAGE>
                             CROSS REFERENCE SHEET
                                      AND
                               TABLE OF CONTENTS
 
--------------------------------------------------------------------------------
 
                                                                   PAGE NUMBER
                                                                 OR REFERENCE(1)
                                                                 ---------------
    Item  Business.............................................         3
      1.
 
    Item  Properties...........................................        12
      2.
 
    Item  Legal Proceedings....................................        13
      3.
 
    Item  Submission of Matters to a Vote of Security
      4.    Holders............................................        13
 
    Item  Market for Registrant's Common Equity and Related
      5.    Stockholder Matters................................        14(2)
 
    Item  Selected Financial Data..............................        14(3)
      6.
 
    Item  Management's Discussion and Analysis of Financial
      7.    Condition and Results of Operations................        14(4)
 
    Item  Qualitative and Quantitative Disclosures About Market
     7A.    Risk...............................................        14(4)
 
    Item  Financial Statements and Supplementary Data..........        14(5)
      8.
 
    Item  Changes in and Disagreements with Accountants on
      9.    Accounting and Financial Disclosure................        14
 
    Item  Directors and Executive Officers of the Registrant...        15(6)
     10.
 
    Item  Executive Compensation...............................        15(7)
     11.
 
    Item  Security Ownership of Certain Beneficial Owners and
     12.    Management.........................................        15(8)
 
    Item  Certain Relationships and Related Transactions.......        15(9)
     13.
 
    Item  Exhibits, Financial Statement Schedules and Reports
     14.    on Form 8-K........................................        16
 
------------------------
 
(1) Parenthetical references are to information incorporated by reference from
    the registrant's Exhibit 13, which includes portions of its Annual Report to
    Shareholders for the year ended December 31, 1998 ("Annual Report") and from
    the registrant's Notice of Annual Meeting of Shareholders and Proxy
    Statement for its Annual Meeting of Shareholders to be held on May 7, 1999
    ("Proxy Statement").
 
(2) Annual Report section entitled "Aerial Stock and Dividend Information" and
    "Market Price Per Common Share by Quarter."
 
(3) Annual Report section entitled "Selected Consolidated Financial Data."
 
(4) Annual Report section entitled "Management's Discussion and Analysis of
    Financial Condition and Results of Operations."
 
(5) Annual Report sections entitled "Consolidated Statements of Operations,"
    "Consolidated Statements of Cash Flows," "Consolidated Balance Sheets,"
    "Consolidated Statements of Changes in Shareholders' Equity," "Notes to
    Consolidated Financial Statements," and "Report of Independent Public
    Accountants."
 
(6) Proxy Statement section entitled "Election of Directors" and "Executive
    Officers."
 
(7) Proxy Statement section entitled "Executive Compensation" except for the
    information specified in Item 402 (a) (8) of Regulation S-K under the
    Securities Exchange Act of 1934, as amended.
 
(8) Proxy Statement section entitled "Security Ownership of Certain Beneficial
    Owners and Management."
 
(9) Proxy Statement section entitled "Certain Relationships and Related
    Transactions."
 
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<PAGE>
--------------------------------------------------------------------------------
 
AERIAL COMMUNICATIONS, INC.
8410 WEST BRYN MAWR AVENUE - SUITE 1100 - CHICAGO, IL 60631
 
    [LOGO]
TELEPHONE (773) 399-4200
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                                     PART I
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ITEM 1. BUSINESS
 
COMPANY
 
    Aerial Communications, Inc. (the "Company" or "Aerial"), [NASDAQ: AERL]
together with its subsidiaries, is a provider of Personal Communications
Services ("PCS") in the Minneapolis, Tampa-St. Petersburg-Orlando, Houston,
Pittsburgh, Kansas City and Columbus (Ohio) Major Trading Areas ("MTAs")
(collectively, the "PCS Markets"). The PCS Markets include approximately 27.7
million population equivalents ("POPs"). The Company has constructed networks
for its PCS Markets using Global System for Mobile Communication ("GSM")
technology. The Company has commenced service in all its markets. By year end
1998, the Company had expanded its system coverage to total more than 80% of the
six MTAs' total population.
 
    The Company was formed in 1991 under Delaware law as a wholly-owned
subsidiary of Telephone and Data Systems, Inc. [AMEX: TDS] and was formerly
named American Portable Telecom, Inc. In November 1996 the Company changed its
name to Aerial Communications, Inc. TDS owned 59,086,000 shares of Common Stock
of the Company at December 31, 1998, representing 82.3% of the combined total of
the Company's outstanding Common and Series A Common Shares and 98.0% of the
voting power.
 
    PCS is the term used to describe the wireless telecommunications services
that are offered by those companies that acquired licenses for radio spectrum
(frequency range 1850-1990 MHz) in the Federal Communications Commission ("FCC")
auctions and are the newest entrants in the wireless telecommunications market.
PCS competes directly with existing cellular telephone, paging and specialized
mobile radio services. PCS providers were the first in most markets to offer
mass market all-digital mobile networks. In addition, the Company believes PCS
providers may be among the first to be able to offer mass market wireless local
loop applications, in competition with switched and direct access local
telecommunications services.
 
    The Company's strategic goal is to take full advantage of the potential of
wireless telecommunications. The Company sees an opportunity for significant
growth in the wireless telecommunications market through the shift of existing
wireless usage patterns from applications focused on business use, special
occasions and emergencies to much broader applications for everyday use. The
Company is structured to meet the increasingly competitive challenges of the
wireless telecommunications marketplace, and has a marketing-oriented approach
focused on serving its customers and their needs. Since the introduction of
cellular telephone service in 1983, the demand for wireless telecommunications
services has grown dramatically as cellular, paging and other emerging wireless
personal communications services have become widely available and increasingly
affordable. As of December 31, 1998, there were an estimated 70 million domestic
wireless telephone subscribers (representing both cellular and PCS customers),
which represented U.S. market penetration of approximately 25%.
 
    During 1996 and early 1997, the Company contracted for network equipment,
billing systems, support software and the equipment and services necessary to
launch service. Additionally during this period, the Company completed the
design for its PCS networks, acquired and built out the switching centers
serving each market, leased and built out a National Operations Center, leased
or purchased the cell sites required to launch service and commenced zoning and
building the sites. The Columbus MTA launched service on March 27, 1997. The
Company's five remaining MTAs launched service during the
 
                                                                               3
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second quarter of 1997. Across all six markets, the Company launched with
approximately 600 cell sites in service. The Company had 1,180 cell sites in
service by the end of 1998. The coverage of the Company's PCS networks includes
the major metropolitan areas within the PCS Markets, as well as portions of the
major highway corridors extending out from those areas.
 
    In November 1996, the Company entered into a Member Control Agreement
("Agreement") forming a joint venture with Rural Cellular Corporation ("RCC"),
the Wireless Alliance, LLC ("WALLC"), to build out certain rural areas covering
approximately 925,000 POPs in the Minneapolis MTA. The Company has contributed
20 MHz of its Minneapolis MTA license covering certain territories as defined in
the Agreement in return for a 49% equity interest in the joint venture. RCC
built the network and is responsible for the ongoing operations. The WALLC
launched service in 1998. The joint venture purchases services such as network
switching from the Company. The network uses GSM technology.
 
