<PAGE>   1


                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

   
                                    FORM 10-K/A
                                 (Amendment #2)
    

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from
         ____ to ____

Commission File Number 0-20421


                            TELE-COMMUNICATIONS, INC.
             ------------------------------------------------------  
             (Exact name of Registrant as specified in its charter)


      State of Delaware                                 84-1260157
 -----------------------------               ----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

         5619 DTC Parkway
        Englewood, Colorado                                 80111
---------------------------------------                  -----------
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:  (303) 267-5500

         Securities registered pursuant to Section 12(b) of the Act:  None

         Securities registered pursuant to Section 12(g) of the Act:
                  Tele-Communications, Inc. Series A TCI Group Common Stock,
                     par value $1.00 per share
                  Tele-Communications, Inc. Series B TCI Group Common Stock,
                     par value $1.00 per share
                  Tele-Communications, Inc. Series A Liberty Media Group
                     Common Stock, par value $1.00 per share
                  Tele-Communications, Inc. Series B Liberty Media Group
                     Common Stock, par value $1.00 per share
                  Tele-Communications, Inc. Series A TCI Ventures Group
                     Common Stock, par value $1.00 per share
                  Tele-Communications, Inc. Series B TCI Ventures Group
                     Common Stock, par value $1.00 per share
                  Class B 6% Cumulative Redeemable Exchangeable Junior Preferred
                     Stock, par value $.01 per share

         Indicate by check mark whether the Registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.      Yes  X    No
                                           ------    ------  

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.    
                             --------

         The aggregate market value of the voting stock held by nonaffiliates of
Tele-Communications, Inc., computed by reference to the last sales price of such
stock, as of the close of trading on January 30, 1998, was approximately
$21,264,000,000.

         The number of shares outstanding of Tele-Communications, Inc.'s common
stock (net of treasury shares and shares held by subsidiaries), as of January
30, 1998, was:

                 Tele-Communications, Inc. Series A TCI Group common stock -
                 480,386,628 shares,
                  Tele-Communications, Inc. Series B TCI Group common stock - 
                  38,882,055 shares,
             Tele-Communications, Inc. Series A Liberty Media Group common stock
             - 325,033,596 shares, Tele-Communications, Inc. Series B Liberty
             Media Group common stock - 31,681,124 shares,.
           Tele-Communications, Inc. Series A TCI Ventures Group common stock -
              390,013,394 shares, and Tele-Communications, Inc. Series B TCI
              Ventures Group common stock - 32,100,604 shares.

                       Documents Incorporated by Reference
                       -----------------------------------

      Portions of the Registrant's definitive Proxy Statement to be used in
      ---------------------------------------------------------------------
    connection with the 1998 Annual Meeting of Stockholders are incorporated
    ------------------------------------------------------------------------
                   by reference in Part III of this Form 10-K.
                   -------------------------------------------


<PAGE>   2
   
                                   SIGNATURES

     Pursuant to the requirements 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.




                                           TELE-COMMUNICATIONS, INC.


Date:  January 11, 1999                     By: /s/ Stephen M. Brett
                                              ----------------------------------
                                                   Stephen M. Brett
                                                   Executive Vice President,
                                                   General Counsel and Secretary
    

<PAGE>   3
                                    PART IV.


Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) (1)  Financial Statements

<TABLE>
<CAPTION>
                                                                     Page No.
                                                                 ---------------
<S>                                                              <C>
Included in Part II of this Report:

Tele-Communications, Inc.:

         Independent Auditors' Report                                 II-71

         Consolidated Balance Sheets,
            December 31, 1997 and 1996                           II-72   to II-73

         Consolidated Statements of Operations,
            Years ended December 31, 1997, 1996 and 1995         II-74   to II-75

         Consolidated Statements of Stockholders' Equity,
            Years ended December 31, 1997, 1996 and 1995         II-76   to II-78

         Consolidated Statements of Cash Flows,
            Years ended December 31, 1997, 1996 and 1995              II-79

         Notes to Consolidated Financial Statements,
            December 31, 1997, 1996 and 1995                     II-80   to II-152

"TCI Group":

         Independent Auditors' Report                                 II-153

         Combined Balance Sheets,
            December 31, 1997 and 1996                           II-154  to II-155

         Combined Statements of Operations,
            Years ended December 31, 1997, 1996 and 1995              II-156

         Combined Statements of Equity,
            Years ended December 31, 1997, 1996 and 1995         II-157 to II-159

         Combined Statements of Cash Flows,
            Years ended December 31, 1997, 1996 and 1995              II-160

         Notes to Combined Financial Statements,
            December 31, 1997, 1996 and 1995                     II-161  to II-210
</TABLE>



                                      IV-1
<PAGE>   4

<TABLE>
<CAPTION>

                                                                     Page No.
                                                                 ---------------
<S>                                                              <C>
"Liberty Media Group":

         Independent Auditors' Report                                  II-211

         Combined Balance Sheets,
            December 31, 1997 and 1996                           II-212   to II-213

         Combined Statements of Operations,
            Years ended December 31, 1997, 1996 and 1995               II-214

         Combined Statements of Equity,
            Years ended December 31, 1997, 1996 and 1995               II-215

         Combined Statements of Cash Flows,
            Years ended December 31, 1997, 1996 and 1995               II-216

         Notes to Combined Financial Statements,
            December 31, 1997, 1996 and 1995                     II-217   to II-250

"TCI Ventures Group":

        Independent Auditors' Report                                   II-251

         Combined Balance Sheets,
            December 31, 1997 and 1996                           II-252   to II-253

         Combined Statements of Operations,
            Years ended December 31, 1997, 1996 and 1995               II-254

         Combined Statements of Equity,
            Years ended December 31, 1997, 1996 and 1995         II-255   to II-256

         Combined Statements of Cash Flows,
            Years ended December 31, 1997, 1996 and 1995         II-257   to II-258

         Notes to Combined Financial Statements,
            December 31, 1997, 1996 and 1995                     II-259   to II-312
</TABLE>



                                      IV-2
<PAGE>   5


(a) (2)  Financial Statement Schedules

Included in Part IV of this Report:

(i)      Financial Statement Schedules required to be filed:       

<TABLE>
<CAPTION>
                                                                     Page No.
                                                                 ---------------
<S>                                                              <C>
         Independent Auditors' Report                                  IV-16

         Schedule I - Condensed Information as to the
            Financial Position of the Registrant, 
            December 31, 1997 and 1996; Condensed Information
            as to the Operations and Cash Flows of the
            Registrant, Years ended
            December 31, 1997, 1996 and 1995                     IV-17 to IV-19

         Schedule II - Valuation and Qualifying Accounts,
            Years ended December 31, 1997, 1996 and 1995               IV-20

(ii)     Separate financial statements for Sprint Spectrum
            Holding Company, L.P. and Subsidiaries

         Consolidated Financial Statements

            Independent Auditors' Report                               IV-21

            Consolidated Balance Sheets                                IV-22

            Consolidated Statements of Operations                      IV-23

            Consolidated Statements of Changes in
                Partners' Capital                                      IV-24

            Consolidated Statements of Cash Flows                      IV-25

            Notes to Consolidated Financial Statements           IV-26 to IV-44

(iii)    Separate financial statements for Telewest
            Communications plc:

         Consolidated Financial Statements

            Independent Auditors' Report                               IV-45

            Consolidated Statements of Operations                IV-46 to IV-47

            Consolidated Balance Sheets                                IV-48

            Consolidated Statements of Cash Flows                      IV-49

            Consolidated Statement of Shareholders' Equity             IV-50

            Notes to Consolidated Financial Statements           IV-51 to IV-81
</TABLE>



                                      IV-3
<PAGE>   6


(a) (3)  Exhibits

Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):

3 - Articles of Incorporation and Bylaws:

   
      3.1      The Restated Certificate of Incorporation, dated August 4, 1994,
                 as amended on August 4, 1994, August 16, 1994, October 11,
                 1994, October 21, 1994, January 26, 1995, August 3, 1995,
                 August 3, 1995, January 25, 1996, January 25, 1996, April 7,
                 1997, August 28, 1997, December 30, 1997 and December 30, 
                 1997.**
    

      3.2      The Bylaws as adopted June 16, 1994.
                 Incorporated herein by reference to the Company's Annual
                   Report on Form 10-K for the year ended December 31, 1994, as
                   amended by Form 10-K/A (Commission File No. 0-20421).

4 - Instruments Defining the Rights of Security Holders, including Indentures:

      4.1      Form of Rights Agreement among Tele-Communications, Inc., TCI 
                 Music, Inc. and the Bank of New York, as Rights Agent.
                   Incorporated by reference to Exhibit 4.3 to the Registration
                     Statement of Form S-4 of TCI Music and TCI (Reg. File Nos.
                     333-28613 and 333-28613-001).

10 - Material Contracts:

     10.1      Amended and Restated Tele-Communications, Inc. 1994 Stock
                 Incentive Plan.*
                   Incorporated herein by reference to the Company's
                     Registration Statement on Form S-8 (Commission File No.
                     333-40141).

     10.2      Amended and Restated Tele-Communications, Inc. 1995 Employee
                 Stock Incentive Plan.*
                   Incorporated herein by reference to the Company's
                     Registration Statement on Form S-8 (Commission File No.
                     333-40141).

     10.3      Amended and Restated Tele-Communications, Inc. 1996 Incentive
                 Plan.* 
                   Incorporated herein by reference to the Company's
                     Registration Statement on Form S-8 (Commission File No.
                     333-40141).

     10.4      Restated and Amended Employment Agreement, dated as of November
                 1, 1992, between the Company and John C. Malone.*
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1992,
                     as amended by Form 10-K/A for the year ended December 31,
                     1992 (Commission File No. 0-5550).

     10.5      Assignment and Assumption Agreement, dated as of August 4, 1994,
                 among TCI/Liberty Holding Company, Tele-Communications, Inc.
                 and John C. Malone.*
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1994,
                     as amended by Form 10-K/A (Commission File No. 0-20421).


                                                                    (continued)


                                      IV-4
<PAGE>   7


10 - Material contracts, continued:

     10.6      Call Agreement, dated February 9, 1998, between
                 Tele-Communications, Inc., John C. Malone and Leslie Malone.
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 25, 1998 (Commission 
                     File No. 0-20421).

     10.7      Call Agreement, dated February 9, 1998, between
                 Tele-Communications, Inc., Gary Magness, both individually and
                 as representative, Kim Magness, both individually and as
                 representative, the Estate of Bob Magness, the Estate of Betsy
                 Magness and any individual or entity which thereafter becomes a
                 party thereto.
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 25, 1998 (Commission 
                     File No. 0-20421).

     10.8      Stockholders Agreement, dated February 9, 1998, by and among
                 Tele-Communications, Inc., John C. Malone, Leslie Malone, Gary
                 Magness, both individually and as representative, Kim Magness,
                 both individually and as representative, the Estate of Bob
                 Magness, the Estate of Betsy Magness and any individual or
                 entity which thereafter becomes a party thereto. 
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 25, 1998 (Commission
                     File No. 0-20421).

     10.9      Consulting Agreement, dated as of January 1, 1996, between
                 Tele-Communications, Inc. and Donne F. Fisher.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.10     Consulting Agreement, dated as March 11, 1995, between
                 Tele-Communications, Inc. and J.C. Sparkman. 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1996
                     (Commission File No. 0-20421).

   
     10.11     Consulting Agreement, dated as of January 1, 1998, between
                 Tele-Communications International, Inc. and Fred A. Vierra.**
    

     10.12     Deferred Compensation Plan for Non-Employee Directors, effective
                 on November 1, 1992.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1992,
                     as amended by Form 10-K/A for the year ended December 31,
                     1992 (Commission File No. 0-5550).

     10.13     Amended and Restated Employment Agreement, dated as of July 18,
                 1995, among Tele-Communications, Inc., Tele-Communications
                 International, Inc. and Fred A. Vierra.* 
                   Incorporated herein by reference to Tele-Communications
                     International, Inc.'s Registration Statement on Form S-1
                     (Commission File No. 33-80491).

                                                                    (continued)


                                    IV-5
<PAGE>   8
10 - Material contracts, continued:

     10.14     Employment Agreement, dated as of January 1, 1993, between
                 Tele-Communications, Inc. and Larry E. Romrell.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K dated December 31, 1994, as amended by
                     Form 10-K/A (Commission File No. 0-20421).

     10.15     Assignment and Assumption Agreement, dated as of August 4, 1994,
                 among TCI/Liberty Holding Company, Tele-Communications, Inc. 
                 and Larry E. Romrell.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K dated December 31, 1994, as amended by
                     Form 10-K/A (Commission File No. 0-20421).

     10.16     Form of 1992 Non-Qualified Stock Option and Stock Appreciation
                 Rights Agreement.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1993,
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.17     Form of 1993 Non-Qualified Stock Option and Stock Appreciation
                 Rights Agreement.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1993,
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.18     Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement, dated as of November 12, 1993, by and between
                 Tele-Communications, Inc. and Jerome H. Kern.*
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1993,
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.19     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, Liberty Media Corporation and
                 grantee relating to stock appreciation rights granted pursuant 
                 to letter dated September 17, 1991.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration
                     Statement on Form S-8 Registration Statement (Commission
                     File No. 33-54263).

     10.20     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, Liberty Media Corporation and
                 grantee relating to the assumption of options and related stock
                 appreciation rights granted under the Liberty Media Corporation
                 1991 Stock Incentive Plan pursuant to letter dated July 26,
                 1993.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration
                     Statement on Form S-8 Registration Statement (Commission
                     File No. 33-54263).

                                                                    (continued)



                                      IV-6
<PAGE>   9


10 - Material contracts, continued:

     10.21     Assumption and Amended and Restated Stock Option Agreement
                 between the Company, TCI/Liberty Holding Company and a 
                 director of Tele-Communications, Inc. relating to assumption 
                 of options and related stock appreciation rights granted 
                 outside of an employee benefit plan pursuant to Tele-
                 Communications, Inc.'s 1993 Non-Qualified Stock Option and 
                 Stock Appreciation Rights Agreement.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.22     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, TCI/Liberty Holding Company and
                 grantee relating to assumption of options and related stock
                 appreciation rights granted under Tele-Communications, Inc.'s
                 1992 Stock Incentive Plan pursuant to Tele-Communications, 
                 Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation 
                 Rights Agreement.*
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.23     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, TCI/Liberty Holding Company and
                 grantee relating to assumption of grants pursuant to the
                 Agreement and Plan of Merger dated June 6, 1991 between United
                 Artists Entertainment Company and Tele-Communications, Inc.*
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.24     Form of letter dated September 17, 1991 from Liberty Media
                 Corporation to grantee relating to grant of stock appreciation
                 rights.*
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.25     Form of letter dated July 26, 1993 from Liberty Media Corporation
                 to grantee relating to grant of options and stock appreciation
                 rights.* 
                   Incorporated by reference to Tele-Communications, Inc.'s Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.26     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, TCI/Liberty Holding Company and
                 grantee relating to assumption of options and related stock
                 appreciation rights under Tele-Communications, Inc.'s 1992 
                 Stock Incentive Plan pursuant to Tele-Communications, Inc.'s 
                 1992 Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

                                                                     (continued)



                                      IV-7
<PAGE>   10


10 - Material contracts, continued:

     10.27     Form of Indemnification Agreement.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1993, 
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.28     Form of 1994 Non-Qualified Stock Option and Stock Appreciation
                 Rights Agreement.* 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K dated December 31, 1994, as amended by 
                     Form 10-K/A (Commission File No. 0-20421).

     10.29     TCI 401(k) Stock Plan, restated effective January 1, 1998.*

     10.30     Form of Restricted Stock Award Agreement for 1995 Award of Series
                 A TCI Group Restricted Stock pursuant to the Tele-
                 Communications, Inc. 1994 Stock Incentive Plan.* 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.31     Form of Restricted Stock Award Agreement for 1995 Award of Series
                 A Liberty Media Group Restricted Stock pursuant to the
                 Tele-Communications, Inc. 1994 Stock Incentive Plan.*
                   Incorporated herein by reference to the Company's Annual 
                       Report on Form 10-K for the year ended December 31, 1995 
                       (Commission File No. 0-20421).

     10.32     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1994 Stock Incentive
                 Plan.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.33     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1994 
                 Stock Incentive Plan.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

                                                                    (continued)

                                      IV-8
<PAGE>   11


10 - Material contracts, continued:

     10.34     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1995 Stock Incentive
                 Plan.* 
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

     10.35     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1995
                 Stock Incentive Plan.*
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

     10.36     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1996 Stock Incentive
                 Plan.*
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

     10.37     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1996
                 Stock Incentive Plan.*
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

   
     10.38     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1996 Stock Incentive
                 Plan.**

     10.39     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Ventures Group
                 common stock pursuant to the Tele-Communications, Inc. 1996
                 Stock Incentive Plan.**

     10.40     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1996
                 Stock Incentive Plan.**
    

   
     10.41     Form of Restricted Stock Award Agreement for 1997 Award of Series
                 A TCI Group Restricted Stock pursuant to the
                 Tele-Communications, Inc. 1996 Incentive Plan.*,**

     10.42     Form of Restricted Stock Award Agreement for 1997 Award of Series
                 A TCI Ventures Group Restricted Stock pursuant to the
                 Tele-Communications, Inc. 1996 Incentive Plan.*,**
    

     10.43     The Tele-Communications International, Inc. 1995 Stock Incentive
                 Plan.*
                     Incorporated herein by reference to Tele-Communications
                       International, Inc. Registration Statement on Form S-1
                       (Commission File No. 33-91876).

                                                                    (continued)



                                      IV-9
<PAGE>   12

10 - Material contracts, continued:

     10.44     Form of Restricted Stock Award Agreement for 1995 Award of Series
                 A Tele-Communications International, Inc. Restricted Stock
                 pursuant to the Tele-Communications International, Inc. 1995
                 Stock Incentive Plan.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.45     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Tele-Communications
                 International, Inc. common stock pursuant to the
                 Tele-Communications International, Inc. 1995 Stock Incentive
                 Plan.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.46     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Tele-Communications
                 International, Inc. common stock.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

   
     10.47     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Tele-Communications
                 International, Inc. common stock pursuant to the
                 Tele-Communications International, Inc. 1995 Stock Incentive
                 Plan.*,**

     10.48     Form of Restricted Stock Award Agreement for 1997 Award of Series
                 A Tele-Communications International, Inc. Restricted Stock
                 pursuant to the Tele-Communications International. Inc. 1995
                 Stock Incentive Plan.*,**
    

     10.49     Restricted Stock Award Agreement, made as of July 1, 1996, among
                 Tele-Communications, Inc., Brendan Clouston and WestMarc
                 Communications, Inc. *
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1996 
                     (Commission File No. 0-20421).

     10.50     Option Agreement, dated as of December 4, 1996, by and between
                 TCI Satellite Entertainment, Inc. and Brendan R. Clouston.*
                   Incorporated herein by reference to the TCI Satellite
                     Entertainment, Inc. Annual Report on Form 10-K for the year
                     ended December 31, 1996 (Commission File No. 0-21317).

     10.51     Form of Stock Appreciation Rights Agreement made as of the 1st
                 day of December, 1996, by and among TCI Wireless Holdings, 
                 Inc., Grantee, TCI Telephony Services, Inc. and 
                 Tele-Communications, Inc.*

     10.52     Form of Stock Appreciation Rights Agreement made as of the 1st
                 day of December, 1996, by and among TCI Teleport Holdings, 
                 Inc., Grantee, TCI Telephony Services, Inc. and 
                 Tele-Communications, Inc.*

     10.53     Form of Amended and Restated Option Agreement made as of the 1st
                 day of December, 1996, by and among TCI Wireline, Inc., Grantee
                 and Tele-Communications, Inc.*

                                                                    (continued)



                                     IV-10
<PAGE>   13


10 - Material contracts, continued:


   
     10.54     Form of Option to Purchase Common Stock Agreement made as of the
                 1st day of December, 1996, by and among TCI.Net, Inc., Grantee
                 and Tele-Communications, Inc.*,**

     10.55     Form of Stock Appreciation Right Agreement made as of the 1st day
                 of December, 1996, by and among TCI Internet Services, Inc.,
                 Tele-Communications, Inc. and Grantee.*,**
    

     10.56     Letter Agreement, dated December 26, 1996, by
                 Tele-Communications, Inc. to purchase WestMarc Series C
                 Cumulative Compounding Redeemable Preferred Stock from Larry E.
                 Romrell.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1996 
                     (Commission File No. 0-20421).

     10.57     Employee Stock Purchase Plan for Bargaining Unit Employees of
                 United Cable Television of Baltimore Limited Partnership.*
                   Incorporated herein by reference to the Tele-Communications,
                     Inc. Registration Statement on Form S-8 (Commission File 
                     No. 33-60839).

     10.58     Employee Stock Purchase Plan for Bargaining Unit Employees of
                 UACC Midwest, Inc. d/b/a TCI of Central Indiana.*
                   Incorporated herein by reference to the Tele-Communications,
                     Inc. Registration Statement on Form S-8 (Commission File 
                     No. 33-64827).

     10.59     Employee Stock Purchase Plan for Bargaining Unit Employees of 
                 TCI of Northern New Jersey, Inc.*
                   Incorporated herein by reference to the Tele-Communications,
                     Inc. Registration Statement on Form S-8 (Commission File 
                     No. 33-64831).

     10.60     Amended and Restated Agreement of Limited Partnership of 
                 MajorCo, L.P., dated as of January 31, 1996, among Sprint 
                 Spectrum, L.P., TCI Network Services, Comcast Telephony 
                 Services and Cox Telephony Partnership.
       
               Second Amended and Restated Joint Venture Formation Agreement,
                 dated as of January 31, 1996, by and between Sprint 
                 Corporation, Tele-Communications, Inc., Comcast Corporation 
                 and Cox Communications, Inc.
               
               Parents Agreement, dated as of January 31, 1996, by  Tele-
                 Communications, Inc. and Sprint Corporation.
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 9, 1996 (Commission 
                     File No. 0-20421).

                                                                    (continued)



                                    IV-11
<PAGE>   14

10- Material contracts, continued:

     10.61     Agreement of Purchase and Sale of Partnership Interest, dated as
                 of January 31, 1996, among Halcyon Communications, Inc., ECP
                 Holdings, Inc. and Fisher Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.62     Consent and Amendment of Amended Agreement of Partnership for
                 Halcyon Communications Partners, dated as of January 31, 1996, 
                 by and among Halcyon Communications, Inc., ECP Holdings, Inc. 
                 and Fisher Communications Associates, L.L.C. 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.63     Assignment and Assumption Agreement, made as of January 31, 
                 1996, between ECP Holdings, Inc. and Fisher Communications 
                 Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.64     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and ECP Holdings, Inc.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.65     Agreement of Purchase and Sale of Partnership Interests, dated as
                 of January 31, 1996, among Halcyon Communications, Inc., 
                 American Televenture of Minersville, Inc., TCI Cablevision of 
                 Nevada, Inc., TCI Cablevision of Utah, Inc., TEMPO Cable, Inc. 
                 and Fisher Communications Associates, L.L.C. 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.66     Consent and First Amendment of Amended and Restated Agreement of
                 Limited Partnership for Halcyon Communications Limited
                 Partnership, dated as of January 31, 1996, by and among 
                 Halcyon Communications, Inc., American Televenture of 
                 Minersville, Inc., TCI Cablevision of Nevada, Inc., TCI 
                 Cablevision of Utah, Inc., TEMPO Cable, Inc. and Fisher 
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.67     Assignment and Assumption Agreement, made as of January 31, 
                 1996, between TCI Cablevision of Utah, Inc. and Fisher 
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

                                                                     (continued)



                                     IV-12
<PAGE>   15


10- Material contracts, continued:

     10.68     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of Utah,
                 Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.69     Assignment and Assumption Agreement, made as of January 31, 1996,
                 between TCI Cablevision of Nevada, Inc. and Fisher 
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.70     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of 
                 Nevada, Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.71     Assignment and Assumption Agreement, made as of January 31, 1996,
                 between American Televenture of Minersville, Inc. and Fisher
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.72     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and American Televenture of
                 Minersville, Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.73     Assignment and Assumption Agreement, made as of January 31, 1996,
                 between TEMPO Cable, Inc. and Fisher Communications Associates,
                 L.L.C.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.74     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and TEMPO Cable, Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

   
     10.75     InterMedia Capital Management, L.P. Agreement of Limited
                 Partnership, dated as of June 10, 1997 and effective as of May
                 22, 1997, by and between InterMedia Management, Inc., Leo J.
                 Hindery, Jr. and TCI ICM I, Inc.**

     10.76     InterMedia Capital Management III, L.P. Amended and Restated
                 Agreement of Limited Partnership, dated as of June 10, 1997, by
                 and among Leo J. Hindery, Jr., InterMedia Management, Inc. and
                 TCI ICM III, Inc.**
    

                                                                    (continued)



                                     IV-13
<PAGE>   16


10- Material contracts, continued:

   
     10.77     InterMedia Capital Management IV, L.P. Amended and Restated
                 Agreement of Limited Partnership, dated as of August 5, 1997,
                 by and between InterMedia Management, Inc., TCI ICM IV, Inc.
                 and Leo J. Hindery, Jr.**
    

     10.78     Amended and Restated Contribution and Merger Agreement, dated
                 as of June 6, 1997, among TCI Communications, Inc., 
                 Cablevision Systems Corporation, CSC Parent Corporation and
                 CSC Merger Corporation.

