<PAGE>   1

================================================================================



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.

                                       Or

[ ]     TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM               TO 
                        , 19                               ---------------    
        -------------       --

                         Commission File Number: 0-23102

                            ------------------------

                                 POWERTEL, INC.
             (Exact name of registrant as specified in its charter)


                    Delaware                                58-1944750
          (State or other jurisdiction                   (I.R.S. Employer
        of incorporation or organization)               Identification No.)


  1233 O.G. Skinner Drive, West Point, Georgia                 31833
    (Address of principal executive offices)                (Zip Code)



       Registrant's telephone number, including area code: (706) 645-2000



         Indicate by a 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.


               Class                       Outstanding at May 12, 1998

   Common Stock, $0.01 par value                     26,948,955



================================================================================

<PAGE>   2


                                 POWERTEL, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                       ----
<S>      <C>         <C>                                                               <C>
PART I               FINANCIAL INFORMATION

         Item 1.     Financial Statements...........................................     3
                                                                                        
                     Condensed Consolidated Balance Sheets as of
                     March 31, 1998 and December 31, 1997...........................     3
                                                                                        
                     Condensed Consolidated Statements of Operations for the
                     Three Months ended March 31, 1998 and 1997.....................     4
                                                                                        
                     Condensed Consolidated Statements of Cash Flows for the
                     Three Months ended March 31, 1998 and 1997.....................     5
                                                                                         
                     Condensed Notes to Consolidated Financial Statements...........     6
                                                                                         
         Item 2.     Management's Discussion and Analysis of Financial
                     Condition and Results of Operations............................     7
                                                                                        
         Item 3.     Quantitative and Qualitative Disclosure About Market
                     Risks.........................................................     14

PART II              OTHER INFORMATION

         Item 1.     Legal Proceedings..............................................    15


         Item 6.     Exhibits and Reports on Form 8-K...............................    15

SIGNATURES

EXHIBIT INDEX
</TABLE>




                                       2
<PAGE>   3




                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                                 POWERTEL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                       MARCH 31,         DECEMBER 31,
                                   ASSETS                                1998                1997
                                                                     -----------         -----------
                                                                           (DOLLARS IN THOUSANDS)
                                                                     (UNAUDITED)
<S>                                                                  <C>                 <C>        
CURRENT ASSETS:
  Cash and cash equivalents                                          $   241,433         $   326,954
  Restricted cash for payment of interest                                 33,375              33,375
  Accounts receivable, net of allowance for doubtful accounts             20,233              34,549
  Inventories                                                             23,335               3,975
  Prepaid expenses and other                                               7,044               6,631
                                                                     -----------         -----------
                                                                         325,420             405,484
                                                                     -----------         -----------

PROPERTY AND EQUIPMENT, AT COST:                                         576,232             541,449
  Less: accumulated depreciation                                         (62,634)            (49,699)
                                                                     -----------         -----------
                                                                         513,598             491,750
                                                                     -----------         -----------

OTHER ASSETS:
  Licenses, net                                                          414,550             416,252
  Restricted cash for payment of interest                                 44,872              43,710
  Deferred charges and other, net                                         20,796              21,396
                                                                     -----------         -----------
                                                                         480,218             481,358
                                                                     -----------         -----------
                                                                     $ 1,319,236         $ 1,378,592
                                                                     ===========         ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable - trade                                           $    12,425         $    46,133
  Accrued construction costs                                              17,906              23,092
  Accrued interest                                                        11,125               2,781
  Accrued other                                                            7,951              11,015
  Accrued taxes other than income                                          7,269               6,056
  Advance billings and customer deposits                                   3,410               2,429
  Current portion of long-term obligations                                   298                 256
                                                                     -----------         -----------
                                                                          60,384              91,762
                                                                     -----------         -----------
LONG-TERM OBLIGATIONS:
  12% Senior Discount Notes due February 2006                            251,471             244,014
  12% Senior Discount Notes due May 2006                                 251,527             244,344
  11.125% Senior Notes due June 2007                                     300,000             300,000
  Credit Agreement                                                       194,685             179,961
  Other                                                                      753                 695
                                                                     -----------         -----------
                                                                         998,436             969,014
                                                                     -----------         -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Series A Convertible Preferred Stock                                         1                   1
  Series B Convertible Preferred Stock                                         1                   1
  Series C Convertible Preferred Stock                                         1                   1
  Series D Convertible Preferred Stock                                         1                   1
  Common Stock                                                               270                 270
  Paid-in capital                                                        477,242             477,109
  Accumulated deficit                                                   (215,624)           (157,934)
  Deferred compensation                                                   (1,131)             (1,288)
  Treasury stock, at cost                                                   (345)               (345)
                                                                     -----------         -----------
                                                                         260,416             317,816
                                                                     -----------         -----------
                                                                     $ 1,319,236         $ 1,378,592
                                                                     ===========         ===========
</TABLE>



    The accompanying condensed notes to financial statements are an integral
                            part of these statements.


