SECURITIES AND EXCHANGE COMMISSION

                                  Washington, D.C. 20549

                          -----------------------------
 (Mark One)
[ X ]     ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934
-------
  For the fiscal year ended December 31, 1999

                                       OR

[ ] TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF  THE  SECURITIES
      EXCHANGE ACT OF
-----
For the transition period from            to
                               ---------

                         Commission file number 33-95298

                              GALAXY TELECOM, L.P.
             (Exact name of Registrant as specified in its charter)

               Delaware                                       43-1697125
  ---------------------------------                  --------------------------
(States of Other Jurisdictions of                           IRS Employer
 Incorporation or Organization)                          Identification No.)

              1220 North Main

            Sikeston, Missouri                                  63801
  ---------------------------------                  --------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:  (573) 472-8200
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to section 12(g) of the Act: None.

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

          Yes       X                               No
                  -----                                   -----

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

Aggregate market value of the voting equity securities held by non-affiliates of
Galaxy Telecom, L.P.: $0

Aggregate market value of the voting equity  securitiesheld by non-affiliates of
Galaxy Telecom Capital Corp.: $0

Number of shares of Galaxy  Telecom  Capital  Corp. outstanding  as of March 31,
2000: 100

DOCUMENTS INCORPORATED BY REFERENCE: Not applicable.


<PAGE>

                                 GALAXY TELECOM, L.P.
                                       FORM 10-K
                          Year Ended December 31, 1999

                                   TABLE OF CONTENTS

Item        Topic                                                       Page
                                                                  -------------
                                     PART I

 1.     Business............................................................ 3
 2.     Properties..........................................................29
 3.     Legal Proceedings...................................................29
 4.     Submission of Matters to a Vote of
        Security Holders....................................................29


                                     PART II

 5.     Market for the Registrant's Securities

        and Related Security Holder Matters.................................30
 6.     Selected Financial Data.............................................30
 7.     Management's Discussion and Analysis of
        Financial Condition and Results of Operations.......................31
7a.     Qualitative and Quantitative Disclosures about
        Market Risks........................................................41
 8.     Financial Statements and Supplementary Data........................F-1
 9.     Changes In and Disagreements with Accountants
        on Accounting and Financial Disclosure............................. 42

                                    PART III

10.     Directors and Executive Officers of the Registrant..................42
11.     Executive Compensation............................................. 43
12.     Security Ownership of Certain Beneficial
        Owners and Management...............................................44
13.     Certain Relationships and Related Transactions......................46

                                     PART IV

14. Exhibits, Financial Statement Schedules

        and Reports on Form 8-K.............................................50

Signatures..................................................................50





                                       2
<PAGE>

                                     PART I

      Item 1.     Business.

      General

      The  Company  owns,  operates  and  develops  clusters  of  classic  cable
television systems ("Systems"), primarily in rural and non-metropolitan areas in
the  Midwestern  and  Southeastern  United  States.  The Company seeks to be the
premier  provider  of cable and  broadband  services in its core  service  areas
(which  include  Southeastern  Nebraska,   Kansas,  Southern  Illinois,  Western
Kentucky and Northern and Central Mississippi) by: (i) developing, upgrading and
acquiring cable television  systems in these areas, and (ii) utilizing its fiber
optic network to provide  enhanced cable  television  services,  such as digital
cable and high-speed Internet access, and advanced  telecommunications and broad
band network services.

     The Partnership has incurred losses each year since its inception and has a
partnership  deficit of $31.9  million at December  31, 1999.  During 1999,  the
Partnership  continued  implementation  of a strategy  whereby it would sell its
cable  television  systems in its non-core  regions and focus on  improving  and
acquiring  cable  television  systems in its core  regions,  which are primarily
located in Illinois,  Kansas,  Kentucky,  Mississippi and Nebraska.  In 1999 and
1998,  the  Partnership  received  proceeds  from  sales of its  non-core  cable
television systems of $10.1 million and $36.8 million,  respectively,  which was
primarily used to pay down the amounts due under its revolving line of credit.

     At December 31, 1999, the  Partnership  was not in compliance  with certain
covenants  under its term loan  agreement.  As discussed in Note 7, on March 31,
2000 the  Partnership  amended  its term  loan  agreement  to  modify  financial
covenants and change the maturity date of all outstanding  borrowings  under the
term loan agreement.

Additionally,  as part of this amended term loan agreement, the Partnership must
have a definitive sale agreement in force by May 31, 2000 to sell  substantially
all  the  interests  of the  Partnership  sufficient  for the  repayment  of all
Partnership  loans  including the Senior  Subordinated  Notes.  This  definitive
agreement  shall not contain any such  contingencies  allowing the  purchaser to
terminate  such an agreement  arising from: (a) the failure of such purchaser to
obtain the financing  necessary for purchase,  (b) the failure of such purchaser
to obtain the  approvals  necessary  for such  purchase  or (c)  relating to the
completion of any due diligence  review by such purchaser  other than completion
of reasonable  due  diligence  customarily  to be completed in such  transaction
after signing such agreement.  Absent of such an agreement to sell substantially
all the assets of the Company  triggers  an event of default  under the terms of
the amended loan agreement.

      Management  is  actively  pursuing  the  sale  of  the  interests  of  the
Partnership  in  accordance  with the  amended  term  loan  agreement.  However,
entering into a definitive  agreement as described  above by May 31, 2000 is not
assured.

      In light of the Partnership's  current  projected  earnings and cash flow,
the  Partnership  believes it will have the financial  resources to maintain its
current  level of  operations  until  December 31, 2000,  the term loan maturity
date.  However,  cash generated from operations  alone will not be sufficient to
pay the term loan on December 31, 2000 without  proceeds from the sale of assets
or refinancing of the term loans.  Additionally,  such a sale as required by the
loan  agreement  would  represent  a change in  control as defined in the Senior
Subordinated Loan Agreement and would represent an event of redemption.

      Absence of the completion of the aforementioned  definitive agreement, and
the  Partnership's  inability  to meet its cash flow needs,  raises  substantial
doubt about its ability to continue as a going concern.

      Galaxy  believes  there  are  significant   advantages  to  acquiring  and
operating  classic  cable  television  systems.  Historically,  in classic cable
television markets,  cable television service is necessary in order to receive a
full    complement    of    over-the-air    television    stations    (including
network-affiliated  stations). In addition,  these markets generally offer fewer
competing entertainment alternatives than larger urban or suburban markets. As a
result,  classic cable television  systems usually have higher basic penetration
rates and lower churn rates than systems  serving  larger  markets.  As compared
with  urban  and  suburban  systems,   classic  systems  have  more  programming
flexibility  for a given  channel  capacity  because they are generally in areas
with fewer  over-the-air  broadcast stations that must be carried and have fewer
local programming  obligations.  In addition,  Galaxy believes that it and other
classic cable system  operators  have lower capital  costs per  subscriber  than
urban and suburban  operators do. Based on the generally lower cost of living in
its operating areas,  Galaxy also believes that classic systems have lower labor
and marketing costs than many urban and suburban systems.

                                       3
<PAGE>

      The three key individuals who manage Galaxy's  day-to-day  operations (the
"Senior Managers") have developed and refined the operating strategy utilized by
Galaxy to efficiently and economically  provide high quality customer service to
classic cable television  systems spread over a wide geographic  area.  Galaxy's
existing  infrastructure  includes  two  customer  service  centers that receive
customer calls through a toll-free  telephone  number.  At the service  centers,
customer service  representatives can address virtually any request or problem a
customer may have through an on-line  customer support computer system utilizing
advanced  software.  The central computer system is integrated with the Qualcomm
OmniTRACS(TM)  satellite-based  dispatch  system,  which has been  installed  in
virtually all of Galaxy's  service  vehicles.  The OmniTRACS system provides the
customer service  representatives  with direct,  real-time,  two-way interactive
communication  with  Galaxy's  field  technicians  and  generates  comprehensive
customer service information on a timely basis. The integration of the OmniTRACS
system with the  centralized  computer  system allows  Galaxy to control  costs,
better manage the customer  service function and provide its customers with high
quality service, generally within a 24-hour period.

      Galaxy believes that consistently high quality  performance from its local
field technicians is important in maintaining good community  relations.  Galaxy
has an ongoing  program of training its field  technicians not only in technical
areas but also in customer service and sales  functions.  Galaxy strives to have
its local field technicians represent Galaxy in each of their respective service
areas as well-trained, responsible and respected members of their communities.

      Galaxy  believes  its  real  opportunity  lies in the  development  of its
properties in Nebraska,  Kansas,  Illinois,  Kentucky and Mississippi (the "Core
Areas").  The Core Areas are considered  such due to Galaxy's  opportunity to be
the  dominant  operator in these  areas and the  ability to generate  additional
revenue through its fiber network (see  "Technology and  Engineering"  discussed
below).  The  properties  that are not in the Core  Areas are  currently  in the
process of being sold,  traded or re-evaluated for potential  conversion to Core
Areas.