               Stockholders Agreement dated as of March 4, 1998, by and among
                 Cablevision Systems Corporation, Tele-Communications, Inc. and
                 the Class B Entities (as defined therein)
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated March 6, 1998 (Commission File
                     No. 0-20421).

   
     10.79     Amended and Restated Asset Contribution Agreement, dated
                 September 25, 1997, by and among Fisher Communications
                 Associates, L.L.C. and Tempo Cable, Inc., Communications
                 Services, Inc., TCI Cablevision of Oklahoma, Inc., TCI of
                 Kansas, Inc., Wentronics, Inc., TCI Cablevision of Utah,
                 Inc., TCI Cablevision of Arizona, Inc., Tulsa Cable 
                 Television, Inc. and TCI American Cable Holdings III,
                 L.P. and Peak Cablevision, LLC.**

     10.80     Amended and Restated Operating Agreement of Peak Cablevision,
                 LLC, made as of September 25, 1997, by TCI American Cable
                 Holdings III, L.P. and Fisher Communications Associates,
                 L.L.C.**

     10.81     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and ECP Holdings, Inc.**

     10.82     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and American Televentures
                 of Minersville, Inc.**

     10.83     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of
                 Utah, Inc.**

     10.84     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and Tempo Cable, Inc.**

     10.85     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of
                 Nevada, Inc.**
    

   
21 - Subsidiaries of Tele-Communications, Inc.**
    

23 - Consent of Experts and Counsel

     23.1 Consent of KPMG Peat Marwick LLP.

     23.2 Consent of KPMG Peat Marwick LLP.

     23.3 Consent of KPMG Peat Marwick LLP.

     23.4 Consent of KPMG Peat Marwick LLP.

     23.5 Consent of KPMG Audit Plc.

     23.6 Consent of Deloitte & Touche LLP.

27 - Financial data schedule

 * Constitutes management contract or compensatory arrangement.

   
** Previously filed.
    


                                     IV-14
<PAGE>   17


(1)      Certain exhibits to agreement have been omitted. A copy of any omitted
         exhibit or schedule will be furnished supplementally to the Commission
         upon request.

(b)      Report on Form 8-K filed during the quarter ended December 31, 1997:

              None.



                                     IV-15
<PAGE>   18


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
Tele-Communications, Inc.:

   
Under date of March 20, 1998 except for note 19 which is as of January 6, 1999,
we reported on the consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1997, which are included in
the December 31, 1997 annual report on Form 10-K, as amended. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related consolidated financial statement schedules as listed
in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
    

In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

As discussed in note 19 to the consolidated financial statements as of December
31, 1997 and for the year then ended have been restated.


                                                  KPMG Peat Marwick LLP


Denver, Colorado
March 20, 1998, except for
note 19 which is as of 
January 6, 1999



                                     IV-16
<PAGE>   19


                                                                     Schedule I
                                                                     -----------
                                                                     Page 1 of 3


                            TELE-COMMUNICATIONS, INC.
                                AND SUBSIDIARIES

                         Condensed Information as to the
                      Financial Position of the Registrant

                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
Assets                                                             1997**     1996*
------                                                            -------    -------
                                                                 amounts in millions
<S>                                                              <C>           <C>
Investments in and advances to consolidated subsidiaries -
  eliminated upon consolidation                                   $ 6,850      6,230

Other assets, at cost, net of amortization                             18         16
                                                                  -------    -------
                                                                  $ 6,868      6,246
                                                                  =======    =======
Liabilities and Stockholders' Equity
------------------------------------
Accrued liabilities                                               $   455        149

Redeemable securities:
    Preferred stock                                                   655        658
    Common stock                                                        5         --

Stockholders' equity:
    Series Preferred Stock, $.01 par value                             --         --
    Convertible Redeemable Participating Preferred Stock,
      Series F, $.01 par value                                         --         --
    Class B 6% Cumulative Redeemable Exchangeable Junior
     Preferred Stock, $.01 par value                                   --         --
    Common stock, $1 par value:
      Series A TCI Group. Authorized 1,750,000,000 shares;
         issued 605,616,143 shares in 1997 and 696,325,478
         shares in 1996                                               606        696
      Series B TCI Group. Authorized 150,000,000 shares;
         issued 78,203,044 shares in 1997 and 84,647,065
         shares in 1996                                                78         85
      Series A Liberty Media Group. Authorized 750,000,000
         shares; issued 344,962,521 shares in 1997 and
         341,766,655 shares in 1996                                   345        342
      Series B Liberty Media Group. Authorized 75,000,000
         shares; issued 35,180,385 shares in 1997 and
         31,784,053 shares in 1996                                     35         32
      Series A TCI Ventures Group. Authorized 750,000,000
         shares; issued 377,386,032 shares in 1997                    377         --
      Series B TCI Ventures Group. Authorized 75,000,000
         shares; issued 32,532,800 shares in 1997                      33         --
    Additional paid-in capital                                      6,304      4,808
    Cumulative foreign currency translation adjustment,
      net of taxes                                                      4         26
    Unrealized holding gains for available-for-sale securities,
      net of taxes                                                    774         15
    Accumulated deficit                                              (812)      (251)
                                                                  -------    -------
                                                                    7,744      5,753
    Treasury stock and common stock held by subsidiaries,
      at cost                                                      (1,991)      (314)
                                                                  -------    -------
         Total stockholders' equity                                 5,753      5,439
                                                                  -------    -------
                                                                  $ 6,868      6,246
                                                                  =======    =======
</TABLE>

 *  Restated - see note 13 to the consolidated financial statements.
**  Restated - see note 19 to the consolidated financial statements.



                                     IV-17
<PAGE>   20

                                                                      Schedule I
                                                                      ----------
                                                                     Page 2 of 3


                            TELE-COMMUNICATIONS, INC.
                                AND SUBSIDIARIES

                         Condensed Information as to the
                          Operations of the Registrant

                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                             1997**   1996*    1995*
                                                            -----    -----    -----
                                                              amounts in millions
<S>                                                         <C>       <C>       <C>
Income (expenses):
    Selling, general and administrative                     $ (19)     (82)     (21)
    Stock compensation                                        (73)      13      (21)
    Gain on sale of stock by subsidiary                        --       --      123
                                                            -----    -----    -----
       Earnings (loss) before share of earnings (loss) of
         consolidated subsidiaries                            (92)     (69)      81

Share of earnings (loss) of consolidated subsidiaries        (469)     361     (264)
                                                            -----    -----    -----

       Net earnings (loss)                                   (561)     292     (183)

Dividend requirements on preferred stocks                     (42)     (35)     (34)
                                                            -----    -----    -----

       Net earnings (loss) attributable to common
         stockholders                                       $(603)     257     (217)
                                                            =====    =====    =====
</TABLE>

*   Restated - see note 13 to the consolidated financial statements.
**  Restated - see note 19 to the consolidated financial statements.



                                     IV-18
<PAGE>   21


                                                                     Schedule I
                                                                    Page 3 of 3


                            TELE-COMMUNICATIONS, INC.
                                AND SUBSIDIARIES

                           Condensed Information as to
                          Cash Flows of the Registrant

                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                           1997      1996*     1995*
                                                          -----      -----     -----
                                                              amounts in millions
<S>                                                       <C>        <C>       <C>
Cash flows from operating activities:
  Earnings (loss) before share of earnings (loss) of
     consolidated subsidiaries                            $ (92)       (69)        81
  Adjustments to reconcile earnings (loss) to net
     cash provided (used) by operating activities:
        Stock compensation                                   73        (13)        21
        Payments of obligation relating to stock
          compensation                                      (43)        (3)        --
        Gain on sale of subsidiary stock                     --         --       (123)
        Change in accrued liabilities                       276         56         53
                                                          -----      -----      -----

     Net cash provided (used) by operating activities       214        (29)        32
                                                          -----      -----      -----
Cash flows from investing activities:
  Reduction in (additional investments in and
    advances to) consolidated subsidiaries, net             370         75       (430)
  Other investing activities                                 (2)       (11)        (9)
                                                          -----      -----      -----
     Net cash provided (used) by investing activities       368         64       (439)
                                                          -----      -----      -----
Cash flows from financing activities:
  Payment of preferred stock dividends                      (42)       (35)       (24)
  Proceeds from issuances of common stock                     5         --        431
  Repurchase of common stock                               (529)        --         --
  Other financing activities                                (16)        --         --
                                                          -----      -----      -----

     Net cash provided (used) by financing activities      (582)       (35)       407
                                                          -----      -----      -----

           Change in cash                                    --         --         --

           Cash at beginning of year                         --         --         --
                                                          -----      -----      -----

           Cash at end of year                            $  --         --         --
                                                          =====      =====      =====
</TABLE>

*  Restated - see note 13 to the consolidated financial statements.

See also note 4 to the consolidated financial statements.



                                     IV-19
<PAGE>   22


                                                                    Schedule II
                                                                    -----------

                            TELE-COMMUNICATIONS, INC.
                                AND SUBSIDIARIES

                        Valuation and Qualifying Accounts

                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                       ADDITIONS          DEDUCTIONS
                                                       ---------          ----------
                                      BALANCE AT       CHARGED TO         WRITE-OFFS         BALANCE
                                      BEGINNING          PROFIT             NET OF           AT END
DESCRIPTION                            OF YEAR          AND LOSS          RECOVERIES         OF YEAR
-----------                           ----------        ---------         ----------         --------
                                                           AMOUNTS IN MILLIONS

<S>                                     <C>               <C>                <C>              <C>
Year ended     
  December 31, 1997:
    Allowance for doubtful
       receivables - trade              $ 36                96                (98)              34
                                        ====               ===                ===               ==

Year ended
  December 31, 1996:
    Allowance for doubtful
       receivables - trade              $ 34               121               (119)              36
                                        ====               ===                ===               ==

Year ended
  December 31, 1995:
    Allowance for doubtful
       receivables - trade              $ 23                86                (75)              34
                                        ====               ===                ===               ==
</TABLE>


                                    IV-20
<PAGE>   23





INDEPENDENT AUDITORS' REPORT


Partners of Sprint Spectrum Holding Company, L.P.
Kansas City, Missouri

We have audited the accompanying consolidated balance sheets of Sprint Spectrum
Holding Company, L.P. and subsidiaries ("the Partnership") as of December 31,
1997 and 1996, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Sprint Spectrum
Holding Company, L.P. and subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for the three years then ended,
in conformity with generally accepted accounting principles.

The Partnership was in the development stage at December 31, 1996; during the
year ended December 31, 1997, the Partnership completed its development
activities and commenced its planned principal operations.



Deloitte & Touche

February 3, 1998




                                     IV-21
<PAGE>   24


             SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                 DECEMBER 31,     DECEMBER 31,
                                                                    1997              1996
                                                                 -----------      -----------
<S>                                                              <C>              <C>        
                                 ASSETS
CURRENT ASSETS:
   Cash and cash equivalents ...............................     $   117,164      $    69,988
   Accounts receivable, net ................................         113,507            3,310
   Receivable from affiliates ..............................          96,291           12,901
   Inventory ...............................................         101,366           72,414
   Prepaid expenses and other assets, net ..................          28,495           14,260
   Note receivable--unconsolidated partnership .............              --          226,670
                                                                 -----------      -----------
     Total current assets ..................................         456,823          399,543

INVESTMENT IN PCS LICENSES, net ............................       2,303,398        2,122,908

INVESTMENTS IN UNCONSOLIDATED PARTNERSHIP(S) ...............         273,541          179,085

PROPERTY, PLANT AND EQUIPMENT, net .........................       3,429,238        1,408,680

MICROWAVE RELOCATION COSTS, net ............................         264,215          135,802

MINORITY INTEREST ..........................................          56,667               --

OTHER ASSETS, net ..........................................         113,127           77,383

                                                                 ===========      ===========
TOTAL ASSETS ...............................................     $ 6,897,009      $ 4,323,401
                                                                 ===========      ===========

                   LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Advances from partners ..................................     $        --      $   167,818
   Accounts payable ........................................         415,944          196,146
   Payable to affiliate ....................................          11,933            5,626
   Accrued interest ........................................          56,678           34,057
   Accrued expenses ........................................         231,429           47,173
   Current maturities of long-term debt ....................          34,562               49
                                                                 -----------      -----------
     Total current liabilities .............................         750,546          450,869

CONSTRUCTION OBLIGATIONS ...................................         705,280          714,934

LONG-TERM DEBT .............................................       3,533,954          686,192

OTHER NONCURRENT LIABILITIES ...............................          48,975           11,356

COMMITMENTS AND CONTINGENCIES

LIMITED PARTNER INTEREST IN CONSOLIDATED
   SUBSIDIARY ..............................................          13,722           13,397

PARTNERS' CAPITAL AND ACCUMULATED DEFICIT:
   Partners' capital .......................................       3,964,750        3,003,484
   Accumulated deficit .....................................      (2,120,218)        (556,831)
                                                                 -----------      -----------
     Total partners' capital ...............................       1,844,532        2,446,653

                                                                 ===========      ===========
TOTAL LIABILITIES AND PARTNERS' CAPITAL ....................     $ 6,897,009      $ 4,323,401
                                                                 ===========      ===========
</TABLE>


See notes to consolidated financial statements




                                     IV-22

<PAGE>   25




             SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                          FOR THE YEARS ENDED DECEMBER 31,
                                                  ---------------------------------------------
                                                     1997              1996            1995
                                                  -----------      -----------      ----------- 
<S>                                               <C>              <C>              <C>        
OPERATING REVENUES ..........................     $   248,607      $     4,175      $        --

OPERATING EXPENSES:
   Cost of revenues .........................         555,030           36,076               --
   Selling, general and administrative ......         696,911          312,697           66,340
   Depreciation and amortization ............         307,400           11,275              211
                                                  -----------      -----------      -----------
     Total operating expenses ...............       1,559,341          360,048           66,551
                                                  -----------      -----------      -----------

LOSS FROM OPERATIONS ........................      (1,310,734)        (355,873)         (66,551)

OTHER INCOME (EXPENSE):
   Interest income ..........................          26,456            8,593              460
   Interest expense .........................        (121,844)            (323)              --
   Other income .............................           5,474            1,586               38
   Equity in loss of unconsolidated
     partnerships ...........................        (168,935)         (96,850)         (46,206)
                                                  -----------      -----------      -----------
     Total other income (expense) ...........        (258,849)         (86,994)         (45,708)
                                                  -----------      -----------      -----------

NET LOSS BEFORE MINORITY INTEREST ...........      (1,569,583)        (442,867)        (112,259)

MINORITY INTEREST ...........................           6,196             (227)           1,830
                                                  -----------      -----------      -----------

NET LOSS ....................................     $(1,563,387)     $  (443,094)     $  (110,429)
                                                  ===========      ===========      ===========

</TABLE>





See notes to consolidated financial statements




                                     IV-23

<PAGE>   26



             SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                         PARTNERS'       ACCUMULATED
                                          CAPITAL          DEFICIT           TOTAL
                                        -----------      -----------      -----------
<S>                                    <C>              <C>              <C>        
BALANCE, January 1, 1995 ..........     $   123,438      $    (3,308)     $   120,130

Contributions of capital ..........       2,168,368               --        2,168,368

Net loss ..........................              --         (110,429)        (110,429)
                                        -----------      -----------      -----------

BALANCE, December 31, 1995 ........       2,291,806         (113,737)       2,178,069

Contributions of capital ..........         711,678               --          711,678

Net loss ..........................              --         (443,094)        (443,094)
                                        -----------      -----------      -----------

BALANCE, December 31, 1996 ........       3,003,484         (556,831)       2,446,653

Contributions of capital ..........         973,001               --          973,001

Net loss ..........................              --       (1,563,387)      (1,563,387)

Return of capital .................         (11,735)              --          (11,735)
                                        -----------      -----------      -----------

BALANCE, December 31, 1997 ........     $ 3,964,750      $(2,120,218)     $ 1,844,532
                                        ===========      ===========      ===========

</TABLE>


See notes to consolidated financial statements



                                     IV-24

<PAGE>   27



             SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                                      ---------------------------------------------
                                                                         1997             1996             1995
                                                                      -----------      -----------      -----------
<S>                                                                   <C>              <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss .......................................................     $(1,563,387)     $  (443,094)     $  (110,429)
 Adjustments to reconcile net loss to net cash provided
  by (used in) operating activities:
  Equity in loss of unconsolidated partnership ..................         168,935           96,850           46,206
  Minority interest .............................................          (6,196)             227           (1,830)
  Depreciation and amortization .................................         307,930           11,275              242
  Amortization of  debt discount and issuance costs .............          49,061           14,008               --
  Changes in assets and liabilities, net of effects
    of acquisition of APC:
    Receivables .................................................        (182,882)         (15,871)            (340)
    Inventory ...................................................         (24,870)         (72,414)              --
    Prepaid expenses and other assets ...........................         (12,497)         (21,608)            (178)
    Accounts payable and accrued expenses .......................         371,168          231,754           47,503
    Other noncurrent liabilities ................................          37,619            9,500            1,856
                                                                      -----------      -----------      -----------
          Net cash used in operating activities .................        (855,119)        (189,373)         (16,970)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures ..........................................      (2,041,313)      (1,386,346)         (31,763)
  Proceeds on sale of equipment .................................              --               --               37
  Microwave relocation costs, net ...............................        (116,278)        (135,828)              --
  Purchase of PCS licenses ......................................              --               --       (2,006,156)
  Purchase of APC, net of cash acquired .........................          (6,764)              --               --
  Investment in unconsolidated partnerships .....................        (191,171)        (190,390)        (131,752)
  Loan to unconsolidated partnership ............................        (111,468)        (231,964)            (655)
  Payment received on loan to unconsolidated partnership ........         246,670            5,950               --
                                                                      -----------      -----------      -----------
          Net cash used in investing activities .................      (2,220,324)      (1,938,578)      (2,170,289)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Advances from partners ........................................              --          167,818               --
  Net borrowing under revolving credit agreement ................         605,000               --               --
  Proceeds from issuance of long-term debt ......................       1,763,045          674,201               --
  Change in construction obligations ............................          (9,654)         714,934
  Payments on long-term debt ....................................        (170,809)             (24)              --
  Debt issuance costs ...........................................         (20,000)         (71,791)              --
  Partner capital contributions .................................         966,772          711,678        2,183,368
  Return of capital .............................................         (11,735)              --               --
                                                                      -----------      -----------      -----------
          Net cash provided by financing activities .............       3,122,619        2,196,816        2,183,368

                                                                      -----------      -----------      -----------
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS ...................................................          47,176           68,865           (3,891)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..................          69,988            1,123            5,014

                                                                      ===========      ===========      ===========
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................     $   117,164      $    69,988      $     1,123
                                                                      ===========      ===========      ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
   o  Interest paid, net of amount capitalized ..................     $    35,629      $       323      $        --

NON-CASH INVESTING AND FINANCING ACTIVITIES:
   o Accrued interest of $51,673 related to vendor
     financing was converted to long-term debt during 
     the year ended December 31, 1997.
   o A PCS license covering the Omaha MTA and valued 
     at $6,229 was contributed to the Company by Cox
     Communications during the year ended 
     December 31, 1997.

</TABLE>



See notes to consolidated financial statements

                                    IV-25
<PAGE>   28


             SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION

Sprint Spectrum Holding Company, L.P. ("Holdings" or the "Company") is a limited
partnership formed in Delaware on March 28, 1995, by Sprint Enterprises, L.P.,
TCI Spectrum Holdings, Inc., Cox Telephony Partnership and Comcast Telephony
Services (together the "Partners"). Holdings was formed pursuant to a
reorganization of the operations of an existing partnership, WirelessCo, L.P.
("WirelessCo") which transferred certain operating functions to Holdings. The
Partners are subsidiaries of Sprint Corporation ("Sprint"), Tele-Communications,
Inc. ("TCI"), Cox Communications, Inc. ("Cox"), and Comcast Corporation
("Comcast", and together with Sprint, TCI and Cox, the "Parents"), respectively.
The Company and certain other affiliated partnerships offer services as Sprint
PCS.

The Partners of the Company have the following ownership interests as of
December 31, 1997, and 1996:

<TABLE>

<S>                                                      <C>
          Sprint Enterprises, L.P.                       40%
          TCI Spectrum Holdings, Inc.                    30%
          Cox Telephony Partnership                      15%
          Comcast Telephony Services                     15%
</TABLE>


Each Partner's ownership interest consists of a 99% general partner interest and
a 1% limited partnership interest.

The Company is consolidated with its subsidiaries, including NewTelco, L.P.
("NewTelco") and Sprint Spectrum L.P., which, in turn, has several subsidiaries.
Sprint Spectrum L.P.'s subsidiaries are Sprint Spectrum Equipment Company, L.P.
("EquipmentCo"), Sprint Spectrum Realty Company, L.P. ("RealtyCo"), Sprint
Spectrum Finance Corporation ("FinCo"), and WirelessCo. RealtyCo and EquipmentCo
were organized on May 15, 1996 for the purpose of holding personal
communications service ("PCS") network-related real estate interests and assets.
FinCo was formed on May 20, 1996 to be a co-obligor of the debt obligations
discussed in Note 5. Additionally, the results of American PCS, L.P. ("APC") are
consolidated from November 1997, the date the Federal Communications Commission
("FCC") approved Holdings as the new managing partner (Note 4). APC, through
subsidiaries, owns a PCS license for and operates a broadband GSM (global system
for mobile communications) in the Washington D.C./Baltimore Major Trading Area
("MTA"), and is in the process of building a code division multiple access
("CDMA") overlay for its existing GSM PCS system. APC includes American PCS
Communications, LLC, APC PCS, LLC, APC Realty and Equipment Company, LLC and
American Personal Communications Holdings, Inc. MinorCo, L.P. ("MinorCo") holds
the minority ownership interests in NewTelco, Sprint Spectrum L.P., EquipmentCo,
RealtyCo and WirelessCo at December 31, 1997 and 1996, and APC at December 31,
1997.