                                       3
<PAGE>   4



                                 POWERTEL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                              MARCH 31,
                                                    1998                      1997
                                              ------------------       -------------------
                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                           <C>                      <C>     
REVENUES AND SALES:
Monthly access revenue                            $ 16,194                $  8,540
Airtime revenue                                      7,544                   1,827
Roaming revenue                                      1,576                   1,242
Toll revenue                                         3,096                   1,290
Installation and connection revenue                  1,029                     667
Other revenue                                          638                     518
                                                  --------                --------
       Total service revenues                       30,077                  14,084
Equipment sales                                      6,646                   5,025
                                                  --------                --------
       Total revenues and sales                     36,723                  19,109
                                                  --------                --------

OPERATING EXPENSES:
Cost of services                                     9,549                   5,428
Cost of equipment sold                              17,425                  11,987
Operations                                          10,398                   3,809
Selling and marketing                               11,915                   5,237
General and administrative                           8,130                   7,680
Depreciation                                        12,935                   8,340
Amortization                                         2,392                   1,178
                                                  --------                --------
       Total operating expenses                     72,744                  43,659
                                                  --------                --------

OPERATING LOSS                                     (36,021)                (24,550)
                                                  --------                --------

OTHER (INCOME) EXPENSE:
Interest (income) expense, net                      21,832                   4,543
Miscellaneous (income) expense, net                   (163)                    473
                                                  --------                --------
       Total other (income) expense                 21,669                   5,016
                                                  --------                --------

LOSS BEFORE INCOME TAXES                           (57,690)                (29,566)
INCOME TAX (BENEFIT) PROVISION                          --                      --
                                                  --------                --------

NET LOSS                                          $(57,690)               $(29,566)
                                                  ========                ========

PER SHARE DATA:
   BASIC LOSS PER COMMON SHARE                    $  (2.14)               $  (1.10)
                                                  ========                ========

   DILUTED LOSS PER COMMON SHARE                  $  (2.14)               $  (1.10)
                                                  ========                ========
</TABLE>


    The accompanying condensed notes to financial statements are an integral
                            part of these statements.



                                       4
<PAGE>   5


                                 POWERTEL, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                                                      MARCH 31,
                                                                               1998               1997
                                                                             ---------         ---------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                          <C>               <C>       
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss                                                                     $ (57,690)        $ (29,566)
       Adjustments to reconcile net loss to net cash used in
              operating activities -
       Depreciation and amortization                                            15,327             9,518
       Bond accretion                                                           14,286             6,320
       Other, net                                                                  769               303
       Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable                          14,316            (4,903)
            Increase in inventories                                            (19,360)          (11,567)
            (Increase) decrease in other assets                                   (425)           10,340
            Decrease in accounts payable, accrued expenses
                and other current liabilities                                  (26,234)          (16,113)
                                                                             ---------         ---------
                Net cash used in operating activities                          (59,011)          (35,668)
                                                                             ---------         ---------

CASH FLOWS (USED IN) PROVIDED FROM INVESTING ACTIVITIES:
       Capital expenditures                                                    (34,745)          (36,209)
       Liquidation of short-term investments, net                                    0            75,659
       Purchase of long-term investments, net                                   (1,162)                0
       Microwave relocation                                                       (374)           (3,265)
       Decrease in accrued construction costs                                   (5,186)          (13,003)
                                                                             ---------         ---------
                Net cash (used in) provided from investing activities          (41,467)           23,182 
                                                                             ---------         ---------

CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES:
       Borrowings under Credit Agreement                                        14,724            34,319
       Proceeds from sale of Common Stock, net                                     133                 5
       Other, net                                                                  100               148
                                                                             ---------         ---------
                Net cash provided from financing activities                     14,957            34,472
                                                                             ---------         ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (85,521)           21,986
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               326,954           185,525
                                                                             ---------         ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   $ 241,433         $ 207,511
                                                                             =========         =========
</TABLE>





    The accompanying condensed notes to financial statements are an integral
                            part of these statements.


                                       5
<PAGE>   6


                                 POWERTEL, INC.
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.      Certain information and footnote disclosures normally included in
        financial statements prepared in accordance with generally accepted
        accounting principles have been condensed or omitted pursuant to Article
        10 of Regulation S-X of the Securities and Exchange Commission. The
        accompanying unaudited condensed consolidated financial statements
        reflect, in the opinion of management, all adjustments necessary to
        achieve a fair statement of financial position and results for the
        interim periods presented. All such adjustments are of a normal
        recurring nature. It is suggested that these condensed consolidated
        financial statements be read in conjunction with the financial
        statements and notes thereto included in the Annual Report of Powertel,
        Inc. ("Powertel" or the "Company") on Form 10-K for the year ended
        December 31, 1997.

2.      Certain prior year amounts have been reclassified to conform to the
        current period presentation.

3.      Effective with the three months ended December 31, 1997, the Company
        adopted Statement of Financial Accounting Standards No. 128, "Earnings
        Per Share" ("SFAS 128"), which requires the restatement of all prior
        period earnings per common share ("EPS") amounts. The components of EPS
        and their derivation as required under SFAS 128 are as follows:

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                               MARCH 31,
                                                                     ------------------------------
                                                                         1998             1997
                                                                     -------------    -------------
        <S>                                                          <C>                <C>        
        Basic earnings per share:
           Net loss available to common stockholders                 $   (57,690)       $  (29,566)
           Average common shares outstanding                              26,965            26,812
           Basic earnings per share                                  $     (2.14)       $    (1.10)

        Diluted earnings per share:
           Net loss available to common stockholders                 $   (57,690)       $  (29,566)
           Average common shares outstanding                              26,965            26,812
           Diluted earnings per share                                $     (2.14)       $    (1.10)
</TABLE>


        Basic EPS was computed by dividing net loss by the weighted average
        number of shares of Common Stock outstanding during the quarter. Diluted
        EPS is the same as basic EPS because all Common Stock equivalents would
        have an antidilutive effect.