    On September 8, 1998, pursuant to the terms of a Purchase Agreement dated
June 1, 1998, Sonera Ltd. ("Sonera"), formerly Telecom Finland Ltd., made a $200
million investment in Aerial Operating Company, Inc. ("AOC"), a then
wholly-owned subsidiary of the Company. Sonera purchased approximately 2.4
million shares of common stock of AOC at a price of approximately $83 per share
representing a 19.4% equity interest in AOC. Sonera's equity ownership amount in
AOC is subject to adjustment based on Aerial's 20-day average stock price during
the three years commencing September 8, 1998. Depending on the level of increase
in the stock price, Sonera's ownership amount in AOC could decline to
approximately 15%. Sonera has the right, subject to adjustment under certain
circumstances, to exchange each share of AOC common stock which it owns for
6.72919 Common Shares of Aerial. Upon the exchange of all of the AOC shares,
Sonera would own an 18.452% equity interest in Aerial, reflecting a purchase
price equivalent to $12.33 per Common Shares of Aerial (the "Equivalent Purchase
Price"). In addition to exchanging AOC common stock for Aerial Common Shares,
Sonera's equity in AOC could be exchanged incrementally, in certain
circumstances, for equity in TDS or cash or any combination of TDS equity,
Aerial equity and cash.
 
PROPOSED TDS CORPORATE RESTRUCTURING
 
    In December 1997, Aerial received a proposal from TDS to acquire all of the
issued and outstanding Common Shares of Aerial not already owned by TDS. The
proposal was part of TDS's proposed corporate restructuring which included
issuing three new classes of common stock (commonly known as "tracking" stock)
and changing the state of incorporation of TDS from Iowa to Delaware. The three
new classes of stock were intended to separately reflect the performance of
TDS's cellular telephone, landline telephone and personal communications
services businesses.
 
    In December 1998, TDS announced the withdrawal of its offer to exchange
tracking stock for the outstanding common shares of Aerial which it did not own.
TDS also announced that it was pursuing a tax-free spin-off of its 82.3%
interest in Aerial, as well as reviewing other alternatives. TDS intends to ask
the Internal Revenue Service ("IRS") to rule on the tax-free status of such a
distribution. There are a number of conditions that must be met for a spin-off
to occur, including a receipt of a favorable IRS ruling, final approval by the
TDS Board, certain government and third party approvals and review by the
Securities and Exchange Commission ("SEC") of appropriate SEC filings. TDS
intends to seek shareholder approval of a proposal to distribute Aerial Series A
Common Shares, on a pro-rata basis, to holders of TDS Series A Common Shares and
Aerial Common Shares, on a pro-rata basis, to holders of TDS Common Shares.
There can be no assurance that a spin-off will be consummated or that other
alternatives will not be pursued. Prior to any spin-off, it is expected that
Aerial will seek additional financing so that Aerial would have the appropriate
capitalization to operate as a stand-alone entity. In connection with such
financing, all or a portion of Aerial's debt to TDS may be converted into
equity.
 
    Following the announcement by TDS in December 1998, that it intended to
distribute to its shareholders all of the capital stock of Aerial that it owns,
and that Aerial would seek additional financing from sources other than TDS in
connection therewith, Sonera contacted TDS to express certain concerns about the
announcement. Sonera has asserted that the TDS announcement reflects a change in
circumstances that warrant the renegotiation of certain matters related to its
investment in AOC, including an adjustment in the Equivalent Purchase Price, and
has raised the possibility of litigation in connection therewith. TDS and Aerial
intend to attempt to reach a mutually acceptable resolution of the concerns
raised by Sonera. There can be no assurance that this matter will not lead to
litigation, or that it
 
4
<PAGE>
will not have a material adverse effect on Aerial or on the plans relating to
the refinancing and spin-off of Aerial.
 
WIRELESS TELECOMMUNICATIONS INDUSTRY
 
    OVERVIEW.  Wireless service is currently available using analog or digital
technology. Traditionally wireless services transmited voice and data signals
over analog-based networks by varying the amplitude or frequency of one
continuous electronic signal transmitted over a single radio channel. Analog
technology currently has several limitations, including inconsistent service
quality, lack of privacy, limited capacity and less reliability in transferring
data without errors. The Company has chosen GSM, which utilizes a digital
technology, for use in the PCS Markets. Digital systems convert voice or data
signals into a stream of digits that is compressed before transmission, enabling
a single radio channel to carry multiple simultaneous signal transmissions. This
additional capacity, along with improvements in digital protocols, allows
digital-based wireless technologies to offer new and enhanced services, such as
greater call privacy and more robust data transmission features, such as "mobile
office" applications (including facsimile, electronic mail and wireless
connections to computer/data networks, including the Internet).
 
    PCS spectrum differs from existing cellular and specialized mobile radio
("SMR") spectrum in three basic ways: frequency, spectrum and geographic
division. PCS networks will operate in a higher frequency range (1850-1990 MHz)
compared to the cellular and SMR frequency (800-900 MHz). PCS is comprised of 30
or 10 MHz spectrum versus 25 MHz spectrum for cellular networks. As a result of
the improved capacity of the infrastructure and large allocation of spectrum in
the A, B and C PCS frequency Blocks, PCS will have more capacity for new
wireless services such as data and video transmission. Finally, the geographic
areas for PCS licenses are divided differently than for cellular licenses. PCS
is segmented among 51 MTAs and 493 Basic Trading Areas ("BTAs") as opposed to
cellular's 306 Metropolitan Statistical Areas ("MSAs") and 428 Rural Service
Areas ("RSAs"). An MTA license generally covers a much larger geographic area
than a BTA, MSA or RSA license.
 
    OPERATION OF WIRELESS NETWORKS.  Wireless service areas are divided into
smaller geographic areas called "cells", each of which contains an antenna and a
base transceiver station ("BTS") consisting of a low-power transmitter, a
receiver and signaling equipment. The cells are typically configured on a grid
in a honeycomb-like pattern, although terrain factors (including natural and
man-made obstructions) and signal coverage patterns may result in irregularly
shaped cells and overlaps or gaps in coverage. The BTS in each cell is connected
by microwave, fiber optic cable or telephone wires to a switching office
("mobile switching center" or "MSC"). The MSC controls the operation of the
wireless telephone network for its entire service area, performing inter-BTS
hand-offs, managing call delivery to handsets, allocating calls among the cells
within the network and connecting calls to local landline telephone systems or
to long-distance telephone carriers. Wireless service providers have
interconnection agreements with various local exchange carriers and
interexchange carriers, thereby integrating the wireless telephone network with
landline telecommunications systems. Because two-way wireless networks are fully
interconnected with landline telephone networks and long-distance networks,
customers can receive and originate both local and long-distance calls from
their wireless telephones.
 
    The signal strength of a transmission between a handset and a BTS antenna
declines as the handset moves away from the BTS antenna. The MSC and the BTSs
monitor the signal strength of calls in process. When the signal strength of a
call declines to a predetermined level, the MSC may "hand off" the call to
another BTS that can establish a stronger signal with the handset. If a handset
leaves the service area of the wireless service provider, the call is
disconnected unless an appropriate technical interface is established to hand
off the call to an adjacent service provider's system.
 
    Operators of wireless networks frequently agree to provide service to
customers from other compatible networks who are temporarily located or
traveling through the operator's service area. Such customers are called
"roamers." Agreements among network operators allocate revenues received from
roamers. With automatic roaming, wireless customers are preregistered in certain
networks outside their home service area and receive service automatically while
they are roaming. Other roaming features permit calls to a customer to follow
the customer into different networks, so that the customer
 
                                                                               5
<PAGE>
will continue to receive calls in a different network just as if the customer
were within his or her service area.
 
