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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, 1996
 
                                          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._______
 
    As of February 28, 1997, the aggregate market value of registrant's Common
Shares held by nonaffiliates was approximately $69 million (based upon the
closing price of the Common Shares on February 28, 1997, of $5 5/8, as reported
by the NASDAQ).
 
    The number of shares outstanding of each of the registrant's classes of
common stock, as of February 28, 1997, is 31,387,781 Common 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 1996 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 12,
1997, 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
 
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                                                                   PAGE NUMBER
                                                                 OR REFERENCE(1)
                                                                 ---------------
 Item 1.  Business.............................................         3
 Item 2.  Properties...........................................        12
 Item 3.  Legal Proceedings....................................        12
 Item 4.  Submission of Matters to a Vote of Security
            Holders............................................        12
 Item 5.  Market for Registrant's Common Equity and Related
            Stockholder Matters................................        13(2)
 Item 6.  Selected Financial Data..............................        13(3)
 Item 7.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations................        13(4)
 Item 8.  Financial Statements and Supplementary Data..........        13(5)
 Item 9.  Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure................        13
Item 10.  Directors and Executive Officers of the Registrant...        14(6)
Item 11.  Executive Compensation...............................        14(7)
Item 12.  Security Ownership of Certain Beneficial Owners and
            Management.........................................        14(8)
Item 13.  Certain Relationships and Related Transactions.......        14(9)
Item 14.  Exhibits, Financial Statement Schedules and Reports
            on Form 8-K........................................        15
 
---------
 
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, 1996 ("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 12, 1997
    ("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>
--------------------------------------------------------------------------------
 
                                                                       [LOGO]
AERIAL COMMUNICATIONS, INC.
8410 WEST BRYN MAWR AVENUE - SUITE 1100 - CHICAGO, IL 60631
TELEPHONE (773) 399-4200
 
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                                     PART I
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ITEM 1. BUSINESS
 
COMPANY
 
    Aerial Communications, Inc. (NASDAQ symbol "AERL" or the "Company" or
"Aerial"), together with its subsidiaries, is a licensee of Personal
Communications Services ("PCS") in the United States, with licenses to provide
service in the Minneapolis, Tampa-St. Petersburg-Orlando, Houston, Pittsburgh,
Kansas City and Columbus Major Trading Areas ("MTAs") (collectively, the "PCS
Markets"). The PCS Markets include approximately 27.6 million population
equivalents ("POPs"). The Company is constructing networks for its PCS Markets
using Global System for Mobile Communication ("GSM") technology. The Company has
commenced development of a marketing program, intends to launch commercial
service in its first market in March 1997, and expects to complete construction
of its PCS networks within twelve months of launch of commercial service.
 
    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, 1996, representing 82.8% percent of the combined
total of the Company's outstanding Common and Series A Common Shares and 98.1%
percent of the voting power.
 
    The Company sold in 1996 its licenses covering the Guam and Alaska Major
Trading Areas for an aggregate pretax gain of $2.6 million.
 
    PCS is the term used to describe the wireless telecommunications services
that will be offered by those companies that acquired or will acquire 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 will initially compete directly with existing
cellular telephone, paging and specialized mobile radio services. PCS will also
include features which have not traditionally been offered by cellular
providers, such as: (i) the provision of all services to one untethered, mobile
number; (ii) lower-priced service options; and (iii) data transmissions to and
from portable computers, advanced paging services and facsimile services. The
Company believes that these enhanced features will contribute to the
acceleration of growth in the wireless telecommunications market. The Company
believes that PCS providers will be the first wireless direct competitors to
cellular providers and the first to offer mass market all-digital mobile
networks. In addition, 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
 
                                                                               3
<PAGE>
everyday use. The Company is being structured to meet the increasingly
competitive challenges of the wireless telecommunications marketplace, and will
have a marketing-oriented approach focused on serving its customers and their
needs. Since 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. Since its introduction in 1983, the number of domestic cellular
telephone subscribers, both analog and digital, has grown from approximately
91,600 in 1984 to an estimated 43.9 million at December 31, 1996, which
represents U.S. market penetration of approximately 16.3%.
 