                                       6
<PAGE>   7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         Powertel, Inc. (the "Company" or "Powertel") provides personal
communications services ("PCS") in the southeastern United States under the name
"Powertel" and cellular telephone service in contiguous portions of eastern
Alabama and western Georgia under the name "InterCel." The Company formerly
provided cellular telephone service in the State of Maine under the name
"Unicel." On May 1, 1997, the Company sold substantially all the assets of
Unicel for approximately $77.2 million (the "Maine Disposition"). The common
stock of the Company, par value of $0.01 per share (the "Common Stock"), is
traded on the Nasdaq Stock Market under the symbol "PTEL."

         Powertel's PCS licenses encompass a territory of approximately 246,000
contiguous square miles with a population of approximately 24.3 million people
in the Major Trading Areas ("MTAs") of Atlanta, Georgia; Jacksonville, Florida;
Memphis, Tennessee/Jackson, Mississippi; and Birmingham, Alabama (the "Current
PCS Markets") and in 13 Basic Trading Areas ("BTAs") in Kentucky and Tennessee
(the "Kentucky/Tennessee BTAs"). The Company first introduced its PCS services
in October 1996 in Jacksonville, Florida and Montgomery, Alabama and, to date,
has launched its PCS services in a total of 25 markets in the Southeast. In all
of these markets, except Atlanta, Georgia, where the Company acquired its
licenses from GTE Mobilnet Incorporated in 1996, the Company was the first to
offer PCS services commercially. Powertel intends to continue to rapidly build
out its PCS network and to launch its PCS services. As of March 31, 1998, the
Company had approximately 157,000 PCS subscribers.

         Average revenues per subscriber in the wireless industry have declined
during recent quarters and are expected to continue to gradually decline in the
future. The Company believes this downward trend is the result of the addition
of lower usage customers who utilize wireless service for personal convenience,
security or as backup for their traditional landline telephones. In addition,
the Company expects that revenue per minute will continue to decline as
competition within the wireless industry intensifies. The Company believes the
effect of this trend on the Company's earnings will be mitigated by
corresponding increases in the number of wireless subscribers and the use of
enhanced services that will be offered to PCS subscribers.

         As a result of: (i) the significant costs required to build out and
maintain the PCS system, hire and manage the required personnel to operate the
PCS business and market its services; (ii) the subsidization of PCS handsets to
customers; and (iii) the depreciation of PCS equipment and amortization of the
PCS licenses, the Company incurred a net loss of $57.7 million for the three
months ended March 31, 1998. The Company expects to continue incurring
significant operating losses during 1998 and thereafter as it continues to build
out its PCS system, develop its PCS customer base and subsidize the cost of PCS
handsets to its customers.

         Minimizing customer attrition, or "churn," becomes a greater challenge
as the subscriber base grows and the wireless marketplace becomes more
competitive. The Company achieved an average monthly churn rate of 1.6% and 3.5%
for its cellular and PCS businesses, respectively, for the three months ended
March 31, 1998. The Company remains focused on improving its PCS churn rate in
the near future through more focused collections efforts, stricter credit
evaluation policies and a proactive customer retention program. However, the
Company expects that ongoing PCS churn rates could be higher than comparable
churn rates for cellular carriers due to the fact that the Company does not
require long-term service contracts. Additionally, the ability of PCS
subscribers to activate service via the phone ("over the air activation")
without any face-to-face contact with Company representatives increases the
Company's susceptibility to subscription fraud, which ultimately results in
churn.

         The Company is a member of the North American GSM Alliance (the
"Alliance"), a consortium of eight PCS carriers which offer PCS service using
the Global System for Mobile Communication ("GSM") throughout North America. All
members of the Alliance have executed roaming agreements with each other,
thereby allowing GSM customers to roam throughout many major metropolitan areas
in the United States and Canada. Additionally, the Company has signed several
roaming agreements and expects to sign numerous others with international GSM
carriers to facilitate international roaming.

         In late 1998 the Company plans to launch a dual-mode (GSM and analog
cellular) product offering and new, network-based pre-pay plans. The Company is
currently negotiating both in-region and out-of-



                                       7
<PAGE>   8

region roaming agreements with cellular carriers to allow the Company's PCS
customers to roam on cellular systems in those areas where a GSM network is not
available. The Company must upgrade its billing system to allow the Company to
bill for dual-mode services and network-based pre-pay plans. Failure by the
Company to successfully launch these new services in a timely manner, to
accurately bill for these services or to enter into dual-mode roaming agreements
with carriers covering a substantial portion of North America where GSM networks
are not available could negatively impact the Company's ability to attract and
retain customers requiring such services.