    Wireless customers generally are charged separately for monthly access, air
time, long-distance calls and custom-calling features (although custom-calling
features may be included in monthly access charges in certain pricing plans).
Wireless network operators pay fees to local exchange and long-distance
telephone companies for access to their networks and toll charges based on
standard or negotiated rates. When wireless operators provide service to roamers
from other networks, they generally charge roamer air-time usage rates, which
usually are higher than standard air-time usage rates for their own customers,
and additionally may charge daily access fees. Special, discounted rate roaming
arrangements, often between neighboring operators who wish to stimulate usage in
their respective territories, provide for reduced roaming fees and no daily
access fees.
 
TECHNOLOGY
 
    With GSM technology, the Company offers easy-to-use, interactive menu-driven
phones, and advanced features such as caller identification and a smart card, as
well as more complex features such as text messaging, which allows the GSM
handset to function as a two-way messaging device. In the future, the Company
intends to increasingly emphasize services which are expected to increase the
size and scope of the wireless market, such as wireless data and information
services as well as wireless local loop services. The Company anticipates that
PCS will ultimately offer a competitive alternative to wireline telephone
service as PCS networks are constructed and PCS operators form strategic
alliances.
 
    GSM is not compatible with other PCS or cellular technologies. However,
compatibility can be achieved through the use of handsets that support multiple
technologies. The Company expects that compatibility between GSM and the
existing analog cellular systems will be achieved with the use of dual-mode
handsets. Aerial expects to launch its dual-mode service in 1999.
 
    To date, seventeen North American PCS companies are providing commercial GSM
service. GSM systems are currently in commercial operation in over 2,400 North
American cities with more than 3 million customers. The Company anticipates that
its customers will be able to roam substantially throughout the United States,
either on other GSM-based PCS networks or by using dual-mode handsets that can
also be used on existing cellular networks.
 
    The Company is a member of the North American GSM Alliance LLC ("GSM
Alliance"), an all-digital wireless PCS network of U.S. and Canadian carriers.
The GSM Alliance was established to create a national network and develop
seamless wireless communications for customers, whether at home, away or abroad.
The GSM Alliance's collaborative efforts focus on serving the wireless customer
efficiently by addressing the areas of roaming, customer care, national
distribution and data communications. The Company is also a member of the GSM
Capital Limited Partnership. The partnership was formed to make investments in
companies mainly engaged in the wireless communications industry using the GSM
platform, that are in a development or expansion stage, or whose securities
trade in an organized market. The Company is also a part of the GSM North
America consortium, which is the North American interest group for the GSM
Association. Formed in 1995, GSM North America brings together service providers
and equipment manufacturers to identify and resolve issues related to making GSM
the premier PCS digital technology.
 
SOURCES OF EQUIPMENT
 
    The Company does not manufacture any of the GSM network equipment, handsets
or accessories ("equipment") used or anticipated to be used in its operations.
The equipment the Company uses or anticipates to use is available from multiple
sources, and the Company anticipates such equipment will continue to be
available to the Company in the foreseeable future, consistent with normal
manufacturing and delivery lead times. As GSM uses an open system architecture,
and due to the fact that GSM has well-developed features, software systems and
equipment that are available "off the shelf", the Company is able to design its
GSM networks and systems without being dependent upon any single manufacturing
source. Nokia Telecommunications Inc. has been the Company's sole supplier of
digital radio channel and switching infrastructure equipment during the initial
build-out of its PCS networks. The
 
6
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Company's current handset vendors are Nokia Mobile Phones, Inc., Motorola Inc.,
and Mitsubishi Wireless Communications, Inc.
 
PRODUCTS AND SERVICES
 
    The Company offers coverage in those areas of the PCS Markets where most of
the population lives and works. Subsequent construction of its PCS networks will
provide coverage which, in combination with roaming services as described above,
is competitive with that of current cellular operators. The Company provides
roaming capabilities through agreements with other GSM and cellular operators.
 
    The Company's two primary sources of revenues are similar to those available
to other cellular system providers. Service revenue primarily consists of
charges for access, airtime and value-added services provided to the Company's
retail customers who use the network operated by the Company, and charges for
long-distance calls made on the Company's systems. Service revenue also consists
of charges to customers of other wireless carriers who use the Company's PCS
network when roaming (outcollect roaming revenue). Equipment sales revenue
consists of the sale of handsets and related accessories to retailers,
independent agents and end user customers. At December 31, 1998, the Company had
311,900 customers. Service revenues and equipment sales revenues totaled $123.6
million and $31.5 million, respectively, for the year ended December 31, 1998.
 
    The Company provides the following services and features:
 
    THE SMART CARD.  GSM technology employs a Smart Card which contains a
microchip containing detailed information about a customer's service profile.
The Smart Card allows the Company to initiate services or change a customer's
service package from a remote location. The Smart Card also allows customers to
roam onto other participating GSM-based networks by using their cards in
handsets compatible with the local network.
 
    FEATURE-RICH HANDSETS.  As part of its basic service package, the Company
provides easy-to-use, interactive menu-driven phones that enable customers to
utilize the features available in a GSM network. These handsets primarily use
words and easy-to-use menus rather than numeric codes to operate handset
functions such as call-forwarding, call-waiting and text messaging.
 
    SHORT TEXT MESSAGING.  GSM technology allows for the capability to send and
receive short text messages, similar to two-way radio paging services. This
service allows the Company to offer a quicker and less expensive form of
wireless communication when a full conversation is not necessary.
 
    ENHANCED SECURITY.  The Company's service provides greater security from
eavesdropping and cloning than analog wireless service. Greater conversation
security is provided by the encryption code of the digital GSM signal. Greater
fraud protection is provided because GSM handsets require the use of a Smart
Card with a sophisticated authentication scheme, the replication of which is
virtually impossible.
 
    As the market for wireless telecommunications services continues to develop,
the Company expects to offer advanced wireless applications such as mobile data
services, wireless private branch exchange applications, wireless local loop
services and other individually customized wireless products and services.
 
MARKETING AND DISTRIBUTION
 
    The Company's marketing objective is to create demand for its PCS service by
clearly differentiating its service offerings. The Company believes the strength
of its marketing efforts are a key contributor to its success. The Company has
developed overall marketing strategies as well as certain, specific local
marketing strategies for each PCS Market.
 
    The Company's mass marketing efforts emphasize the value of the Company's
services and its "fairness" to customers and are supported by heavily promoting
the Aerial brand name. This is supported by a substantial advertising program.
 
    The Company offers its services and products through traditional cellular
sales channels as well as through new, lower cost channels which increase the
quality of the typical sale. The Company utilizes traditional sales channels
which include mass merchandisers and retail outlets, company retail stores,
 
                                                                               7
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sales agents and a direct sales force. National distributors include Best Buy,
Office Depot, Staples and Ritz Camera. The Company currently also distributes
its services and products through over 90 company retail locations (mall stores,
strip mall stores and kiosks). Based in part upon the remote activation feature
of the GSM Smart Card, the Company also intends to develop distribution
innovations such as simplified retail sales processes and lower-cost channels
which include inbound telesales, affinity marketing programs, and via the
Internet.
 
COMPETITION
 
    The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of digital upgrades to
existing analog cellular networks, evolving industry standards, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements, and changes in end-user
requirements and preferences. Accordingly, the Company expects competition in
the wireless telecommunications business to be dynamic and intense as a result
of the entrance of new competitors and the development of new technologies,
products and services.
 