    During 1996 the Company contracted for network equipment, billing systems,
support software and the majority of equipment and services necessary to launch
service. All of the senior management positions and most other key management
positions have been staffed. The Company has completed the final 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
majority of the cell sites required to launch and commenced zoning and building
the sites. Key operating and marketing staff are in place in each of the PCS
Markets. The initial coverage of the Company's PCS networks will include the
major metropolitan areas within the PCS Markets, as well as portions of the
major highway corridors extending out from those areas. The Company expects to
complete construction of its PCS networks within twelve months of launch of
commercial service, at which time its PCS networks are anticipated to cover
approximately 80% of the population within the PCS Markets.
 
    In November 1996, the Company entered into a Member Control Agreement
("Agreement") forming a joint venture with Rural Cellular Corporation ("RCC") to
build out certain rural areas covering approximately 530,000 POPs in the
Minneapolis MTA. The Company will contribute 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 will be responsible for building
out the network and for the ongoing operations. It is anticipated that the joint
venture will purchase services such as network switching and customer billing
from the Company. The network will use GSM technology. The Company expects to
benefit from the joint venture by extending the GSM footprint without the
capital investment required to build out the network. The Agreement is awaiting
FCC approval.
 
TECHNOLOGY
 
    By implementing GSM technology the Company believes it will be able to
launch more services earlier than it could with other available technologies as
well as rapidly complete the initial construction of its networks. Since GSM
technology has been in use successfully in Europe since 1992, the Company does
not expect to encounter network-related problems. Generally, it takes a number
of years to successfully launch a new wireless technology into commercial
operation, with problems arising in both handsets and network infrastructure. By
using GSM technology, the Company believes that these problems have already been
mitigated. GSM also offers sophisticated operations and maintenance systems
which are expected to facilitate the integration and launch of PCS networks
containing several hundred cell sites. The Company will offer a full range of
telecommunications services, including easy-to-use, interactive menu-driven
phones, and advanced features such as Caller ID 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.
 
    To date, in North America, nearly 20 PCS companies have chosen or are
expected to choose GSM. With the completion of the U.S. broadband PCS auctions,
license areas of GSM committed operators now total more than 260 million POPs
(representing 98.3% of the U.S. population). The Company anticipates that its
customers will be able to roam throughout the United States and Canada, either
on other GSM-based PCS networks or by using dual-mode handsets that also can be
used on existing cellular networks.
 
    GSM is not directly 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
 
4
<PAGE>
compatibility between GSM and the existing analog cellular systems will be
achieved with the use of dual-mode handsets. Dual-mode handsets are expected to
be available in late 1997. Because analog cellular service is available
nationwide, the Company expects that PCS customers will be able to roam into
many service areas served by analog cellular providers.
 
WIRELESS TELECOMMUNICATIONS INDUSTRY
 
    OVERVIEW.  Wireless service is currently available using analog or digital
technology. Most wireless services currently transmit 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 single number (or "find me") service, 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).
 
    While digital technology serves generally to reduce transmission
interference relative to analog technology, capacity limitations in the 8 Kb
vocoder cellular digital handsets now deployed by several digital wireless
operators using TDMA technology also cause a perceptible decline in voice
quality. This gap in voice quality has proven to be a significant barrier to
cellular operators attempting to switch their customers from analog to digital
service. Manufacturers have developed enhanced 13 Kb vocoder digital handsets
for both PCS and digital cellular networks using GSM or CDMA technology. These
new handsets are expected to offer digital voice transmission comparable to
wireline quality.
 
    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 will also be
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"
 
                                                                               5
<PAGE>
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 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.
 
PRODUCTS AND SERVICES
 
    The Company's fundamental customer proposition will be an affordable,
reliable, high-quality mobile voice communications service. At the commencement
of commercial service, the Company intends to offer 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 is competitive with
that of current cellular operators. The Company will also provide roaming
capabilities, through agreements with other GSM and cellular operators.
 
    The Company will provide several distinct services and features, certain of
which are currently available only on PCS networks. These include:
 
    THE SMART CARD.  GSM technology employs a credit-card sized Smart Card which
contains a microchip containing detailed information about a customer's service
profile. The Smart Card will allow 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
will provide easy-to-use, interactive menu-driven phones that will enable
customers to utilize the features available in a GSM network. These handsets
will 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 will provide greater security from
eavesdropping and cloning than existing 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.
 