RESULTS OF OPERATIONS

         The following table reflects the composition of the Company's cellular
and PCS service revenue and equipment sales, and related gross margins, as well
as overall operating and other costs and margins. The Company's historical
results of operations, particularly in view of the Maine Disposition and the
start-up costs associated with the Company's PCS business, will not be
comparable with future periods.






















                                       8
<PAGE>   9



<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED MARCH 31,
                                           --------------------------------------------------------------------------------------
                                                            1998                                         1997
                                           -----------------------------------------     ----------------------------------------
                                                                           COMBINED                                      COMBINED  
                                                                           CELLULAR                                      CELLULAR  
                                                                             AND                                            AND     
                                             CELLULAR          PCS           PCS          CELLULAR          PCS             PCS 
                                           -------------    ----------  -------------    -----------     ----------     ---------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                        <C>              <C>         <C>              <C>             <C>             <C>     
SERVICE REVENUE & COST ANALYSIS:
Service revenue
   Local customers-
     Access revenue ....................      $  1,992       $ 14,202       $ 16,194       $  4,000       $  4,540       $  8,540
     Airtime revenue ...................           794          6,750          7,544          1,545            282          1,827
     Toll revenue ......................            52          2,434          2,486            218            673            891
                                              --------       --------       --------       --------       --------       --------
                                                 2,838         23,386         26,224          5,763          5,495         11,258
                                              --------       --------       --------       --------       --------       --------
   Roamers-
     Access and airtime revenue ........         1,003            573          1,576          1,242             --          1,242
     Toll revenue ......................           350            260            610            399             --            399
                                              --------       --------       --------       --------       --------       --------
                                                 1,353            833          2,186          1,641             --          1,641
                                              --------       --------       --------       --------       --------       --------
   Other-
     Installation and connection .......            12          1,017          1,029             42            625            667
     Other .............................           131            507            638            292            226            518
                                              --------       --------       --------       --------       --------       --------
                                                   143          1,524          1,667            334            851          1,185
                                              --------       --------       --------       --------       --------       --------
       Total service revenue ...........         4,334         25,743         30,077          7,738          6,346         14,084
Cost of services .......................           448          9,101          9,549          1,069          4,359          5,428
                                              --------       --------       --------       --------       --------       --------
   Gross margin ........................      $  3,886       $ 16,642       $ 20,528       $  6,669       $  1,987       $  8,656
                                              ========       ========       ========       ========       ========       ========

EQUIPMENT SALES & COST ANALYSIS:
Equipment sales ........................      $    200       $  6,446       $  6,646       $    240       $  4,785       $  5,025
Cost of equipment sales ................           471         16,954         17,425            840         11,147         11,987
                                              --------       --------       --------       --------       --------       --------
   Gross margin ........................      $   (271)      $(10,508)      $(10,779)      $   (600)      $ (6,362)      $ (6,962)
                                              ========       ========       ========       ========       ========       ========

OPERATING MARGIN ANALYSIS:
Total revenues .........................      $  4,534       $ 32,189       $ 36,723       $  7,978       $ 11,131       $ 19,109
                                              --------       --------       --------       --------       --------       --------

Operating expense-
  Cost of services and equipment sales .           919         26,055         26,974          1,909         15,506         17,415
  Operations ...........................           464          9,934         10,398          1,010          2,799          3,809
  Selling and marketing ................           589         11,326         11,915          1,239          3,998          5,237
  General and administrative ...........           428          7,702          8,130            913          6,767          7,680
  Depreciation .........................           526         12,409         12,935            951          7,389          8,340
  Amortization .........................            --          2,392          2,392            178          1,000          1,178
                                              --------       --------       --------       --------       --------       --------
       Total operating expenses ........         2,926         69,818         72,744          6,200         37,459         43,659
                                              --------       --------       --------       --------       --------       --------
Operating (loss) income ................      $  1,608       $(37,629)       (36,021)      $  1,778       $(26,328)       (24,550)
                                              ========       ========                      ========       ========
Interest expense (income), net .........                                      21,832                                        4,543
Miscellaneous (income) expense..........                                        (163)                                         473
                                                                            --------                                     --------
Loss before income taxes................                                     (57,690)                                     (29,566)
Income tax (benefit) provision..........                                          --                                           --
                                                                            --------                                     --------
Net loss................................                                    $(57,690)                                    $(29,566)
                                                                            ========                                     ========

OTHER SUPPLEMENTAL DATA:
EBITDA .................................      $     --       $     --      $ (15,412)      $     --       $     --       $(12,244)
Subscribers at end of period ...........        26,565        156,918        183,483         49,731         34,886         84,617
</TABLE>







                                       9
<PAGE>   10




THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

         The following discussion reflects the Company's results of operations
for its PCS and cellular lines of business. All general corporate costs have
been allocated to the PCS line of business.