    The Company competes directly with up to five other PCS providers in each of
its PCS Markets. The other successful bidders in the FCC's broadband Block A and
Block B PCS auction in each of the six PCS Markets were PCS PrimeCo (Houston and
Tampa-St. Petersburg-Orlando), Sprint Spectrum (Minneapolis, Pittsburgh and
Kansas City) and AT&T Wireless Services, Inc. (Columbus). The existing cellular
providers in the PCS Markets, most of which have an infrastructure in place and
have been operational for a number of years, have, in most cases, upgraded their
networks to provide comparable services in competition with the Company.
Principal cellular providers in the PCS Markets are AT&T Wireless Services,
Inc., BellSouth Mobility, Inc., GTE Mobile Communications Corporation, AirTouch
Communications, Inc., Southwestern Bell, Bell Atlantic-NYNEX Mobile and
Ameritech Cellular. Additionally, the Company competes with SMR provider Nextel
Communications, Inc. in each of its six PCS Markets.
 
    The Company also competes with other communications technologies that now
exist, such as paging, enhanced specialized mobile radio ("ESMR") and global
satellite networks. In the future, cellular service and PCS will also compete
more directly with traditional landline telephone service providers and with
cable operators who expand into the offering of traditional communications
services over their cable systems.
 
    All of such competition is intense. There can be no assurance that the
Company will be able to compete successfully in this environment or that new
technologies and products that are more commercially effective than the
Company's technologies and products will not be developed. In addition, many of
the Company's competitors have substantially greater financial, technical,
marketing, sales and distribution resources than those of the Company and have
significantly greater experience than the Company in testing new or improved
telecommunications products and services and obtaining regulatory approvals.
Some competitors are expected to market other services, such as cable television
access, with their wireless telecommunications service offerings. Several of the
Company's competitors are operating, or planning to operate, through joint
ventures and affiliation arrangements, wireless telecommunications networks that
cover most of the United States.
 
    The Company anticipates that market prices for two-way wireless services
generally will continue to decline in the future based on increased competition.
The Company will compete to attract and retain customers principally on the
basis of services and enhancements, its customer service, the size and location
of its service areas and pricing. The Company's ability to compete successfully
will also depend, in part, on its ability to anticipate and respond to various
competitive factors affecting the industry, including new services that may be
introduced, changes in consumer preferences, demographic trends, economic
conditions and discount pricing strategies by competitors, which could adversely
affect the Company's operating margins.
 
REGULATION
 
    REGULATORY ENVIRONMENT.  The FCC regulates the licensing, construction,
operation and acquisition of wireless telecommunications systems in the United
States pursuant to the Communications Act of
 
8
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1934, as amended, and the rules, regulations and policies promulgated by the FCC
thereunder (the "Communications Act"). Under the Communications Act, the FCC is
authorized to allocate, grant and deny licenses for PCS frequencies, establish
regulations governing the interconnection of PCS networks with wireline and
other wireless carriers, grant or deny license renewals and applications for
transfer of control or assignment of PCS licenses, and impose fines and
forfeitures for any violations of FCC regulations.
 
    In addition, the Telecommunications Act of 1996 (the "1996 Act"), which
amended the Communications Act, mandates significant changes in existing
telecommunications rules and policies to promote competition, ensure the
availability of telecommunications services to all parts of the nation and to
streamline regulations of the telecommunications industry to remove regulatory
burdens, as competition develops and makes regulation less necessary. The FCC
promulgated and continues to promulgate regulations governing construction and
operation of wireless carriers, licensing (including renewal of licenses) and
technical standards for the provision of PCS services under the Communications
Act, and is implementing the legislative objectives of the 1996 Act, as
discussed below.
 
    PCS LICENSING.  The FCC established PCS service areas in the United States
and its possessions and territories based upon Rand McNally's market definition
of 51 MTAs comprised of 493 smaller BTAs. Each MTA consists of at least two
BTAs.
 
    The FCC has allocated 120 MHz of radio spectrum in the 2 GHz band for
licensed broadband PCS services. The FCC divided the 120 MHz of spectrum into
six individual blocks, each of which is allocated to serve either MTAs or BTAs.
The spectrum allocation includes two 30 MHz blocks ("A" and "B" Blocks) licensed
for each of the 51 MTAs, one 30 MHz block ("C" Block) licensed for each of the
493 BTAs, and three 10 MHz blocks ("D," "E" and "F" Blocks) licensed for each of
the 493 BTAs. A PCS license has been awarded for each MTA and substantially all
of the BTAs in every block, for a total of more than 1,500 licenses. This means
that in any PCS service area as many as six licensees could be operating
separate PCS networks. Under the FCC's rules, a broadband PCS licensee may own
combinations of licenses with total aggregate spectrum coverage of up to 45 MHz
in a single geographic area. The FCC adopted comprehensive rules that outlined
the bidding process, described the bidding application and payment process,
established penalties for certain bid withdrawals, default or disqualification
and established regulatory safeguards.
 
    Several auction winners have filed for bankruptcy. Other winners tendered
approximately 450 licenses acquired in auctions to the FCC for cancellation in
1998. These licenses are scheduled to be reauctioned starting in March of 1999.
 
    On November 9, 1995, in Cincinnati Bell Telephone Co. v. FCC (Case No.
94-3701/4113), the United States Court of Appeals for the Sixth Circuit granted
two petitions for review of an FCC order that had barred certain common
ownership of cellular and PCS interests in the same market, and remanded the
case to the FCC for further proceedings. Neither of the two petitioners had been
barred by cross interests from applying for any of the authorizations the FCC
later granted to the Company. The Company is watching the FCC proceedings
closely.
 
    The grants of licenses to the Company are conditioned upon timely compliance
with the FCC's build-out requirements, I.E., coverage of one-third of the
population of a PCS market within five years of initial license grant and
coverage of two-thirds of that population within ten years. The Company has
exceeded the buildout requirements for both the five year and ten year stages
for each of its MTAs.
 
    The FCC also imposes a requirement that all licensees register and obtain
FCC registration numbers for all of their antenna towers which require prior
Federal Aviation Administration ("FAA") clearance. All broadband PCS
transmitting facilities of the Company also must comply with federal "radio
frequency (RF) radiation requirements." The Company has complied with and
continues to comply with the antenna registration and RF radiation requirements.
 
    The FCC enhanced 911 ("E911") regulations require broadband PCS operators to
"be capable of transmitting 911 calls from individuals with speech or hearing
disabilities through the use of Text Telephone Devices ("TTY")." TTY equipment
currently, however, is not compatible with digital wireless systems such as the
Company's. Consequently, on December 4, 1998, Aerial filed a petition with the
FCC requesting a waiver of the applicability of the TTY connectivity requirement
to the Company's digital
 
                                                                               9
<PAGE>
system. On December 30, 1998, the FCC granted the Company, along with over 100
other wireless operators, a temporary waiver of the regulation. Equipment
manufacturers are developing hardware and software that will make TTY devices
compatible with the digital wireless technologies used by the Company and other
wireless service providers. The Company is working with manufacturers and other
members of the wireless industry in developing solutions for users of TTY
devices.
 
    The E911 regulations also require broadband PCS operators to determine the
approximate location of persons making the emergency calls. On February 5, 1999,
the Company filed a petition requesting a waiver to clarify that handset based
location technology will meet the FCC's E911 location requirements. A waiver
will enable the Company to be compliant with the location requirements by
introducing new handsets that have the capability of being located rather than
installing very expensive upgraded equipment throughout the Company's entire
network. The Company's waiver and dozens of other wireless operators' waiver
requests are pending before the FCC.
 