VENTURE FORMATION AND AFFILIATED PARTNERSHIPS - A Joint Venture Formation
Agreement (the "Formation Agreement"), dated as of October 24, 1994, and
subsequently amended as of March 28, 1995, and January 31, 1996, was entered
into by the Parents, pursuant to which the Parents agreed to form certain
entities to (i) provide national wireless telecommunications services, including
acquisition and development of PCS licenses, (ii) develop a PCS wireless system
in the Los Angeles-San Diego MTA, and (iii) take certain other actions.



                                    IV-26
<PAGE>   29

On October 24, 1994, WirelessCo was formed and on March 28, 1995, additional
partnerships were formed consisting of Holdings, MinorCo, NewTelco, and Sprint
Spectrum L.P. The Partners' ownership interests in WirelessCo were initially
held directly by the Partners as of October 24, 1994, the formation date of
WirelessCo, but were subsequently contributed to Holdings and then to Sprint
Spectrum L.P. on March 28, 1995.

SPRINT SPECTRUM HOLDING COMPANY, L.P. PARTNERSHIP AGREEMENT - The Amended and
Restated Agreement of Limited Partnership of MajorCo, L.P. (the "Holdings
Agreement"), dated as of January 31, 1996, among Sprint Enterprises, L.P., TCI
Spectrum Holdings, Inc., Comcast Telephony Services and Cox Telephony
Partnership provides that the purpose of the Company is to engage in wireless
communications services.

The Holdings Agreement generally provides for the allocation of profits and
losses according to each Partner's proportionate percentage interest, after
giving effect to special allocations. After special allocations, profits are
allocated to partners to the extent of and in proportion to cumulative net
losses previously allocated. Losses are allocated, after considering special
allocations, according to each Partner's allocation of net profits previously
allocated.

The Holdings Agreement provides for planned capital contributions by the
Partners ("Total Mandatory Contributions") of $4.2 billion, which includes
agreed upon values attributable to the contributions of certain additional PCS
licenses by a Partner. The Total Mandatory Contributions amount is required to
be contributed in accordance with capital contribution schedules to be set forth
in approved annual budgets. The partnership board of Holdings may request
capital contributions to be made in the absence of an approved budget or more
quickly than provided for in an approved budget, but always subject to the Total
Mandatory Contributions limit. The proposed budget for fiscal 1998 has not yet
been approved by the partnership board, which has resulted in the occurrence of
a Deadlock Event (as defined) under the Holdings Agreement as of January 1,
1998. If the 1998 proposed budget is not approved through resolution procedures
set forth in the Holdings Agreement, certain specified buy/sell procedures may
be triggered which may result in a restructuring of the partners' interest in
the Company or, in limited circumstances, liquidation of the Company. As of
December 31, 1997, approximately $4.0 billion of the Total Mandatory
Contributions had been contributed by the Partners to Holdings and its
affiliated partnerships, of which approximately $3.3 billion had been
contributed to Sprint Spectrum L.P.

EMERGENCE FROM DEVELOPMENT STAGE COMPANY - Prior to the third quarter of 1997,
the Company reported its operations as a development stage enterprise. The
Company has commenced service in all of the MTAs in which it owns a license. As
a result, the Company is no longer considered a development stage enterprise,
and the balance sheets and statements of operations and of cash flows are no
longer presented in development stage format.

Management believes that the Company will incur additional losses in 1998 and
require additional financial resources to support the current level of
operations and the remaining network buildout for the year ended December 31,
1998. Management believes the Company has the ability to obtain the required
levels of financing through additional financing arrangements or additional
equity funding from the Partners.


                                    IV-27
<PAGE>   30



2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The assets, liabilities, results of operations and cash
flows of entities in which the Company has a controlling interest have been
consolidated. All significant intercompany accounts and transactions have been
eliminated.

MINORITY INTERESTS - MinorCo, the limited partner in NewTelco, has been
allocated approximately $0.3 million and $0.2 million in income for the years
ended December 31, 1997, and 1996, respectively. Losses of $1.8 million for the
year ended December 31, 1995 incurred by NewTelco as losses in excess of the
general partner's capital accounts (which consisted of $1,000) are to be
allocated to the limited partner to the extent of its capital account.

In November 1997, concurrent with the acquisition discussed in Note 4, American
Personal Communications II, L.P. ("APC II") became the minority owner in APC.
APC II has been allocated approximately $6.5 million in losses in APC since the
date of acquisition. Prior to November 1997, APC II, as majority owner, had been
allocated approximately $50 million in losses in excess of its investment. At
December 31, 1997, after consolidation of APC, the total of such losses,
approximately $56.7 million, was recorded as minority interest in the Company's
consolidated balance sheet. This treatment reflects that APC II continued to be
responsible for funding its share of losses until January 1, 1998 when the
Company acquired the remaining interest in APC.

TRADEMARK AGREEMENT - Sprint(R) is a registered trademark of Sprint
Communications Company L.P. and Sprint(R) and Sprint PCS(R) are licensed to the
Company on a royalty-free basis pursuant to a trademark license agreement
between the Company and Sprint Communications Company L.P.

REVENUE RECOGNITION - Operating revenues for PCS services are recognized as
service is rendered. Operating revenues for equipment sales are recognized at
the time the equipment is delivered to a customer or an unaffiliated agent.

COST OF EQUIPMENT - The Company uses multiple distribution channels for its
inventory, including third-party retailers, Company-owned retail stores, its
direct sales force and telemarketing. Cost of equipment varies by distribution
channel and includes the cost of multiple models of handsets, related accessory
equipment, and warehousing and shipping expenses.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments
with original maturities of three months or less to be cash equivalents. The
Company maintains cash and cash equivalents in financial institutions with the
highest credit ratings.

ACCOUNTS RECEIVABLE - Accounts receivable are net of an allowance for doubtful
accounts of approximately $9.0 million and $0.2 million at December 31, 1997 and
1996, respectively.

INVENTORY - Inventory consists of wireless communication equipment (primarily
handsets). Inventory is stated at lower of cost (on a first-in, first-out basis)
or replacement value. Any losses on the sales of handsets are recognized at the
time of sale.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost
or fair value at the date of acquisition. Construction work in progress
represents costs incurred to design and construct the PCS network. Repair and
maintenance costs are charged to expense as incurred. When network equipment is
retired, or otherwise disposed of, its book value, net of salvage, is charged to
accumulated depreciation. 


                                    IV-28
<PAGE>   31

When non-network equipment is sold, retired or abandoned, the cost and
accumulated depreciation are relieved and any gain or loss is recognized.
Property, plant and equipment are depreciated using the straight-line method
based on estimated useful lives of the assets. Depreciable lives range from 3 to
20 years.

EQUIPMENT UNDER CAPITAL LEASES - APC leases certain of its office and other
equipment under capital lease agreements. The assets and liabilities under
capital leases are recorded at the lesser of the present value of aggregate
future minimum lease payments, including estimated bargain purchase options, or
the fair value of the assets under lease. Assets under these capital leases are
depreciated over their estimated useful lives of 5 to 7 years. Depreciation
related to capital leases is included within depreciation expense.

INVESTMENT IN PCS LICENSES - During 1994 and 1995, the Federal Communications
Commission ("FCC") auctioned PCS licenses in specific geographic service areas.
The FCC grants licenses for terms of up to ten years, and generally grants
renewals if the licensee has complied with its license obligations. The Company
believes it will be able to secure renewal of the PCS licenses held by its
subsidiaries. PCS licenses are amortized over estimated useful lives of 40 years
once placed in service. Accumulated amortization for PCS licenses totaled
approximately $45.2 million and $1.7 million as of December 31, 1997, and 1996,
respectively. There was no amortization in 1995.

MICROWAVE RELOCATION COSTS - The Company has also incurred costs associated with
microwave relocation in the construction of the PCS network. Microwave
relocation costs are amortized over estimated useful lives of 40 years once
placed in service. Accumulated amortization for microwave relocation costs
totaled approximately $5.2 million as of December 31, 1997. There was no
amortization in 1996 or 1995.

INTANGIBLE ASSETS - The ongoing value and remaining useful life of intangible
assets are subject to periodic evaluation. The Company currently expects the
carrying amounts to be fully recoverable. Impairments of intangibles and
long-lived assets are assessed based on an undiscounted cash flow methodology.

CAPITALIZED INTEREST - Interest costs associated with the construction of
capital assets (including the PCS licenses) incurred during the period of
construction are capitalized. The total interest costs capitalized in 1997 and
1996 were approximately $98.6 million and $30.5 million, respectively. There
were no amounts capitalized in 1995.

DEBT ISSUANCE COSTS - Included in other assets are costs associated with
obtaining financing. Such costs are capitalized and amortized to interest
expense over the term of the related debt instruments using the effective
interest method. Accumulated amortization for the years ended December 31, 1997
and 1996 were approximately $13.4 million and $1.9 million, respectively. There
was no amortization in 1995.

OPERATING LEASES - Rent expense is recognized on the straight-line basis over
the life of the lease agreement, including renewal periods. Lease expense
recognized in excess of cash expended is included in non-current liabilities in
the consolidated balance sheet.

MAJOR CUSTOMER - The Company markets its products through multiple distribution
channels, including Company-owned retail stores and third-party retail outlets.
The Company's subscribers are disbursed throughout the United States. Sales to
one third-party retail customer represented approximately 21% and 88% of
operating revenue in the consolidated statements of operations for the years
ended December 


                                     IV-29

<PAGE>   32

31, 1997 and 1996, respectively. The Company reviews the credit history of
retailers prior to extending credit and maintains allowances for potential
credit losses. The Company believes that its risk from concentration of credit
is limited.

INCOME TAXES - The Company has not provided for federal or state income taxes
since such taxes are the responsibility of the individual Partners.

FINANCIAL INSTRUMENTS - The carrying value of the Company's short-term financial
instruments, including cash and cash equivalents, receivables from customers and
affiliates and accounts payable approximates fair value. The fair value of the
Company's long-term debt is based on quoted market prices for the same issues or
current rates offered to the Company for similar debt. A summary of the fair
value of the Company's long-term debt at December 31, 1997 and 1996 is included
in Note 5.

The fair value of the interest rate contracts is the estimated net amount that
APC would pay to terminate the contracts at the balance sheet date. The fair
value of the fixed rate loans is estimated using discounted cash flow analysis
based on APC's current incremental borrowing rate at which similar borrowing
agreements would be made under current conditions.

DERIVATIVE FINANCIAL INSTRUMENTS - Derivative financial instruments (interest
rate contracts) are utilized by APC to reduce interest rate risk. APC has
established a control environment which includes risk assessment and management
approval, reporting and monitoring of derivative financial instrument
activities. APC does not hold or issue derivative financial instruments for
trading purposes.

The differentials to be received or paid under interest rate contracts that are
matched against underlying debt instruments and qualify for settlement
accounting are recognized in income over the life of the contracts as
adjustments to interest expense. Gains and losses on terminations of interest
rate contracts are recognized as other income or expense when terminated in
conjunction with the retirement of associated debt. Gains and losses on
terminations of interest rate contracts not associated with the retirement of
debt are deferred and amortized to interest expense over the remaining life of
the associated debt to the extent that such debt remains outstanding.

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

RECLASSIFICATIONS - Certain reclassifications have been made to the 1996 and
1995 consolidated financial statements to conform to the 1997 consolidated
financial statement presentation.


                                     IV-30

<PAGE>   33



3.   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31, 1997 and
1996 (in thousands):

<TABLE>
<CAPTION>
                                                                     1997            1996
                                                                     ----            ----
<S>                                                              <C>              <C>        
Land                                                             $     1,444      $       905
Buildings and leasehold improvements                                 618,281           86,467
Fixtures and office furniture                                        165,998           68,210
Network equipment                                                  2,265,213          255,691
Telecommunications plant - construction work in progress             632,922        1,006,990
                                                                 -----------      -----------
                                                                   3,683,858        1,418,263
Less accumulated depreciation                                       (254,620)          (9,583)
                                                                 -----------      -----------

                                                                 $ 3,429,238      $ 1,408,680
                                                                 ===========      ===========
</TABLE>

Depreciation expense on property, plant and equipment was approximately $244.9
million, $ 9.6 million, and $0.2 million for the years ended December 31, 1997,
1996 and 1995, respectively.


4.   INVESTMENTS IN PARTNERSHIPS

APC - On January 9, 1995, WirelessCo acquired a 49% limited partnership interest
in APC. In September 1997, Holdings increased its ownership in APC to a 58.3%
through additional capital contributions of $30 million, and became the managing
partner upon FCC approval in November, 1997. As of January 1, 1998, Holdings and
MinorCo increased their ownership percentages to 99.75% and 0.25%, respectively,
of the partnership interests for approximately $30 million.

The acquisition increasing ownership to 58.3% was accounted for as a purchase
and, accordingly, the operating results of APC has been included in the
Company's consolidated financial statements since the date of the FCC's approval
of the acquisition. The purchase price was allocated to the assets acquired and
the liabilities assumed based on a preliminary estimate of fair value. The
following table reflects the total of APC's assets and liabilities at the date
of acquisition:

<TABLE>

<S>                                                    <C>  
          Assets acquired                              $ 503
          Cash paid                                      (30)
          Minority interest                               50
                                                       -----
          Liabilities assumed                          $ 523
                                                       =====
</TABLE>

The ultimate allocation of the purchase price may differ from the initial
estimate.

                                     IV-31

<PAGE>   34



The following unaudited pro forma financial information assumes the acquisition
had occurred on January 1 of each year and that the Company had owned 100% of
APC and consolidated its results in the financial statements:


                Proforma - Sprint Spectrum Holding Company, L.P.

<TABLE>
<CAPTION>
                                                               1997             1996
                                                            -----------      -----------
<S>                                                         <C>              <C>        
          Net sales ...................................     $   355,038      $    76,013
          Net loss (before minority interest)  ........      (1,646,551)        (553,274)
</TABLE>

Pro forma data does not purport to be indicative of the results that would have
been obtained had these events actually occurred at the beginning of the periods
presented and is not intended to be a projection of future results.

Prior to acquisition of controlling interest, the Company's investment in APC
was accounted for under the equity method. The partnership agreement between the
Company and APC II specified that losses were allocated based on percentage
ownership interests and certain other factors. In January 1997, the Company and
APC II amended the APC partnership agreement with respect to the allocation of
profits and losses. For financial reporting purposes, profits and losses were
allocated in proportion to Holdings' and APC II's respective partnership
interests, except for costs related to stock appreciation rights and interest
expense attributable to the FCC interest payments which were allocated entirely
to APC II. Losses of approximately $60 million, $97 million and $46 million for
the years ended December 31, 1997, 1996 and 1995, respectively, are included in
equity in losses of unconsolidated subsidiaries during the period prior to the
acquisition of controlling interest.

COX COMMUNICATIONS PCS, L.P. - On December 31, 1996, the Company acquired a 49%
limited partner interest in Cox Communications PCS, L.P. ("Cox PCS"). Cox
Pioneer Partnership ("CPP") holds a 50.5% general and a 0.5% limited partner
interest and is the general and managing partner. The investment in Cox PCS is
accounted for under the equity method. Under the terms of the partnership
agreement, CPP and the Company are obligated to, among other things: (a) upon
FCC consent to the assumption and recognition of the license payment obligations
by Cox PCS, CPP is obligated to make capital contributions in an amount equal to
such liability and related interest (the PCS license covering the Los
Angeles-San Diego MTA was contributed to Cox PCS in March 1997) (b) the Company
is obligated to make capital contributions of approximately $368.9 million to
Cox PCS; (c) the Company is not obligated to make any cash capital contributions
upon the assumption by Cox PCS of the FCC payment obligations until CPP has
contributed cash in an amount equal to the aggregate principal and interest of
such obligations; and, (d) CPP and the Company are obligated to make additional
capital contributions in an amount equal to such partner's percentage interest
times the amount of additional capital contributions being requested.

As of December 31, 1997, approximately $348.2 million in equity, including $2.45
million to PCS Leasing Co, L.P. ("LeasingCo"), a subsidiary of Cox PCS, had been
contributed to Cox PCS by the Company. Through December 31, 1996, $168 million
had been contributed to Cox PCS. Losses are allocated to the partners based on
their ownership percentages. Subsequent to December 31, 1997, the Company
completed its funding obligation to Cox PCS under the partnership agreement.
Concurrent with this funding, the Company paid approximately $33.2 million in
interest that had accrued on the unfunded capital obligation.


                                     IV-32

<PAGE>   35

Additionally, the Company acquired a 49% limited partner interest in LeasingCo.
LeasingCo was formed to acquire, construct or otherwise develop equipment and
other personal property to be leased to Cox PCS. The Company is not obligated to
make additional capital contributions to LeasingCo beyond the initial funding of
approximately $2.45 million .

Under the partnership agreement, CPP has the right to require that Holdings
acquire all or part of CPP's interest in Cox PCS based on fair market value at
the time of the transaction. Subsequent to December 31, 1997, CPP elected to
exercise this right. As a result, the Company intends to acquire 10.2% of Cox
PCS, subject to FCC approval, which will give the Company controlling interest.
The purchase price, currently estimated at $80 million, will be based on the
fair market value of Cox PCS as determined by independent appraisals. Through
December 2008, CPP may put any remaining interest in Cox PCS to the Company.


5.   LONG-TERM DEBT AND BORROWING ARRANGEMENTS

Long-term debt consists of the following as of December 31, 1997 and 1996 (in
thousands):

<TABLE>
<CAPTION>
                                                                    1997           1996
                                                                 ----------     ----------
<S>                                                              <C>            <C>    
     11% Senior Notes due in 2006                                $  250,000     $  250,000
     12-1/2% Senior Discount Notes due in 2006, net of
         unamortized discount of $177,720 and $214,501 at
         December 31, 1997 and 1996, respectively                   322,280        285,499
     Credit Facility - term loans                                   300,000        150,000
     Credit Facility - revolving credit                             605,000             --
     Vendor Financing                                             1,612,914             --
     APC Senior Secured Term Loan Facility                          220,000             --
     APC Senior Secured Reducing Revolving Credit                                       --
       Facility                                                     141,429
     Due To FCC, net of unamortized discount of                                         --
       $11,989                                                      90,355
     Other                                                           26,538            742
                                                                 ----------     ----------
     Total debt                                                   3,568,516        686,241
     Less current maturities                                         34,562             49
                                                                 ----------     ----------

     Long-term debt                                              $3,533,954     $  686,192
                                                                 ==========     ==========
</TABLE>

SENIOR NOTES AND SENIOR DISCOUNT NOTES - In August 1996, Sprint Spectrum L.P.
and Sprint Spectrum Finance Corporation (together, the "Issuers") issued $250
million aggregate principal amount of 11% Senior Notes due 2006 ("the Senior
Notes"), and $500 million aggregate principal amount at maturity of 12 1/2%
Senior Discount Notes due 2006 (the "Senior Discount Notes" and, together with
the Senior Notes, the "Notes"). The Senior Discount Notes were issued at a
discount to their aggregate principal amount at maturity and generated proceeds
of approximately $273 million. Cash interest on the Senior Notes will accrue at
a rate of 11% per annum and is payable semi-annually in arrears on each February
15 and August 15, commencing February 15, 1997. Cash interest will not accrue or
be payable on the Senior Discount Notes prior to August 15, 2001. Thereafter,
cash interest on the Senior Discount Notes 


                                     IV-33

<PAGE>   36

will accrue at a rate of 12 1/2% per annum and will be payable semi-annually in
arrears on each February 15 and August 15, commencing February 15, 2002.

On August 15, 2001, the Issuers will be required to redeem an amount equal to
$384.772 per $1,000 principal amount at maturity of each Senior Discount Note
then outstanding ($192 million in aggregate principal amount at maturity,
assuming all of the Senior Discount Notes remain outstanding at such date).

The Notes are redeemable at the option of the Issuers, in whole or in part, at
any time on or after August 15, 2001 at the redemption prices set forth below,
respectively, plus accrued and unpaid interest, if any, to the redemption date,
if redeemed during the 12 month period beginning on August 15 of the years
indicated below:

                                                                      
<TABLE>
<CAPTION>
                                                                  SENIOR DISCOUNT                     
                                                SENIOR NOTES           NOTES                          
             YEAR                             REDEMPTION PRICE   REDEMPTION PRICE 
             ----                             ----------------   ----------------
<S>                                           <C>                <C>     
             2001                                 105.500%           110.000%
             2002                                 103.667%           106.500%
             2003                                 101.833%           103.250%
             2004  and thereafter                 100.000%           100.000%
</TABLE>

In addition, prior to August 15, 1999, the Issuers may redeem up to 35% of the
originally issued principal amount of the Notes with the net proceeds of one or
more public equity offerings, provided that at least 65% of the originally
issued principal amount at maturity of the Senior Notes and Senior Discount
Notes would remain outstanding immediately after giving effect to such
redemption. The redemption price of the Senior Notes is equal to 111.0% of the
principal amount of the Senior Notes so redeemed, plus accrued and unpaid
interest, if any, to the redemption date. The redemption price of the Senior
Discount Notes is equal to 112.5% of the accreted value at the redemption date
of the Senior Discount Notes so redeemed.

The Notes contain certain restrictive covenants, including (among other
requirements) limitations on additional indebtedness, limitations on restricted
payments, limitations on liens, and limitations on dividends and other payment
restrictions affecting certain restricted subsidiaries.

BANK CREDIT FACILITY -Sprint Spectrum L.P. (the "Borrower") entered into an
agreement with The Chase Manhattan Bank ("Chase") as agent for a group of
lenders for a $2 billion bank credit facility dated October 2, 1996. The
proceeds of this facility are to be used to finance working capital needs,
subscriber acquisition costs, capital expenditures and other general Borrower
purposes.

The facility consists of a revolving credit commitment of $1.7 billion and a
$300 million term loan commitment.. In November 1997, certain terms relating to
the financial and operating conditions were amended. As of December 31, 1997,
$605 million had been drawn at a weighted average interest rate of 8.42%, with
$1.1 billion remaining available. There were no borrowings under the revolving
credit commitment as of December 31, 1996. Commitment fees for the revolving
portion of the agreement are payable quarterly based on average unused revolving
commitments. As of February 15, 1998, the Company had borrowed an additional
$225 million under the revolving credit facility.


                                     IV-34
<PAGE>   37


The revolving credit commitment expires July 13, 2005. Availability will be
reduced in quarterly installments ranging from $75 million to $175 million
commencing January 2002. Further reductions may be required after January 1,
2002 to the extent that the Borrower meets certain financial conditions.

The term loans are due in sixteen consecutive quarterly installments beginning
January 2002 in aggregate principal amounts of $125,000 for each of the first
fifteen payments with the remaining aggregate outstanding principal amount of
the term loans due as the last installment.

Interest on the term loans and/or the revolving credit loans is at the
applicable LIBOR rate plus 2.5% ("Eurodollar Loans"), or the greater of the
prime rate or 0.5% plus the Federal Funds effective rate, plus 1.5% ("ABR
Loans"), at the Borrower's option. The interest rate may be adjusted downward
for improvements in the bond rating and/or leverage ratios. Interest on ABR
Loans and Eurodollar Loans with interest period terms in excess of 3 months is
payable quarterly. Interest on Eurodollar Loans with interest period terms of
less than 3 months is payable on the last day of the interest period. As of
December 31, 1997 and 1996, the weighted average interest rate on the term loans
was 8.39% and 8.19%, respectively.

Borrowings under the Bank Credit Facility are secured by the Borrower's
interests in WirelessCo, RealtyCo and EquipmentCo and certain other personal and
real property (the "Shared Lien"). The Shared Lien equally and ratably secures
the Bank Credit Facility, the Vendor Financing agreements (discussed below) and
certain other indebtedness of the Borrower. The credit facility is jointly and
severally guaranteed by WirelessCo, RealtyCo and EquipmentCo and is non-recourse
to the Parents and the Partners.