      At December 31, 1999, the  Partnership  was not in compliance with certain
covenants  under its term loan  agreement.  As discussed in Note 7, on March 31,
2000 the  Partnership  amended  its term  loan  agreement  to  modify  financial
covenants and change the maturity date of all outstanding  borrowings  under the
term loan agreement.

      Background

      The Senior Managers,  Tommy L. Gleason, Jr., James M. Gleason and J. Keith
Davidson  have  been  involved  in  the  construction,  acquisition,  ownership,
management and operation of classic cable television  systems as a team for more
than 15 years. They have collective  experience in the cable television industry
exceeding  60 years.  From 1987  through  1994,  the  Senior  Managers  operated
approximately 100 classic cable television systems for Galaxy Cablevision,  L.P.
("Galaxy  Cablevision");  a master  limited  partnership  traded on the American
Stock  Exchange.  Prior  thereto,  between  1981 and 1987,  the Senior  Managers
constructed and operated cable television systems in Alabama, Illinois, Indiana,
Tennessee and Texas through a number of related entities.

      In response to changes in the federal tax laws  regarding  master  limited
partnerships,  Galaxy Cablevision commenced in 1994 the liquidation of its cable
television  holdings.  Thereafter,  the Senior Managers organized Galaxy Systems
Management,  Inc.  ("Galaxy  Management") to acquire  selected cable  television
properties.  Commencing in May 1994, Galaxy  Management  entered into definitive
agreements to acquire selected cable television systems from Galaxy Cablevision,
Vantage Cable Associates,  L.P. ("Vantage Cable"),  Vista Communications Limited
Partnership,  III ("Vista Communications") and Chartwell Cable of Colorado, Inc.
("Chartwell"),  (collectively the "Initial  Systems").  Each of these agreements
was assigned to, and assumed by, Galaxy prior to the consummation of each of the
transactions.  In  order  to  facilitate  Galaxy's  acquisition  of the  Initial
Systems,  funds managed by TA Associates,  Spectrum  Equity  Investors and Fleet
Equity Partners (the "Equity Investors") and the Senior Managers,  collectively,
invested  equity  capital  of  approximately   $30  million  in  Galaxy.   These
acquisitions represented 223 cable television systems.

                                       4
<PAGE>

      During 1995, Galaxy entered into definitive agreements to acquire selected
cable television systems representing approximately 300 cable systems and 81,700
subscribers  from Galaxy  Cablevision,  Phoenix Cable,  Douglas  Communications,
Friendship Cable and Vista  Communications,  for approximately $92.2 million, or
approximately $1,130 per subscriber.

      During 1996, Galaxy entered into definitive agreements to acquire selected
cable television  systems  representing  approximately  16,200  subscribers from
Cablevision of Texas, High Plains Cable,  Midcontinent  Cable, Five Rivers Cable
Company,  Hurst  Communications  and CS Cable Services,  Inc., for approximately
$15.8 million, or approximately $980 per subscriber.  During 1996, Galaxy traded
one system located in Kansas  representing  approximately  7,000 subscribers for
assets  comprising six cable  television  systems of  Tele-Communications,  Inc.
located in northern Mississippi  representing  approximately 10,400 subscribers.
Galaxy also  traded  assets  comprising  the  Ranburn  cable  system in Ranburn,
Alabama  serving  approximately  110  subscribers for a similar system in Mexia,
Alabama serving approximately 230 subscribers.

      During 1997, Galaxy entered into definitive agreements to acquire selected
cable television systems  representing  approximately 1,610 subscribers from TCI
Cable of the Midland.,  for approximately $1.7 million, or approximately  $1,056
per  subscriber.  During 1997,  Galaxy sold systems  located in South  Carolina,
Mississippi  and  Kansas   representing   approximately  3,080  subscribers  for
approximately $3.3 million, or approximately $1,070 per subscriber.

      1998 Acquisitions, Dispositions and Trades

      Galaxy acquired and disposed of various assets comprising cable television
systems during 1998. Following is a brief discussion of each transaction.

      On January 15, 1998,  Galaxy sold its cable television  systems located in
Wyoming and Idaho, representing 4,000 subscribers for $4.9 million or $1,225 per
subscriber. Galaxy used the proceeds from this sale to pay down principal of the
revolving note.

      On February 1, 1998,  Galaxy sold its cable  television  system located in
Hooper,  Nebraska,  representing 242 subscribers for approximately  $262,000, or
approximately $1,080 per subscriber.  Galaxy used the proceeds from this sale to
pay down principal of the revolving note.

      On March 31, 1998,  Galaxy sold two cable  television  systems  located in
Olathe,  Kansas,  and Independence,  Missouri,  representing 269 subscribers for
approximately  $190,000,  or approximately $706 per subscriber.  Galaxy used the
proceeds from this sale to pay down principal of the revolving note.

      On March 31, 1998, Galaxy sold six cable television systems located in and
around Ottawa County,  Kansas,  representing  752 subscribers for  approximately
$623,000, or approximately $830 per subscriber.

      On March 31, 1998, Galaxy purchased one cable television system located in
Brooks  and  Colquitt  Counties  in  Georgia,   representing  approximately  300
subscribers for approximately $141,000, or approximately $470 per subscriber.

      On March 31, 1998, Galaxy traded four cable television  systems located in
and around Sheridan County, Nebraska, representing approximately 850 subscribers
for  one  cable  television  system  located  in  Jefferson  County,   Colorado,
representing approximately 730 subscribers.

       On April 30, 1998, Galaxy sold seven cable television  systems located in
and around Lincoln County,  Kansas,  representing  approximately 500 subscribers
for approximately  $395,000,  or approximately $790 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

      On June 30,  1998,  Galaxy  sold one cable  television  system  located in
Goessel,  Kansas,  representing  approximately 100 subscribers for approximately
$110,000, or approximately $1,100 per subscriber.  Galaxy used the proceeds from
this sale to pay down principal of the revolving note.

      On June 30, 1998, Galaxy sold all of its cable television  systems located
in  central   Georgia,   representing   approximately   5,100   subscribers  for
approximately  $6,120,000,  or approximately $1,200 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

       On July 31, 1998, Galaxy two cable television  systems located in Kansas,
representing 201 subscribers for approximately  $171,000,  or approximately $850
per subscriber.

      On August 20, 1998,  Galaxy sold 25 cable television  systems,  13 systems
located in Iowa and 12 systems located in Missouri,  representing  approximately
3,972  subscribers  for  approximately  $3,178,000,  or  approximately  $800 per
subscriber. Galaxy used the proceeds from this sale to pay down principal of the
revolving note.

       On August 31, 1998, Galaxy sold nine cable television  systems located in
Southwest   Georgia,    representing   approximately   2,225   subscribers   for
approximately  $2,760,000,  or approximately $1,240 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

      On August 31, 1998,  Galaxy sold 23 cable television  systems,  14 systems
located in  Illinois  and nine in  Nebraska,  representing  approximately  3,210
subscribers for approximately  $2,758,000, or approximately $860 per subscriber.
Galaxy used the proceeds  from this sale to pay down  principal of the revolving
note.

      On November 30, 1998, Galaxy sold its cable television  systems located in
Louisiana,  representing  5,575  subscribers for  approximately  $9,500,000,  or
approximately $1,700 per subscriber.  Galaxy used the proceeds from this sale to
pay down principal of the revolving note.

      On December 31, 1998,  Galaxy sold one cable television  system located in
Hawkins County,  Tennessee,  representing  approximately  1,740  subscribers for
approximately  $2,050,000,  or approximately $1,177 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

      On December 31, 1998,  Galaxy sold 72 cable television  systems located in
Illinois,  Missouri and Kansas, representing approximately 8,300 subscribers for
approximately  $6,200,000,  or approximately  $750 per subscriber.  In addition,
Galaxy  realized a 40% equity position in Galaxy  American  Communications,  LLC
("GAC").  This equity has no current  market value at the present  time.  Galaxy
used the proceeds from this sale to pay down principal of the revolving note.

      1999 Acquisitions, Dispositions and Trades

      On February 12, 1999, Galaxy sold one satellite master antenna  television
system ("SMATV") located in Spring Creek,  Georgia,  representing  approximately
1,000  subscribers for  approximately  $1,220,000,  or approximately  $1,220 per
subscriber,  and recorded a gain on sale of approximately  $1.0 million.  Galaxy
used the proceeds from this sale to pay down principal of the revolving note.