         Service revenue from local customers increased $15.0 million, or 133%,
for 1998, as compared to 1997. PCS service revenue from local customers
increased $17.9 million, or 326%, over the first quarter of 1997 as a result of
the continued rapid increase in subscribers (to approximately 157,000 at March
31, 1998, from approximately 35,000 at March 31, 1997), which is due in part to
the launch of several new markets during 1997. Cellular service revenue from
local customers decreased $2.9 million, or 51%, primarily as a result of the
Maine Disposition, which occurred during the second quarter of 1997 and the
corresponding reduction in customers (to approximately 27,000 at March 31, 1998,
from approximately 50,000 at March 31, 1997).

          The average monthly service revenue per local PCS subscriber was
$57.23 versus $63.52 a year ago. This decrease is primarily attributable to
changes in the Company's rate plan offerings from 1997 to 1998. At March 31,
1997, the majority of the Company's PCS subscribers were participants in a
promotional plan under which they received unlimited monthly airtime for local
calling for a fixed monthly fee of $50 (the "Prestige Partners"). In 1998, the
Company's subscriber base has a choice of multiple rate plan offerings with
fixed monthly access charges ranging from $10 to $90 and monthly unlimited toll
packages from $5 to $15.

          During the first quarter of 1998, the Prestige Partners were
transitioned from unlimited, flat rate local service to measured service rate
plans. The Company's average revenue per PCS subscriber increased for the first
quarter of 1998 as compared to the fourth quarter of 1997 primarily due to the
transition of the Prestige Partners. The Company anticipates marginal declines
in future periods primarily due to lower minute usage by new wireless
subscribers and increased price competition among competing wireless carriers.
The Company believes that this is consistent with a general trend in the
wireless industry of declining average monthly revenue per subscriber.

          The average monthly service revenue per local cellular subscriber
(excluding roaming revenue and equipment sales) decreased to $37.92 for the
first quarter of 1998, as compared to $39.40 for the same period a year ago. The
Company believes that this decrease is consistent with industry trends over
recent years of declining average monthly revenue per cellular subscriber. The
Company believes that this decline reflects the continuing industry-wide growth
of more convenience-oriented, lower-use subscribers as well as pricing pressures
related to increased competition.

          The Company generated $.8 million in PCS roaming revenue during the
first quarter of 1998 as compared to none a year ago. This increase reflects the
success of the previously mentioned roaming agreements with Alliance partners
that became effective during the last five months of 1997. Cellular roaming
revenue decreased $.3 million, or 18%, for the first quarter of 1998, as
compared to the same period in 1997. This decrease is attributable to the Maine
Disposition.

         Other service revenue, which includes activation and installation fees,
fees from vertical services and interconnection fees billed to local exchange
carriers ("LECs") for connections to the Company's PCS network, increased $.5
million, or 41%, for the first quarter of 1998, as compared to the same period
in 1997. This increase is due primarily to the activation fees associated with
the addition of new PCS subscribers and the increase in interconnection fees as
a result of increased traffic on the Company's PCS network.

         Cost of services includes the cost of: (i) interconnection with LEC
facilities; (ii) direct cell site costs (e.g., property taxes and insurance,
site lease costs and electric utilities); (iii) PCS and cellular roaming
validation (provided by third-party clearinghouses); (iv) long distance toll
costs; (v) cellular cloning and fraud; and (vi) supplementary services (such as
voice mail). PCS cost of services increased $4.7 million or 109% for the first
quarter of 1998, as compared to the same period in 1997. This increase primarily
reflects the interconnection and tower lease costs associated with the
approximately 500 cell sites that have been placed in service since March 31,
1997 in the Company's expanding PCS network. Cellular cost of services decreased
$.6 million, or 58%, in 1998 as compared to 1997 primarily as a result of the
Maine Disposition and a significant decrease in costs associated with cloning
and subscription fraud in the InterCel division during 1998.

         The Company generated a negative PCS equipment margin of 163% on $6.4
million of sales during the first quarter of 1998, as compared to a negative
margin of 133% on $4.8 million of sales for the same period in 1997. The
increase in negative PCS equipment margins during the first quarter of 1998
reflects an increase in the percent of handset sales to the Company's agents and
mass merchants where the equipment subsidy is higher. The Company generated a
negative cellular equipment margin of 136% on $.2 million of sales during the
first quarter of 1998, as compared to a negative margin of 250% on $.2 million
of sales for the same period in 1997. This change is primarily attributable to
the Maine Disposition. The Company expects to continue subsidizing the cost of
PCS and cellular handsets to consumers for the foreseeable future.



                                       10
<PAGE>   11

         Operations costs, which include the costs of maintaining the cellular
and PCS systems, customer service, credit and collections and inventory
management totaled $10.4 million for first quarter of 1998 while PCS operations
costs totaled $9.9 million, a 255% increase over the same period a year ago,
primarily as a result of the costs associated with the Company's significantly
expanded network and a significant increase in the bad debt provision resulting
from the disconnection of non-paying customers. Cellular operations costs
totaled $.5 million for the quarter, a 54% decrease from 1997, which is
attributable primarily to the Maine Disposition.

         Selling and marketing costs totaled $11.9 million for the first quarter
of 1998, an increase of $6.7 million, or 128%, from the same period of 1997.
Substantially all of this increase is attributable to ongoing PCS advertising
costs, as well as the costs of all direct and indirect sales channels, including
commissions incurred as a result of the continued rapid growth in the number of
PCS subscribers.