The Bank Credit Facility agreement and Vendor Financing agreements contain
certain restrictive financial and operating covenants, including (among other
requirements) maximum debt ratios (including debt to total capitalization),
limitations on capital expenditures, limitations on additional indebtedness and
limitations on dividends and other payment restrictions affecting certain
restricted subsidiaries. The loss of the right to use the Sprint(R) trademark,
the termination or non-renewal of any FCC license that reduces population
coverage below specified limits, or certain changes in controlling interest in
the Borrower, as defined, among other provisions, constitute events of default.

VENDOR FINANCING - As of October 2, 1996, the Company entered into financing
agreements with Northern Telecom, Inc. ("Nortel") and Lucent Technologies, Inc.
("Lucent" and together with Nortel, the "Vendors") for multiple drawdown term
loan facilities totaling $1.3 billion and $1.8 billion, respectively. The
proceeds of such facilities are to be used to finance the purchase of goods and
services provided by the Vendors. Additionally, the commitments allow for the
conversion of accrued interest into additional principal. Such conversions do
not reduce the availability under the commitments. Interest accruing on the debt
outstanding at December 31, 1997, can be converted into additional principal
through February 8, 1999 and March 30, 1999, for Lucent and Nortel,
respectively.

On April 30, 1997 and November 20, 1997, the Company amended the terms of its
financing agreement with Nortel. The amendments provide for a syndication of the
financing commitment between Nortel, several banks and other vendors (the
"Nortel Lenders"), and the modification of certain operating and financial
covenants. The commitment provides financing in two phases. During the first
phase, the Nortel Lenders will finance up to $800 million. Under the second
phase, the Nortel Lenders will finance up to an additional $500 million upon the
achievement of certain operating and financial conditions, as amended. As of
December 31, 1997, $630 million, including converted accrued interest of 


                                    IV-35
<PAGE>   38


$18.6 million, had been borrowed at a weighted average interest rate of 8.98%
with $189 million remaining available under the first phase. In addition, the
Company paid $20 million in origination fees upon the initial drawdown under the
first phase and will be obligated to pay additional origination fees on the date
of the initial drawdown loan under the second phase. As of February 15, 1998,
the Company had borrowed an additional $47.0 million under the Nortel facility.
There were no borrowings under the Nortel facility at December 31, 1996.

On May 29, 1997 and November 20, 1997, the Company amended the terms of its
financing agreement with Lucent. The amendments provide for a syndication of the
financing commitment between Lucent, Sprint and other banks and vendors (the
"Lucent Lenders"), and the modification of certain operating and financial
covenants. The Lucent Lenders have committed to financing up to $1.5 billion
through December 31, 1997, and up to an aggregate of $1.8 billion thereafter.
The Company pays a facility fee on the daily amount of certain loans outstanding
under the agreement, payable quarterly. The Lucent agreement terminates June 30,
2001. As of December 31, 1997, the Company had borrowed approximately $983
million, including converted accrued interest of $33.1 million, under the Lucent
facility at a weighted average interest rate of 8.94%, with $850 million
remaining available. As of February 15, 1998, the Company had borrowed an
additional $104.1 million under the Lucent facility. There were no borrowings
under the Lucent facility at December 31, 1996.

The principal amounts of the loans drawn under both the Nortel and Lucent
agreements are due in twenty consecutive quarterly installments, commencing on
the date which is thirty-nine months after the last day of such "Borrowing Year"
(defined in the agreements as any one of the five consecutive 12-month periods
following the date of the initial drawdown of the loan). The aggregate amount
due each year is equal to percentages ranging from 10% to 30% multiplied by the
total principal amount of loans during each Borrowing Year.

The agreements provide two borrowing rate options. During the first phase of the
Nortel agreement and throughout the term of the Lucent agreement "ABR Loans"
bear interest at the greater of the prime rate or 0.5% plus the Federal Funds
effective rate, plus 2%. "Eurodollar Loans" bear interest at the London
interbank (LIBOR) rate (any one of the 30-, 60- or 90-day rates, at the
discretion of the Company), plus 3%. During the second phase of the Nortel
agreement, ABR Loans bear interest at the greater of the prime rate or 0.5% plus
the Federal Funds effective rate, plus 1.5%; and Eurodollar loans bear interest
at the LIBOR rate plus 2.5%. Interest from the date of each loan through one
year after the last day of the Borrowing Year is added to the principal amount
of each loan. Thereafter, interest is payable quarterly.

Borrowings under the Vendor Financing are secured by the Shared Lien. The Vendor
Financing is jointly and severally guaranteed by WirelessCo, RealtyCo, and
EquipmentCo and is non-recourse to the Parents and the Partners.

Certain amounts included under construction obligations on the consolidated
balance sheets may be financed under the Vendor Financing agreements.

DUE TO FCC - APC became obligated to the FCC for $102 million upon receipt of
the commercial PCS license covering the Washington D.C./Baltimore MTA. In March
1996, the FCC determined that interest on the amount due would begin to accrue
on March 8, 1996, at an interest rate of 7.75%. Beginning with the first payment
due in April 1996, the FCC granted two years of interest-only payments followed
by three years of principal and interest payments. Based on the interest and
payment provisions determined by the FCC and APC's incremental borrowing rate
for similar debt at the time the debt was issued, APC has accrued interest
beginning upon receipt of the license at an effective rate of 13%.


                                    IV-36
<PAGE>   39


In connection with the acquisition discussed in Note 4, Holdings became
responsible for making principal and interest payments under the APC's
obligation to the FCC.

APC SENIOR SECURED CREDIT FACILITIES - As of February 7, 1997, American PCS
Communications, LLC entered into credit facilities of $420 million, consisting
of a term loan facility of $220 million and a reducing revolving credit facility
of $200 million (together, the "Credit Agreement"). The Credit Agreement is
secured by first priority liens on all the equity interests held by American PCS
Communications LLC in its direct subsidiaries, including the equity interests of
the subsidiaries which will hold APC's PCS license and certain real property
interest and equipment and a first priority security interest in, and mortgages
on, substantially all other intangible and tangible assets of APC and
subsidiaries. The Credit Agreement matures February 7, 2005, with an interest
rate of LIBOR plus 2.25%. The interest rate may be stepped down over the term of
the credit agreement based on the ratio of outstanding debt to earnings before
interest, tax, depreciation and amortization. Proceeds from the Credit Agreement
were used to repay the outstanding financing from Holdings as of the closing
date of the credit agreement, capital expenditures for the communications
systems, general working capital requirements, and net operating losses.

The Credit Agreement contains covenants which require APC to maintain certain
levels of wireless subscribers, as well as other financial and non-financial
requirements.

In January 1998 APC completed negotiations with its lenders to amend the Credit
Agreement. As amended, the Credit Agreement contains certain covenants which,
among other things, contain certain restrictive financial and operating
covenants including, maximum debt ratios (including debt to total
capitalization) and limitations on capital expenditures. The covenants require
American PCS Communications, LLC to enter into interest rate contracts on a
quarterly basis to protect and limit the interest rate on 40% of its aggregate
debt outstanding.

OTHER DEBT - At December 31, 1997, other debt included a note payable to Lucent
for the financing of debt issuance costs, a note payable for certain leasehold
improvements, and capital leases acquired in the purchase of APC. Maturities on
the debt range from 3 to 10 years, at interest rates from 8.32% to 21%.

INTEREST RATE CONTRACTS - As of December 31, 1997, APC had entered into nine
interest rate contracts (swaps and a collar), with an aggregate notional amount
of $122 million. Under the agreements APC pays a fixed rate and receives a
variable rate such that it will protect APC against interest rate fluctuations
on a portion of its variable rate debt. The fixed rates paid by APC on the
interest rate swap contracts range from approximately 5.97% to 6.8%. Option
features contained in certain of the swaps operate in a manner such that the
interest rate protection in some cases is effective only when rates are outside
a certain range. Under the collar arrangement, APC will receive 6.19% when LIBOR
falls below 6.19% and pay 8% when LIBOR exceeds 8%. The contracts expire in
2001. The fair value of the interest rate contracts at December 31, 1997 was an
unrealized loss of approximately $1.3 million. The notional amounts represent
reference balances upon which payments and receipts are based and consequently
are not indicative of the level of risk or cash requirements under the
contracts. APC has exposure to credit risk to the counterparty to the extent it
would have to replace the interest rate swap contract in the market when and if
a counterparty were to fail to meet its obligations. The counterparties to all
contracts are primary dealers that meet APC's criteria for managing credit
exposures.


                                    IV-37
<PAGE>   40


FAIR VALUE - The estimated fair value of the Company's long-term debt at
December 31, 1997 and 1996 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                    1997                       1996
                                             ----------------------    ----------------------
                                             Carrying    Estimated     Carrying    Estimated
                                              Amount     Fair Value     Amount     Fair Value
                                             --------    ----------    --------    ----------
<S>                                         <C>          <C>          <C>          <C>    
11% Senior Notes                             $250,000     $280,650     $250,000     $270,625
12 1/2% Senior Discount Notes                 322,280      389,300      285,499      337,950
Credit facility - term loans                  300,000      300,000      150,000      151,343
Credit facility - revolver                    605,000      605,000           --           --
Vendor facility - Lucent                      983,299      983,299           --           --
Vendor facility - Nortel                      629,615      629,615           --           --
APC Senior Secured Term Loan 
  Facility                                    220,000      220,000           --           --
APC Senior Secured Reducing Revolving
  Credit Facility                             141,429      141,429           --           --
FCC debt                                       90,355       98,470           --           --
</TABLE>

At December 31, 1997, scheduled maturities of long-term debt and capital leases
during each of the next five years are as follows (in thousands):

<TABLE>
<CAPTION>
                                        Long-term   Capital
                                          Debt      Leases
                                        ---------   -------
<S>                                     <C>         <C>    
         1998                           $  29,800   $ 5,411
         1999                              40,425     3,667
         2000                              53,624       591
         2001                             395,291        42
         2002                             583,113         -
                                                    -------
                                                      9,711

         Less interest                                 (898)
                                                    -------

         Present value of minimum
           lease payments                             8,813
                                                    =======
</TABLE>


6.   COMMITMENTS AND CONTINGENCIES

OPERATING LEASES - Minimum rental commitments as of December 31, 1997, for all
noncancelable operating leases, consisting principally of leases for cell and
switch sites and office space, for the next five years, are as follows (in
thousands):

<TABLE>
<S>                                   <C>       
            1998                          $  135,124
            1999                             131,279
            2000                             104,658
            2001                              63,379
            2002                              21,254
</TABLE>


                                       IV-38

<PAGE>   41


Gross rental expense for cell and switch sites aggregated approximately $92.1
million and $13.1 million for the years ended December 31, 1997 and 1996,
respectively. Gross rental expense for office space approximated $33.2 million,
$11.4 million, and $0.7 million for the years ended December 31, 1997, 1996, and
1995, respectively. Certain cell and switch site leases contain renewal options
(generally for terms of 5 years) that may be exercised from time to time and are
excluded from the above amounts.

PROCUREMENT CONTRACTS - On January 31, 1996, the Company entered into
procurement and services contracts with AT&T Corp. (subsequently assigned to
Lucent ) and Nortel for the engineering and construction of a PCS network. Each
contract provides for an initial term of ten years with renewals for additional
one-year periods. The Vendors must achieve substantial completion of the PCS
network within an established time frame and in accordance with criteria
specified in the procurement contracts. Pricing for the initial equipment,
software and engineering services has been established in the procurement
contracts. The procurement contracts provide for payment terms based on delivery
dates, substantial completion dates, and final acceptance dates. In the event of
delay in the completion of the PCS network, the procurement contracts provide
for certain amounts to be paid to the Company by the Vendors. The minimum
commitments for the initial term are $0.8 billion and $1.0 billion from Lucent
and Nortel, respectively, which include, but are not limited to, all equipment
required for the establishment and installation of the PCS network.

HANDSET PURCHASE AGREEMENTS - In June, 1996, the Company entered into a
three-year purchase and supply agreement with a vendor for the purchase of
handsets and other equipment totaling approximately $500 million. During 1997
and 1996, the Company purchased $332.7 million and $85 million under the
agreement, respectively. The total purchase commitment must be satisfied by
April 30, 1998.

In September, 1996, the Company entered into another three-year purchase and
supply agreement with a second vendor for the purchase of handsets and other
equipment totaling more than $600 million, with purchases that commenced in
April, 1997. During 1997, the Company purchased $147.6 million under the
agreement. The total purchase commitment must be satisfied by April 2000.

SERVICE AGREEMENTS - The Company has entered into an agreement with a vendor to
provide PCS call record and retention services. Monthly rates per subscriber are
variable based on overall subscriber volume. If subscriber fees are less than
specified annual minimum charges, the Company will be obligated to pay the
difference between the amounts paid for processing fees and the annual minimum.
Annual minimums range from $20 million to $60 million through 2001. The
agreement extends through December 31, 2001, with two automatic, two-year
renewal periods, unless terminated by the Company. The Company may terminate the
agreement prior to the expiration date, but would be subject to specified
termination penalties.

The Company has also entered into an agreement with a vendor to provide prepaid
calling services. Monthly rates per minute of use are based on overall call
volume. If the average minutes of use are less than monthly specified minimums,
the Company is obligated to pay the difference between the average minutes used
at the applicable rates and the monthly minimum. Monthly minimums range from
$40,000 to $50,000 during the initial term. Certain installation and setup fees
for processing and database centers are also included in the agreement and are
dependent upon a need for such centers. The agreement extends through July 1999,
with successive one-year term renewals, unless terminated by the Company. The
Company may terminate the agreement prior to the expiration date, but would be
subject to specified termination penalties.


                                       IV-39
<PAGE>   42

In January 1997, the Company entered into a four and one-half year contract for
consulting services. Under the terms of the agreement, consulting services will
be provided at specified hourly rates for a minimum number of hours. The total
commitment is approximately $125 million over the term of the agreement.

LITIGATION - The Company is involved in various legal proceedings incidental to
the conduct of its business. While it is not possible to determine the ultimate
disposition of each of these proceedings, the Company believes that the outcome
of such proceedings, individually and in the aggregate, will not have a material
adverse effect on the Company's financial condition or results of operations.


7.   EMPLOYEE BENEFITS

Employees performing services for the Company were employed by Sprint through
December 31, 1995. Amounts paid to Sprint relating to pension expense and
employer contributions to the Sprint Corporation 401(k) plan for these employees
approximated $0.3 million in 1995.

The Company maintains short-term and long-term incentive plans. All salaried
employees of Sprint Spectrum L.P. are eligible for the short-term incentive plan
commencing at date of hire. Employees of APC are covered by the APC plans.
Short-term incentive compensation is based on incentive targets established for
each position based on the Company's overall compensation strategy. Targets
contain both an objective Company component and a personal objective component.
Charges to operations for the short-term plan approximated $20.0 million, $12.3
million, and $3.5 million for the years ended December 31, 1997, 1996, and 1995,
respectively.

LONG-TERM COMPENSATION OBLIGATION - The Company has two long-term incentive
plans, the 1996 Plan and the 1997 Plan. Employees meeting certain eligibility
requirements are considered to be participants in each plan. Participants in the
1996 Plan will receive 100% of the pre-established targets for the period from
July 1, 1995 to June 30, 1996 (the "Introductory Term"). Participants in the
1996 Plan elected either a payout of the amount due or converted 50% or 100% of
the award to appreciation units. Unless converted to appreciation units, payment
for the Introductory Term of the 1996 Plan will be made in the third quarter of
1998. Under the 1996 plan, appreciation units vest 25% per year commencing on
the second anniversary of the date of grant and expire after a term of ten
years. The 1997 Plan appreciation units vest 25% per year commencing on the
first anniversary of the date of the grant and also expire after ten years. For
the years ended December 31, 1997, 1996, and 1995, $18.1 million, $9.5 million,
and $1.9 million, respectively, has been expensed under both plans. At December
31, 1997 a total of approximately 103 million units have been authorized for
grant for both plans. The Company has applied APB Opinion No. 25, "Accounting
for Stock Issued to Employees" for 1997 and 1996. No significant difference
would have resulted if SFAS No. 123, "Accounting for Stock-Based Compensation"
had been applied.

SAVINGS PLAN - Effective January, 1996, the Company established a savings and
retirement program (the "Savings Plan") for certain employees, which qualifies
under Section 401(k) of the Internal Revenue Code. Most permanent full-time, and
certain part-time, employees are eligible to become participants in the plan
after one year of service or upon reaching age 35, whichever occurs first.
Participants make contributions to a basic before tax account and supplemental
before tax account. The maximum contribution for any participant for any year is
16% of such participant's compensation. For each eligible employee who elects to
participate in the Savings Plan and makes a contribution to the basic before tax
account, the Company makes a matching contribution. The matching contributions
equal 50% 



                                       IV-40

<PAGE>   43

of the amount of the basic before tax contribution of each participant up to the
first 6% that the employee elects to contribute. Contributions to the Savings
Plan are invested, at the participant's discretion, in several designated
investment funds. Distributions from the Savings Plan generally will be made
only upon retirement or other termination of employment, unless deferred by the
participant. Expense under the Savings Plan approximated $4.9 million and $1.1
million in 1997 and 1996, respectively.

APC also has an employee savings plan that qualifies under Section 401(k) of the
Internal Revenue code. All APC employees completing one year of service are
eligible and may contribute up to 15% of their pretax earnings. APC matches 100%
of the first 3% of the employee's contribution. Employees are immediately fully
vested in APC's contributions. In addition, APC makes discretionary
contributions on behalf of eligible participants in the amount of 2% of
employee's compensation. Expenses relating to the employee savings plan have not
been significant since the date of acquisition.

PROFIT SHARING (RETIREMENT) PLAN - Effective January, 1996, the Company
established a profit sharing plan for its employees. Employees are eligible to
participate in the plan after completing one year of service. Profit sharing
contributions are based on the compensation, age, and years of service of the
employee. Profit sharing contributions are deposited into individual accounts of
the Company's retirement plan. Vesting occurs once a participant completes five
years of service. For the years ended December 31, 1997 and 1996, expense under
the profit sharing plan approximated $2.5 million and $0.7 million,
respectively.

DEFERRED COMPENSATION PLAN FOR EXECUTIVES - Effective January, 1997, the Company
established a non-qualified deferred compensation plan which permits certain
eligible executives to defer a portion of their compensation. The plan allows
the participants to defer up to 80% of their base salary and up to 100% of their
annual short-term incentive compensation. The deferred amounts earn interest at
the prime rate. Payments will be made to participants upon retirement,
disability, death or the expiration of the deferral election under the payment
method selected by the participant.


8.   RELATED PARTY TRANSACTIONS

BUSINESS SERVICES - The Company reimburses Sprint for certain accounting and
data processing services, for participation in certain advertising contracts,
for certain cash payments made by Sprint on behalf of the Company and other
management services. The Company is allocated the costs of such services based
on direct usage.
Allocated expenses of approximately $10.5 million, $11.9 million, and
$2.6 million are included in selling, general and administrative expense in the
consolidated statements of operations for 1997, 1996, and 1995, respectively. In
addition to the miscellaneous services agreement described above, the Company
has entered into agreements with Sprint for invoicing services, operator
services, and switching equipment. The Company is also using Sprint as its
interexchange carrier, with the agreement for such services covered under the
Holdings partnership agreement. Charges are based on the volume of services
provided, and are similar to those that would be incurred with an unrelated
third-party vendor.

APC - The Company entered into an affiliation agreement with APC in January 1995
which provides for the reimbursement of certain allocable costs and payment of
affiliation fees. For the year ended December 31, 1997, the reimbursement of
allocable costs of approximately $14.0 million is included in selling, general
and administrative expenses. There were no reimbursements recognized in 1996 or
1995. Additionally, affiliation fees are recognized based on a percentage of
APC's net revenues. During the year ended December 31, 1997, affiliation fees of
$4.2 million are included in other income.


                                       IV-41

<PAGE>   44


COX PCS - Concurrent with the execution of the partnership agreement, the
Company entered into an affiliation agreement with Cox PCS which provides for
the reimbursement of certain allocable costs and payment of affiliate fees. For
the years ended December 31, 1997 and 1996, allocable costs of approximately
$20.0 million and $7.3 million, respectively, are netted against selling,
general and administrative expenses in the accompanying consolidated statements
of operations. Of these total allocated costs, approximately $1.6 million and
$7.3 million were included in receivables from affiliates in the consolidated
balance sheets. In addition, the Company purchases certain equipment, such as
handsets, on behalf of Cox PCS. Receivables from affiliates for handsets and
related equipment were approximately $31.2 million and $6 million at December
31, 1997 and 1996, respectively.

PHILLIECO, L.P. - The Company provides various services to PhillieCo, L.P.
("PhillieCo"), a limited partnership organized by and among subsidiaries of
Sprint, TCI and Cox. PhillieCo owns a PCS license for the Philadelphia MTA.
During the year ended December 31, 1997, costs for services incurred during 1996
and 1997 of $36.3 million were allocated to PhillieCo. and are included as a
reduction of selling, general and administrative expenses in the accompanying
consolidated statements of operations. Additionally, affiliation fees are
recognized based on a percentage of PhillieCo's net revenues. During the year
ended December 31, 1997, affiliation fees of $0.3 million are included in other
income in the accompanying consolidated statements of operations. The allocated
costs and affiliate fees of $36.6 million are included in receivable from
affiliates at December 31, 1997 and were paid during January 1998.
There were no such costs at December 31, 1996.






                                    IV-42


<PAGE>   45
SPRINTCOM, INC. - The Company provides services to SprintCom, Inc.
("SprintCom"), an affiliate of Sprint. The Company is currently building out the
network infrastructure in certain BTA markets where SprintCom was awarded
licenses. Such services include engineering, management, purchasing, accounting
and other related services. For the year ended December 31, 1997, costs for
services provided of $29.1 million were allocated to SprintCom, and are included
as a reduction of selling, general and administrative expenses in the
accompanying consolidated statements of operations. Of the total allocated
costs, approximately $14.0 million are included in receivables from affiliates
at December 31, 1997. No such costs were incurred in 1996.

PAGING SERVICES - In 1996, the Company commenced paging services pursuant to
agreements with Paging Network Equipment Company and Sprint Communications
Company L.P. ("Sprint Communications"). For the years ended December 31, 1997
and 1996, Sprint Communications received agency fees of approximately $10.6
million and $4.9 million, respectively.

ADVANCES FROM PARTNERS - In December 1996, the Partners advanced approximately
$168 million to the Company, which was contributed to Cox PCS (Note 4). The
advances were repaid in February 1997.


                                      IV-43

<PAGE>   46



9.   QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for 1997 and 1996 is as follows (in
thousands):

<TABLE>
<CAPTION>
            1997                         First        Second       Third        Fourth
            ----                         -----        ------       -----        ------
<S>                                     <C>          <C>          <C>          <C>     
     Operating revenues ...........     $  9,467     $ 25,386     $ 72,534     $141,220
     Operating expenses ...........      200,281      303,098      455,236      600,726
     Net loss .....................      188,884      287,664      420,914      665,925


            1996
            ----
     Operating revenues ...........     $     --     $     --     $     --     $  4,175
     Operating expenses ...........       30,978       46,897       87,135      195,038
     Net loss .....................       67,425       90,770      101,497      183,402
</TABLE>


10.   SUBSEQUENT EVENTS

Subsequent to December 31, 1997, the Company reorganized operations under which
certain field offices will be consolidated. Costs associated with this
reorganization are expected to be recorded in the first quarter of 1998 and will
consist primarily of severance pay, write-off of certain leasehold improvements
and termination payments under lease agreements.





                                    IV-44
<PAGE>   47

                          Independent Auditors' Report





To the Board of Directors and Shareholders of
Telewest Communications plc


We have audited the accompanying consolidated balance sheet of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations and cash flows for each of the
years in the three year period ended December 31, 1997.  These consolidated
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1996, in conformity with generally
accepted accounting principles in the United States of America.