            On  May  1,  1999,   Galaxy  traded  6  cable  television   systems,
representing approximately 7,500 subscribers for seven cable television systems,
representing approximately 7,100 subscribers from Mississippi Cablevision,  Inc.
("MCI"),  an affiliate of  Telecommunications,  Inc. The Galaxy cable television
systems are located primarily in Colorado,  Iowa and South Dakota, while the MCI
cable television systems are located in Mississippi. The trade was accounted for
as a business  combination in accordance  with the Accounting  Principles  Board
Opinion No. 16 "Business  Combinations."  The estimated fair market value of the
cable   television   systems   received  was   approximately   $9.4  million  or
approximately  $1,300  per  subscriber.  The  fair  market  value  of the  cable
television systems received was estimated by using the purchase price (price per
subscriber) for similar cable television systems bought from MCI by an affiliate
of Galaxy.  The net historical cost of the cable television systems given up was
approximately  $6.9  million,  resulting  in Galaxy  recording a gain on sale of
approximately $2.5 million, net of expenses.

      On  June  23,  1999,  Galaxy  sold 8  cable  television  systems,  located
primarily  in  Alabama,   representing   approximately   5,500  subscribers  for
approximately $8.4 million, or approximately $1,540 per subscriber, and recorded
a gain on sale of approximately $1.8 million. Galaxy used the proceeds from this
sale to pay down principal of the revolving note.

      On October 1, 1999, Galaxy sold seven satellite master antenna  television
systems("SMATV's")  and two cable systems  located  primarily in the Kansas City
area,  representing  approximately  1,165  subscribers for  approximately  $1.36
million, or approximately $1,161 per subscriber,  and recorded a gain on sale of
approximately  $244,000.  Galaxy  used the  proceeds  from this sale to pay down
principal of the revolving note.

      Pending Dispositions

      On March 31, 2000,  Galaxy sold one cable  television  system,  located in
Kansas,  representing  approximately  1,424 subscribers for  approximately  $3.5
million,  or approximately  $2,492 per subscriber.  Galaxy will use the proceeds
from this sale to pay down principal of the term loan.

      Cable Operations

      The Company has been focusing on increasing  its cash flow  generated from
classic  cable  markets  which  are in or  contiguous  to its Core  Systems.  By
clustering  Systems,  the Company believes that it realizes  economies of scale,
such as reduced payroll  expenses,  reduced local management and technical costs
per subscriber, reduced direct sales expenses, increased local advertising sales
and more efficient introduction and utilization of new technologies. The Company
will  continue  to  explore  acquiring  systems  in its core  service  areas and
divesting its Non-Core Systems.

      The  Company is in the midst of a  significant  capital  expenditure  plan
designed to upgrade and  interconnect its Core Systems by installing fiber optic
cable and associated electronic equipment.  Such installation allows the Company
to  significantly  increase the  transmission  capacity of the affected  systems
(thereby  providing  the Company  with the  opportunity  to add new  programming
services, such as Digital Cable), increase the quality of such transmissions and
achieve  operational  efficiencies,  including  the  reduction  of headends  and
related expenses.  The Company has realized  increased revenues and cash flow in
its  Core   Systems   where   the   Company   has   implemented   upgrades   and
interconnectivity.

 Cable Strategy.  The Company's cable strategy is to achieve superior  operating
performance  by  consolidating  its  operations  within  its  Core  Systems  and
utilizing and  expanding its fiber optic network  beyond its current 1,400 miles
to offer a  broader  array of  services  while  improving  service  quality  and
lowering operating costs. The Company's cable strategy consists of the following
elements:

 o Focus on  Expansion  of Core  Systems.  The Company  intends to continue  its
focused  acquisition and  consolidation  strategy  within its Core Systems.  The
Company recently acquired cable systems from TCI that are contiguous to the Core
Systems operations in Northern Mississippi.  The Company will continue to pursue
acquisitions  of  systems in close  proximity  to its Core  Systems  that can be
incorporated  into its current or planned fiber  network.  The Company  believes
that it will be able to further  enhance  subscriber  cash flows as it completes
acquisitions complementary to its Core Systems, further upgrades and expands its
fiber  network in its core service  areas,  and continues to divest its Non-Core
Systems.

 o  Implement  Operating  Efficiencies.  Upon  acquiring  a System,  the Company
implements extensive  management,  operational and technical changes designed to
improve operating efficiencies and increase operating cash flow. By centralizing
and  upgrading  customer  support  functions,  the  Company  expects  to  reduce
administrative  costs and better manage and train  employees,  while providing a
higher level of customer  service.  The Company  also seeks to reduce  technical
operating costs and capital  expenditures by consolidating  headend  facilities.
The  Company's  goal is to continue to reduce the number of headends in its Core
System to fewer than 100, while assuming the same number of total subscribers.

 o  Strategically  Upgrade  Systems.  The  Company is  currently  upgrading  and
interconnecting its system  capabilities by significantly  increasing the amount
of fiber optic cable in its Core Systems. In addition to the resulting reduction
in  the  number  of  headends  required  and  increased  channel  capacity,  the
installation  of fiber optic  cable will allow the  Company to provide  enhanced
services,  including  Digital  Cable and  high-speed  Internet  access via cable
modems. Digital Cable, which the Company is currently testing in one of its Core
Systems, includes near video-on-demand, multi-channel pay-per-view, inter-active
navigator  and  multiplex   premium  services  by  employing  video  compression
technology.  This  technology  allows  the  Company  to offer  up to 12  digital
channels in the same  frequency  spectrum  required to transmit a single  analog
channel.  Cable modems permit  high-speed  Internet access and enhanced web site
services.  The Company has 44 cable modem customers as of December 31, 1999. The
fiber  enhancement of the Company's Core Systems will also allow it to aggregate
larger numbers of subscribers on each headend.  The Company believes this allows
it to increase  advertising margins because the ad insertion equipment which the
Company installs in each headend will reach more subscribers.

 o Enhance  Customer  Value.  The Company  strives to assure product quality and
reliable  service.  The  Company's  regional call centers  incorporate  advanced
computer  technology  and  communications  equipment  which allow the Company to
effectively  manage its  Systems.  The Company  believes  that by  investing  in
ongoing,  recurring  training and incentive plans for both its customer  service
staff and technical  personnel it is able to maintain a high level of commitment
to service among these important customer contact employees.

Telecommunications Services Operations

      As the Company began to deploy fiber optic cable in Nebraska and Kansas to
interconnect  its  Systems,   it  was  approached  by  a  group  of  educational
institutions  and state  agencies  about  utilizing this network to provide them
with advanced  telecommunications  services.  Upon further  review of demand for
these services in Nebraska and Kansas, the Company realized that the offering of
video conferencing for distance learning,  wide area network  connections and an
intrastate virtual private telephone network (which includes  four-digit dialing
and Internet  access) (the "Telecom  Services")  represented  an attractive  new
business  opportunity  for the Company  with the  potential  for high  operating
margins. In July 1997, and September,  1997, the Company began to provide one or
more of these  services to schools in Nebraska and Kansas,  respectively.  As of
December  31, 1999,  the Company  served 70 schools in Nebraska and 6 schools in
Kansas.

      Markets Served.  The Company has developed  detailed  business and network
architecture  plans for each of  Nebraska  and  Kansas in order to  successfully
market to the  educational  institutions  and state agencies in these states and
take advantage of the sizeable  demand for such Telecom  Services.  The Nebraska
plans call for these services to be delivered over the Company's  Nebraska fiber
optic network (the "Nebraska  Network"),  which was originally designed to serve
its cable television systems. As a result, the Telecom Services can be delivered
at little  additional  incremental cost to the Company.  The Company has already
constructed  900 miles of fiber optic  cable in  Nebraska  and 36 miles of fiber
optic cable in Kansas.

      Although  the  Nebraska  market  represents a  potentially  large  revenue
opportunity  for the  Company,  the size of the  Kansas  market  opportunity  is
significantly  greater.  Kansas has  approximately  2,350  schools and 109 state
agencies, and the Company currently intends on offering Telecom Services to many
of these schools and agencies  which are inside  service  territories  currently
served by the Company's  Kansas Systems.  Other of these  educational  sites and
state agencies,  however, are in areas outside of the service territories served
by the  Company's  Kansas  Systems.  As a result,  Galaxy  intends to expand its
Kansas fiber optic network (the "Kansas Network") beyond the areas served by its
Kansas Systems. This expansion will only occur in areas where either a school or
state agency has entered into an exclusive  long-term  contract with the Company
to provide Telecom  Services.  The actual miles of fiber optic cable laid in the
Kansas  Network will be dependent on the number schools and state agencies which
enter into contracts with the Company.