         General and administrative costs ("G&A") were $8.1 million for the
first quarter of 1998, an increase of only $.5 million from the same period of
1997. PCS G&A costs, which totaled $7.7 million for the quarter, increased 14%
from the same period of 1997 primarily as a result of an increase in the number
of employees and the related increase in facilities costs at the Company's
corporate and regional administrative offices and information technology center.
The increase in PCS G&A was partially offset by a $.5 million decrease in
cellular G&A resulting from the Maine Disposition.

         Depreciation and amortization for the first quarter of 1998 totaled
$15.3 million, a 61% increase over the same period in 1997, and consisted
principally of the depreciation of the cellular and PCS network and the
amortization of PCS licenses. Substantially all of this increase is attributable
to the depreciation associated with the approximately 500 PCS cell sites that
have been placed in service since March 31, 1997 and the amortization costs
associated with the Atlanta MTA license which was placed into service during
July 1997.

         Net consolidated interest expense totaled $21.8 for the first quarter
of 1998 as compared to $4.5 million for the same period in 1997. This increase
reflects: (i) the additional interest costs associated with the $300 million
11.125% Senior Notes due June 2007 (the "1997 Notes"); (ii) the lower
availability of funds for investment due to the buildout of the PCS network; and
(iii) a reduction in capitalized interest ($.7 million in 1998 as compared to
$6.7 million in 1997), which is attributable to the completion and placing in
service of substantial portions of the PCS system.

          The effective income tax rate for the first quarters of both 1998 and
1997 was 0%. The Company generated a $57.7 million net loss during the first
quarter of 1998 and expects to continue to incur significant operating losses
throughout the remainder of 1998 and beyond. The tax benefit of these operating
losses will not be recognized until management determines that it is more likely
than not that such benefit is realizable.

LIQUIDITY AND CAPITAL RESOURCES

         The Company requires significant amounts of capital for funding the
operations and expansion of its PCS business. Total capital expenditures,
including capital expenditures for information technology and the support of the
PCS business, totaled approximately $35 million for the first quarter of 1998.
Costs associated with the PCS system buildout include tower sites, leasehold
improvements, base station and switch equipment and labor expenses related to
construction of sites. The Company currently estimates that capital expenditures
will total approximately $195 million for the remainder of 1998 relating to the
initial buildout of the PCS systems in the Kentucky/Tennessee BTAs and the
continued expansion of its Current PCS Markets and its cellular system. By the
end of 1998, the Company expects to be able to offer PCS services in markets
containing approximately 60% of the population within its PCS markets. Wireless
coverage is expected to extend across most metropolitan areas, certain secondary
cities and major connecting highway corridors within the PCS markets.
Thereafter, based on customer demand and competitive factors, the Company
intends to continue to build out its PCS system to enhance and expand its
coverage. The Company anticipates that it will need to raise additional
financing in the event it decides to make acquisitions of additional licenses or
businesses or expand and enhance the existing PCS coverage in existing PCS
markets.

         In May 1997, the Company sold its cellular operations in the State of
Maine to Rural Cellular Corporation ("Rural Cellular"). On the closing date,
Rural Cellular paid the Company $71.8 million in cash and paid $5.4 million into
escrow. On November 3, 1997, the $5.4 million was released from escrow to the


                                       11
<PAGE>   12

Company. In addition, Rural Cellular reimbursed the Company approximately
$250,000 for capital expenditures made on its behalf prior to the closing of the
transaction.

         On June 10, 1997, the Company issued $300 million principal amount of
the 1997 Notes (together with the previously issued Senior Discount Notes due
February 2006 and the Senior Discount Notes due May 2006, the "Notes") in a
private offering. In September 1997, the Company exchanged substantially all of
the private 1997 Notes for substantially identical notes that were registered
under the Securities Act of 1933, as amended (the "Securities Act"). The Company
used $89.6 million of the proceeds from the 1997 Notes to purchase and pledge,
for the benefit of the holders of the 1997 Notes, certain U.S. government
securities to provide for the payment of the first six scheduled interest
payments on the 1997 Notes.

         On June 5, 1997, pursuant to a Stock Purchase Agreement, dated as of
May 23, 1997, between the Company and The Huff Alternative Income Fund, L.P.
("Huff"), the Company issued to Huff 50,000 shares of nonvoting Series C
Convertible Preferred Stock for an aggregate purchase price of $22.5 million.
Also, on June 5, 1997, pursuant to a Stock Purchase Agreement, dated as of May
23, 1997, between the Company and SCANA Communications, Inc. ("SCANA"), the
Company issued to SCANA 50,000 shares of nonvoting Series D Convertible
Preferred Stock (together with the Series C Convertible Preferred Stock, the
"Preferred Stock"), for an aggregate purchase price of $22.5 million. The Series
C Convertible Preferred Stock and Series D Convertible Preferred Stock become
convertible on December 5, 1998 and March 14, 2002, respectively, at the option
of the holder, into Common Stock at a conversion price of $12.75, subject to
adjustment. Both series of Preferred Stock are redeemable at the option of the
Company, in whole or in part, on a pro rata basis, at a redemption price of $450
per share plus declared and unpaid dividends, anytime subsequent to June 5,
2002. Both series of Preferred Stock have a liquidation preference over the
Common Stock of $450 per share plus declared and unpaid dividends in the event
of a liquidation, dissolution or winding up of the Company. Both series of
Preferred Stock rank, as to dividends, on parity with the Common Stock.