KPMG Audit Plc
Chartered Accountants
Registered Auditors



March 19, 1998
London, England





                                     IV-45
<PAGE>   48
Telewest Communications - US GAAP

Consolidated statements of operations

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31
                                                                              1997         1997          1996           1995
                                                                             $'000      L. '000       L. '000        L. '000
                                                                          (NOTE 2)
<S>                                                                        <C>           <C>           <C>            <C>   
REVENUE
   Cable television                                                        262,698       159,918       121,224        64,740
   Telephony - residential                                                 273,748       166,645       125,013        57,597
   Telephony - business                                                     72,085        43,882        34,562        17,449
   Other (L. 3,573, L. 1,600 and L. 1,451 in 1997, 1996 and 1995,
      respectively, from related parties)                                   26,370        16,053         9,467         4,998
                                                                          --------      --------      --------      --------
                                                                           634,901       386,498       290,266       144,784
                                                                          --------      --------      --------      --------

OPERATING COSTS AND EXPENSES:
   Programming                                                            (153,496)      (93,441)      (69,906)      (32,194)
   Telephony                                                               (82,373)      (50,145)      (52,572)      (29,526)
   Selling, general, and administrative (including L. 1,170, L. 2,560
      and L. 3,257 in 1997, 1996 and 1995, respectively, to related
      parties)                                                            (317,591)     (193,335)     (167,323)     (105,388)
  Depreciation                                                            (291,318)     (177,341)     (129,716)      (60,019)
  Amortization of goodwill                                                 (43,359)      (26,395)      (26,149)       (7,854)
                                                                          --------      --------      --------      --------
                                                                          (888,137)     (540,657)     (445,666)     (234,981)
                                                                          --------      --------      --------      --------
OPERATING LOSS                                                            (253,236)     (154,159)     (155,400)      (90,197)


OTHER INCOME/(EXPENSE):
  Interest income (including L. 3,178, L. 1,723 and L. 1,583 in 1997,
      1996 and 1995, respectively, from related parties)                    13,074         7,959        16,651        15,645
  Interest expense                                                        (232,805)     (141,721)     (105,172)      (26,649)
  Loss on disposal of interest rate swaps                                       --            --            --        (8,609)
  Foreign exchange losses, net                                             (38,676)      (23,544)       (2,838)      (14,575)
  Share of net losses of affiliates                                        (35,640)      (21,696)      (15,973)      (12,777)
  Gain/(loss) on disposal of assets                                          1,871         1,139           571          (419)
  Minority interests in profits of consolidated subsidiaries, net             (482)         (293)         (180)          (16)
  Other, net                                                                    --            --            --            82
                                                                          --------      --------      --------      --------
LOSS BEFORE INCOME TAXES                                                  (545,894)     (332,315)     (262,341)     (137,515)
Income tax expense (note 14)                                                  (225)         (137)          (50)          (16)
                                                                          --------      --------      --------      --------
NET LOSS                                                                  (546,119)     (332,452)     (262,391)     (137,531)
                                                                          --------      --------      --------      --------
</TABLE>





                                     IV-46
<PAGE>   49

Telewest Communications - US GAAP

Consolidated statements of operations (continued)

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31

                                                     1997                  1997                1996               1995
                                                      $*                   L. *                L. *               L. *
                                                (EXCEPT NUMBER                                               (except number
                                                  OF SHARES)                                                  of shares)
<S>                                               <C>                 <C>                 <C>                 <C>        
BASIC AND DILUTED LOSS PER ORDINARY SHARE
Weighted average number of ordinary shares
outstanding                                       927,567,600         927,567,600         925,425,473         861,424,848

BASIC AND DILUTED LOSS PER ORDINARY SHARE               (0.59)              (0.36)              (0.28)              (0.16)
</TABLE>


See accompanying notes to the consolidated financial statements

* EXCEPT NUMBER OF SHARES





                                     IV-47
<PAGE>   50

Telewest Communications - US GAAP

Consolidated balance sheets

<TABLE>
<CAPTION>
                                                                                            DECEMBER 31
                                                                                 1997            1997            1996
                                                                                $'000          L. '000         L. '000
ASSETS                                                                       (note 2)
<S>                                                                            <C>             <C>             <C>   
Cash and cash equivalents                                                      48,595          29,582          79,116
Trade receivables (net of allowance for doubtful accounts of
   L. 6,507 and L. 5,405)                                                      60,167          36,627          29,305
Other receivables (note 7)                                                     43,050          26,207          32,394
Prepaid expenses                                                               12,526           7,625           5,168
Investment in affiliates, accounted for under the equity method,
   and related receivables (note 8)                                            98,081          59,707          69,420
Other investments, at cost                                                     42,162          25,666          25,666
Property and equipment (less accumulated depreciation of
   L. 481,451  and L. 308,240)  (note 9)                                    2,801,658       1,705,520       1,447,194
Goodwill (less accumulated amortization of L. 64,301 and L. 37,907 )          765,342         465,905         491,290
Other assets (less accumulated amortization of L. 10,140 and L. 4,162)
  (note 11)                                                                    92,833          56,513          62,387
                                                                           ----------      ----------      ----------
TOTAL ASSETS                                                                3,964,414       2,413,352       2,241,940
                                                                           ----------      ----------      ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                               43,877          26,710          46,855
Other liabilities (note 12)                                                   326,345         198,664         190,200
Debt (note 13)                                                              2,255,516       1,373,054         879,351
Capital lease obligations (note 17)                                           124,080          75,534          54,390
                                                                           ----------      ----------      ----------
TOTAL LIABILITIES                                                           2,749,818       1,673,962       1,170,796
                                                                           ----------      ----------      ----------
MINORITY INTERESTS                                                              1,051             640             347
                                                                           ----------      ----------      ----------
SHAREHOLDERS' EQUITY (note 15)
Convertible preference shares, 10p par value;  661,000,000 shares
   authorized and 496,066,708 shares issued and outstanding                    81,489          49,607          49,607
Ordinary shares, 10p par value;  2,010,000,000 shares authorized;
   927,567,600 issued and outstanding in 1997 and 1996                        152,372          92,757          92,757
Additional paid-in capital                                                  2,189,533       1,332,887       1,332,887
Accumulated deficit                                                        (1,206,661)       (734,560)       (402,108)
                                                                           ----------      ----------      ----------
                                                                            1,216,733         740,691       1,073,143
Ordinary shares held in trust for the Telewest Restricted Share
    Scheme (note 16)                                                           (3,188)         (1,941)         (2,346)
                                                                           ----------      ----------      ----------
TOTAL SHAREHOLDERS' EQUITY                                                  1,213,545         738,750       1,070,797
                                                                           ----------      ----------      ----------
Commitments and contingencies (note 17)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                  3,964,414       2,413,352       2,241,940
                                                                           ----------      ----------      ----------
</TABLE>


See accompanying notes to the consolidated financial statements





                                     IV-48
<PAGE>   51

Telewest Communications - US GAAP

Consolidated statements of cash flows

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                  1997        1997        1996         1995
                                                                  $'000      L. '000     L. '000     L. '000
                                                                (NOTE 2)
<S>                                                             <C>         <C>         <C>         <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                        (546,119)   (332,452)   (262,391)   (137,531)
Adjustments to reconcile Net loss to net
    cash provided by / (used in) operating
    activities:
Depreciation                                                     291,318     177,341     129,716      60,019
Amortization of goodwill                                          43,359      26,395      26,149       7,854
Amortization of deferred financing costs and issue discount
    on senior discount debentures                                127,280      77,482      74,104      16,605
Accrued interest on senior debentures                                 --          --          --       5,451
Unrealized loss on foreign currency translation                   38,676      23,544       2,838      14,575
Loss on disposal of interest rate swaps                               --          --          --       8,609
Share of net losses of affiliates                                 35,640      21,696      15,973      12,777
(Gain)/loss on disposals of assets                                (1,871)     (1,139)       (571)        419
Minority interests in profits of consolidated subsidiaries           482         293         180          16
Changes in operating assets and liabilities, net of effect of
    acquisition of subsidiaries:
      Change in receivables                                       (7,011)     (4,268)    (15,908)     (5,282)
      Change in prepaid expenses                                  (4,036)     (2,457)        953      (3,367)
      Change in accounts payable                                 (11,648)     (7,091)     (4,575)     (5,603)
      Change in other liabilities                                 38,825      23,635      51,668      19,206
Other                                                                 --          --          --        (356)
                                                                --------    --------    --------    --------
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES                4,895       2,979      18,136      (6,608)
                                                                --------    --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment                            (714,635)   (435,037)   (464,367)   (254,453)
Cash paid for acquisition of subsidiaries                           (999)       (608)    (14,167)     (3,232)
Additional investments in and loans to affiliates                (14,825)     (9,025)     (2,728)     (9,143)
Additions to other investments                                        --          --      (5,000)         --
Proceeds from disposals of assets                                  9,962       6,066       3,059         688
Other investing activities                                            --          --          --         335
                                                                --------    --------    --------    --------
NET CASH USED IN INVESTING ACTIVITIES                           (720,497)   (438,604)   (483,203)   (265,805)
                                                                --------    --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for credit facility arrangement costs                       --          --     (18,400)         --
Proceeds from debenture issue                                         --          --          --     754,812
Cash paid for foreign currency option                                 --          --          --     (88,070)
Repayment of borrowings                                           (3,901)     (2,375)       (937)   (157,930)
Cash paid for debenture issue costs                                   --          --        (829)    (20,574)
Cash paid for  share issue costs                                      --          --          --      (6,141)
Proceeds from borrowings                                         644,760     392,500     100,400          --
Capital element of finance lease repayments                       (6,523)     (3,971)     (1,231)     (1,291)
                                                                --------    --------    --------    --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                        634,336     386,154      79,003     480,806
                                                                --------    --------    --------    --------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS             (81,266)    (49,471)   (386,064)    208,393
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS        (103)        (63)        362       8,423
                                                                --------    --------    --------    --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                   129,964      79,116     464,818     248,002
                                                                --------    --------    --------    --------
CASH AND CASH EQUIVALENTS AT END OF YEAR                          48,595      29,582      79,116     464,818
                                                                --------    --------    --------    --------
</TABLE>


See accompanying notes to the consolidated financial statements





                                     IV-49
<PAGE>   52

Telewest Communications - US GAAP

Consolidated statement of shareholders' equity

<TABLE>
<CAPTION>
                                                   Convertible                      Shares  Additional   Accumulated
                                                    preference      Ordinary          held     Paid-in       deficit
                                                        shares        shares      in trust     Capital                       Total
                                                       L. '000       L. '000       L. '000     L. '000       L. '000       L. 'OOO
<S>                                                     <C>          <C>           <C>          <C>           <C>          <C>    
BALANCE AT DECEMBER 31, 1994                            15,300       84,824        (7,280)      686,276       (2,186)      776,934

Conversion of ordinary shares into
  convertible preference shares (see note 15)           11,227      (11,227)           --            --           --            --

Shares issued in connection with the
  acquisition of TCMN (see notes 5 and 15)              23,080       18,399            --       636,695           --       678,174

Accrued employee compensation
  relating to the Telewest Restricted Share Scheme          --           --         5,171            --           --         5,171

Net Loss                                                    --           --            --            --     (137,531)     (137,531)

BALANCE AT DECEMBER 31, 1995                            49,607       91,996        (2,109)    1,322,971     (139,717)    1,322,748

Ordinary shares issued                                      --          761            --         9,916           --        10,677

Accrued employee compensation
  relating to the Telewest Restricted  Share Scheme         --           --          (237)           --           --          (237)

Net loss                                                    --           --            --            --     (262,391)     (262,391)

BALANCE AT DECEMBER 31, 1996                            49,607       92,757        (2,346)    1,332,887     (402,108)    1,070,797

Accrued employee compensation
  relating to the Telewest Restricted Share Scheme          --           --           405            --           --           405

Net loss                                                    --           --            --            --     (332,452)     (332,452)
                                                    ----------   ----------    ----------    ----------   ----------    ----------
BALANCE AT DECEMBER 31, 1997                            49,607       92,757        (1,941)    1,332,887     (734,560)      738,750
                                                    ----------   ----------    ----------    ----------   ----------    ----------
</TABLE>




                                     IV-50

<PAGE>   53

Telewest Communications - US GAAP

Notes to the consolidated financial statements

Years ended December 31, 1997 and 1996

1)      ORGANIZATION AND HISTORY

        Telewest Communications plc ("the Company") is a cable television and
        telephony operator which offers these services to business and
        residential customers in the United Kingdom ("UK"). The Company derives
        its cable television revenues from installation fees, monthly basic and
        premium service fees and advertising charges. The Company derives its
        telephony revenues from connection charges, monthly line rentals, call
        charges, special residential service charges and interconnection fees
        payable by other operators. The cable television and telephony services
        account for approximately 41% and 54%, respectively, of the Company's
        revenue. This revenue is predominantly derived from residential, rather
        than business, customers.

        The Company was incorporated on October 20, 1994 under the laws of
        England and Wales in preparation for the October 2,1995 internal
        reorganization of Telewest Communications Cable Limited ("TCCL"), then
        called Telewest Communications plc, and its subsidiaries whereby the
        entire issued share capital of TCCL was transferred to the Company in
        exchange for fully paid up shares of the Company. TCCL had traded since
        November 22, 1994 when affiliates of Tele-Communications, Inc. (the "TCI
        Affiliates") and affiliates of US WEST (the "US WEST Affiliates")
        contributed their UK cable interests to TCCL (the "Contribution"). These
        interests were previously held by the TCI Affiliates and US WEST
        Affiliates through TCI/US Cable Communications Group, a general
        partnership. TCI/US WEST Cable Communications Group and its subsidiaries
        collectively are referred to herein as the "Joint Venture" and the TCI
        Affiliates and US WEST Affiliates collectively are referred to herein as
        the "Joint Venturers".

2)      BASIS OF PREPARATION

        The consolidated financial statements have been prepared in accordance
        with generally accepted accounting principles in the United States of
        America ("US GAAP"). The preparation of financial statements in
        conformity with US GAAP requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        at the date of the financial statements and the reported amounts of
        revenues and expenses during the reporting period. Actual results could
        differ from those estimates.

        The economic environment and currency in which the Company operates is
        the UK and hence its reporting currency is Pounds Sterling (L.).
        Certain financial information for the year ended December 31, 1997 has
        also been translated into US Dollars, with such US Dollar amounts being
        unaudited and presented solely for the convenience of the reader, at the
        rate of $1.6427 = L. 1.00, the Noon Buying Rate of the Federal
        Reserve Bank of New York on December 31, 1997. The presentation of the
        US Dollar amounts should not be construed as a representation that the
        Pounds Sterling amounts could be so converted into US Dollars at the
        rate indicated or at any other rate.





                                     IV-51
<PAGE>   54

Telewest Communications - US GAAP

Notes to consolidated financial statements (continued)

(3)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        PRINCIPLES OF CONSOLIDATION

        The consolidated financial statements include the accounts of the
        Company and those of all majority-owned subsidiaries. All significant
        intercompany accounts and transactions have been eliminated upon
        consolidation.

        All acquisitions have been accounted for under the purchase method of
        accounting. Under this method, the results of subsidiaries and
        affiliates acquired in the year are included in the consolidated
        statement of operations from the date of acquisition.

        Impairment of Long-Lived Assets. Effective January 1, 1996, the company
        adopted Statement of Financial Accounting Standards No. 121 (FAS 121),
        "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to
        Be Disposed Of." FAS 121 requires that long-lived assets and certain
        identifiable intangibles, including goodwill, to be held and used by an
        entity, to be reviewed for impairment whenever events or changes in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. Upon adoption of this standard, the company evaluated its
        long-lived assets using projected undiscounted future cash flows and
        operating income for each subsidiary and determined that no material
        impairment of these assets existed at January 1, 1996, and, accordingly,
        no loss was recognized. The company believes that no material impairment
        existed at December 31, 1997.

        Goodwill arising on consolidation (representing the excess of the fair
        value of the consideration given over the fair value of the identifiable
        net assets acquired) is amortized over the acquisition's useful life or
        over a maximum period of 40 years. The Company assesses the
        recoverability of this intangible asset by determining whether the
        amortization of the goodwill balance over its remaining life can be
        recovered through projected undiscounted future operating cash flows of
        the acquired operations. The assessment of the recoverability of
        goodwill will be impacted if projected future operating cashflows are
        not achieved. The amount of goodwill impairment, if any, is measured
        based on the projected discounted future operating cashflows using a
        discount rate reflecting the Company's cost of funds.

        CASH AND CASH EQUIVALENTS

        Cash and cash equivalents include highly-liquid investments with
        original maturities of three months or less that are readily convertible
        into cash.





                                     IV-52
<PAGE>   55

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(3)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (continued)

        FINANCIAL INSTRUMENTS

        The Company uses foreign currency option contracts which permit, but do
        not require, the Company to exchange foreign currencies at a future date
        with another party at a contracted exchange rate. The Company also
        enters into combined foreign currency and interest rate swap contracts
        ("Foreign Currency Swaps"). Such contracts are used to hedge against
        adverse changes in foreign currency exchange rates associated with
        obligations denominated in foreign currency. The foreign currency option
        and Foreign Currency Swaps are recorded on the balance sheet in other
        assets or other liabilities at their fair value at the reporting period
        with changes in their fair value during the reporting period being
        reported as part of the foreign exchange gain or loss in the
        consolidated statement of operations. Such gains and losses are offset
        against foreign exchange gains and losses on the obligations denominated
        in foreign currencies which have been hedged.

        Interest swap agreements which are used to manage interest rate risk on
        the Company's borrowings are accounted for using the accruals method,
        Net income or expense resulting from the differential between floating
        and fixed rate interest payments is recorded on an accruals basis. To
        the extent that the interest rate swap agreements are delaying starting,
        net income or expense is not recognized until the effective date of the
        agreement.

        Other interest rate swaps which are held as trading assets are recorded
        on the consolidated balance sheet at their fair value at the end of each
        reporting period with changes in their fair value being recorded as
        gains and losses in the consolidated statement of operations.

        INVESTMENTS

        Investments in partnerships, joint ventures and subsidiaries in which
        the Company's voting interest is 20% to 50%, and others where the
        Company has significant influence, are accounted for using the equity
        method. Investments which do not have a readily determinable fair value,
        in which the Company's voting interest is less than 20%, and in which
        the Company does not have significant influence, are carried at cost and
        written down to the extent that there has been an other-than-temporary
        diminution in value.

        ADVERTISING COSTS

        Advertising costs are expensed as incurred. The amount of advertising
        costs expensed was L. 25,920,000, L. 24,846,000, and L. 10,246,000 for
        the years ended 31 December 1997, 1996, and 1995, respectively.





                                     IV-53
<PAGE>   56

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(3)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (continued)

        PROPERTY AND EQUIPMENT

        Property and equipment is stated at cost, including the historical
        carryover basis cost from the Contribution. Except during the
        pre-maturity period as described below, depreciation is provided to
        write off the cost, less estimated residual value, of property and
        equipment by equal installments over their estimated useful economic
        lives as follows:

<TABLE>
<S>                                                                            <C>     
        Freehold and long leasehold buildings                                  50 years
        Cable and ducting                                                      20 years
        Electronic equipment
        -      Systems electronics                                              8 years
        -      Switching equipment                                              8 years
        -      Subscriber electronics                                           5 years
        -      Headend, studio, and playback facilities                         5 years
        Other equipment
        -      Office furniture and fittings                                    5 years
        -      Motor vehicles                                                   4 years
</TABLE>

        During the pre-maturity period, depreciation of cable and ducting and
        system electronics is charged monthly to write off the estimated cost at
        the end of the pre-maturity phase over a useful life of 20 and 8 years,
        respectively. In accordance with Statement of Financial Accounting
        Standard ("SFAS") No 51, "Financial Reporting by Cable Television
        Companies", the monthly charge is scaled down by a ratio of average
        customers in the current period to the estimated customer base at the
        end of the pre-maturity period. The pre-maturity period covers the
        period between connecting the first customer and substantial completion
        of the network.

        Pre-construction costs which are included within cable and ducting are
        amortized over the life of the franchise from the date of the first
        customer.

        The Company accounts for costs, expenses and revenues applicable to the
        construction and operation of its cable systems under SFAS No 51.

        The estimated useful lives of cable and ducting and systems electronics
        were reassessed with effect from January 1, 1996, and were changed from
        25-30 years and 10 years to 20 years and 8 years,





                                     IV-54
<PAGE>   57

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(3)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

        respectively. The net book value of these assets are being written off
        over their revised estimated remaining lives.

        In 1997, the treatment of activation costs was reviewed. With effect
        from 1 January 1997, activation labour was reclassified from cable and
        ducting to electronics to be consistent with the classification of
        activation materials. The assets are now depreciated over 8 years rather
        than 20 years.

        FRANCHISE COSTS

        Expenditure incurred on successful applications for franchise licences
        is included in property and equipment and is amortized over the
        remaining life of the original franchise term. Costs relating to
        unsuccessful applications are charged to the consolidated statement of
        operations.

        DEFERRED FINANCING COSTS

        Costs incurred in raising debt are deferred and recorded on the
        consolidated balance sheet in other assets. The costs are amortized to
        the consolidated statement of operations at a constant rate to the
        carrying value of the debt over the life of the obligation.

        MINORITY INTERESTS

        Recognition of the minority interests' share of losses of consolidated
        subsidiaries is limited to the amount of such minority interests'
        allocable portion of the equity of those consolidated subsidiaries.

        FOREIGN CURRENCIES

        Transactions in foreign currencies are recorded using the rate of
        exchange in effect at the date of the transaction. Monetary assets and
        liabilities denominated in foreign currencies are translated using the
        rate of exchange ruling at the balance sheet date and the gains or
        losses on translation are included in the consolidated statement of
        operations.

        REVENUE RECOGNITION

        Revenue is recognized as services are delivered. Other revenues include
        connection fees which are recognized in the period of connection to the
        extent that the fee is offset by direct selling costs. The remainder is
        recognized over the estimated average period that customers are expected
        to remain connected to the system.

        PENSION COSTS

        The Company operates a defined contribution scheme or contributes up to
        specified limits to third-party schemes on behalf of the employees. The
        amount included in losses in 1997, 1996 and 1995 of L. 2,801,000, L.
        2,580,000, and L. 1,538,000, respectively, represents the contributions
        payable to the selected schemes in respect of the relevant accounting
        periods.




                                     IV-55
<PAGE>   58

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(3)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

        INCOME TAXES

        Under the asset and liability method of SFAS No 109, deferred tax assets
        and liabilities are recognized for the future tax consequences
        attributable to differences between the financial statement carrying
        amounts of existing assets and liabilities and their respective tax
        bases. Deferred tax assets and liabilities are measured using enacted
        tax rates expected to apply to taxable income in the years in which
        those temporary differences are expected to be recovered.

        SHARE-BASED COMPENSATION

        SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but
        does not require, companies to record compensation cost for share-based
        employee compensation plans at fair value. The Company has chosen to
        continue to account for share-based compensation using the intrinsic
        value method prescribed in Accounting Principles Board Opinion No. 25,
        "Accounting for Stock Issued to Employees" and related interpretations.
        Accordingly, compensation cost for share options is measured as the
        excess, if any, of the quoted market price of the Company's share at the
        date of the grant over an employee must pay to acquire the shares.

        Share purchased by the trustees in connection with the Telewest
        Restricted Share Scheme, are valued at the market price on the date on
        which they are purchased and are reflected as a reduction of
        shareholders' equity in the consolidated balance sheet. This equity
        account is reduced when the shares are awarded to employees based on the
        original cost of the shares to the trustees. The value of awards of
        ordinary shares to be made to employees in future years is charged to
        the consolidated statement of operations to the extent that the awards
        have been awarded to and earned by employees in the current accounting
        period. The value of shares which have been awarded to, but have not
        been earned by employees is included as deferred compensation expense
        within other assets.