6
<PAGE>
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 will be 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 will emphasize the value of the
Company's high-quality, innovative services and will be supported by heavily
promoting the Aerial brand name. This will be supported by a substantial
advertising program.
 
    The Company plans to offer 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 will utilize traditional
sales channels which include mass merchandisers and retail outlets, company
retail stores, sales agents and a direct sales force. 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, neighborhood sales and on-line sales.
 
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. In March 1996, the Company selected Nokia Telecommunications Inc. as its
sole supplier of digital radio channel and switching infrastructure equipment
during the initial build-out of its PCS networks.
 
THE COMPANY'S PCS MARKETS
 
    The PCS Markets cover large areas with attractive demographic
characteristics including growing populations, high population densities,
favorable commuting patterns, high median household incomes and favorable
business climates. The Company believes the geographic diversity of the PCS
Markets mitigates adverse consequences which may result from an economic
slowdown in one particular region.
 
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 will compete 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). Each of
these PCS licensees is designing and constructing their respective networks. PCS
PrimeCo's networks are commercially operational in Houston and Tampa. Sprint
Spectrum has launched commercial service in Pittsburgh. The FCC has awarded the
initial licenses for the Block C spectrum and has recently announced the winning
bidders for the D, E and F Blocks. The Company also expects that existing
cellular providers in the PCS Markets, most of which have an infrastructure in
place and have been operational for a number of years, will upgrade their
networks to provide comparable services in competition with the Company.
Principal cellular providers in the PCS Markets are AT&T Wireless
 
                                                                               7
<PAGE>
Services, Inc., BellSouth Mobility, Inc., GTE Mobile Communications Corporation,
AirTouch Communications, Inc., U S WEST NewVector Group, Inc., Bell
Atlantic-NYNEX Mobile and Ameritech Cellular.
 
    The Company also expects to compete with other communications technologies
that now exist, such as paging, enhanced specialized mobile radio ("ESMR") and
global satellite networks, and expects to compete with cellular and PCS
resellers. 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. In addition, the Company may face competition from
technologies that may be introduced in the future.
 
    All of such competition is expected to be 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.
 
    Handsets used for GSM-based PCS networks will not be automatically
compatible with cellular systems, and vice versa. The Company expects dual-mode
handsets to be available in late 1997, which will permit its customers to roam
by using the existing cellular wireless network in other markets. Until then,
this lack of interoperability may impede the Company's ability to attract
current cellular customers or potential new wireless communication customers
that desire the ability to access different service providers in the same
market.
 
    The Company anticipates that market prices for two-way wireless services
generally will 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 OF WIRELESS TELECOMMUNICATIONS INDUSTRY
 
    REGULATORY ENVIRONMENT.  The FCC regulates the licensing, construction,
operation and acquisition of wireless telecommunications systems in the U.S.
pursuant to the Communications Act of 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 forfeitures for 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 unnecessary. The FCC
promulgated and continues to promulgate regulations governing construction and
operation of wireless providers, 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.
 
8
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    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 BTA in every
block, for a total of more than 2,000 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. The FCC has awarded the initial licenses for the C Block spectrum
and has recently announced the winning bidders for the D, E and F Blocks.
 
    An appeal has been taken to the FCC from the Bureau order by a party
alleging that some of the authorizations were granted to parties which had
engaged in collusion in the competitive bidding process. That party has also
sought review of the denial of its motion for a stay of the grant of A and B
Block authorizations. No allegation of collusion was made against TDS or the
Company. The Company would defend vigorously any challenges to the
authorizations it has been granted.
 
    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.
 
    In compliance with FCC restrictions on common ownership of cellular and
broadband PCS interests in overlapping market areas, United States Cellular,
another subsidiary of TDS, entered into a series of arrangements for the
divestiture or restructuring of certain of its cellular interests in market
areas where the Company was awarded broadband PCS licenses. A number of these
proposed arrangements required FCC approval of assignment or transfer of control
applications before they could be consummated. These applications have been
approved by the FCC and have been consummated.
 