      Telecommunications  Strategy.  The Company's  telecommunications  services
strategy is to significantly enhance profitability by leveraging its fiber optic
network and existing  infrastructure  to broaden its  customer  base through the
provision of telecommunications and broadband services.

      o Expand Telecommunications  Offerings. The Company has designed its fiber
optic  network  with  significant  excess  capacity  to  support a wide array of
telecommunications  services and to be compatible with technologies  still under
development in the industry, including server-based applications such as virtual
LANs, e-commerce, and voice over the Internet. The Company's fiber optic network
can  provide up to 150  megabit  WAN  connections,  private  intranet  services,
high-speed  Internet  access  and  intrastate  virtual  private  networks  using
four-digit dialing for multi-site  customers.  The Company can resell its excess
capacity to  competitive  local  exchange  carriers  ("CLECs") and long distance
companies  operating in its service  areas.  As the fiber optic network is built
out,  the  Company  expects to expand its  customer  base  initially  to include
additional  schools,  and  eventually  governmental  entities,  businesses,  and
strategic  partners  all  of  which  can  be  added  to the  network  at  little
incremental cost.

      o Concentrate  Operations  Geographically.  The Company intends to provide
the  Telecom  Services  in  Nebraska  and  Kansas  where  it  believes  it has a
competitive  advantage to be the low cost,  superior  customer service provider.
The  Company can build out its fiber optic  network at lower  incremental  costs
than  competitors  in these  states  because  of the  Company's  existing  cable
infrastructure,   lower  labor  costs  than  in  urban   markets  and  favorable
topography.  In addition, the fact that the Company will be first-to-market with
Telecom Services in these states,  the sparse population of areas served and the
lack of existing  infrastructure in both states create significant time and cost
barriers to entry for potential competitors.

      o Provide  Customized  Services.  The Company tailors  service  offerings,
sales and  marketing  techniques  and network  deployment  to meet the different
needs of its customers.  By working closely with customers,  the Company designs
and  engineers the services for each  customer to meet the  particular  needs of
that  customer.  The Company has found that many of its  competitors  only offer
communication  connections  to  customers,  and that those  customers  must then
determine  how to  effectively  use the  communication  capability.  The Company
offers  turn-key  solutions  by  providing  scaleable  technology  and  training
together with fiber optic  connections,  thereby permitting the customer to more
effectively use its fiber optic connection.  The Company believes its ability to
tailor services provides a distinct advantage over its potential competition for
contracts.

      o  Pursue  Demand-Driven  Network  Deployment.   The  Company  utilizes  a
demand-driven  approach  to  network  construction  by  marketing  and  securing
long-term  contracts for its services before committing capital  expenditures to
develop  or expand  its  fiber  plant.  The  Company  seeks to secure  5-10 year
contracts  which  provide  for the Company to be the  exclusive  provider to its
customers  of  the  services   rendered  for  the  duration  of  the   contract.
Furthermore,  pursuant to the terms of certain customer  contracts,  the Company
receives  up-front  reimbursement  for a  portion  of the  capital  expenditures
required  to  purchase  the  necessary  equipment  and add the  customer  to its
network.

      o Develop Strategic Relationships.  The Company continues to seek to enter
into mutually beneficial strategic relationships with telecommunications service
providers and other entities  operating in the same regions as its Core Systems.
The  Company  has  an  agreement  with  Broadband  Networks,   Inc.  ("BNI"),  a
telecommunications  system  designer  and  integrator,  pursuant  to  which  BNI
provides  system  design,  grant  process and marketing  support,  and equipment
procurement and  installation to Telecom Service  customers of the Company.  The
Company has developed a strategic  relationship with Cable USA, a communications
provider  serving  areas in Nebraska not  currently  served by the  Company,  to
interconnect  their  respective  fiber optic  networks to offer their  broadband
services over a larger network.  The Company is also in discussions with certain
CLEC  providers  pursuant to which the Company will provide the CLEC with access
to its fiber network.  This will give the CLEC a broader reach into the tertiary
and more rural markets See "Risk  Factors-Reliance Upon Certain Key Vendors" and
"Company-Telecommunications Services Operations; Strategic Relationships.".

      The Company  feels that their  fiber  network in both  markets  will be an
affordable means to CLECs for the transportation of both local and long distance
traffic back to their switch locations. One such CLEC is Birch Telecom, a Kansas
City based  operator,  whom the Company is working to develop an agreement which
will give Birch a broader  reach into the tertiary and more rural  markets.  The
Company has  developed a  strategic  relationship  with Cable USA in Nebraska to
interconnect  their  respective  fiber optic  networks to offer their  broadband
services over a larger  network.  Cable USA is a cable  television  provider,  a
certified  competitive  access  provider,  a long distance  carrier,  a cellular
provider  and has also filed with the Nebraska  Public  Service  Commission  for
authorization to conduct CLEC services in the State.

Marketing, Rates and Collections

      The Company aggressively markets and promotes its cable television systems
with the objective of increasing penetration and average revenue per subscriber.
The Company  actively  markets the basic and premium  programming of the Systems
primarily through door-to-door selling efforts, telemarketing,  and, to a lesser
degree,  through  media  advertising  and  direct  mail.  Each of the  Company's
customer  service  centers  has a  Marketing  Director  who  coordinates  direct
door-to-door  campaigns  throughout the  geographic  areas of the Systems and is
responsible  for  internal  incentives  for the customer  service and  technical
staffs.  The Marketing  Director also insures that the Company is providing high
quality   sales  and  service  by   supervising   and   training   direct  sales
representatives  and assessing  picture and service quality within the Company's
Systems.  Customer service  representatives  follow up by telephone contact with
the customer on three separate occasions, generally 10, 30 and 60 days following
a new  installation,  to assess the  quality of the  installation,  the  overall
service the customer is receiving and to assure customer satisfaction.

      The  Company's  current  monthly  rates for full basic  service range from
$15.00 to  $31.20,  and rates for  premium  services  from  $6.95 to $13.40  per
service. The Company's goal has been to standardize its programming,  rates, and
premium security over all of the Systems. During the past two years emphasis has
been  placed  on  adding  core  programming  to  standardize  channel  line-ups,
obtaining  discounted  programming rates for channel placement,  and negotiating
programming  contracts  that  offer  attractive  rates and launch  support.  The
Company has  restructured  its  packaging  strategy  offering  multiple  premium
services to range from $7.95 to $28.95.  For example, a customer can receive the
Starz/Encore  package  for as low as $7.95  or the  Showtime/The  Movie  Channel
Package  for  $10.95.  This has allowed the  customer  several  premium  package
choices, while uncomplicating the sales and training process. Standardization of
the Company's channel lineups,  programs,  and pricing has simplified  training,
improved system performance, and reduced cost.

      The Company uses Convergys'  Cablemaster 2000 for its billing system. This
is a system developed specifically for the cable television industry.  Convergys
operates  the billing  system at its service  center in  Florida,  and  produces
statements for customers on a monthly basis.  Billing statements are printed and
mailed directly to customers,  who have 15 days from their cycle billing date to
remit payment to the Company's  central payment  processing  center in Sikeston,
Missouri.  If after 15 days a customer  has not made a payment,  the customer is
charged a late payment fee. The Company  aggressively pursues collection of past
due amounts by telephoning  the customer at  approximately  35 days past the due
date. If these measures fail, the customer is notified and then disconnected.  A
final statement is sent to the customer within a week after disconnection and 30
days thereafter the customer's  account is referred to a collection  agency. The
Company has contact with the Convergys  center via phone and computer  interface
and has immediate  access to all of its billing and customer  information  as if
the process were done in-house.

      In addition to monthly and installation fees, additional potential sources
of revenue for cable  operators are the sale of local spot  advertising  time on
locally originated and satellite-delivered programming. The Company is realizing
significant growth in local advertising as it consolidates headends. The Company
believes  that  significant  growth can be  sustained  as the average  number of
subscribers  per  headend  increases  with  consolidation.  Cable  systems  also
generate  revenue  through  sales of  products  offered  through  home  shopping
channels since the local cable system receives a commission each time one of its
subscribers makes a purchase. The Company has increased its carriage of both QVC
and Home Shopping  Network and has received launch support from each programmer.
Consequently  the Company has  increased its revenue from home shopping 33% from
1997 to 1999. Other potential sources of revenue include pay-per-view movies and
events (such as concerts,  sporting events, and other  entertainment  features).
The Company currently does not generate  significant revenues from pay-per-view.
However,  the Company  believes  that,  through its planned  roll out of Digital
Cable service,  pay-per-view revenues will show significant growth over the next
few years.

Programming

      The Company  typically  carries a wide array of  programming  on its basic
service. To enhance value for its customers,  the Company selectively modernizes
and  upgrades its cable plant to increase  the number of channel  offerings  and
improve the quality of signal delivered to its customers.  The Company regularly
evaluates  the  programming  offered  to its  customers  and  has  significantly
increased the number of basic channels  offered in its systems over the past two
years. The Company has launched an aggregate of approximately  3,000 channels of
programming  over that time period.  The Company was also one of the first cable
operators to commit to provide The Disney  Channel as part of its basic service,
and now carries the Disney channel only as a basic service. The Company also has
an ongoing program of repackaging its premium channels to improve customer value
and satisfaction.