    The FCC licenses granted to the Company are issued for a ten-year period
expiring June 23, 2005, and may be renewed. In the event challengers file
competing applications in response to any of the Company's renewal filings, the
FCC has rules and regulations providing that the application of the licensee
seeking renewal will be granted and the application of the challenger will not
be considered in the event that the broadband PCS licensee involved has (i)
provided "substantial" service, which is defined as "sound, favorable and
substantially above a level of mediocre service just minimally justifying
renewal" and (ii) substantially complied with FCC rules, policies and the
Communications Act. Although the Company is unaware of any circumstances which
would prevent the approval of any future renewal applications, there can be no
guarantee that the Company's licenses will be renewed by the FCC in the future.
Moreover, although revocation and involuntary modification of licenses are
extraordinary regulatory measures, the FCC does have the authority to restrict
the operation of licensed facilities or revoke or modify licenses.
 
    The FCC has proceedings in process which could open up other frequency bands
for wireless telecommunications and PCS-like services. There can be no assurance
that such proceedings will not result in additional wireless competition.
 
    In addition, there are citizenship requirements, assignment requirements and
other federal rules and regulations that may affect the business of the Company.
 
    RECENT EVENTS.  There are certain regulatory proceedings currently pending
before the FCC that are of particular importance to the broadband PCS industry.
 
    The FCC is expected to give the telecommunications industry guidance as to
the implementation of the Communications Assistance for Law Enforcement Act
("CALEA"). Due to a conflict between manufacturing standards and law enforcement
requirements, the FCC extended the compliance date to June 30, 2000.
 
    The FCC has adopted a limited expansion of the obligation of cellular
carriers to serve the subscribers of broadband PCS providers, among others, even
though neither the subscribers or the PCS providers involved have a pre-existing
service relationship with such cellular carrier. Under these new policies,
broadband PCS providers may offer their subscribers handsets which are capable
of operating over broadband PCS and cellular networks so that when their
subscribers are out of range of broadband PCS networks, they will be able to
obtain non-automatic access to cellular networks. The FCC expects that
implementation of these roaming capabilities will promote competition between
broadband PCS and cellular service providers. The FCC is considering whether all
cellular, broadband PCS and certain SMR providers should be required to provide
"automatic" roaming service to other providers (i.e., carrier-to-carrier roaming
service) during a five year period commencing after the last group of initial
broadband PCS licenses are awarded which is expected to occur in 1999.
 
    The FCC has adopted requirements which will make it possible for subscribers
to retain, subject to certain geographic and other limitations, their existing
telephone numbers when they switch from one service provider to another. This
numbering portability will include switching between local exchange carrier
("LEC") and other wireline providers, between wireless service providers and
between LEC/ wireline and wireless providers. LECs in the 100 largest MSAs had
implementation deadlines by the end of 1998 at those switches which received
specific requests for numbering portability. The FCC recently
 
10
<PAGE>
extended the compliance date for cellular, broadband PCS, and certain other
wireless providers to November 24, 2002.
 
    The FCC also has pending proceedings: (1) to ensure that the customers of
wireless providers, among others, receive complete, accurate and understandable
bills, (2) to establish effective safeguards to protect against unauthorized
access to certain customer information (i.e., CPNI), (3) to retain, relax or
repeal its 45 MHZ spectrum cap on the amount of broadband PCS and cellular
spectrum which entities under common ownership or control may hold in any single
market and its related cellular cross-interest restrictions, (4) to devise
guidelines for the operation and administration of universal service support
mechanisms as applied to wireless providers, and (5) to implement requirements
for wireless providers to set rates for interstate interexchange services in
each state at levels no higher than the rates charged to subscribers in any
other state.
 
    The FCC also is continuing to implement the 1996 Act. The 1996 Act provides
that implementing its legislative objectives will be the task of the FCC, the
state public utilities commissions and a Federal-State Joint Board. Much of this
implementation has and continues to be proceeding in numerous, concurrent
proceedings with aggressive deadlines. The Company cannot predict the full
extent and nature of developments of the 1996 Act which will depend, in part,
upon interrelationships among state and federal regulators.
 
    The primary purpose and effect of the 1996 Act is to open all
telecommunications markets to competition -- including local telephone service.
The 1996 Act makes most direct or indirect state and local barriers to
competition unlawful. It directs the FCC to preempt all inconsistent state and
local laws and regulations, after notice and comment proceedings. It also
enables electric and other utilities to engage in telecommunications service
through qualifying subsidiaries.
 
    Only narrow powers over competitive entry are left to state and local
authorities. Each state retains the power to impose competitively neutral
requirements that are consistent with the 1996 Act's universal service provision
and necessary for universal services, public safety and welfare, continued
service quality and consumer rights.
 
    The 1996 Act establishes principles and a process for implementing a
modified "universal service" policy. This policy seeks nationwide, affordable
service and access to advanced telecommunications and information services. It
calls for reasonably comparable urban and rural rates and services. The 1996 Act
also requires universal service to schools, libraries and rural health
facilities at discounted rates. In a series of orders adopted in 1997, the FCC
established universal service support mechanisms which require
telecommunications providers, including all wireless carriers, to contribute.
The Company has made the required Universal Service Worksheet filings and makes
the required periodic payments.
 
    Since enactment, the FCC has adopted orders implementing certain local
competition provisions of the 1996 Act. The FCC found that broadband PCS and
certain other wireless providers that are entitled to reciprocal compensation,
may not be charged for LEC-originated traffic or for code opening/per-number
fees, and may obtain LEC interconnection subject to the terms of the 1996 Act.
Appeals were taken to the United States Supreme Court from these FCC orders by
numerous parties alleging that the FCC has exceeded its statutory mandate, among
other matters. On January 25,1999, the U.S. Supreme Court upheld the FCC's
general jurisdiction to implement the local competition provisions of the 1996
Act.
 
    STATE AND LOCAL REGULATION  The scope of state regulatory authorities covers
such matters as the terms and conditions of interconnection between LECs and
wireless carriers with respect to intrastate services, customer billing
information and practices, billing disputes, other consumer protection matters,
facilities construction issues and transfers of control, among other matters. In
these areas, particularly the terms and conditions of interconnection between
LECs and wireless providers, the FCC and state regulatory authorities share
regulatory responsibilities with respect to interstate and intrastate issues,
respectively.
 
    The FCC has pending numerous petitions for pre-emption of state and local
regulations which allege such regulations prohibit or impair the provision of
interstate or intrastate telecommunications services. It has also requested
public comment on a petition requesting pre-emption of moratoria imposed by
state and local governments on siting of telecommunications facilities, the
imposition of
 
                                                                              11
<PAGE>
state taxes on the gross receipts of commercial mobile radio service ("CMRS")
providers and other proposed state taxes based on the asset value of CMRS
licenses awarded by the FCC. The FCC has been actively involved in educating
state and local regulatory and zoning authorities as to the prohibitions in the
1996 Act against the creation of unreasonable and discriminatory zoning,
taxation or other barriers to new wireless providers.
 
    The FCC is required to forbear from applying any statutory or regulatory
provision that is not necessary to keep telecommunications rates and terms
reasonable or to protect consumers. A state may not apply a statutory or
regulatory provision that the FCC decides to forbear from applying. In addition,
the FCC must review its telecommunications regulations every two years and
change any that are no longer necessary.
 
    The Company and its subsidiaries have been and intend to remain active
participants in proceedings before the FCC and before state regulatory and
zoning authorities. Proceedings with respect to the foregoing policy issues
before the FCC and state regulatory authorities could have significant impacts
on the competitive market structure among wireless providers and the
relationships between wireless providers and other carriers. The Company is
unable to predict the scope, pace, or financial impact of policy changes which
could be adopted in these proceedings.
 