    The grants of licenses to the Company are also 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. A significant factor
affecting the schedule and cost of the Company's network implementation will be
the relocation of existing private microwave facilities which operate on the
same frequencies to be used for the Company's broadband PCS operations. Under
the FCC's policies, if the Company decides that any existing microwave facility
must be relocated, it is required to provide substitute facilities at its own
expense so that the companies using these existing facilities may continue to
have access to the same or equivalent communications capabilities. The FCC
concluded proceedings in 1996 clarifying and changing its requirements for
permissible relocation costs, adopting incentives to encourage reliance on
voluntary relocation agreements and requiring the sharing of relocation costs
where the relocation of private microwave facilities benefits multiple broadband
PCS licenses.
 
    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 policies 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" performance, 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
assurance that the Company's licenses will be renewed by the FCC in the
 
                                                                               9
<PAGE>
future. Moreover, although revocation and involuntary modification of licenses
are extraordinary regulatory measures, the FCC has 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 regulations and requirements which may affect the business of the
Company.
 
    RECENT EVENTS.  The FCC adopted certain significant decisions during 1996.
In one decision, the FCC required that all licensees register and obtain FCC
registration numbers for all of their antenna towers which require prior Federal
Aviation Administration ("FAA") clearance. The FCC also amended its
environmental protection rules to adopt new guidelines and procedures for
evaluating the environmental effects of radio frequency ("RF") emissions.
 
    The FCC has also imposed new "enhanced 911" regulations in broadband PCS
systems to determine the precise location of the person making the emergency
call. The new rules require broadband PCS providers to work with local public
safety officials to process 911 calls, including those made from mobile
telephones not registered with the broadband PCS provider, and to meet phased
deadlines for implementing these capabilities.
 
    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 the subscribers involved have no pre-existing service relationship with
that 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 has adopted requirements which will make it possible for subscribers
to retain, at the same location, 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 have implementation deadlines by the end of 1998.
Broadband PCS, cellular and certain other wireless providers have phased
implementation deadlines in 1998 and 1999.
 
    The FCC is also proceeding 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 is proceeding in numerous, concurrent proceedings with aggressive
deadlines. The Company cannot predict the full extent, nature and
interrelationships among state and federal implementation and other responses to
the 1996 Act.
 
    The primary purpose and effect of the new law 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. While a state may not impose requirements
that effectively function as barriers to entry, it retains limited authority to
regulate certain competitive practices in rural telephone company service areas.
 
    Since enactment, the FCC has adopted orders implementing the local
competition provisions of the 1996 Act. The FCC found that broadband PCS and
certain other wireless providers 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
have been taken
 
10
<PAGE>
to the United States Court of Appeals for the Eighth Circuit from these FCC
orders by numerous parties alleging that the FCC has exceeded its statutory
mandate, among other matters. The Eighth Circuit Court granted a stay of certain
rules adopted in the FCC orders pending its decision on the merits of these
appeals.
 
    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. The FCC has proceedings pending to address
recommendations made by the Joint Board with respect to the implementation of
the universal service provisions of the 1996 Act, including, among other issues,
the size of the universal service fund and the assessment mechanism to determine
how much individual wireless carriers will be required to contribute.
 
    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 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 and local 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
 
    Generally, the Company's operating results are not significantly affected by
seasonal factors.
 
EMPLOYEES
 
    As of December 31, 1996, the Company had a total of 424 employees. None of
the Company's employees is represented by a labor union. The Company considers
its relations with its employees to be good.
 
                                                                              11
<PAGE>
    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; and unanticipated changes in growth in PCS
customers, penetration rates, churn rates and the mix of products and services
offered in the Company's markets. 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 and
National Operations Center in Tampa. These leases provide for monthly rentals at
market rates and expire, subject to renewal options, on various dates through
2006. The Company also leases 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, 1996, the Company had entered into
370 such cell site agreements. The Company owns all five of its 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 is not involved in any
currently pending lawsuits or proceedings that it believes will have,
individually or in the aggregate, a material adverse effect on the Company.
 
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 1996.
 
12
<PAGE>
--------------------------------------------------------------------------------
                                    PART II
--------------------------------------------------------------------------------
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    Except as described below, such information is incorporated herein by
reference from Exhibit 13, Annual Report section entitled "Aerial Stock and
Dividend Information" and "Market Price Per Common Share By Quarter."
 