      The  Company  has  various   arrangements  to  obtain  basic  and  premium
programming  from program  suppliers whose  compensation is typically based on a
fixed fee per  subscriber.  The Company has negotiated  programming  arrangement
with premium  service  suppliers that offer cost incentives to the Company under
which premium  service unit prices  decline as certain  premium  service  growth
thresholds  are met. In  addition  to volume  pricing  discounts,  some  program
suppliers  offer  marketing  support to the  Company in the form of  advertising
funds,  promotional  materials,  rebates  and other  incentives.  The  Company's
programming  arrangements  generally  are for a fixed period of time,  typically
three  to  five  years,  and  are  subject  to  negotiated  renewal,  and may be
terminated in certain instances.

      The Company is also a member of the National Cable Television  Cooperative
(the "NCTC"),  a purchasing  cooperative  that  negotiates  volume  discounts on
behalf of its members for both  programming  and  hardware,  and benefits in the
aggregate nearly 10 million cable subscribers.

      The Company has various  retransmission  consents with several  commercial
broadcast  stations.  None of these consents  require direct payment of fees for
carriage;  however,  in some cases the Company has entered into  agreements with
certain  stations  to  carry  satellite-delivered  cable  programming  which  is
affiliated with the network  carried by such stations.  In one case, the Company
agreed to spend small amounts on advertising with the station on an annual basis
over the three-year term of the agreement.  These agreements are in effect until
December 31, 2002. There can be no assurance that such agreements can or will be
renewed under similar terms. See "-Legislation and Regulation."

      The Company's cable  programming  costs have increased in recent years and
are  expected  to  continue  to increase  due to  additional  programming  being
provided to customers,  increased costs to produce or purchase cable programming
and other factors. The Company believes it will continue to have access to cable
programming  services  at  reasonable  price  levels,  although  there can be no
assurances with respect thereto.  The Company believes that a significant amount
of new cable television  programming is becoming  available and that the Company
will be able to identify and take advantage of available  incentives  associated
with channel  position and  additional  channels to  accommodate  such expanding
programming.  The Company  expects it will be able to recover  programming  cost
increases through rate increases.

Service, Installation and Repair

      As competition has increased in the cable television industry, the Company
has developed an infrastructure  that attempts to maximize the value of services
provided to its  customers  by assuring  the  customer of a quality  product and
reliable on time service. The Company has equipped its regional customer service
call centers with advanced computer technology and communications equipment that
allow the Company to efficiently  manage  geographically  diverse  classic cable
television  systems.  This  centralizing  of the customer  service  function has
allowed the Company to create an infrastructure  that provides the customer with
superior  service  through a  smaller  number of high  quality,  well  motivated
employees than through a series of small disjointed offices. The Company invests
significant  resources  in ongoing  training  and  incentive  plans for both its
customer service staff and field technical personnel to maintain a high level of
enthusiasm among these customer contact employees.

      The Company has  developed an  integrated  computer  network with advanced
software systems to facilitate  effective  interaction with the customer,  while
providing  for ease of management  oversight.  The  Company's  computer  network
integrates  PC network  functions,  such as management  reporting,  internal and
external  e-mail and Internet  access,  with its mainframe  billing  provided by
Convergys (formerly Cincinnati Bell Information Systems) all interfaced with the
OmniTRACS  satellite based dispatch system. Not only does this integration allow
a customer service  representative in the call center to schedule service with a
customer  at the time of the call,  but  allows  real time  dispatch  and follow
through  from  the  field  technical  personnel.  All of the  Company's  service
vehicles  are  equipped  with a  Qualcomm  OmniTRACS  unit  which  receives  via
satellite and stores the individual service technician's work orders and service
orders. Based on the work load of the individual technician the customer service
representative  can  schedule  any  new  work  from a  customer  because  as the
technician finishes each job that individual  completes the order in the central
billing  computer  immediately  through  the  OmniTRACS  unit  in  the  vehicle.
Therefore,  at any time the  actual  work load and  schedule  of any  individual
technician is available.  This real time two way  communication  also allows any
manager  with  access to a PC to dial in from  remote  locations  to access  the
system to monitor these functions from anywhere.  Management can monitor each of
the field technician's  current work load, work history,  status of all assigned
work and even the exact location of the individual  vehicle as well as a history
of the vehicle's  travels.  This  information  allows  management to efficiently
assign  work by area or job type,  and then  monitor  its  progress in real time
without the costs and delays involved in fax machines, cell phones, and pagers.

Technology and Engineering

      All of the plant in the Systems  has a channel  capacity of 36 channels or
more. Although many of the Systems presently have the capability to increase the
number of channels  offered to subscribers  without having to increase  existing
bandwidth,  the Company has an ongoing plan to increase all of its Systems to at
least 550 MgHz,  which will allow up to 80  channels,  by  December,  2001.  The
following  table sets  forth  certain  information  with  regard to the  channel
capacities of the Systems as of December 31, 1999.

                                      Up to 29    30 to 53  54 or more
                                      Channels    Channels   Channels    Total

                                      ---------   ---------  ---------   ------
Systems:
   Number of systems                      6          223        26         255
   Percent of total systems             2.3%        87.5%      10.2%      100%
   Miles of plant                        56         4,821       995       5,872
   Percent of total plant miles         1.0%        82.1%      16.9%      100%

      The Company is currently offering Digital Cable in six systems to test its
marketing and roll-out strategies. This technology is allowing up to 12 channels
to be carried in the space of one analog  channel.  These digital  signals allow
cable  television  systems to carry more and varied  programming  with  improved
quality  and  reliability  for both video and  audio.  This new  service  allows
systems to carry  multichannel  pay-per-view  and multiplexed  premium  services
which is  significantly  increases  the amount of  programming  available to the
customer.  The Company  intends to continue to add Digital  Cable service to its
Core  Systems  over the next two  years  now that the  technology  is  generally
available.

Franchises

 Cable  television   systems   generally  are  constructed  and  operated  under
non-exclusive  franchises  granted  by  local  governmental  authorities.  These
franchises  typically  contain  many  conditions,  such as time  limitations  on
commencement  and completion of construction;  conditions of service,  including
number of  channels,  types of  programming  and  provision  of free  service to
schools and certain other public institutions;  and maintenance of insurance and
indemnity  bonds.  The  provisions  of local  franchises  are subject to federal
regulation  under the Cable  Communications  Policy Act of 1984 (the "1984 Cable
Act"),  the 1992  Cable  Act and the 1996  Telecom  Act.  See  "Legislation  and
Regulation."

      The table below  illustrates the grouping of the franchises of the Systems
by date of expiration.

               Year of                                     Percentages
               Franchise               Number of             of Total
               Expiration              Franchises          Franchises
               -----------             -----------        ------------
               2000-2001                   57                 11.1%
               2002-2004                   136                26.4%
               After 2004                  322                62.5%
                                        --------             -------
                  Total                    515               100.0%
                                         =======             ======

      The 1984 Cable Act provides for among other things,  an orderly  franchise
renewal process in which franchise renewal may not be unreasonably  withheld or,
if renewal is withheld,  the franchise authority must pay the operator the "fair
market value" for the system covered by such  franchise.  In addition,  the 1984
Cable Act  establishes  comprehensive  renewal  procedures  that require that an
incumbent  franchisee's renewal application be assessed on its own merit and not
as part of a comparative process with competing applications.

 The Company believes that it generally  maintains a good  relationship with the
franchising  communities it serves. The Company maintains internal procedures to
ensure  effective  communications  with the franchising  authorities by use of a
newsletter and individual  contact from both the call center responsible for the
individual system and the Company's field management.  Moreover,  as the Company
has worked  closely in some areas with the local  schools,  close  relationships
with the local area and state politicians have become more commonplace.

 The Company  also  believes  that  maintaining  high  quality and well  trained
technical field personnel is important to good community relations.  Because the
local technician may be the only Company  representative an individual  customer
may ever meet, the  effectiveness of that  interaction is important.  To improve
that  effectiveness,  the Company has an ongoing  training program for its field
personnel  not only in the  technical  area,  but in customer  service and sales
functions. The Company strives to have its local field technicians represent the
Company in each of their respective  service areas as well trained,  experienced
and responsible members of the community.

Competition

      Cable  television  competes  for  customers  in local  markets  with other
providers of  entertainment,  news and  information.  The  competitors  in these
markets include broadcast television and radio, newspapers,  magazines and other
printed  sources of  information  and  entertainment,  as well as satellite  and
wireless video  distribution  systems and directly  competitive cable television
operations.   Federal  law  prohibits  cities  from  granting   exclusive  cable
franchises  and from  unreasonably  refusing  to grant  additional,  competitive
franchises.  In  addition,  an  increasing  number of cities are  exploring  the
feasibility   of  owning  their  own  cable  systems  in  a  manner  similar  to
city-provided  utility  services.   The  1996  Telecom  Act  may  initiate  more
competition  with cable service,  because it allows local  exchange  carriers to
provide video services in their local service areas, in direct  competition with
local cable companies (with certain regulatory safeguards).