        On March 4, 1996, Powertel PCS, Inc., a wholly owned subsidiary of the
Company ("Powertel PCS"), entered into a $125 million credit agreement (the
"Credit Agreement") with Ericsson Inc. ("Ericsson") regarding the purchase of
and vendor financing for PCS equipment and services. On October 31, 1996, March
31, 1997, June 26, 1997 and November 18, 1997, Powertel PCS and Ericsson entered
into amendments to the Credit Agreement, which increased the equipment financing
commitment to $165 million and amended certain other provisions of the Credit
Agreement. During the fourth quarter of 1997, the $165 million commitment under
the Credit Agreement was syndicated to a group of lenders. On December 23, 1997,
the Credit Agreement was amended to increase the financing commitment to $265
million. On February 6, 1998, Powertel PCS and the lenders entered into an
amended and restated Credit Agreement to incorporate the terms and conditions of
the original agreement and the subsequent amendments.

         Although the Company is currently unable to predict with certainty the
amount of expenditures that may be made beyond 1998, the Company expects that it
will require additional capital. Sources of additional capital may include
vendor financing, cash flow from operations, public and private equity and debt
financing and asset dispositions by the Company. The Company may also require
additional financing in the event it decides to make acquisitions of additional
licenses or businesses. The extent of additional financing required will
partially depend on the success of the Company's businesses. The Company
currently has no other sources of income or cash flows other than its cellular
and PCS operations and the interest income earned from investing its cash and
the proceeds of the public and private debt and equity offerings which were
completed during 1997 and 1996. There can be no assurance that additional
financing will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company and within the limitations contained
in the indentures to the Notes, the Credit Agreement or any future financing
arrangements. The restrictions on additional indebtedness under the indentures
to the Notes require the Company to satisfy specified leverage ratios in order
to incur indebtedness; however, they permit the Company and its subsidiaries to
incur an unlimited amount of additional indebtedness to finance the acquisition
of inventory or equipment.

         The Company expects to incur significant operating losses and to
generate significant negative cash flow from operating activities in the future,
while it develops and constructs its PCS system and builds a PCS customer base.
Cash interest will not be payable on the 12% Senior Discount Notes due February
2006 and the 12% Senior Discount Notes due May 2006 (collectively, the "Senior
Discount Notes") prior to 2001. Management believes that cash flow from
operations may be insufficient to repay the Notes or any additional financing
that the Company may obtain in full at maturity and that they may need to be
refinanced. There can be no assurance that any such refinancing could be
effected successfully or on terms acceptable to the Company.


                                       12
<PAGE>   13

         During the first quarter of 1998, the Company used net cash of $59.0
million for operating activities, as compared to $35.7 million for the same
period in 1997. Operating activities for 1998 included $57.7 million of net
loss, $15.3 million of depreciation and amortization, $14.3 million of bond
accretion on the Senior Discount Notes and $31.7 million related to changes in
assets and liabilities.

         Cash used in investing activities was $41.5 million for the first
quarter of 1998, as compared to $23.2 million provided from investing activities
for the same period in 1997. Investing activities for 1998 consisted primarily
of capital expenditures totaling $34.7 million and a decrease in accrued
construction costs of $5.2 million (both primarily related to the buildout of
the PCS system and support systems).

        Cash provided from financing activities was $15.0 million for the first
quarter of 1998, as compared to $34.5 million for the same period in 1997.
Financing activities for 1998 consisted primarily of borrowings of $14.7 million
under the Credit Agreement.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 ("FAS 130"), "Reporting Comprehensive Income," and Statement
of Financial Accounting Standards No. 131 ("FAS 131"), "Disclosures About
Segments of an Enterprise and Related Information." Both statements are
effective for fiscal years beginning after December 15, 1997. FAS 130 did not
have an impact on the Company, and FAS 131 is not anticipated to have a material
impact on the Company's financial statements.

         In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities," which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires entities to expense certain start-up costs
and organization costs as they are incurred. The Company does not anticipate
that this statement will have an impact on its financial statements.

OTHER

         The Year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g., "97" for 1997). On January 1, 2000, any
clock or date recording mechanism including date sensitive software which uses
only two digits to represent the year may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices or engage in
similar activities.

         The Company is currently working to address and resolve this issue with
respect to its computerized information systems. The Company is also discussing
the Year 2000 issue with its significant suppliers to determine the extent to
which the Company is vulnerable to those third parties' failure to remediate
their own Year 2000 issues. The Company presently believes that with conversions
to new systems and modifications to existing software the Year 2000 issue can be
mitigated. The Company is currently utilizing and will continue to utilize
internal and external resources to implement, reprogram or replace and test
software and related assets affected by the Year 2000 issue. The Company expects
to complete the majority of its efforts in this area by early 1999 leaving
adequate time to assess and correct any significant issues that may materialize.
However, if such modifications and conversions are not made, or are not timely,
or if systems from third parties on which the Company's systems rely will not be
converted on time or if such third parties fail to convert or if such
conversions are incompatible with the Company's systems, the Year 2000 issue
could have a material adverse impact on the Company's business, financial
condition and results of operations.