SEASONALITY
 
    Management believes there exists within the wireless telecommunications
industry a seasonality in both revenues, which tend to be greater in the fourth
quarter due to customer growth, and operating expenses, which tend to be higher
in the fourth quarter due to increased marketing activities and customer growth,
which may cause operating income (loss) to vary from quarter to quarter.
 
EMPLOYEES
 
    As of December 31, 1998, the Company had a total of 1,907 employees. None of
the Company's employees is represented by a labor union. The Company considers
its relations with its employees to be good.
 
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
                        SAFE HARBOR CAUTIONARY STATEMENT
 
    THIS FORM 10-K CONTAINS "FORWARD-LOOKING" STATEMENTS, AS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, THAT ARE BASED ON CURRENT
EXPECTATIONS, ESTIMATES AND PROJECTIONS. STATEMENTS THAT ARE NOT HISTORICAL
FACTS, INCLUDING STATEMENTS ABOUT THE COMPANY'S BELIEFS AND EXPECTATIONS ARE
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS CONTAIN POTENTIAL RISKS AND
UNCERTAINTIES AND, THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
 
    IMPORTANT FACTORS THAT MAY AFFECT THESE PROJECTIONS OR EXPECTATIONS INCLUDE,
BUT ARE NOT LIMITED TO: CHANGES IN THE OVERALL ECONOMY; CHANGES IN COMPETITION
IN THE COMPANY'S MARKETS; ADVANCES IN TELECOMMUNICATIONS TECHNOLOGY; CHANGES IN
THE TELECOMMUNICATIONS REGULATORY ENVIRONMENT; PENDING AND FUTURE LITIGATION;
AVAILABILITY OF FUTURE FINANCING; UNANTICIPATED CHANGES IN GROWTH IN PCS
CUSTOMERS, PENETRATION RATES, CHURN RATES AND THE MIX OF PRODUCTS AND SERVICES
OFFERED IN THE COMPANY'S MARKETS AND UNANTICIPATED PROBLEMS WITH THE YEAR 2000
ISSUE. READERS SHOULD EVALUATE ANY STATEMENTS IN LIGHT OF THESE IMPORTANT
FACTORS.
 
ITEM 2. PROPERTIES
 
    The Company currently leases office and warehouse space in each of its PCS
Markets as well as office space for its corporate headquarters in Chicago,
customer service center in Kansas City and National Operations Center in Tampa.
The Company also has leases for its retail store locations and leases certain
cell sites for its digital radio channel (or "BTS") equipment on land, buildings
and other fixed structures at various rentals for various terms. As of December
31, 1998, the Company had 1,180 cell sites in service across all its PCS
markets. The leases provide for monthly rentals at market rates and expire,
subject to renewal options, on various dates through 2021. The Company owns all
five of its
 
12
<PAGE>
switch site buildings serving each of the PCS Markets (the Pittsburgh switch
also serves the Columbus market).
 
ITEM 3. LEGAL PROCEEDINGS
 
    The Company is involved from time to time in routine legal and regulatory
proceedings incidental to its business. The Company does not believe that such
routine legal and regulatory proceedings will have, individually or in the
aggregate, a material adverse effect on the Company. However, concerns raised by
Sonera Ltd. about the spin-off announcement made by TDS have indicated the
possibility of litigation. See Item 1. Business--Proposed TDS Corporate
Restructuring.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matter was submitted to a vote of securities holders during the fourth
quarter of fiscal year 1998.
 
                                                                              13
<PAGE>
--------------------------------------------------------------------------------
                                    PART II
--------------------------------------------------------------------------------
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    Incorporated herein by reference from Exhibit 13, Annual Report section
entitled "Aerial Stock and Dividend Information" and "Market Price Per Common
Share By Quarter."
 
ITEM 6. SELECTED FINANCIAL DATA
 
    Incorporated herein by reference from Exhibit 13, Annual Report section
entitled "Selected Consolidated Financial Data."
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    Incorporated herein by reference from Exhibit 13, Annual Report section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    Incorporated herein by reference from Exhibit 13, Annual Report section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" under the caption "Market Risk."
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    Incorporated herein by reference from Exhibit 13, Annual Report sections
entitled "Consolidated Statements of Operations," "Consolidated Statements of
Cash Flows," "Consolidated Balance Sheets," "Consolidated Statements of Changes
in Shareholders' Equity," "Notes to Consolidated Financial Statements" and
"Report of Independent Public Accountants."
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    None.
 
14
<PAGE>
--------------------------------------------------------------------------------
                                    PART III
--------------------------------------------------------------------------------
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    Incorporated herein by reference from Proxy Statement sections entitled
"Election of Directors" and "Executive Officers."
 
ITEM 11. EXECUTIVE COMPENSATION
 
    Incorporated herein by reference from Proxy Statement section entitled
"Executive Compensation" except for the information specified in item 402 (a)
(8) of Regulation S-K under the Securities Exchange Act of 1934, as amended.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Incorporated herein by reference from Proxy Statement section entitled
"Security Ownership of Certain Beneficial Owners and Management."
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    Incorporated herein by reference from Proxy Statement section entitled
"Certain Relationships and Related Transactions."
 
                                                                              15
<PAGE>
--------------------------------------------------------------------------------
                                    PART IV
--------------------------------------------------------------------------------
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
    The following documents are filed as a part of this report:
 
(a) (1) Financial Statements
 
<TABLE>
<S>                                                                  <C>
    Consolidated Statements of Operations..........................  Annual Report*
    Consolidated Statements of Cash Flows..........................  Annual Report*
    Consolidated Balance Sheets....................................  Annual Report*
    Consolidated Statements of Changes in Shareholders' Equity.....  Annual Report*
    Notes to Consolidated Financial Statements.....................  Annual Report*
    Report of Independent Public Accountants.......................  Annual Report*
</TABLE>
 
------------------------
 
*   Incorporated herein by reference from Exhibit 13.
 
    (2) Schedules
 
<TABLE>
<CAPTION>
                                                                                    LOCATION
                                                                                    --------
 
<S>    <C>                                                                          <C>
Report of Independent Public Accountants on Financial Statement Schedule..........  page 18
 
II.    Valuation and Qualifying Accounts for each of the Three Years in the Period
       Ended December 31, 1998....................................................  page 19
 
All other schedules have been omitted because they are not applicable or not
  required or because the required information is shown in the financial
  statements or notes thereto.
</TABLE>
 
    (3) Exhibits
 
The exhibits set forth in the accompanying Index to Exhibits are filed as a part
of this Report. The following is a list of each management contract or
compensatory plan or arrangement required to be filed as an exhibit to this form
pursuant to Item 14 (c) of this Report.
 
EXHIBIT
 NUMBER   DESCRIPTION
--------  ----------------------------------------------------------------------
 10.8     Aerial Communications, Inc. 1996 Long-Term Incentive Plan, as amended,
          is hereby incorporated by reference to Exhibit 99.1 to the Company's
          registration statement on Form S-8 (Registration No 333-06471).
 10.9     Description of Terms of Signing Letter with Donald W. Warkentin dated
          June 7, 1995, is hereby incorporated by reference to Exhibit 10.15 to
          the Company's Annual Report on Form 10-K for the year ended December
          31, 1996.
 10.10    Aerial Communications, Inc. Compensation Plan for Non-Employee
          Directors is hereby incorporated by reference to Exhibit 99.1 to the
          Company's Form S-8 dated May 2, 1997 (Registration No. 333-26429).
 10.11    Description of Supplemental Benefit Agreement with Donald W. Warkentin
          dated August 2, 1996, is hereby incorporated by reference to Exhibit
          10.17 to the Company's Annual Report on Form 10-K for the year ended
          December 31, 1997.
 10.12    Amendment to the Aerial Communications, Inc. 1996 Long-Term Incentive
          Plan is hereby incorporated by reference to Exhibit 99.2 of the
          Company's Form S-8 dated April 30, 1998 (Registration No. 333-51561).
 