    On November 4, 1996, the Company issued $226.2 million in aggregate
principal amount at maturity of Series A Zero Coupon Notes ("Notes") due in
2006. The issue price of the Notes was 44.2% of the principal amount at maturity
or $100 million, and there is no periodic payment of interest. The $100 million
in proceeds from the sale of the Notes were paid to Nokia Telecommunications
Inc., in satisfaction of all outstanding obligations and future obligations up
to $100 million of the Company under a Credit Agreement dated June 19, 1996. The
Notes and the obligations under the Credit Agreement are fully and
unconditionally guaranteed by TDS at an annual fee rate of 3%. Such Notes were
issued without registration under the Securities Act of 1933, as amended,
pursuant to an exemption therefrom in Rule 144A under such act.
 
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 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.
 
                                                                              13
<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 RELATIONSHIP AND RELATED TRANSACTIONS
 
    Incorporated herein by reference from Proxy Statement section entitled
"Certain Relationships and Related Transactions."
 
14
<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 16
II.    Valuation and Qualifying Accounts for each of the Three Years in the Period
       Ended December 31, 1996....................................................  page 17
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
--------  ----------------------------------------------------------------------
 10.14    Aerial Communications, Inc. 1996 Long-Term Incentive Plan, as amended,
          is hereby incorporated by reference to Exhibit B to the Company's
          Notice of Annual Meeting of Shareholders and Proxy Statement for the
          1997 Annual Meeting of Shareholders.
 10.15    Description of Terms of Signing Letter with Donald W. Warkentin dated
          June 7, 1995.
 
(b) Reports on Form 8-K filed during the quarter ended December 31, 1996.
 
    The Company filed on November 29, 1996, a Current Report on Form 8-K dated
November 4, 1996, for the purpose of filing the Trust Indenture Agreement dated
November 4, 1996, between the Company, as issuer, Telephone and Data Systems,
Inc., as guarantor, and The First National Bank of Chicago, as trustee related
to the Series A Zero Coupon Notes Due 2006.
 
    The Company filed on November 27, 1996, a Current Report on Form 8-K dated
November 20, 1996, for the purpose of filing a Certificate of Ownership and
Merger with the Secretary of State of the State of Delaware to effect a change
in its name from "American Portable Telecom, Inc." to "Aerial Communications,
Inc." The NASDAQ ticker symbol was also changed from "APTI" to "AERL".
 
    The Company filed on December 18, 1996, a Current Report on Form 8-K dated
June 19, 1996, for the purpose of filing the Credit Agreement dated June 19,
1996 and rider thereto dated October 30, 1996, between the Company and Nokia
Telecommunications Inc.
 
                                                                              15
<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 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 29, 1997. 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 financials 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 29, 1997
 
16
<PAGE>
AERIAL COMMUNICATIONS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                COLUMN A                                                   COLUMN C
                               DESCRIPTION                                   COLUMN B     ADDITIONS                   COLUMN E
-------------------------------------------------------------------------   BALANCE AT    CHARGED TO                 BALANCE AT
                                                                           BEGINNING OF   COSTS AND     COLUMN D       END OF
(DOLLARS IN THOUSANDS)                                                        PERIOD       EXPENSES    DEDUCTIONS      PERIOD
                                                                           ------------  ------------  -----------  ------------
<S>                                                                        <C>           <C>           <C>          <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
  Valuation Allowance for Deferred Tax Assets                               $    1,291    $   13,738   $        --  $     15,029
FOR THE YEAR ENDED DECEMBER 31, 1995
  Valuation Allowance for Deferred Tax Assets                                      170         1,121            --         1,291
FOR THE YEAR ENDED DECEMBER 31, 1994
  Valuation Allowance for Deferred Tax Assets                               $      101    $       69   $        --  $        170
</TABLE>
 
                                                                              17
<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 20, 1997
 
    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
--------------------------------------------------  ------------------------------  ---------------------
<S>                                                 <C>                             <C>
                /S/ DONALD W. WARKENTIN                                   DIRECTOR     March 20, 1997
        ----------------------------------
               Donald W. Warkentin
 
                   /S/ J. CLARKE SMITH                                    DIRECTOR     March 20, 1997
        ----------------------------------
                 J. Clarke Smith
 
               /S/ LEROY T. CARLSON, JR.                     CHAIRMAN AND DIRECTOR     March 20, 1997
        ----------------------------------
              LeRoy T. Carlson, Jr.
 