      The Company  believes  that of the  competitive  threats to the  Company's
cable television business, four are the most substantial. (1) DBS, (2) MMDS, (3)
overbuilds by municipalities or telephone companies, and (4) SMATV systems.

 There are two major DBS providers  which  currently  serve  approximately  11.8
million  subscribers  nationally as of December 31, 1999.  The Company  believes
that these providers are continuing to grow their  subscriber  base.  Because of
the quality of the digitally  compressed  signal from these  providers and their
ability  to  provide  a wide  range of video and  audio  offerings,  they are an
effective  competitor of cable television systems. The Company believes however,
that it can  effectively  compete with DBS because of its ability to offer local
and  regional  broadcast  stations  on it  systems,  many of which  are not well
received with a home antenna,  and the "whole house" nature of cable service vs.
DBS. The Company also  believes that with its intended roll out of digital cable
service over the next two years, many of the competitive advantages DBS may have
today in  offering  digital  picture  and audio for  multichannel  pay-per-view,
multiplexed premiums, digital audio service, and narrow-cast basic services will
be negated.  However,  DBS service currently has some unique programming rights,
and is not subject to a variety of regulatory burdens imposed on franchise cable
operators (e.g.  franchise fees).  Although the effect of competition from these
DBS services cannot be specifically predicted, there has been significant growth
in DBS customers  nationwide and the Company  expects that such  competition may
continue.

 Wireless cable  television  systems have been  competing with cable  television
systems somewhat  ineffectively in urban markets,  but more effectively in rural
markets where cable systems  frequently  carry fewer  programming  choices.  The
Company  operates  in several  areas where it competes  directly  with  wireless
operators.  The  Company  believes  that its  operations  have  not been  widely
effected by this competition, primarily because the MMDS signal used by wireless
cable  operates in a  "line-of-sight  nature" and because of the number of large
trees within the  communities  it serves  which  obscure the  line-of-sight  and
impede the MMDS signal.  Some wireless operators have announced plans to provide
a  digital  video  service  in the near  future.  Although  the  Company  has no
knowledge of the digital plans of wireless operators with which it competes, the
Company  does not  believe  that this  additional  service,  if  offered by such
operators, will materially affect its ability to compete with such operators.

      Since  the  passage  of  the  Telecom  Act  of  1996,  and  the  announced
deregulation of the electric utility  business,  several local exchange carriers
(LECs) and local  municipal  owned power  companies  have built video systems to
directly compete with existing cable television  systems.  This process is known
as  "overbuilding."  The Company has experienced two instances of LEC overbuilds
in two small systems,  one in Alabama and one in Kansas, and has been threatened
with an overbuild by one  municipally  owned power company in  Mississippi.  The
Company  believes  that  this is an  increasingly  more  likely  threat to cable
systems in general,  and has the  potential  to have more  impact in  individual
markets than the other forms of competition because the new operator is offering
a competing  service,  it is  identical  to the  incumbent  system with the same
competitive  advantages.  The Company believes that in areas where it is able to
complete its plan of fiber  interconnect and offer a very high level of service,
it is less likely to face this type of competition  because of its  relationship
with  its  franchise  authorities  and  customers.  Typically,  these  overbuild
situations  occur in systems  where either the incumbent  cable  operator is not
offering a competitive service, or the relationship between the operator and the
franchise  authority  is strained in some way.  The Telecom Act of 1996  permits
telephone  companies to provide  competitive video  programming  through several
means, subject to certain limitations,  and has relaxed statutory and regulatory
restrictions   on  the  ability  of  LECs,   including  the  RBOCs,   and  their
subsidiaries, to compete with operators of cable television systems.

      Cable television operators also compete with SMATV systems.  These systems
are  essentially  small,  closed cable  systems which  operate  within  specific
hotels, apartment or condominium complexes and individual residences. Due to the
widespread  availability  of earth  stations,  such SMATV systems can offer both
improved  reception  of  local  television  stations  and  many  offer  the same
satellite-delivered  program  services  which are  offered by  franchised  cable
operators.  SMATV  systems  currently  benefit  from  operating  advantages  not
available to franchised  cable  television  systems,  including fewer regulatory
burdens  (such as, in many  cases,  no rate  regulation).  The 1996  Telecom Act
broadens an exemption  from  regulation  as a "cable  system",  which may exempt
additional SMATV systems from regulation.

      The Telecom Act of 1996 also  established a new framework for the delivery
of video programming -- the open video system ("OVS").  Under these rules, a LEC
or other entrant may provide  in-region  distribution  of video  programming  to
subscribers,  with certain regulatory conditions.  The FCC has certified several
companies to provide OVS in various parts of the United States.

Telecommunications Services Operations

      The Company has realized that the offering of Telecom Services represented
an attractive  new business  opportunity  for the Company with the potential for
high operating margins.

      Markets Served.  The Company has developed  detailed  business and network
architecture  plans for each of  Nebraska  and  Kansas in order to  successfully
market to the  educational  institutions  and state agencies in these states and
take advantage of the sizeable  demand for such Telecom  Services.  The Nebraska
plans  call for these  services  to be  delivered  over the  Company's  Nebraska
Network, which was originally designed to serve its cable television systems. As
a result, the Telecom Services can be delivered at little additional incremental
cost to the Company.

      Although  the  Nebraska  market  represents a  potentially  large  revenue
opportunity  for the  Company,  the size of the  Kansas  market  opportunity  is
significantly  greater.  Kansas has  approximately  2,350  schools and 109 state
agencies  representing 250 sites, and the Company  currently intends on offering
Telecom  Services to many of these schools and agencies which are inside service
territories  currently  served by the Company's  Kansas Systems.  Other of these
educational  sites and state  agencies,  however,  are in areas  outside  of the
service territories served by the Company's Kansas Systems. As a result,  Galaxy
intends  to expand  its Kansas  Network  beyond  the areas  served by its Kansas
Systems.  This expansion will only occur in areas where either a school or state
agency has entered  into an  exclusive  long-term  contract  with the Company to
provide  Telecom  Services.  The actual  miles of fiber  optic cable laid in the
Kansas  Network will be dependent on the number schools and state agencies which
enter into contracts with the Company.

      Services Offered.  Telecom Services offered by the Company include:

 o Full Motion Video  Conferencing.  The GRADES  service  platform  offers fully
interactive video  conferencing.  Students  participate in classroom learning in
multiple sites remote from the teaching resource. All user sites can participate
interactively  in  lectures,   meetings,  seminars,  private  consultations  and
demonstrations.  The conference is broadcast real time and  interactive  without
the  choppy  stop-motion  video  common  to  conferences  that  are  held  using
fractional  video  compression  techniques over twisted pair copper systems.  In
providing full motion video  conferencing,  GRADES utilizes  proprietary  EDCOMM
software developed by Broadband  Networks  Incorporated  ("BNI").  This software
permits users to automatically  schedule conferences in advance and the software
then connects the  conference  sites.  Non-scheduled  conferences  can be easily
arranged on-demand with the simple use of remote control. The system allows each
user to  originate  up to four video  sources and receive up to eighty  sources.
This provides the ability for many simultaneous videoconferences at one time and
permits charts and exhibits to be viewed in addition to the lecturer. The GRADES
services can deliver a video conference to a conference classroom or directly to
the desktop of an individual student or administrator.  This service has allowed
schools to share teaching  resources and significantly  upgrade their curriculum
in subjects such as higher level math, science, and language.  With the addition
of colleges and  universities  to the network,  high school students can receive
college level course work and credit, further enhancing the benefits to the user
schools.  Teachers can also continue their education  through  participating  in
graduate  level course work at remote  locations.  In-service  training over the
network allows  teachers and  administrators  to remain at their schools and not
travel to a training  location,  increasing  their  available time for teaching.
Through an ATM Gateway in the network  hierarchy,  schools can take  students on
interactive  field trips to the Library of Congress,  The  Smithsonian  Museums,
NASA,  or any  other  location  in the  world.  The  ATM  Gateway  insures  that
inter-connectivity  and  interoperability  exist  between  all other  conference
sources. The Company plans on offering this tool to schools, hospitals,  nursing
homes, medical centers, state agencies and other multiple user sites where there
is a community of interest.