(b) Reports on Form 8-K filed during the quarter ended December 31, 1998.
 
    On November 9, 1998, the Company filed a Current Report on Form 8-K dated
June 30, 1998, for the purpose of filing a redacted copy of the June 30, 1998,
Credit Agreement between Nokia Telecommunications Inc., and the Company.
 
16
<PAGE>
    The Company filed a Current Report on Form 8-K dated December 18, 1998, for
the purpose of filing the news release dated December 18, 1998, concerning the
Company's announcement that the offer from its parent company, Telephone and
Data Systems, Inc. [AMEX: TDS], to acquire all of the issued and outstanding
Common Shares of the Company not already owned by TDS had been withdrawn. TDS
said that it is pursuing a tax free spin-off of its 82.3% interest in Aerial, as
well as reviewing other alternatives.
 
                                                                              17
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                        ON FINANCIAL STATEMENT SCHEDULE
 
To the Shareholders and Board of Directors of AERIAL COMMUNICATIONS, INC.:
 
    We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the Aerial Communications,
Inc. and Subsidiaries Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 27, 1999
(except with respect to the matter discussed in Note 10, as to which the date is
March 15, 1999). Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The financial
statement schedule listed in Item 14 (a) (2) is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This financial statement schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
 
ARTHUR ANDERSEN LLP
 
Chicago, Illinois
January 27, 1999
(except with respect to the matter discussed in Note 10, as to which the date is
March 15, 1999)
 
18
<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                          COLUMN C
                                                                            COLUMN B     ADDITIONS                   COLUMN E
                                                                           BALANCE AT    CHARGED TO                 BALANCE AT
                                COLUMN A                                  BEGINNING OF   COSTS AND     COLUMN D       END OF
                              DESCRIPTION                                    PERIOD       EXPENSES    DEDUCTIONS      PERIOD
------------------------------------------------------------------------  ------------  ------------  -----------  ------------
<S>                                                                       <C>           <C>           <C>          <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
  Valuation Allowance for Deferred Tax Assets...........................  $    129,412  $    148,370  $        --  $    277,782
  Allowance for Doubtful Accounts deducted from Accounts Receivable.....         7,252        23,239       24,616         5,875
FOR THE YEAR ENDED DECEMBER 31, 1997
  Valuation Allowance for Deferred Tax Assets...........................        15,029       114,383           --       129,412
  Allowance for Doubtful Accounts deducted from Accounts Receivable.....            --         7,252           --         7,252
FOR THE YEAR ENDED DECEMBER 31, 1996
  Valuation Allowance for Deferred Tax Assets...........................  $      1,291  $     13,738  $        --  $     15,029
</TABLE>
 
                                                                              19
<PAGE>
                                   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.
 
<TABLE>
<S>                                             <C>        <C>
                                                AERIAL COMMUNICATIONS, INC.
 
                                                By:                 /S/ DONALD W. WARKENTIN
                                                           ------------------------------------------
                                                                      Donald W. Warkentin
                                                              PRESIDENT (CHIEF EXECUTIVE OFFICER)
 
                                                By:                   /S/ J. CLARKE SMITH
                                                           ------------------------------------------
                                                                        J. Clarke Smith
                                                                   VICE PRESIDENT-FINANCE AND
                                                                  ADMINISTRATION AND TREASURER
                                                                   (CHIEF FINANCIAL OFFICER)
 
                                                By:                   /S/ B. SCOTT DAILEY
                                                           ------------------------------------------
                                                                        B. Scott Dailey
                                                           CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)
</TABLE>
 
Dated: March 30, 1999
 
    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(S)                     DATE
--------------------------------------------------  ------------------------------  ---------------------
<S>                                                 <C>                             <C>
             /s/ DONALD W. WARKENTIN                DIRECTOR                           March 30, 1999
        ----------------------------------
               Donald W. Warkentin
 
               /s/ J. CLARKE SMITH                  DIRECTOR                           March 30, 1999
        ----------------------------------
                 J. Clarke Smith
 
            /s/ LEROY T. CARLSON, JR.               CHAIRMAN AND DIRECTOR              March 30, 1999
        ----------------------------------
              LeRoy T. Carlson, Jr.
 
               /s/ LEROY T. CARLSON                 DIRECTOR                           March 30, 1999
        ----------------------------------
                 LeRoy T. Carlson
 
               /s/ SANDRA L. HELTON                 DIRECTOR                           March 30, 1999
        ----------------------------------
                 Sandra L. Helton
 
             /s/ RUDOLPH E. HORNACEK                DIRECTOR                           March 30, 1999
        ----------------------------------
               Rudolph E. Hornacek
 
                /s/ JAMES BARR III                  DIRECTOR                           March 30, 1999
        ----------------------------------
                  James Barr III
 
             /s/ WALTER C.D. CARLSON                DIRECTOR                           March 30, 1999
        ----------------------------------
               Walter C.D. Carlson
 
                /s/ JOHN D. FOSTER                  DIRECTOR                           March 30, 1999
        ----------------------------------
                  John D. Foster
 
            /s/ THOMAS W. WILSON, JR.               DIRECTOR                           March 30, 1999
        ----------------------------------
              Thomas W. Wilson, Jr.
</TABLE>
 
20
<PAGE>
<TABLE>
<CAPTION>
                    SIGNATURE                                  TITLE(S)                     DATE
--------------------------------------------------  ------------------------------  ---------------------
                /s/ MATTI MAKKONEN                  DIRECTOR                           March 30, 1999
        ----------------------------------
                  Matti Makkonen
<S>                                                 <C>                             <C>
 
               /s/ PERTTI MIETTUNEN                 DIRECTOR                           March 30, 1999
        ----------------------------------
                 Pertti Miettunen
</TABLE>
 
                                                                              21
<PAGE>
--------------------------------------------------------------------------------
                                 EXHIBIT INDEX
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                  DESCRIPTION
--------  ----------------------------------------------------------------------
<C>       <S>
 
  3.1     Restated Certificate of Incorporation of the Company, is hereby
          incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q
          for the quarter ended June 30, 1997.
 
  3.2     Restated Bylaws of the Company.
 
  4.1     Trust Indenture Agreement dated as of November 4, 1996, between the
          Company as issuer, TDS as guarantor, and The First National Bank of
          Chicago, as trustee for the Company's Series A Zero Coupon Notes, due
          2006, is hereby incorporated by reference to Exhibit 4.1 to the
          Company's Form 8-K dated November 4, 1996.
 
  4.2     Trust Indenture Agreement dated as of February 5, 1998, between the
          Company as issuer, TDS as guarantor, and The First National Bank of
          Chicago, as trustee for the Company's Series B Zero Coupon Notes, due
          2008, is hereby incorporated by reference to Exhibit 4.1 to the
          Company's Form 8-K dated February 5, 1998.
 
  9.1(a)  Voting Trust Agreement, dated as of June 30, 1989, is hereby
          incorporated by reference to an exhibit to Post-Effective Amendment
          No. 3 to the TDS Registration Statement on Form S-1, No. 33-12943.
 