                  /S/ LEROY T. CARLSON                                    DIRECTOR     March 20, 1997
        ----------------------------------
                 LeRoy T. Carlson
 
                 /S/ MURRAY L. SWANSON                                    DIRECTOR     March 20, 1997
        ----------------------------------
                Murray L. Swanson
 
                /S/ RUDOLPH E. HORNACEK                                   DIRECTOR     March 20, 1997
        ----------------------------------
               Rudolph E. Hornacek
 
                    /S/ JAMES BARR III                                    DIRECTOR     March 20, 1997
        ----------------------------------
                  James Barr III
 
                /S/ WALTER C.D. CARLSON                                   DIRECTOR     March 20, 1997
        ----------------------------------
               Walter C.D. Carlson
 
                    /S/ JOHN D. FOSTER                                    DIRECTOR     March 20, 1997
        ----------------------------------
                  John D. Foster
 
               /S/ THOMAS W. WILSON, JR.                                  DIRECTOR     March 20, 1997
        ----------------------------------
              Thomas W. Wilson, Jr.
</TABLE>
 
18
<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 8-K
          dated November 20, 1996.
 
  3.2     Restated Bylaws of the Company, are hereby incorporated by reference
          to Exhibit 3.2 to the Company's Amendment No. 1 to Form S-1
          (Registration No. 333-1514)
 
  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.
 
  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 the TDS 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 the TDS Annual Report on Form 10-K for
          the year ended December 31, 1992.
 
 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     Revolving Credit Agreement dated as of August 1, 1995 between the
          Company and TDS, is hereby incorporated by reference to Exhibit 10.2
          to the Company's Amendment No. 1 to Form S-1 (Registration No.
          333-1514)
 
 10.3     Amendment dated December 31, 1995 to Revolving Credit Agreement
          between the Company and TDS, is hereby incorporated by reference to
          Exhibit 10.3 to the Company's Amendment No. 1 to Form S-1
          (Registration No. 333-1514)
 
 10.4     Form of Tax Allocation Agreement between the Company and TDS, is
          hereby incorporated by reference to Exhibit 10.4 to the Company's
          Amendment No. 1 to Form S-1 (Registration No. 333-1514)
 
 10.5     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)
 
 10.6     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)
 
 10.7     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)
 
 10.8     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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                  DESCRIPTION
--------  ----------------------------------------------------------------------
<C>       <S>
 10.9     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)
 
 10.10*   Software License Agreement dated as of December 15, 1995 between the
          Company and Aethos Communications, Inc., is incorporated by reference
          to Exhibit 10.11 to the Company's Amendment No. 1 to Form S-1
          (Registration No. 333-1514)
 
 10.11*   Project Management and Construction Agreement dated as of January 15,
          1996 between the Company and Fluor Daniel, Inc., is hereby
          incorporated by reference to Exhibit 10.12 to the Company's Amendment
          No. 1 to Form S-1 (Registration No. 333-1514)
 
 10.12*   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)
 
 10.13*   Credit Agreement dated as of June 19, 1996, and rider thereto dated
          October 30, 1996, between the Company and Nokia Telecommunications
          Inc., is hereby incorporated by reference to Exhibit 99.1 to the
          Company's Form 8-K dated June 19, 1996.
 
 10.14    Aerial Communications, Inc. 1996 Long-Term Incentive Plan, as amended,
          is hereby incorporated by reference to Exhibit B to the Company's
          Notice of Annual Meeting of Shareholders and Proxy Statement for the
          1997 Annual Meeting of Shareholders.
 
 10.15    Description of Terms of Signing Letter with Donald W. Warkentin dated
          June 7, 1995.
 
 11       Computation of earnings per common share
 
 13       Incorporated portions of the 1996 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.
<PAGE>
   [LOGO]
AERIAL COMMUNICATIONS, INC.
8410 West Bryn Mawr - Suite 1100
Chicago, Illinois 60631
Phone: (773) 399-4200
Fax: (773) 399-4170