        NEW ACCOUNTING STANDARDS APPLICABLE TO THE COMPANY

        EARNINGS PER SHARE AND CAPITAL STRUCTURE

        The Company adopted the provisions of SFAS No. 128, "Earnings per
        Share."  This Statement required that all prior-period earnings per
        share calculations be restated to conform with the provisions of this
        statement. Basic earnings per share has been computed by dividing net
        income available to ordinary shareholders by the weighted average number
        of ordinary shares outstanding during the period. Diluted earnings per
        share is computed by adjusting the weighted average number of ordinary
        shares outstanding during the period for all dilutive potential ordinary
        shares outstanding during the period and adjusting the net loss for any
        changes in income or loss that would result from the conversion of such
        potential ordinary shares. There is no difference in net income and
        number of shares used for basic and diluted net income per ordinary
        share, as potential ordinary share equivalents are not included in the
        computation as their effect would be to decrease the loss per share.





                                     IV-56
<PAGE>   59

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(3)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

        COMPREHENSIVE INCOME

        In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
        Income," which is effective for fiscal years beginning after December
        15, 1997. Reclassification of financial statements for earlier periods
        for comparative purposes is required. It requires that all items that
        are required to be recognized under accounting standards as components
        of comprehensive income be reported in a financial statement that is
        displayed with the same prominence as other financial statements. It
        requires that an enterprise (a) classify items of other comprehensive
        income by their nature in a financial statement and (b) display the
        accumulated balance of other comprehensive income separately from
        retained earnings and additional paid-in capital in the equity section
        of the statement of financial position. The Company is currently
        reviewing the likely impact on the classification of items included in
        the shareholders' equity.

        SEGMENT INFORMATION

        In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of
        an Enterprise and Related Information," which is effective for fiscal
        years beginning after December 15, 1997. In the initial year of
        application comparative information for earlier years is to be restated.
        It requires that companies disclose segment data based on how management
        makes decisions about allocating resources to segments and measuring
        their performance. It also requires entity-wide disclosures about the
        products and services an entity provides, the material countries in
        which it holds assets and reports revenues, and its major customers. The
        Company is currently reviewing the likely impact on the level of
        disclosure currently provided in its financial statements. 

        PENSIONS AND OTHER POST-RETIREMENT BENEFITS

        In February 1998, the Financial Accounting Standards Board issued
        Statement of Financial Accounting Standards No. 132 "Employers'
        Disclosure about Pensions and other Post-retirement Benefits" (SFAS No.
        132" ). SFAS No. 132 revises disclosure requirements about employers'
        pension and other post-retirement benefit plans. SFAS No. 132 is
        effective for fiscal years beginning after December 15, 1997. The
        company has not determined the impact that SFAS No. 132 will have on its
        pension and other post-retirement benefit disclosures.





                                     IV-57
<PAGE>   60

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(4)     FINANCIAL INSTRUMENTS

        FOREIGN CURRENCY OPTION CONTRACT

        At December 31, 1997, the Company held a Pounds Sterling put option to
        purchase US$1,537,000,000 to hedge its exposure to adverse fluctuations
        in exchange rates on the principal amount at maturity of its US
        Dollar-denominated Senior Discount Debentures due 2007 ("Senior Discount
        Debentures"). The expiration date of this option contract is September
        28, 2000. The put option has a strike price at expiration of L. 1.00 =
        US$1.4520. The foreign currency option has been included in other assets
        at its fair value on December 31, 1997.

        FOREIGN CURRENCY SWAP

        The Company has entered into a Foreign Currency Swap to hedge its
        exposure to adverse fluctuations in exchange rates on the principal
        amount of its US Dollar-denominated Senior Debentures due 2006 ("Senior
        Debentures"). The terms of the contract provided for the Company to make
        an initial exchange of principal of US$300,000,000 in exchange for 
        L. 196,078,000. On expiration on October 1, 2000, the initial principal
        amounts will be re-exchanged. The interest element of the Foreign
        Currency Swap requires the Company to make Pounds Sterling fixed-rate
        interest payments and to receive US Dollar fixed-rate interest payments
        on the initial exchange amounts on a semi annual basis. The foreign
        currency swap contract has been included in other liabilities at its
        fair value on December 31, 1997.

        INTEREST RATE SWAPS

        The Company has also entered into certain delayed-starting interest rate
        swap agreements in order to manage interest rate risk on its senior
        secured credit facility ("Senior Secured Facility"). The effective dates
        of the swap agreements are January 2, 1997 and March 3, 1997, and the
        agreements mature on December 31, 2001 and March 28, 2002. The aggregate
        notional principal amount of the swaps adjusts upwards on a semi-annual
        basis to a maximum of L. 750 million. In accordance with the swap
        agreements, the Company receives interest at the six month LIBOR rate
        and pays a fixed interest rate in the range of 7.835-7.975%.



                                    IV-58
<PAGE>   61

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(4)     FINANCIAL INSTRUMENTS (CONTINUED)

        FAIR VALUE OF FINANCIAL INSTRUMENTS

        SFAS No. 119 "Disclosure about Derivative Financial Instruments and Fair
        Value of Financial Instruments" requires disclosure of an estimate of
        the fair values of certain financial instruments. SFAS No. 119 defines
        the fair value of a financial instrument as the amount at which the
        instrument could be exchanged in a current transaction between willing
        parties other than in a forced sale. Fair value estimates are made at a
        specific point in time, based upon relevant market information and
        information about the financial instrument. These estimates are
        subjective in nature and involve uncertainties and matters of
        significant judgement, and therefore cannot be determined precisely.
        Changes in assumptions could significantly affect the estimates.

        At 31 December 1997, the Company's significant financial instruments
        include cash and cash equivalents, trade receivables, a foreign currency
        option contract, a Foreign Currency Swap, interest rate swap agreements,
        trade payables and long-term borrowings. The following table summarizes
        the fair value of the foreign currency option contract, the Foreign
        Currency Swap, the interest rate swap agreement, the Senior Discount
        Debentures and the Senior Debentures. The fair value of the other
        financial instruments held by the Company approximates their recorded
        carrying amount due to the short maturity of these instruments and these
        instruments are not presented in the following table.

<TABLE>
<CAPTION>
                                           AT DECEMBER 31, 1997      At December 31, 1996

                                          CARRYING   FAIR VALUE     Carrying  Fair value
                                           AMOUNT                    amount
                                           L. '000    L. '000       L. '000    L. '000
<S>                                        <C>         <C>          <C>         <C>   
          Assets:

          Foreign currency option
            contract                       26,145      26,145       25,828      25,828


          Liabilities:

          Interest rate swap agreements        --      25,543           --        4,776
          Foreign Currency Swap            18,039      18,039       26,481       26,481
          Senior Discount Debentures      696,954     729,532      600,799      621,367
          Senior Debentures               182,626     189,931      175,203      179,582
</TABLE>



                                    IV-59
<PAGE>   62

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(4)     FINANCIAL INSTRUMENTS (CONTINUED)

        FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

        The estimated fair value of the foreign currency option contract, the
        interest rate swap agreements and the Foreign Currency Swap are based on
        quotations received from independent, third party financial institutions
        and represent the net amount receivable or payable to terminate the
        position, taking into consideration market rates and counter-party
        credit risk. The estimated fair values of the Senior Discount Debentures
        and the Senior Debentures are also based on quotations from independent
        third party financial institutions and are based on discounting the
        future cash flows to net present values using appropriate market
        interest rates prevailing at the year end.

        MARKET RISK AND CONCENTRATIONS OF CREDIT RISK

        Market risk is the sensitivity of the value of the financial instruments
        to changes in related currency and interest rates. Generally, the
        Company is not exposed to such market risk because gains and losses on
        the financial instruments are offset by gains and losses on the
        underlying assets and liabilities.

        The Company may be exposed to potential losses due to the credit risk of
        non-performance by the counter-parties to its foreign currency option,
        interest rate swap agreements and Foreign Currency Swap contract,
        however such losses are not anticipated as these counter-parties are
        major international financial institutions.

        Temporary cash investments also potentially expose the Company to
        concentrations of credit risk, as defined by SFAS No. 105 "Disclosure of
        Information about Financial Instruments with Off-Balance-Sheet Risk and
        Financial Instruments with Concentrations of Credit Risks." The Company
        places its temporary cash investments with major international financial
        institutions and limits the amount of credit exposure to any one
        financial institution. Concentrations of credit risk with respect to
        trade receivables are limited due to the large number of customers
        comprising the Company's customer base.

        At December 31, 1997, the Company had no significant concentration of
        credit risk.



                                    IV-60
<PAGE>   63

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

 (5)    BUSINESS COMBINATIONS

        On January 10, 1996, the Company acquired the entire issued share
        capital of Telewest Communications (Worcester) Limited, then called Bell
        Cablemedia (Worcester) Limited and owner of the Worcester cable
        franchise for cash consideration of L. 9,849,000. Telewest
        Communications (Worcester) Limited was otherwise a dormant company with
        net assets of L. 2 representing its called up share capital. This
        acquisition had been accounted for under the purchase method of
        accounting. The goodwill arising on acquisition was L. 9,849,000 and
        is being amortised on a straight-line basis over 20 years.

        During 1996, the Company made various other minor acquisitions, largely
        for share consideration. The goodwill arising on these acquisitions was
        L. 11,708,000 and is being amortised on a straight-line basis over
        20 years.

        On October 3, 1995, the Company acquired the entire share capital of
        Telewest Communications Midlands & North West) Limited ("TCMN"), then
        called SBC CableComms (UK), a company which holds cable television and
        telephony interests in the UK, from an affiliate of Cox Communications,
        Inc. and affiliates of SBC Communications, Inc. in exchange for an
        aggregate of 183,994,960 ordinary shares of 10 pence each and
        230,790,208 convertible preference shares of 10 pence each. The value
        attributable to the shares issued was L. 1.635 per share, being the
        market price of the shares on June 8, 1995, the day the terms of the
        acquisition were agreed to and announced. The fair value of the share
        consideration using this share price was L. 678,174,000. The
        aggregate cost of acquisition was L. 689,878,000 including the costs
        of acquisition. This acquisition has been accounted for under the
        purchase method of accounting. The goodwill arising on acquisition is
        L. 464,872,000 and is being amortized on a straight-line basis over
        20 years.


                                    IV-61
<PAGE>   64

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(6)     SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

        Cash paid for interest was L. 63,479,000, L. 25,795,000 and L. 6,041,000
        for the years ended December 31, 1997, 1996 and 1995, respectively.

        Significant non-cash investing activities of the Company are described
        below. The amounts stated for 1996 represent the purchase of former
        minority shareholders' interests in certain UK cable interests held by
        the Company. The amounts stated for 1995 represent the purchase of TCMN
        for largely share consideration as described in Note 5 to the
        consolidated financial statements.

<TABLE>
<CAPTION>
                                                        1997         1996        1995
                                                      L. '000      L. '000     L. '000
<S>                                                   <C>           <C>        <C>    
        Purchase/contribution of cable interests:
           Assets                                          --           --      428,080
           Liabilities assumed                             --           --      (45,144)
           Debt assumed                                    --           --     (157,930)
                                                     --------     --------     --------
        Net assets acquired/contributed                    --           --      225,006
        Goodwill on acquisition                            --        9,874      464,872
                                                     --------     --------     --------
                                                           --        9,874      689,878
                                                     --------     --------     --------
        Share consideration/capital contribution           --        9,869      678,174
        Costs of acquisition                               --            5       11,704
                                                     --------     --------     --------
                                                           --        9,874      689,878
                                                     --------     --------     --------
</TABLE>



                                    IV-62
<PAGE>   65

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(7)     OTHER RECEIVABLES

<TABLE>
<CAPTION>
                                                        At December 31

                                                        1997       1996
                                                       L. '000    L. '000
<S>                                                     <C>       <C>   
        Value Added Tax refund                          4,567     10,633
        Interconnection receivables                     1,505      3,865
        Interest receivable                               807         63
        Accrued income                                  8,290      4,356
        Prepaid expenses                                3,161      5,714
        Other                                           7,877      7,763
                                                       ------     ------
                                                       26,207     32,394
                                                       ------     ------
</TABLE>

(8)     INVESTMENTS

        The Company has investments in affiliates accounted for under the equity
        method at December 31, 1997 and 1996 as follows:

<TABLE>
<CAPTION>
                                                       Percentage ownership
                                                         At December 31,
                                                        1997         1996
<S>                                                    <C>          <C>   
         Cable London plc                              50.00%       50.00%

         Birmingham Cable Corporation Limited          27.47%       27.47%

         London Interconnect Limited                   16.67%       16.67%

         Central Cable Sales Limited                   50.00%       50.00%

         Front Row Television Limited                  40.00%       --
</TABLE>

        The Company has accounted for its investment in London Interconnect
        Limited under the equity method because it is in a position to exercise
        a significant influence over London Interconnect Limited.



                                    IV-63
<PAGE>   66

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

        Summarized combined financial information for such affiliates which
        operate principally in the cable television and telephony industries is
        as follows:

        COMBINED FINANCIAL POSITION

<TABLE>
<CAPTION>
                                                         AT DECEMBER 31
                                                        1997         1996
                                                       L. '000     L. '000
<S>                                                    <C>         <C>    
       Property and equipment, net                     429,161     391,183
       Intangible assets, net                            4,859       3,845
       Other assets, net                                30,249     105,475
                                                       -------     -------
       TOTAL ASSETS                                    464,269     500,503
                                                       -------     -------

       Debt                                            293,492     281,500
       Other liabilities                                98,758      91,947
       Owners' equity                                   72,019     127,056
                                                       -------     -------
       TOTAL LIABILITIES AND EQUITY                    464,269     500,503
                                                       -------     -------
</TABLE>

COMBINED OPERATIONS

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                         1997           1996
                                                        L. '000       L. '000
<S>                                                     <C>            <C>   
       Revenue                                          120,468        98,329
       Operating expenses                              (150,768)     (124,358)
                                                       --------      --------
       Operating loss                                   (30,300)      (26,029)
       Interest  expense                                (26,311)      (15,945)
                                                       --------      --------
       NET LOSS                                         (56,611)      (41,974)
                                                       --------      --------
</TABLE>

        The Company's investments in affiliates are comprised as follows:

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                        1997       1996
                                                       L. '000    L. '000
<S>                                                    <C>        <C>   
       Loans                                           39,863     29,089
       Share of net assets                             19,844     40,331
                                                       ------     ------
                                                       59,707     69,420
                                                       ------     ------
</TABLE>



                                     IV-64

<PAGE>   67

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

        Any excess of the purchase cost over the value of the net assets
        acquired is treated as goodwill and amortized over 20 years on a
        straight-line basis.

(9)     PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                 CABLE AND       ELECTRONIC          OTHER
                                         LAND     BUILDINGS        DUCTING        EQUIPMENT       EQUIPMENT           TOTAL
                                      L. '000       L. '000        L. '000          L. '000         L. '000         L. '000
<S>                                     <C>           <C>          <C>               <C>             <C>           <C>      
ACQUISITION COSTS
Balance at January 1, 1997              4,223         45,956       1,101,961         489,835         113,459       1,755,434
Reclassification                           --            (62)       (118,331)        117,954             439              --
Additions                                  11          8,683         280,814         101,204          49,882         440,594
Disposals                                  --             --            (182)           (556)         (8,319)         (9,057)
                                   ----------     ----------      ----------      ----------      ----------      ----------
  Balance at December 31, 1997          4,234         54,577       1,264,262         708,437         155,461       2,186,971
                                   ----------     ----------      ----------      ----------      ----------      ----------
ACCUMULATED DEPRECIATION
Balance at January 1, 1997                 --          7,378         121,181         130,483          49,198         308,240
Reclassification                           --             --         (12,792)         12,792              --              --
Charge for year                            --          3,824          59,324          88,502          25,691         177,341
Disposals                                  --             --            (182)           (229)         (3,719)         (4,130)
                                   ----------     ----------      ----------      ----------      ----------      ----------
Balance at December 31, 1997               --         11,202         167,531         231,548          71,170         481,451
                                   ----------     ----------      ----------      ----------      ----------      ----------
1997 NET BOOK VALUE                     4,234         43,375       1,096,731         476,889          84,291       1,705,520
                                   ----------     ----------      ----------      ----------      ----------      ----------
ACQUISITION COSTS
Balance at January 1, 1996              4,223         36,005         766,866         359,617          79,239       1,245,950
Additions                                  --          9,951         335,844         130,783          39,012         515,590
Disposals                                  --             --            (749)           (565)         (4,792)         (6,106)
                                   ----------     ----------      ----------      ----------      ----------      ----------
Balance at December 31, 1996            4,223         45,956       1,101,961         489,835         113,459       1,755,434
                                   ----------     ----------      ----------      ----------      ----------      ----------
ACCUMULATED DEPRECIATION
Balance at January 1, 1996                 --          4,920          74,532          70,810          31,880         182,142
Charge for year                            --          2,458          47,374          60,220          19,664         129,716
Disposals                                  --             --            (725)           (547)         (2,346)         (3,618)
                                   ----------     ----------      ----------      ----------      ----------      ----------
Balance at December 31, 1996               --          7,378         121,181         130,483          49,198         308,240
                                   ----------     ----------      ----------      ----------      ----------      ----------
1996 NET BOOK VALUE                     4,223         38,578         980,780         359,352          64,261       1,447,194
                                   ----------     ----------      ----------      ----------      ----------      ----------
</TABLE>



                                     IV-65

<PAGE>   68

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

Cable and ducting consists principally of civil engineering and fibre optic
costs. In addition, cable and ducting includes net book value of
pre-construction and franchise costs of L. 9,807,000 and L. 13,220,000
as of December 31, 1997 and 1996, respectively. Electronic equipment includes
the Company's switching, headend and converter equipment. Other equipment
consists principally of motor vehicles, office furniture and fixtures, leasehold
improvements.

(10)    VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                               ADDITIONS CHARGED
                                                      TO
                         BALANCE AT    ACQUISITION OF   COSTS AND                   BALANCE AT
                          JANUARY 1              TCMN    EXPENSES       DEDUCTIONS DECEMBER 31
                            L. '000           L. '000     L. '000          L. '000     L. '000
<S>                           <C>              <C>          <C>            <C>          <C>  
       1997
       Allowance for
       doubtful accounts      5,405               --        8,815          (7,713)      6,507
                             ------           ------       ------          ------      ------

       1996
       Allowance for
       doubtful accounts      4,695               --        9,020          (8,310)      5,405
                             ------           ------       ------          ------      ------

       1995
       Allowance for
       doubtful accounts      1,736            1,063        5,920          (4,024)      4,695
                             ------           ------       ------          ------      ------
</TABLE>

(11)    OTHER ASSETS

        The components of other assets, net of amortization, are as follows:

<TABLE>
<CAPTION>
                                                                             At December 31
                                                                            1997       1996
                                                                          L. '000    L. '000
<S>                                                                        <C>        <C>   
       Deferred financing costs of debentures                              13,770     17,510
       Deferred financing costs of Senior Secured Facility                 15,963     18,186
       Foreign currency option contract                                    26,145     25,828
       Other                                                                  635        863
                                                                           ------     ------
                                                                           56,513     62,387
                                                                           ------     ------
</TABLE>

(12)    OTHER LIABILITIES

        Other liabilities are summarised as follows:

<TABLE>
<CAPTION>
                                                                              AT DECEMBER 31
                                                                             1997        1996
                                                                           L. '000     L. '000
<S>                                                                             <C>      <C>  
       Amounts due to affiliated or other related parties                       61       1,901
       Accrued interest                                                     13,641       8,921
       Accrued construction costs                                           30,235      36,397
       Accrued expenses and deferred income                                112,198      82,938
       Foreign Currency Swap                                                18,039      26,481
       Other liabilities                                                    24,490      33,562
                                                                           -------     -------
                                                                           198,664     190,200
</TABLE>






                                     IV-66


<PAGE>   69

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(13)    DEBT

        Debt is summarized as follows at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                          Weighted average                   1997             1996
                                                           interest rate                  L. '000          L. '000
                                                          1997       1996
<S>                                                       <C>        <C>                  <C>              <C>    
        Senior Debentures                                 9.625%     9.625%               182,626          175,203
        Senior Discount Debentures                       11.000%    11.000%               696,954          600,799
        Senior Secured Facility                           9.071%     8.281%               492,500          100,000
        Other debt                                        8.719%     7.790%                   974            3,349
                                                                                         --------         --------
                                                                                        1,373,054          879,351
                                                                                         --------         --------
</TABLE>

        SENIOR DEBENTURES

        In October 1995, the Company issued US$300,000,000 principal amount of
        Senior Debentures with a yield to maturity of 9.625%. The cash
        consideration received at the date of issue was L. 188,703,000. The
        Senior Debentures mature on October 1, 2006. Interest on the Senior
        Debentures accrues semi annually and is payable in arrears. The Senior
        Debentures are redeemable, in whole or in part, at the option of the
        Company at any time on or after October 1, 2000 at the redemption price
        of 104.813% of the principal amount during the year commencing October
        1, 2000, 102.406% of the principal amount during the year commencing
        October 1, 2001, and thereafter at 100% of the principal amount plus
        accrued and unpaid interest.

        The Senior Debentures and the Senior Discount Debentures, which are
        described below, were issued to finance working capital, capital
        expenditure, foreign currency swap and options to hedge against adverse
        fluctuations in exchange rates, and additional investments in affiliated
        companies. A portion of the net proceeds of the issue also was used to
        repay the L. 157,930,000 indebtedness outstanding under the loan
        facility held by TCMN at the date that it was acquired by the Company.

        The indenture under which the Senior Debentures were issued contains
        various covenants which among other things, restrict the ability of the
        Company to incur additional indebtedness, pay dividends, create certain
        liens, enter into certain transactions with shareholders or affiliates,
        or sell certain assets. The Company was in compliance with the covenants
        at December 31, 1997.


                                     IV-67
<PAGE>   70

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(13)    DEBT (CONTINUED)

        The Company has entered into a Foreign Currency Swap to hedge its
        exposure to adverse fluctuations in exchange rates on the principal
        amount which will be outstanding on October 1, 2000, the earliest
        redemption date, and the associated interest payments of the Senior
        Debentures. The terms of the Foreign Currency Swap are described in Note
        4 to the consolidated financial statements.

        The Senior Debentures are unsecured liabilities of the Company.

        SENIOR DISCOUNT DEBENTURES

        In October 1995, the Company issued US$1,536,413,000 principal amount at
        maturity of Senior Discount Debentures with a yield to maturity of 11%.
        The cash consideration received at the date of issue was L. 566,109,000
        (US$900,000,000). At December 31, 1997, the unamortized portion of the
        discount on issue was L. 238,344,000 (US$391,528,000). The Senior
        Discount Debentures mature on October 1, 2007. Interest on the Senior
        Discount Debentures accrues semi annually. Cash interest will not accrue
        on the Senior Discount Debentures prior to October 1, 2000 and is
        thereafter payable in arrears on April 1 and October 1 of each year at a
        rate of 11% per annum. The Senior Discount Debentures are redeemable, in
        whole or in part, at the option of the Company at any time on or after
        October 1, 2000 at the redemption price of 100% of the principal amount
        plus accrued and unpaid interest.

        The indenture under which the Senior Discount Debentures were issued
        contains various covenants as set out for the Senior Debentures above
        and the Company was in compliance with such covenants at December 31,
        1997.

        The Company has purchased a five year Pounds Sterling put option to
        purchase US$1,537,000,000 to hedge its exposure to adverse fluctuations
        in exchange rates on the principal amount which will be outstanding on
        October 1, 2000, the earliest redemption date, of the Senior Discount
        Debentures. The terms of the foreign currency option contract are
        described in Note 4 to the consolidated financial statements.