         Management does not believe that the costs to resolve its Year 2000
issues will be material to the Company. The costs of the project and the
timetable in which the Company plans to complete the Year 2000 compliance
requirements are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no assurance that these estimates will be
achieved and actual



                                       13
<PAGE>   14

results could differ materially from these plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

        This report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
statements appear in a number of places in this Report and include all
statements which are not historical facts and which relate to the intent, belief
or current expectations of the Company, its directors or its officers with
respect to, among other things: (i) the Company's financing plans, including the
Company's ability to obtain financing in the future; (ii) trends affecting the
Company's financial condition or results of operations; (iii) the Company's
growth strategy (including the Company's anticipated network buildout) and
operating strategy; (iv) the Company's anticipated capital needs and anticipated
capital expenditures; and (v) projected outcomes and effects on the Company of
litigation and investigations concerning the Company. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in forward-looking statements as a result
of: (i) factors affecting the availability, terms and cost of capital, risks
associated with the selection of the Company's PCS digital protocol and PCS
system implementation, competitive factors and pricing pressures, general
economic conditions, the failure of the market demand for the Company's products
and services to be commensurate with management's expectations or past
experience, the impact of present or future laws and regulations on the
Company's business, changes in operating expenses or the failure of operating
and buildout expenses to be consistent with management's expectations and the
difficulty of accurately predicting the outcome and effect of certain matters,
such as matters involving litigation and investigations; (ii) various factors
discussed herein; and (iii) those factors discussed in detail in the Company's
filings with Securities and Exchange Commission (the "Commission"), including
the "Risk Factors" section of the Company's Registration Statement on Form S-4
(Registration number (333-31399), as declared effective by the Commission on
July 31, 1997.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

         Not applicable.











                                       14
<PAGE>   15



                           PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

         Reference is made to the Company's Form 10-K for the year ended
December 31, 1997 (as filed with the Commission on March 24, 1998) for a
discussion of certain legal proceedings. In addition to the legal proceedings
discussed therein, the Company is subject from time to time to legal proceedings
that arise out of the Company's business operations, including in connection
with service, billing and collection matters. Although the actual damages sought
in such legal proceedings are generally small, certain of these legal
proceedings may seek punitive damages and/or attempt to be certified as class
actions. While the Company currently does not expect such legal proceedings to
have a material adverse effect on the Company, no assurance can be given that
the resolution of any or all of such legal proceedings will not have a material
adverse effect on the Company's business, financial condition or results of
operations.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

         (A)      EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number            Exhibit Description
------            -------------------

<S>               <C>
10(a)             Amended and Restated Credit Agreement dated as of February 6,
                  1998, among Powertel PCS, Inc., the Banks and Other Financial
                  Institutions Listed on the Signature Pages thereof, Ericsson
                  Inc., as Agent, and National Westminster Bank PLC, as
                  Administrative Agent for the Lenders. * -

27                Financial Data Schedule (for SEC use only).
</TABLE>

---------------------------------

*        Confidential treatment has been requested for certain confidential
         portions of this exhibit pursuant to Rule 24(b)(2) under the Exchange
         Act. In accordance with Rule 24(b)(2), these confidential portions have
         been omitted from this exhibit and filed separately with the
         Commission.

-        The Registrant agrees to furnish supplementally a copy of any omitted
         schedule or exhibit to the Commission upon request, as provided in Item
         601(b)(2) of Regulation S-K.

         (B) REPORTS ON FORM 8-K.

                  None.





                                       15
<PAGE>   16


                                   SIGNATURES

         Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.


                                 POWERTEL, INC.



May 12, 1998                        /s/ Allen E. Smith
------------                        -------------------------------------------
                                    Allen E. Smith
                                    President and Chief Executive Officer



May 12, 1998                        /s/ Fred G. Astor, Jr.
------------                        -------------------------------------------
                                    Fred G. Astor, Jr.
                                    Executive Vice President and Chief 
                                    Financial Officer
                                    (Chief Accounting Officer)














                                       16
<PAGE>   17



                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit
Number            Exhibit Description
------            -------------------

<S>               <C>
10(a)             Amended and Restated Credit Agreement dated as of February 6,
                  1998, among Powertel PCS, Inc., the Banks and Other Financial
                  Institutions Listed on the Signature Pages thereof, Ericsson
                  Inc., as Agent, and National Westminster Bank PLC, as
                  Administrative Agent for the Lenders. * -

27                Financial Data Schedule (for SEC use only).
</TABLE>

---------------------------------

*        Confidential treatment has been requested for certain confidential
         portions of this exhibit pursuant to Rule 24(b)(2) under the Exchange
         Act. In accordance with Rule 24(b)(2), these confidential portions have
         been omitted from this exhibit and filed separately with the
         Commission.

-        The Registrant agrees to furnish supplementally a copy of any omitted
         schedule or exhibit to the Commission upon request, as provided in Item
         601(b)(2) of Regulation S-K.