 o WAN Connections. This service connects each site's local area network ("LAN")
over a  fiber-based  WAN  backbone  and  provides  for a  distributed  link  for
communications  between all sites connected to the network.  The WAN network has
been configured in full compliance with the appropriate  IEEE Standards for LANs
for  physical  and data link as defined by the  International  organization  for
Standardization  of Open  Systems.  The WAN is scaleable  from 100 megabits to 1
gigabit of capacity  based on the needs of the end user.  For  example,  schools
will use the WAN  connections to connect  themselves to the State  Department of
Education for the purpose of having a dedicated full-time data connection to any
network database. This type of dedicated connection provides a means of fast and
immediate  file  transfers  maintaining  accurate and up to date  databases  for
record,  statistical  information  and general files that are  accessible to any
user at any time. Other customers,  such as banks and professional  offices with
multiple  locations,  can use a WAN connection  for file  transfer,  accessing a
central  library and other data  transfers at speeds not generally  available at
competitive  costs  over  existing  networks.  With WAN  connections  in  place,
customers  will not only have  their own  private  intranet  for e-mail and file
sharing for  communications  between  locations in the same community,  but will
also have the same ability to share digitized documentaries, training videos and
other  specialty  videos across the network and between all sites.  This type of
service  is in demand by  schools as it allows  dedicated  high-speed  access to
valuable shared resources.  The Company plans on offering this service to health
care facilities for access to pharmacy and patient records,  government agencies
for high-speed access to databases such as motor vehicle records,  and banks and
multi-site  businesses  for file  transfer,  central  database  access and other
high-speed data transfers.

 o High Speed Internet Connections. Customers connected to the fiber access will
be able to subscribe to high-speed Internet access.  Customers that subscribe to
this service will be able to customize  their bandwidth needs based on a minimum
connection speed per computer  connected to the Internet.  The Company's network
is  designed  to be  dynamic,  flexible  and  scaleable  and  will  support  the
customers'  need for  additional  bandwidth  as the number of  computers at each
location increase.  The Company plans to offer, through  subcontractors,  e-mail
services, web hosting and development,  and back room technical support. Through
the fiber network,  multiple  location  customers can aggregate  their bandwidth
needs and can share in the expense of one large bandwidth  connection out to the
Internet  through one access point on the network.  The Company is  aggressively
pursuing this type of commercial Internet connection.  The Company believes they
can provide high-speed  Internet  connections at affordable rates as compared to
the  competition by leveraging its fiber network.  The Company's  strategy is to
take full advantage of its Internet service by not only providing commercial and
residential  cable modem and dial-up  Internet  service to its cable  television
customers,  but to make high speed Internet connections  available through other
cable operators or dial-up Internet service  providers  ("ISP's").  This is done
easily  through an established  fiber  connection in each  particular  town. The
fiber  network  will  give the  cable  operator  or ISP in a  connected  town an
opportunity  of providing  Internet  services with the back room support  entity
already in place, at a fraction of the cost.

      The Company has selected  the ISP Channel to aid in the  provision of high
speed Internet access in certain markets to residential and business  customers.
The ISP Channel is a turn key high speed Internet access service provider and is
furnishing the necessary headend and related transmission equipment,  connection
to the Internet, marketing and sales material and customer installation of cable
modems.  The Company has chosen the ISP Channel  because of their  expertise  in
marketing,  end user  support and their  ability to be a  technical  resource in
providing  such  services.  The Company is  supplying  sufficient  cable  system
bandwidth,  which will allow the ISP Channel to provide such services. In return
the ISP Channel will share revenues derived from the end users Internet use.

 o  Four-Digit  Dialing  Connections.   Multiple  location  customers  that  are
connected to the Company's fiber network will be able to subscribe to four digit
dialing  which  permits them to dial four digits and connect  themselves to each
other at  non-metered/flat  rates.  This eliminates  usage-based short haul toll
charges sites now incurred when calling other sites outside the local  telephone
exchange.  The Company  believes  that because the majority of a school's  short
haul toll calls are to other schools, the demand for this  non-metered/flat rate
connection  over a private line network will be  significant.  This service will
permit schools to save money by only using the local exchange carriers for calls
that go off the network. In addition,  by aggregating all user sites at one PBX,
schools will then be able to negotiate  volume discounts for long distance calls
with inter-exchange carriers.

      The GRADES  solution,  when fully  implemented,  will allow the Company to
offer  a  full  complement  of  telephone  services  to  businesses,  hospitals,
governmental  offices and  individual  homes.  The fiber  network the Company is
constructing  has been  designed  with the  capacity to provide high speed data,
voice and video  services to many users.  The future  Internet  customers on the
network will not only have a high speed Internet  connection for research or web
browsing,  but will be able to subscribe to an Internet  Protocol (IP) Telephone
service.  IP Telephone is the technology  that will allow the Company to deliver
high quality,  low-cost telephone communications through the customer's Internet
connection.  This is done through a  translation  of a typical voice signal to a
digitized  and  compressed  packet of data,  identical  to the data being  moved
around the Internet today,  and then reconverted from data to voice on the other
end.  The Company  believes  that this will be a service  offering  that will be
widely  subscribed to by both the  individual  Internet  customer as well as the
business customer.

      Telecommunications  Strategy.  The Company's  telecommunications  services
strategy is to significantly enhance profitability by leveraging its fiber optic
network and existing  infrastructure  to broaden its  customer  base through the
provision of telecommunications and broadband services.

      Expand  Telecommunications  Offerings.  The Company has designed its fiber
optic  network  with  significant  excess  capacity  to  support a wide array of
telecommunications  services and to be compatible with technologies  still under
development in the industry, including server-based applications such as virtual
LANs, e-commerce, and voice over the Internet. The Company's fiber optic network
can  provide  up  to 1  gigabit  WAN  connections,  private  intranet  services,
high-speed  Internet  access  and  intrastate  virtual  private  networks  using
four-digit dialing for multi-site  customers.  The Company intends to resell its
excess capacity to competitive  local exchange carriers  ("CLECs")  operating in
its service areas.  As the fiber optic network is expanded,  the Company expects
to  expand  its  customer  base  to  include  additional  schools,  governmental
entities,  and  businesses,  all of which can be added to the  network at little
incremental cost.

      Concentrate  Operations  Geographically.  The  Company  intends to provide
these state-of-the-art  telecommunications services in Nebraska and Kansas where
it believes it has a competitive advantage to be the low cost, superior customer
service provider.

      Provide Customized Services. The Company tailors service offerings,  sales
and marketing  techniques and network  deployment to meet the different needs of
customers. By working closely with customers,  the Company designs and engineers
the services for each customer to meet the  particular  needs of that  customer.
The  Company  believes  its  ability  to tailor  services  provides  a  distinct
advantage over its potential competition for contracts.

      o  Pursue  Demand-Driven  Network  Deployment.   The  Company  utilizes  a
demand-driven  approach  to  network  construction  by  marketing  and  securing
long-term  contracts for its services before committing capital  expenditures to
develop  or expand  its  fiber  plant.  The  Company  seeks to secure  5-10 year
contracts  which  provide  for the Company to be the  exclusive  provider to its
customers  of  the  services   rendered  for  the  duration  of  the   contract.
Furthermore,  pursuant to the terms of certain customer  contracts,  the Company
receives  up-front  reimbursement  for a  portion  of the  capital  expenditures
required to add the customer to its network.

      o Develop Strategic Relationships.  The Company continues to seek to enter
in mutually beneficial strategic relationships with  telecommunications  service
providers and other entities  operating in the same regions as its Core Systems.
To date the Company has entered into arrangements with BNI, Birch Telecom, Cable
USA and MediaCity.  In conjunction with Broadband  Networks,  Inc. ("BNI"),  the
Company has commenced providing these services to these original schools.

See "Risk Factors-Reliance Upon Certain Key Vendors."

 Marketing and Rates.  The Company  markets its Telecom  Services to educational
institutions  under the "GRADES" brand name. GRADES stands for Galaxy's Regional
Access Distance Education System. The Company's objective is to provide advanced
telecommunications  services that offer schools and state agencies an integrated
solution to their need for video conferencing,  data transfer,  content services
(such as the Internet),  and more efficient voice communications.  When compared
to similar services offered by competitors using twisted pair copper technology,
the  Company's   telecommunications   solutions  provide  a  superior  level  of
functionality  at greater  speeds and at lower  costs.  The Company is currently
providing  GRADES service to primary and secondary  schools in both Nebraska and
Kansas and is in the process of negotiating  contracts to provide GRADES service
to additional schools, colleges and universities in both states.