        The Senior Discount Debentures are unsecured liabilities of the Company.

        SENIOR SECURED FACILITY

        During 1996 a subsidiary of the Company entered into a senior secured
        facility (the "Senior Secured Facility") with a syndicate of banks. The
        facility is available to finance the capital expenditure, working
        capital requirements and other permitted related activities involving
        the construction and operation of all the Company's owned and operated
        franchises, to pay cash interest on the Company's unsecured debentures,
        to fund the repayment of existing secured borrowings in respect of the
        London South and South West Regional Franchise Areas, to fund loans to
        or investments in affiliated companies, to bid for or purchase, and
        subsequently construct, licenses or franchises which may become
        available and to refinance advances and the payment of interest, fees,
        and expenses in respect of the Senior Secured Facility.



                                    IV-68
<PAGE>   71

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

        The facility is divided into two tranches: the first portion (Tranche A)
        is available on a revolving basis for up to L. 300 million, reducing to
        L. 100 million by June 30, 1998 with full repayment by December 31,
        1998; the second portion (Tranche B) is available on a revolving basis
        concurrently with Tranche A for an amount up to 6.5 times the trailing,
        rolling six month annualised consolidated net operating cash flow,
        gradually reducing throughout the period of the facility to 4 times by
        January 1, 2000. Thereafter, the amount outstanding under the facility
        converts to a term loan amortising over 5 years. The aggregate drawing
        at any time under both tranches cannot exceed L. 1.2 billion. At
        December 31, 1997 L. 125 million (1996:$100 million) was outstanding
        under Tranche A, and L. 367.5 million under Tranche B (1996:$nil)

        Borrowings under the facility are secured by the assets of the Company,
        including the partnership interests and shares of subsidiaries, and bear
        interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875%
        above LIBOR (depending on the ratio of borrowings to the trailing,
        rolling six month annualized consolidated net operating cash flow) for
        Tranche B.

(13)    DEBT (CONTINUED)

        Since 31 December 1997, this facility has been restructured with revised
        financial covenants, a reduction in the amount available under the
        facility from $1,200 million to $1,000 million, and a supplementary 
        L. 100 million revolving credit facility secured with a second fixed and
        floating charge, and interest costs on the latter ranging from 3.5% -
        5.5% above LIBOR

        The Company's ability to borrow under the facility is subject to, among
        other things, its compliance with the financial and other covenants and
        borrowing conditions contained therein.

        The Company was in compliance with the covenants at December 31,1997.

        OTHER DEBT

        Other debt is represented by property loans which are secured on
        freehold land and buildings held by the Company which matures from 1998
        onwards. The property loans bear interest at a rate of between 1.00% and
        1.50% above LIBOR.



                                    IV-69
<PAGE>   72

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(14)    INCOME TAXES

        Loss before income taxes is solely attributable to the UK:

        The provisions for income taxes follow:

<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31,
                                            1997      1996     1995
                                           L. '000  L. '000  L. '000
<S>                                          <C>      <C>     <C>
       Currently payable                     137      50      16
                                             ---     ---     ---
</TABLE>

        A reconciliation of income taxes determined using the statutory UK rate
        of 31.5% (1996:33%) to the effective rate of income tax is as follows:

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                       1997          1996         1995
                                                                                        %             %             %
<S>                                                                                   <C>            <C>          <C> 
        Corporate tax at UK statutory rates                                           (31.5)         (33)         (33)
        Permanent differences                                                            0.5            1            3
        Valuation allowance and other temporary differences                               29           30           26
        Share of losses of affiliates                                                      2            2            4
                                                                                    --------      -------      -------
                                                                                          --           --           --
                                                                                    ========      =======      =======
</TABLE>



                                    IV-70
<PAGE>   73

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(14)    INCOME TAXES (continued)

        Deferred income tax assets and liabilities at December 31, 1997 and 1996
        are summarised as follows:

<TABLE>
<CAPTION>
                                                                     1997          1996
                                                                  L. '000       L. '000
<S>                                                                <C>          <C>       
       Deferred tax assets relating to:
       Fixed assets                                                79,100            --
       Net operating loss carried forward                         181,800       310,300
       Other                                                        2,400         3,400
                                                                 --------      --------
       Deferred tax asset                                         263,300       313,700

       Valuation allowance                                       (247,400)     (175,200)
                                                                 --------      --------

       Deferred tax liabilities relating to:                       15,900       138,500
                                                                 --------      --------
       Fixed assets                                                    --      (110,600)
       Other                                                      (15,900)      (27,900)
                                                                 --------      --------
       Deferred tax liabilities                                   (15,900)     (138,500)
                                                                 --------      --------
       DEFERRED TAX ASSET PER BALANCE SHEET                            --            --
                                                                 --------      --------
</TABLE>

        At December 31 1997 the company estimates that it has subject to Inland
        Revenue agreement, net operating losses ("NOLS") of L. 587,000,000
        available to relieve against future profits. This excludes capital
        allowances on assets which were available to the company, but had not
        been claimed.

        Due to a history of operating losses the company has established a
        valuation allowance with respect to deferred tax assets, except to the
        extent of deferred tax liabilities.

        The NOLs have an unlimited carry-forward period under UK tax law, but
        are limited to their use to the type of business which has generated the
        loss.


                                    IV-71
<PAGE>   74

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(15)    SHAREHOLDERS' EQUITY

        MOVEMENTS IN SHARE CAPITAL

        In 1996 the Company issued 7,604,200 ordinary shares at 10 pence each
        for the following consideration: an additional 0.25% of the ordinary
        shares of Cable London plc, the surrender by Trans-Global (UK) Limited
        of is option to acquire 9.9% of equity in the South East Regional
        Franchise Area, and the remaining 20% of the ordinary shares of Telewest
        Communications (Cotswolds) Limited held by a minority interest.

        On October 3, 1995, the Company acquired the entire share capital of
        TCMN from its former shareholders in exchange for an aggregate of
        183,994,960 ordinary shares of 10 pence each and 230,790,208 convertible
        preference shares of 10 pence each. On October 2, 1995, pursuant to a
        court-approved scheme of arrangement (the "Scheme of Arrangement"), the
        Company exchanged 735,468,440 ordinary shares of 10 pence each and
        265,276,500 convertible preference shares of 10 pence each in
        consideration for the transfer of shares of TCCL to the Company.
        Dealings in ordinary shares and ADSs representing ordinary shares of
        TCCL ceased on the London Stock Exchange and NASDAQ National Market
        immediately prior to the execution of the Scheme of Arrangement and upon
        completion of the Scheme of Arrangement, dealings in the ordinary shares
        and ADSs representing ordinary shares of the Company commenced.
        Immediately prior to the execution of the Scheme of Arrangement on
        October 2, 1995, TCCL restructured its share capital by converting
        112,276,500 ordinary shares of 10 pence each into 112,276,500
        convertible preference shares of 10 pence each.

        CONVERTIBLE PREFERENCE SHARES

        The convertible preference shares are convertible into fully paid up
        ordinary shares at any time on the basis of one ordinary share for every
        convertible preference share provided that, immediately following the
        conversion, the percentage of the issued ordinary share capital of the
        Company held by members of the public, as defined by the listing rules
        of the London Stock Exchange, does not fall below 25%. The ordinary
        shares arising on conversion will rank pari passu in all respects with
        the ordinary shares then in issue.

        The holders of the convertible preference shares are entitled to receive
        a dividend of such amount as is declared and paid in relation to each
        ordinary share, subject to the dividend to be paid not exceeding 20
        pence per share net of any associated tax credit.

        In the event of a winding-up of the Company or other return of capital,
        the assets of the Company available for distribution will be paid first
        to the holders of the convertible preference shares up to the sum of
        capital paid-up or credited as paid-up unless the right of election upon
        a winding-up of the Company has been exercised in respect of the
        convertible preference shares ("the Elected Shares"). If the election
        has been exercised, the holders of the ordinary shares and the Elected
        Shares will receive any surplus in accordance with the amount paid-up or
        credited as paid-up on the shares held.

        The holders of the convertible preference shares are not entitled to
        vote at any general meeting of the Company unless the meeting includes
        the consideration of a resolution for winding up the Company or a
        resolution modifying the rights or privileges attaching to the
        convertible preference shares.


                                    IV-72
<PAGE>   75

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(16)    SHARE-BASED COMPENSATION PLANS

        At December 31, 1997, the Company operates five types of share-based
        compensation plans: the Telewest Executive Share Option Schemes, the
        Telewest Sharesave Schemes, and the Telewest Restricted Share Scheme, as
        replaced in 1997 by the Telewest Long Term Incentive Plan ("LTIP") and
        an Equity Participation Plan ("EPP").

        The Company applies APB Opinion Bulletin No. 25 and related
        interpretations in accounting for its share-based compensation plans.
        Accordingly, no compensation cost has been charged to the consolidated
        statement of operations in respect of performance-based option grants
        since the options do not have exercise prices less than the market value
        of the Company's ordinary shares. Compensation cost has been recognized
        for fixed option grants since the options have exercise prices less than
        the market value of the Company's ordinary shares at the date of grant.
        Compensation cost has also been recognized for awards over ordinary
        shares made in under the Telewest Restricted Share Scheme since the
        awards have no exercise price. Compensation cost recognized for fixed
        option grants and awards under the Telewest Restricted Share Scheme was
        (L.496,000), L.1,380,000, and L.1,334,000 for 1997, 1996, and 1995,
        respectively. If compensation costs for share option grants and awards
        under the Telewest Restricted Share Scheme and LTIP Scheme had been
        determined based on their fair value at the date of grant for 1997 and
        1996 consistent with the method prescribed by SFAS 123 "Accounting for
        Stock-Based Compensation", the Company's net loss and basic and diluted
        loss per share would have been adjusted to the pro forma amounts set out
        below:

<TABLE>
<CAPTION>
                                                                                1997          1996           1995
                                                                             L. '000       L. '000        L. '000
<S>                                                                         <C>           <C>           <C>      
        Net loss             - As reported                                  (332,452)     (262,391)     (137,531)
                             - Proforma                                     (336,737)     (264,579)     (138,468)
</TABLE>

<TABLE>
<CAPTION>
                                                                                1997          1996          1995
                                                                                  L.            L.            L. 
<S>                                                                            <C>           <C>           <C>   
        Loss per share       - As reported                                     (0.36)        (0.28)        (0.16)
                             - Proforma                                        (0.36)        (0.29)        (0.16)
</TABLE>

        PERFORMANCE-BASED SHARE OPTION COMPENSATION PLANS

        The Company has two performance-based share option plans: the Telewest
        1995 (No. 1) Executive Share Option Scheme and the Telewest 1995 (No. 2)
        Executive Share Option Scheme. Under both plans, certain officers and
        key employees are granted options to purchase ordinary shares of the
        Company. The exercise price of each option generally equals the market
        price of the Company's ordinary shares on the date of grant. The options
        are exercisable between three and ten years after the date of the grant
        with exercise conditional on the Company's shares outperforming by
        price the FT-SE100 Index over any three year period preceding exercise.
        The Company may grant options for up to 92,000,000 ordinary shares.


                                    IV-73



<PAGE>   76

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(16)    SHARE COMPENSATION PLANS (continued)

        The fair value of each option grant was estimated on the date of grant
        using the Black-Scholes option-pricing model with a weighted-average
        risk-free interest rate of 6.8, 8.1 and 8.3 percent used for grants in
        1997, 1996 and 1995, respectively, and an expected volatility of between
        30 and 45 percent used for grants in these years. The Company does not
        expect to pay a dividend on its ordinary shares at any time during the
        expected life of the option.

        A summary of the status of the Company's performance-based share option
        plan as of December 31, 1997, 1996, and 1995, the first year in which
        the options were granted, and changes during the years ended on those
        dates is presented below: 

        PERFORMANCE-BASED SHARE OPTION COMPENSATION PLANS (continued)

<TABLE>
<CAPTION>
                                                            1997                      1996                       1995
                                                                WEIGHTED                   Weighted                    Weighted
                                                    NUMBER       AVERAGE        Number      average       Number        average
                                                        OF      EXERCISE            of     exercise           of       exercise
                                                    SHARES         PRICE        shares        price       shares          price
<S>                                                <C>             <C>         <C>           <C>        <C>               <C>
        Outstanding at beginning of year           11,238,852      153.0p      8,645,229     160.4p              --          --
        Granted                                     8,994,654       83.7p      4,121,474     140.9p       8,871,398       160.3p
        Forfeited                                  (1,205,075)     147.1p     (1,527,851)    162.6p        (226,169)      158.0p
                                                  -----------                -----------                -----------
        Outstanding at end of year                 19,028,431      120.6p     11,238,852     153.0p       8,645,229       160.4p
                                                  -----------                -----------                -----------
        Options exercisable at year-end             3,375,739      152.3p      1,023,042     154.3p              --          --
        Weighted-average fair value of
           options granted during the year               50.4p                      75.6p                      86.0p
</TABLE>


                                    IV-74






<PAGE>   77

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(16)    SHARE COMPENSATION PLANS (continued)

        The following table summarizes information about the Company's
        performance-based share option plans outstanding at December 31, 1997.

<TABLE>
<CAPTION>
                                    OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
                                   Number         Weighted-                             Number
              Range of     outstanding at           average        Weighted-     exercisable at       Weighted-
       exercise prices        31 December         remaining          average        31 December         average
                                     1997  contractual life   exercise price           1997      exercise price
<S>       <C>                   <C>               <C>                 <C>              <C>                <C>   
           71.0-73.0p           2,666,913         7.4 years            72.6p

          82.5p-83.0p           5,297,509         7.6 years            82.9p

          117.5-118.0p            765,847         9.2 years           117.5p

          135.0-141.0p          3,674,467         6.2 years           140.6p           1,293,086          140.8p

          154.5-155.5p          4,842,914         4.8 years           154.5p           1,502,527          154.6p

          171.5-173.5p          1,780,781         5.9 years           172.4p             580,126          171.9p

           71.0-173.5P         19,028,431         6.5 years           120.6P           3,375,739          152.3P
</TABLE>

        FIXED SHARE OPTION COMPENSATION PLANS

        The Company also operates the Telewest Sharesave Scheme, a fixed share
        option compensation scheme. Under this plan, the Company grants options
        to employees to purchase ordinary shares at a 20% discount to market
        price. These options can be exercised only with funds saved by employees
        over time in a qualified savings account. The options are exercisable
        between 37 and 66 months after the date of grant.


                                    IV-75



<PAGE>   78

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(16)    SHARE COMPENSATION PLANS (continued)

        FIXED SHARE OPTION COMPENSATION PLANS (continued)

        The fair value of each option grant was estimated on the date of grant
        using the Black-Scholes option-pricing model with a weighted-average
        risk-free interest rate of 6.95 percent, 7.4 percent, and 7.2 percent,
        used for grants in 1997, 1996 and 1995, respectively and an expected
        volatility of between 30 and 45 percent. The Company does not expect to
        pay a dividend on its ordinary shares at any time during the expected
        life of the option.

        A summary of the status of the Company's fixed share option plan as of
        December 31, 1997, 1996, and 1995 and the changes during the years ended
        on those dates is presented below:

<TABLE>
<CAPTION>
                                                    1997                        1996                       1995
                                              NUMBER      WEIGHTED       Number      Weighted       Number      Weighted
                                                  OF       AVERAGE           of       average           of       average
                                              SHARES      EXERCISE       shares      exercise       shares      exercise
                                                             PRICE                      price                      price
<S>                                           <C>           <C>          <C>            <C>         <C>            <C>   
         Outstanding at beginning of
         year                                 4,076,635     119.8p       3,345,941      139.6p      1,666,534      150.0p
         Granted                              5,341,783      58.0p       2,165,009      102.5p      2,168,157      134.0p
         Forfeited                           (2,450,243)    120.7p      (1,434,315)     139.8p       (488,750)     150.0p
                                             ----------                -----------                 ----------
         Outstanding at end of year           6,968,175      72.1p       4,076,635      119.8p      3,345,941      139.6p
                                             ----------                -----------                 ----------
         Options exercisable at year-end             --                         --                         --
         Weighted-average fair value of
           options granted during the
            year                                   42.7p                      49.7p                      79.3p
</TABLE>

        The following table summarizes information about the Company's fixed
        share options outstanding at December 31, 1997.

<TABLE>
<CAPTION>
                  Options outstanding
                                        Number       Weighted-average
                                outstanding at              Remaining
           Exercise price     31 December 1997       Contractual life
<S>                 <C>            <C>                    <C>      
                    58.0p          5,341,783              3.6 years

                   102.5p            941,444              2.6 years

                   134.0p            404,256              3.6 years

                   150.0p            280,692              2.6 years
         ---------------       -------------          -------------

          58.0P - 150.0 p          6,968,175              3.4 YEARS
</TABLE>


                                    IV-76




<PAGE>   79

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

        TELEWEST RESTRICTED SHARE SCHEME

        The Company operates the Telewest Restricted Share Scheme in conjunction
        with an employment trust, the Telewest Employees Share Ownership Plan
        Trust (the "Telewest ESOP"), which has been designed to provide
        incentives to executives of the Company based on the performance of the
        Company. Under the Telewest Restricted Share Scheme, executives may be
        granted awards over ordinary shares of the Company based on a percentage
        of salary. The awards made for no consideration. The awards generally
        vest three years after the date of the award and are exercisable for up
        to seven years after the date when they vest. Awards granted under the
        Telewest Restricted Share Scheme may be made over a maximum of 4,000,000
        ordinary shares of the Company.

        The fair value of each award is the share price of the ordinary shares
        on the date the award was made.

        A summary of the status of the Company's Restricted Share Scheme at
        December 31, 1997, 1996, and 1995 and changes during the years ended on
        those dates is presented below:

<TABLE>
<CAPTION>
                                                          1997            1996            1995
                                                     NUMBER OF       Number of       Number of
                                                        SHARES          shares          shares
<S>                                                  <C>             <C>             <C>
          Outstanding at beginning of year           2,648,433       2,616,857              --
          Granted                                      377,975         328,297       2,857,191
          Exercised                                 (1,123,324)        (62,920)             --
          Forfeited                                   (155,922)       (233,801)       (240,334)
                                                    ----------      ----------      ----------
          Outstanding at end of year                 1,747,162       2,648,433       2,616,857

                                                    ----------      ----------      ----------
                                                       924,008         646,341          49,867
          Awards exercisable at year end                    --              --              --

          WEIGHTED-AVERAGE FAIR VALUE OF AWARDS
          GRANTED DURING THE YEAR                         1.25            1.47            1.72
</TABLE>

        At December 31, 1997, the 1,747,162 awards outstanding and the 924,008
        awards exercisable have weighted average remaining contractual lives of
        6.7 years and 6.6 years respectively.

        The Telewest Restricted Share Scheme has been replaced with a Long-Term
        Incentive Plan ("LTIP") for share awards to executive Directors and
        senior executives. Under the LTIP, an executive will be awarded the
        provisional right to receive, for no payment, a number of Telewest
        shares with a value equating to a percentage of base salary. The shares
        will not vest unless certain performance criteria, based on total
        shareholder return assessed over a three year period are met. The
        percentage of salary will be determined by the Remuneration Committee
        and will be up to 100% of base salary for executive Directors.


                                    IV-77


<PAGE>   80

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

        TELEWEST LONG TERM INCENTIVE PLAN ("LTIP")

        A summary of the status of the Company's Long Term Incentive Plan at
        December 31, 1997 and 1996 and changes during the years ended on those
        dates is presented below:

<TABLE>
<CAPTION>
                                                                              1997
                                                                         NUMBER OF
                                                                            SHARES
<S>                                                                        <C>    
          Outstanding at beginning of year                                      --
          Granted                                                          574,309
                                                                           -------
          Outstanding at end of year                                       574,309

                                                                           -------
          Awards exercisable at year end                                        --
                                                                           -------

          Weighted-average fair value of awards
          granted during the year                                             0.81
</TABLE>

        At December 31, 1997, the 574,309 awards outstanding have weighted
        average remaining contractual lives of 9.8 years.


                                     IV-78
<PAGE>   81

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(17)    COMMITMENTS AND CONTINGENCIES

        CAPITAL AND OPERATING LEASES

        The Company leases a number of assets under arrangements accounted for
        as capital leases, as follows:

<TABLE>
<CAPTION>
                                                           Acquisition          Accumulated            Net book
                                                                 costs         Depreciation               Value
                                                               L. '000              L. '000             L. '000
<S>                                                             <C>                 <C>                  <C>   
          At December 31, 1997
          Electronic equipment                                  58,465              (16,061)             42,404
          Other equipment                                       40,207               (8,050)             32,157

          At December 31, 1996
          Electronic equipment                                  46,634               (8,376)             38,258
          Other equipment                                        8,780               (1,900)              6,880
</TABLE>

        Depreciation charged on these assets was L. 10,889,000 and L. 7,106,000
        for the years ended 31 December, 1997 and 1996 respectively

        The Company leases business offices and uses certain equipment under
        lease arrangements accounted for as operating leases. Minimum rental
        expense under such arrangements amounted to L. 3,198,000, L. 3,065,000
        and L. 2,276,000 for the years ended December 31, 1997, 1996 and 1995,
        respectively.

        Future minimum lease payments under capital and operating leases are
        summarized as follows as of December 31, 1997:

<TABLE>
<CAPTION>
                                                 Capital leases         Operating leases
                                                        L. '000                 L. '000
<S>                                                     <C>                     <C>  
       1998                                              15,712                  3,059
       1999                                              14,488                  2,989
       2000                                              12,740                  2,939
       2001                                              11,883                  2,885
       2002                                               8,741                  2,884
       2003 and thereafter                               38,413                 14,323
                                                       --------
                                                        101,977
       Imputed interest                                 (26,443)
                                                       --------
       Total                                             75,534
                                                       --------
</TABLE>

        It is expected that, in the normal course of business, expiring leases
        will be renewed or replaced.

        Contingent liabilities

        The Company is a party to various legal proceedings in the ordinary
        course of business which it does not believe will result, in aggregate,
        in a material adverse effect on its financial condition.


                                     IV-79
<PAGE>   82

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

(18)    RELATED PARTY TRANSACTIONS

        The Company, in the normal course of providing cable television
        services, purchases certain of its programming from certain UK
        affiliates of TCI. Such programming is purchased on
        commercially-available terms. Total purchases in the year amounted to L.
        9,681,000.

        The Company has management agreements with TCI and US WEST under which
        amounts are paid by the Company relating to TCI and US WEST employees
        who have been seconded to the Company. For the years ended December 31,
        1997, 1996, and 1995, fees paid by the Company under the agreements were
        L. 968,000, L. 2,185,000 and L. 3,042,000 respectively. The Company has
        similar management agreements with Cox Communications, Inc and SBC
        Communications, Inc. For the years ended December 31,1997, and 1996,
        fees paid by the Company under these agreements were L. 202,000 and L.
        374,000.

        The Company has entered into consulting agreements with its affiliates
        pursuant to which the Company provides consulting services related to
        telephony operations. Under the agreements, the Company receives an
        annual fee from each affiliate based upon the affiliate's revenues. Fees
        received for the years ended December 31,1997, 1996 and 1995 were L.
        786,000, L. 642,000 and L. 566,000, respectively. The Company also
        receives a fee for providing switching support services, comprising of a
        fixed element based on a number of switches, and a variable element
        based on a number of lines. Fees received for the years ended December
        31, 1997, 1996 and 1995, were L. 740,000, L. 741,000 and L. 827,000,
        respectively.