  9.1(b)  Amendment dated as of May 9, 1991, to the Voting Trust Agreement dated
          as of June 30, 1989, is hereby incorporated by reference to Exhibit
          9.2 to TDS's Annual Report on Form 10-K for the year ended December
          31, 1991.
 
  9.1(c)  Amendment dated as of November 20, 1992, to the Voting Trust Agreement
          dated as of June 30, 1989, as amended, is hereby incorporated by
          reference to Exhibit 9.1(c) to TDS's Annual Report on Form 10-K for
          the year ended December 31, 1992.
 
  9.1(d)  Amendment dated as of May 22, 1998, to the Voting Trust Agreement
          dated as of June 30, 1989, as amended, is hereby incorporated by
          reference to Exhibit 99.3 to TDS's Current Report on Form 8-K filed on
          June 5, 1998.
 
 10.1     Form of Exchange Agreement between the Company and TDS, is hereby
          incorporated by reference to Exhibit 10.1 to the Company's Amendment
          No. 1 to Form S-1 (Registration No. 333-1514).
 
 10.2     Form of Cash Management Agreement between the Company and TDS, is
          hereby incorporated by reference to Exhibit 10.5 to the Company's
          Amendment No. 1 to Form S-1 (Registration No. 333-1514).
 
 10.3     Form of Intercompany Agreement between the Company and TDS, is hereby
          incorporated by reference to Exhibit 10.6 to the Company's Amendment
          No. 1 to Form S-1 (Registration No. 333-1514).
 
 10.4     Form of Registration Rights Agreement between the Company and TDS, is
          hereby incorporated by reference to Exhibit 10.7 to the Company's
          Amendment No. 1 to Form S-1 (Registration No. 333-1514).
 
 10.5     Form of Insurance Cost Sharing Agreement between the Company and TDS,
          is hereby incorporated by reference to Exhibit 10.8 to the Company's
          Amendment No. 1 to Form S-1 (Registration No. 333-1514).
 
 10.6     Form of Employee Benefit Plans Agreement between the Company and TDS,
          is hereby incorporated by reference to Exhibit 10.9 to the Company's
          Amendment No. 1 to Form S-1 (Registration No. 333-1514).
</TABLE>
 
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                  DESCRIPTION
--------  ----------------------------------------------------------------------
<C>       <S>
 10.7*    PCS Infrastructure Supply Contract dated as of March 1, 1996, between
          the Company and Nokia Telecommunications Inc., is hereby incorporated
          by reference to Exhibit 10.13 to the Company's Amendment No. 1 to Form
          S-1 (Registration No. 333-1514).
 
 10.8     Aerial Communications, Inc. 1996 Long-Term Incentive Plan, as amended,
          is hereby incorporated by reference to Exhibit 99.1 to the Company's
          registration statement on Form S-8 (Registration No 333-06471).
 
 10.9     Description of Terms of Signing Letter with Donald W. Warkentin dated
          June 7, 1995, is hereby incorporated by reference to Exhibit 10.15 to
          the Company's Annual Report on Form 10-K for the year ended December
          31, 1996.
 
 10.10    Aerial Communications, Inc. Compensation Plan for Non-Employee
          Directors is hereby incorporated by reference to Exhibit 99.1 to the
          Company's Form S-8 dated May 2, 1997 (Registration No. 333-26429).
 
 10.11    Description of Supplemental Benefit Agreement with Donald W. Warkentin
          dated August 2, 1996, is hereby incorporated by reference to Exhibit
          10.17 to the Company's Annual Report on Form 10-K for the year ended
          December 31, 1997.
 
 10.12    Amendment to the Aerial Communications, Inc. 1996 Long-Term Incentive
          Plan is hereby incorporated by reference to Exhibit 99.2 of the
          Company's Form S-8 filed on April 30, 1998 (Registration No.
          333-51561).
 
 10.13    Investment Agreement by and between the Company, Telephone & Data
          Systems, Inc., Aerial Operating Company, Inc. and Sonera Ltd. is
          hereby incorporated by reference to Exhibit 99.2 of the Company's Form
          8-K dated September 8, 1998 and filed on September 17, 1998.
 
 10.14    Registration Rights Agreement by and between the Company and Sonera
          Ltd. is hereby incorporated by reference to Exhibit 99.3 of the
          Company's Form 8-K dated September 8, 1998 and filed on September 17,
          1998.
 
 10.15    Joint Venture Agreement by and between the Company, Aerial Operating
          Company, Inc. and Sonera Corporation U.S., is hereby incorporated by
          reference to Exhibit 99.4 of the Company's Form 8-K dated September 8,
          1998 and filed on September 17, 1998.
 
 10.16    Supplemental Agreement by and between the Company, Aerial Operating
          Company, Inc. and Sonera Ltd. is hereby incorporated by reference to
          Exhibit 99.5 of the Company's Form 8-K dated September 8, 1998 and
          filed September 17, 1998.
 
 10.17    Restated and amended Tax Allocation Agreement by and between the
          Company, Aerial Operating Company, Inc. and Telephone and Data
          Systems, Inc., is hereby incorporated by reference to Exhibit 99.6 of
          the Company's Form 8-K dated September 8, 1998 and filed September 17,
          1998.
 
 10.18    Guaranty Agreement by and between the Company and Telephone and Data
          Systems, Inc., dated August 31, 1998, is hereby incorporated by
          reference to Exhibit 99.7 of the Company's Form 8-K dated September 8,
          1998 and filed on September 17, 1998.
 
 10.19    Purchase Agreement between the Company, Aerial Operating Company,
          Inc., Telephone and Data Systems, Inc. and Sonera Ltd., dated June 1,
          1998, is hereby incorporated by reference to Exhibit 99.9 of the
          Company's Form 8-K dated September 8, 1998 and filed on September 17,
          1998.
 
 10.20(a) Revolving Credit Agreement dated August 31, 1998, by and between
          Telephone and Data Systems, Inc. and Aerial Operating Company, Inc. is
          hereby incorporated by reference to Exhibit 99.8 of the Company's Form
          8-K dated September 8, 1998 and filed on September 17, 1998.
</TABLE>
 
                                                                              23
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                  DESCRIPTION
--------  ----------------------------------------------------------------------
<C>       <S>
 10.20(b) First Amendment dated November 3, 1998, to the Revolving Credit
          Agreement between Telephone and Data Systems, Inc. and Aerial
          Operating Company, Inc.
 
 10.20(c) Second Amendment dated February 15, 1998 to the Revolving Credit
          Agreement between Telephone and Data Systems, Inc and Aerial Operating
          Company, Inc.
 
 10.21*   Credit Agreement dated June 30, 1998, by and between Nokia
          Telecommunications Inc. and the Company, is hereby incorporated by
          reference to Exhibit 99.1 of the Company's Form 8-K dated June 30,
          1998 and filed on November 9, 1998.
 
 10.22    Tax Settlement Agreement dated March 12, 1999, by and between the
          Company, Aerial Operating Company, Inc. and Telephone and Data
          Systems, Inc.
 
 11       Computation of earnings per common share (included in Footnote 2(l) to
          consolidated financial statements in Exhibit 13)
 
 13       Incorporated portions of the 1998 Annual Report to Shareholders
 
 21       List of Subsidiaries of the Registrant
 
 23       Consent of Independent Public Accountants
 
 27       Financial Data Schedule
</TABLE>
 
------------------------
 
* Confidential material appearing in this exhibit was omitted and filed
  separately with the Securities and Exchange Commission in accordance with Rule
  406 promulgated under the Securities Act of 1933.
 
24