(19)    QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     1997
                                                       FOURTH        THIRD        SECOND          First
                                         TOTAL        QUARTER      QUARTER       QUARTER        quarter
                                       L. '000        L. '000      L. '000       L. '000        L. '000
<S>                                    <C>           <C>           <C>            <C>           <C>   
       Revenue                         386,498       104,972       100,087        91,052        90,390
       Operating loss                 (154,159)      (39,578)      (41,394)      (36,421)      (36,766)
       Finance expenses, net          (156,167)      (29,604)      (43,613)      (30,992)      (51,958)

       Net loss                       (332,452)      (74,887)      (90,780)      (72,902)      (93,883)
       Basic and diluted loss per
       ordinary share                 (36 pence)    (8 pence)     (10 pence)    (8 pence)     (10 pence)
</TABLE>

<TABLE>
<CAPTION>
                                                               1996
                                              FOURTH           THIRD        SECOND         First
                                 TOTAL       QUARTER         QUARTER       QUARTER       quarter
                               L. '000       L. '000         L. '000       L. '000       L. '000
<S>                             <C>            <C>           <C>           <C>           <C>   
Revenue                         290,266        83,663        73,123        68,320        65,160
Operating loss                 (155,400)      (46,095)      (34,512)      (38,536)      (36,257)
Finance expenses, net           (90,788)       28,222       (30,710)      (54,503)      (33,797)

Net loss                       (262,391)      (22,361)      (69,303)      (97,080)      (73,647)
Basic and diluted loss per
ordinary share                 (28 pence)    (2 pence)     (7 pence)     (10 pence)    (8 pence)
</TABLE>


                                     IV-80
<PAGE>   83

Telewest Communications - US GAAP

Notes to the consolidated financial statements (continued)

        The Company regularly reviews estimated useful lives of its property and
        equipment and the estimates in calculating the capitalised overheads
        which relate to the construction of the cable network. With effect from
        January 1, 1996, the company has revised the estimated lives of certain
        assets as set out in Note 3 to the consolidated financial statements and
        certain estimates used in calculating capitalizable overheads. The
        impact of these revisions was to increase the depreciation charge for
        1996 from L. 110,223,000 to L. 129,716,000 and to increase the basic and
        diluted loss per ordinary share for the year by 2 pence, and to increase
        the capitalization of overheads in 1996 from L. 38,812,000 to L.
        54,019,000 and to reduce the basic and diluted loss per share for the
        year by 2 pence. The impact was principally accounted for in the fourth
        quarter of 1996. In 1997, the treatment of activation costs was
        reviewed. With effect from 1 January 1997, activation labour was
        reclassified from Cable and Ducting to Electronics to be consistent with
        the classification of activation materials. The impact of this change,
        was an additional depreciation charge of L. 10,359,000, with activation
        labour now depreciated over 8 years rather than 20 years.

        Finance expenses include foreign exchange gains and losses on the
        retranslation or valuation of non sterling denominated financial
        instruments using period end exchange rates and market valuations.


                                     IV-81
<PAGE>   84
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

3 - Articles of Incorporation and Bylaws:

   
      3.1      The Restated Certificate of Incorporation, dated August 4, 1994,
                 as amended on August 4, 1994, August 16, 1994, October 11,
                 1994, October 21, 1994, January 26, 1995, August 3, 1995,
                 August 3, 1995, January 25, 1996, January 25, 1996, April 7,
                 1997, August 28, 1997, December 30, 1997 and December 30, 
                 1997.**
    

      3.2      The Bylaws as adopted June 16, 1994.
                 Incorporated herein by reference to the Company's Annual
                   Report on Form 10-K for the year ended December 31, 1994, as
                   amended by Form 10-K/A (Commission File No. 0-20421).

4 - Instruments Defining the Rights of Security Holders, including Indentures:

      4.1      Form of Rights Agreement among Tele-Communications, Inc., TCI 
                 Music, Inc. and the Bank of New York, as Rights Agent.
                   Incorporated by reference to Exhibit 4.3 to the Registration
                     Statement of Form S-4 of TCI Music and TCI (Reg. File Nos.
                     333-28613 and 333-28613-001).

10 - Material Contracts:

     10.1      Amended and Restated Tele-Communications, Inc. 1994 Stock
                 Incentive Plan.*
                   Incorporated herein by reference to the Company's
                     Registration Statement on Form S-8 (Commission File No.
                     333-40141).

     10.2      Amended and Restated Tele-Communications, Inc. 1995 Employee
                 Stock Incentive Plan.*
                   Incorporated herein by reference to the Company's
                     Registration Statement on Form S-8 (Commission File No.
                     333-40141).

     10.3      Amended and Restated Tele-Communications, Inc. 1996 Incentive
                 Plan.* 
                   Incorporated herein by reference to the Company's
                     Registration Statement on Form S-8 (Commission File No.
                     333-40141).

     10.4      Restated and Amended Employment Agreement, dated as of November
                 1, 1992, between the Company and John C. Malone.*
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1992,
                     as amended by Form 10-K/A for the year ended December 31,
                     1992 (Commission File No. 0-5550).

     10.5      Assignment and Assumption Agreement, dated as of August 4, 1994,
                 among TCI/Liberty Holding Company, Tele-Communications, Inc.
                 and John C. Malone.*
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1994,
                     as amended by Form 10-K/A (Commission File No. 0-20421).


                                                                    (continued)


<PAGE>   85
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------


10 - Material contracts, continued:

     10.6      Call Agreement, dated February 9, 1998, between
                 Tele-Communications, Inc., John C. Malone and Leslie Malone.
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 25, 1998 (Commission 
                     File No. 0-20421).

     10.7      Call Agreement, dated February 9, 1998, between
                 Tele-Communications, Inc., Gary Magness, both individually and
                 as representative, Kim Magness, both individually and as
                 representative, the Estate of Bob Magness, the Estate of Betsy
                 Magness and any individual or entity which thereafter becomes a
                 party thereto.
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 25, 1998 (Commission 
                     File No. 0-20421).

     10.8      Stockholders Agreement, dated February 9, 1998, by and among
                 Tele-Communications, Inc., John C. Malone, Leslie Malone, Gary
                 Magness, both individually and as representative, Kim Magness,
                 both individually and as representative, the Estate of Bob
                 Magness, the Estate of Betsy Magness and any individual or
                 entity which thereafter becomes a party thereto. 
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 25, 1998 (Commission
                     File No. 0-20421).

     10.9      Consulting Agreement, dated as of January 1, 1996, between
                 Tele-Communications, Inc. and Donne F. Fisher.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.10     Consulting Agreement, dated as March 11, 1995, between
                 Tele-Communications, Inc. and J.C. Sparkman. 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1996
                     (Commission File No. 0-20421).

   
     10.11     Consulting Agreement, dated as of January 1, 1998, between
                 Tele-Communications International, Inc. and Fred A. Vierra.**
    

     10.12     Deferred Compensation Plan for Non-Employee Directors, effective
                 on November 1, 1992.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1992,
                     as amended by Form 10-K/A for the year ended December 31,
                     1992 (Commission File No. 0-5550).

     10.13     Amended and Restated Employment Agreement, dated as of July 18,
                 1995, among Tele-Communications, Inc., Tele-Communications
                 International, Inc. and Fred A. Vierra.* 
                   Incorporated herein by reference to Tele-Communications
                     International, Inc.'s Registration Statement on Form S-1
                     (Commission File No. 33-80491).

                                                                    (continued)


<PAGE>   86
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10 - Material contracts, continued:

     10.14     Employment Agreement, dated as of January 1, 1993, between
                 Tele-Communications, Inc. and Larry E. Romrell.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K dated December 31, 1994, as amended by
                     Form 10-K/A (Commission File No. 0-20421).

     10.15     Assignment and Assumption Agreement, dated as of August 4, 1994,
                 among TCI/Liberty Holding Company, Tele-Communications, Inc. 
                 and Larry E. Romrell.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K dated December 31, 1994, as amended by
                     Form 10-K/A (Commission File No. 0-20421).

     10.16     Form of 1992 Non-Qualified Stock Option and Stock Appreciation
                 Rights Agreement.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1993,
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.17     Form of 1993 Non-Qualified Stock Option and Stock Appreciation
                 Rights Agreement.* 
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1993,
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.18     Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement, dated as of November 12, 1993, by and between
                 Tele-Communications, Inc. and Jerome H. Kern.*
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1993,
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.19     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, Liberty Media Corporation and
                 grantee relating to stock appreciation rights granted pursuant 
                 to letter dated September 17, 1991.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration
                     Statement on Form S-8 Registration Statement (Commission
                     File No. 33-54263).

     10.20     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, Liberty Media Corporation and
                 grantee relating to the assumption of options and related stock
                 appreciation rights granted under the Liberty Media Corporation
                 1991 Stock Incentive Plan pursuant to letter dated July 26,
                 1993.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration
                     Statement on Form S-8 Registration Statement (Commission
                     File No. 33-54263).

                                                                    (continued)



<PAGE>   87
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10 - Material contracts, continued:

     10.21     Assumption and Amended and Restated Stock Option Agreement
                 between the Company, TCI/Liberty Holding Company and a 
                 director of Tele-Communications, Inc. relating to assumption 
                 of options and related stock appreciation rights granted 
                 outside of an employee benefit plan pursuant to Tele-
                 Communications, Inc.'s 1993 Non-Qualified Stock Option and 
                 Stock Appreciation Rights Agreement.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.22     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, TCI/Liberty Holding Company and
                 grantee relating to assumption of options and related stock
                 appreciation rights granted under Tele-Communications, Inc.'s
                 1992 Stock Incentive Plan pursuant to Tele-Communications, 
                 Inc.'s 1993 Non-Qualified Stock Option and Stock Appreciation 
                 Rights Agreement.*
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.23     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, TCI/Liberty Holding Company and
                 grantee relating to assumption of grants pursuant to the
                 Agreement and Plan of Merger dated June 6, 1991 between United
                 Artists Entertainment Company and Tele-Communications, Inc.*
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.24     Form of letter dated September 17, 1991 from Liberty Media
                 Corporation to grantee relating to grant of stock appreciation
                 rights.*
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.25     Form of letter dated July 26, 1993 from Liberty Media Corporation
                 to grantee relating to grant of options and stock appreciation
                 rights.* 
                   Incorporated by reference to Tele-Communications, Inc.'s Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

     10.26     Form of Assumption and Amended and Restated Stock Option
                 Agreement between the Company, TCI/Liberty Holding Company and
                 grantee relating to assumption of options and related stock
                 appreciation rights under Tele-Communications, Inc.'s 1992 
                 Stock Incentive Plan pursuant to Tele-Communications, Inc.'s 
                 1992 Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement.* 
                   Incorporated herein by reference to the Company's Post
                     Effective Amendment No. 1 to Form S-4 Registration 
                     Statement on Form S-8 Registration Statement (Commission 
                     File No. 33-54263).

                                                                     (continued)



<PAGE>   88
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10 - Material contracts, continued:

     10.27     Form of Indemnification Agreement.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1993, 
                     as amended by Form 10-K/A for the year ended December 31,
                     1993 (Commission File No. 0-5550).

     10.28     Form of 1994 Non-Qualified Stock Option and Stock Appreciation
                 Rights Agreement.* 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K dated December 31, 1994, as amended by 
                     Form 10-K/A (Commission File No. 0-20421).

     10.29     TCI 401(k) Stock Plan, restated effective January 1, 1998.*

     10.30     Form of Restricted Stock Award Agreement for 1995 Award of Series
                 A TCI Group Restricted Stock pursuant to the Tele-
                 Communications, Inc. 1994 Stock Incentive Plan.* 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.31     Form of Restricted Stock Award Agreement for 1995 Award of Series
                 A Liberty Media Group Restricted Stock pursuant to the
                 Tele-Communications, Inc. 1994 Stock Incentive Plan.*
                   Incorporated herein by reference to the Company's Annual 
                       Report on Form 10-K for the year ended December 31, 1995 
                       (Commission File No. 0-20421).

     10.32     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1994 Stock Incentive
                 Plan.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.33     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1994 
                 Stock Incentive Plan.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

                                                                    (continued)

<PAGE>   89
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10 - Material contracts, continued:

     10.34     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1995 Stock Incentive
                 Plan.* 
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

     10.35     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1995
                 Stock Incentive Plan.*
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

     10.36     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1996 Stock Incentive
                 Plan.*
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

     10.37     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1996
                 Stock Incentive Plan.*
                     Incorporated herein by reference to the Company's Annual
                       Report on Form 10-K for the year ended December 31, 1995
                       (Commission File No. 0-20421).

   
     10.38     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Group common stock
                 pursuant to the Tele-Communications, Inc. 1996 Stock Incentive
                 Plan.**

     10.39     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A TCI Ventures Group
                 common stock pursuant to the Tele-Communications, Inc. 1996
                 Stock Incentive Plan.**

     10.40     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Liberty Media Group
                 common stock pursuant to the Tele-Communications, Inc. 1996
                 Stock Incentive Plan.**
    

   
     10.41     Form of Restricted Stock Award Agreement for 1997 Award of Series
                 A TCI Group Restricted Stock pursuant to the
                 Tele-Communications, Inc. 1996 Incentive Plan.*,**

     10.42     Form of Restricted Stock Award Agreement for 1997 Award of Series
                 A TCI Ventures Group Restricted Stock pursuant to the
                 Tele-Communications, Inc. 1996 Incentive Plan.*,**
    

     10.43     The Tele-Communications International, Inc. 1995 Stock Incentive
                 Plan.*
                     Incorporated herein by reference to Tele-Communications
                       International, Inc. Registration Statement on Form S-1
                       (Commission File No. 33-91876).

                                                                    (continued)



<PAGE>   90
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10 - Material contracts, continued:

     10.44     Form of Restricted Stock Award Agreement for 1995 Award of Series
                 A Tele-Communications International, Inc. Restricted Stock
                 pursuant to the Tele-Communications International, Inc. 1995
                 Stock Incentive Plan.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.45     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Tele-Communications
                 International, Inc. common stock pursuant to the
                 Tele-Communications International, Inc. 1995 Stock Incentive
                 Plan.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.46     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1995 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Tele-Communications
                 International, Inc. common stock.*
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

   
     10.47     Form of Non-Qualified Stock Option and Stock Appreciation Rights
                 Agreement for 1997 Grant of Options with tandem stock
                 appreciation rights to purchase Series A Tele-Communications
                 International, Inc. common stock pursuant to the
                 Tele-Communications International, Inc. 1995 Stock Incentive
                 Plan.*,**

     10.48     Form of Restricted Stock Award Agreement for 1997 Award of Series
                 A Tele-Communications International, Inc. Restricted Stock
                 pursuant to the Tele-Communications International. Inc. 1995
                 Stock Incentive Plan.*,**
    

     10.49     Restricted Stock Award Agreement, made as of July 1, 1996, among
                 Tele-Communications, Inc., Brendan Clouston and WestMarc
                 Communications, Inc. *
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1996 
                     (Commission File No. 0-20421).

     10.50     Option Agreement, dated as of December 4, 1996, by and between
                 TCI Satellite Entertainment, Inc. and Brendan R. Clouston.*
                   Incorporated herein by reference to the TCI Satellite
                     Entertainment, Inc. Annual Report on Form 10-K for the year
                     ended December 31, 1996 (Commission File No. 0-21317).

     10.51     Form of Stock Appreciation Rights Agreement made as of the 1st
                 day of December, 1996, by and among TCI Wireless Holdings, 
                 Inc., Grantee, TCI Telephony Services, Inc. and 
                 Tele-Communications, Inc.*

     10.52     Form of Stock Appreciation Rights Agreement made as of the 1st
                 day of December, 1996, by and among TCI Teleport Holdings, 
                 Inc., Grantee, TCI Telephony Services, Inc. and 
                 Tele-Communications, Inc.*

     10.53     Form of Amended and Restated Option Agreement made as of the 1st
                 day of December, 1996, by and among TCI Wireline, Inc., Grantee
                 and Tele-Communications, Inc.*

                                                                    (continued)



<PAGE>   91
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10 - Material contracts, continued:


   
     10.54     Form of Option to Purchase Common Stock Agreement made as of the
                 1st day of December, 1996, by and among TCI.Net, Inc., Grantee
                 and Tele-Communications, Inc.*,**

     10.55     Form of Stock Appreciation Right Agreement made as of the 1st day
                 of December, 1996, by and among TCI Internet Services, Inc.,
                 Tele-Communications, Inc. and Grantee.*,**
    

     10.56     Letter Agreement, dated December 26, 1996, by
                 Tele-Communications, Inc. to purchase WestMarc Series C
                 Cumulative Compounding Redeemable Preferred Stock from Larry E.
                 Romrell.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1996 
                     (Commission File No. 0-20421).

     10.57     Employee Stock Purchase Plan for Bargaining Unit Employees of
                 United Cable Television of Baltimore Limited Partnership.*
                   Incorporated herein by reference to the Tele-Communications,
                     Inc. Registration Statement on Form S-8 (Commission File 
                     No. 33-60839).

     10.58     Employee Stock Purchase Plan for Bargaining Unit Employees of
                 UACC Midwest, Inc. d/b/a TCI of Central Indiana.*
                   Incorporated herein by reference to the Tele-Communications,
                     Inc. Registration Statement on Form S-8 (Commission File 
                     No. 33-64827).

     10.59     Employee Stock Purchase Plan for Bargaining Unit Employees of 
                 TCI of Northern New Jersey, Inc.*
                   Incorporated herein by reference to the Tele-Communications,
                     Inc. Registration Statement on Form S-8 (Commission File 
                     No. 33-64831).

     10.60     Amended and Restated Agreement of Limited Partnership of 
                 MajorCo, L.P., dated as of January 31, 1996, among Sprint 
                 Spectrum, L.P., TCI Network Services, Comcast Telephony 
                 Services and Cox Telephony Partnership.
       
               Second Amended and Restated Joint Venture Formation Agreement,
                 dated as of January 31, 1996, by and between Sprint 
                 Corporation, Tele-Communications, Inc., Comcast Corporation 
                 and Cox Communications, Inc.
               
               Parents Agreement, dated as of January 31, 1996, by  Tele-
                 Communications, Inc. and Sprint Corporation.
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated February 9, 1996 (Commission 
                     File No. 0-20421).

                                                                    (continued)



<PAGE>   92
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10- Material contracts, continued:

     10.61     Agreement of Purchase and Sale of Partnership Interest, dated as
                 of January 31, 1996, among Halcyon Communications, Inc., ECP
                 Holdings, Inc. and Fisher Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.62     Consent and Amendment of Amended Agreement of Partnership for
                 Halcyon Communications Partners, dated as of January 31, 1996, 
                 by and among Halcyon Communications, Inc., ECP Holdings, Inc. 
                 and Fisher Communications Associates, L.L.C. 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.63     Assignment and Assumption Agreement, made as of January 31, 
                 1996, between ECP Holdings, Inc. and Fisher Communications 
                 Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.64     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and ECP Holdings, Inc.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.65     Agreement of Purchase and Sale of Partnership Interests, dated as
                 of January 31, 1996, among Halcyon Communications, Inc., 
                 American Televenture of Minersville, Inc., TCI Cablevision of 
                 Nevada, Inc., TCI Cablevision of Utah, Inc., TEMPO Cable, Inc. 
                 and Fisher Communications Associates, L.L.C. 
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.66     Consent and First Amendment of Amended and Restated Agreement of
                 Limited Partnership for Halcyon Communications Limited
                 Partnership, dated as of January 31, 1996, by and among 
                 Halcyon Communications, Inc., American Televenture of 
                 Minersville, Inc., TCI Cablevision of Nevada, Inc., TCI 
                 Cablevision of Utah, Inc., TEMPO Cable, Inc. and Fisher 
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

     10.67     Assignment and Assumption Agreement, made as of January 31, 
                 1996, between TCI Cablevision of Utah, Inc. and Fisher 
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual 
                     Report on Form 10-K for the year ended December 31, 1995 
                     (Commission File No. 0-20421).

                                                                     (continued)



<PAGE>   93
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10- Material contracts, continued:

     10.68     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of Utah,
                 Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.69     Assignment and Assumption Agreement, made as of January 31, 1996,
                 between TCI Cablevision of Nevada, Inc. and Fisher 
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.70     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of 
                 Nevada, Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.71     Assignment and Assumption Agreement, made as of January 31, 1996,
                 between American Televenture of Minersville, Inc. and Fisher
                 Communications Associates, L.L.C.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.72     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and American Televenture of
                 Minersville, Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.73     Assignment and Assumption Agreement, made as of January 31, 1996,
                 between TEMPO Cable, Inc. and Fisher Communications Associates,
                 L.L.C.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

     10.74     Option Agreement, dated as of January 31, 1996, between Fisher
                 Communications Associates, L.L.C. and TEMPO Cable, Inc.
                   Incorporated herein by reference to the Company's Annual
                     Report on Form 10-K for the year ended December 31, 1995
                     (Commission File No. 0-20421).

   
     10.75     InterMedia Capital Management, L.P. Agreement of Limited
                 Partnership, dated as of June 10, 1997 and effective as of May
                 22, 1997, by and between InterMedia Management, Inc., Leo J.
                 Hindery, Jr. and TCI ICM I, Inc.**

     10.76     InterMedia Capital Management III, L.P. Amended and Restated
                 Agreement of Limited Partnership, dated as of June 10, 1997, by
                 and among Leo J. Hindery, Jr., InterMedia Management, Inc. and
                 TCI ICM III, Inc.**
    

                                                                    (continued)



<PAGE>   94
                                 EXHIBIT INDEX


Exhibit No.                       Description
-----------                       -----------

10- Material contracts, continued:

   
     10.77     InterMedia Capital Management IV, L.P. Amended and Restated
                 Agreement of Limited Partnership, dated as of August 5, 1997,
                 by and between InterMedia Management, Inc., TCI ICM IV, Inc.
                 and Leo J. Hindery, Jr.**
    

     10.78     Amended and Restated Contribution and Merger Agreement, dated
                 as of June 6, 1997, among TCI Communications, Inc., 
                 Cablevision Systems Corporation, CSC Parent Corporation and
                 CSC Merger Corporation.

               Stockholders Agreement dated as of March 4, 1998, by and among
                 Cablevision Systems Corporation, Tele-Communications, Inc. and
                 the Class B Entities (as defined therein)
                   Incorporated herein by reference to the Company's Current
                     Report on Form 8-K, dated March 6, 1998 (Commission File
                     No. 0-20421).

   
     10.79     Amended and Restated Asset Contribution Agreement, dated
                 September 25, 1997, by and among Fisher Communications
                 Associates, L.L.C. and Tempo Cable, Inc., Communications
                 Services, Inc., TCI Cablevision of Oklahoma, Inc., TCI of
                 Kansas, Inc., Wentronics, Inc., TCI Cablevision of Utah,
                 Inc., TCI Cablevision of Arizona, Inc., Tulsa Cable 
                 Television, Inc. and TCI American Cable Holdings III,
                 L.P. and Peak Cablevision, LLC.**

     10.80     Amended and Restated Operating Agreement of Peak Cablevision,
                 LLC, made as of September 25, 1997, by TCI American Cable
                 Holdings III, L.P. and Fisher Communications Associates,
                 L.L.C.**

     10.81     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and ECP Holdings, Inc.**

     10.82     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and American Televentures
                 of Minersville, Inc.**

     10.83     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of
                 Utah, Inc.**

     10.84     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and Tempo Cable, Inc.**

     10.85     Promissory Note, dated January 15, 1998, between Fisher
                 Communications Associates, L.L.C. and TCI Cablevision of
                 Nevada, Inc.**
    

   
21 - Subsidiaries of Tele-Communications, Inc.**
    

23 - Consent of Experts and Counsel

     23.1 Consent of KPMG Peat Marwick LLP.

     23.2 Consent of KPMG Peat Marwick LLP.

     23.3 Consent of KPMG Peat Marwick LLP.

     23.4 Consent of KPMG Peat Marwick LLP.

     23.5 Consent of KPMG Audit Plc.

     23.6 Consent of Deloitte & Touche LLP.

27 - Financial data schedule

 * Constitutes management contract or compensatory arrangement.

   
** Previously filed.