   The Company  ultimately  intends to offer its Telecom  Services and access to
its Nebraska and Kansas Networks to businesses,  hospitals, and individual homes
in addition to educational institutions and state agencies. In fact, the Company
is currently  working with 28 hospitals  within the areas served by its Nebraska
Network to provide video and data services. The Company further believes that it
will have the opportunity to provide  carriers  carrier services as it continues
to build  out its  Nebraska  and  Kansas  Networks.  The  Company  is  currently
negotiating with long distance carriers, independent local carriers and start-up
competitive  local  exchange  carriers  ("CLECs") in Nebraska and Kansas to give
them access to the  Company's  Nebraska and Kansas  Networks.  Such access would
allow  these  carriers  to  negotiate   alternative   back-haul   agreements  at
potentially  more  affordable  pricing  levels.  The  Company  may also make its
headends  available  to other cable  operators  in an effort to give other cable
operators  an  affordable   opportunity  to  consolidate  their  systems.   This
consolidation  would allow them to provide  similar  enhanced  services as those
provided  to  Galaxy's  subscriber  base.  See  Telecommunications   Services  -
Strategic Relationships.

 Service Contracts.  In Nebraska,  the GRADES  contracting  process is primarily
being  orchestrated  by Educational  Service Units ("ESUs")  located  throughout
state. ESUs are administrative and purchasing centers for geographical groups of
school  districts.  The Company and each ESU negotiate the basic  contract terms
and rate structure for the schools  districts  located within the area served by
that ESU. The  individual  school  district then has an option of signing up for
the services  offered  pursuant to the terms of the  contract.  Each  individual
school  within a school  district  may  subscribe  to any  level of  service  it
desires.  The Company  currently  provides GRADES services to schools located in
four of  Nebraska's  nineteen  ESUs.  Those four ESUs  represent  a total of 250
schools. The Company is currently working on contracts with five additional ESUs
for similar GRADES service offerings. In Kansas, each individual school district
is responsible for negotiating its own contract with the Company.

 The standard GRADES contract  establishes the Company as the provider of video,
facsimile,  NEBSAT access and internet  access  services  during the term of the
contract.  The contract has an initial term of four years, which may be extended
annually  for a one-year  period up to a total of ten years.  Schools that enter
into the standard contract may terminate the contract for cause only, subject to
the payment of an early  termination fee. A school may not terminate in order to
acquire  similar  services from another fiber optic cable network  provider.  In
addition  to the  recurring  charges  outlined in  Telecommunication  Services -
Marketing and Rates,  the Company charges an up-front  design,  installation and
engineering  fee which  supports its cost of connecting  the school to the fiber
optic cable  network  and the wiring of the  classrooms  and offices  within the
school.  The Company is responsible for  maintenance  and repair costs,  and any
costs  associated  with  technology  migration and system upgrades chosen by the
Company.  The schools pay a monthly fixed service charge,  based on the services
received.

     The Company has  contracts  with the 24 school  districts  and  educational
service  units  (`ESUs")  in  Nebraska  that  receive  GRADES  services  and  an
additional  32  school  districts  and ESUs  which are in the  process  of being
connected  to the  Nebraska  Network.  The  Company  also has a contract  and is
providing service to one Kansas school district representing 6 schools and is in
the  design  stage  with a Kansas  ESU that  represents  over  125  schools.  In
addition,  the Company  plans on responding to some of the 300 schools in Kansas
that have posted requests for proposal's ("RFPs") on the Internet as part of the
U.S.  Government's  Universal  Service Fund ("USF")  process.  The RFPs range in
requests from Internet access to long distance service.  The Company's  strategy
is to respond to the posted RFPs based on  geographic  area which will  provide,
along with the Southeast  Kansas ESU, a substantial  base for  construction  and
expansion of the Kansas Network.

 Service, Installation and Repair. The Company plans to outsource the technical,
maintenance and equipment aspects of providing the GRADES services.  The Company
has entered into a five year contract with BNI to assist in the initial  design,
integration and ongoing support of all of the fiber network components. BNI is a
network design  engineering  company and a manufacturer of optical  transmission
electronics,  data modems and ethernet  switches.  BNI will  provide  advice and
expertise on the selection of other  equipment and services  needed from vendors
in order to provide a service with a specific requirement, such as bandwidth and
speed,  security  or media file  service  access.  Currently,  the  Company  and
Broadband  Networks  ("BNI") are engaged in a joint  effort to bid on  providing
telecommunications services to educational facilities,  health facilities, state
agencies and other  prospective  users  within the Kansas and  Nebraska  service
areas.

 Technology and Engineering.  The fiber network  architecture  being constructed
for the Company's cable television systems provides  significant excess capacity
for new telecommunications  service offerings.  The Nebraska and Kansas Networks
are being designed in a fully redundant topology with multiple rings and will be
able to fully  support  Synchronous  Optical  Network  (SONET) and  Asynchronous
Transfer Mode (ATM) switching. The Nebraska and Kansas Networks provide up to 96
spare  fibers on primary  routes and 24 spare fibers on  secondary  routes.  The
Company is taking advantage of this excess capacity through the provision of the
advanced   telecommunications   services  and  content  delivery   opportunities
described above.  These new opportunities are expected to yield higher operating
margins  than those  that could be  achieved  by a similar  independent  startup
enterprise  because of the Company's  ability to capitalize upon the fiber optic
network that has been installed to support and enhance the delivery of its cable
television  services.  As of December 31, 1999,  the Company had installed  over
1,400 miles of fiber optic  cable for use by its  Systems in  Nebraska,  Kansas,
Kentucky and Mississippi.

 The Company is also working  closely with Kansas to  substantially  upgrade the
state's T-1  (1.54Mb)  internal  communications  system to a system that will be
based on 100Mb Ethernet and provide  faster  Internet  connections,  full motion
video  conferencing and four-digit  dialing.  These services will provide Kansas
with the ability to offer enhanced  services at affordable  rates,  while at the
same time augmenting the current support  infrastructure  which supports the 109
state agencies and their approximately 250 sites across the State.

 Regulation.  The services  provided by the Company over the Nebraska and Kansas
Networks  are  subject to state  regulations  only,  and are not  subject to FCC
regulations  at this time.  In  Nebraska,  the  Company is  currently  certified
through the Nebraska  Public Service  Commission as an Intrastate  Interexchange
Carrier  over a private  line  network.  This gives the  Company  the ability to
provide video, non-switched voice, IP telephone and data services. The Company's
statewide  certificate  and  completed  1,400 mile fiber  network  will give the
Company a market equivalent to 330 towns (50% of Nebraska's towns) and a covered
population of 1,155,325 (70% of Nebraska's population).

 The Company  recently  received  its  certification  by the Kansas  Corporation
Commission  as an  Intrastate  Interexchange  Carrier.  This  will also give the
Company the authority to provide  video,  non-switched  voice and data services.
The Company's  statewide  certificate will give it a market equivalent to 87% of
Kansas' towns and 95% of its population.

      Competition. The Company believes that there is a large and growing demand
for high bandwidth  services such as those available in the GRADES service line.
The Company  further  believes that the secondary and tertiary  markets that the
Company plans to compete in are  under-served  at this point for these services.
The primary competitors are the numerous facilities based established  Incumbent
Local  Exchange  Carriers  ("ILECs").   These  competitors  have  financial  and
technical resources,  long-standing relationships with their customers and offer
services similar to those offered by the Company.  Unlike the ILEC  competitors,
the Company is deploying a network design to primarily consolidate the Company's
cable  television  business.  The  fiber  optic  networks  that the  Company  is
employing  are high  bandwidth  by their  nature and are  superior  to the ILECs
primary networks which are twisted pair copper networks.  Further, certain ILECs
(the former Bell  Operating  Companies)  are subject to regulatory  restrictions
that prohibit them from transporting services across an entire service area.

 The  Company's  competitors  are and will  continue to deploy  fiber  networks.
However,  the Company  believes that the secondary and tertiary markets will not
be  the  primary  focus  of  the  major  ILECs.   There  are  numerous   smaller
independently owned ILECs which serve the markets targeted by the Company. These
smaller ILECs  typically  serve markets that are rural,  low-density  population
areas and are adjacent to or are in some cases  surrounded  by the larger ILECs.
In order  for the  ILECs to  compete  it is often  necessary  for them to form a
consortium in order to cover the  geographic  requirements  of a particular  bid
from a customer such as a school district. These consortiums are often difficult
to form as each ILEC has different business objectives and strategies.  Further,
the ILECs are typically highly  regulated,  have different cost structures,  and
often required to meet regulatory requirements in pricing services.

      In addition to ILECs,  entities  potentially  capable of offering services
similar  to GRADES  include  Interexchange  Carriers  ("IXCs")  and other  cable
television  companies.  IXCs have  fiber  optic  networks  that are  capable  of
providing competing  services.  However,  the IXCs lack local  infrastructure to
deliver  the  services  to the  end-user  customer.  While IXCs could  build the
required  local  infrastructure,  it is  unlikely  that  they  will do so in the
secondary and tertiary  markets.  Some IXCs have acquired CLECs which have fiber
optic local  infrastructure.  However, at this time, those networks are confined
to primary markets and it is unlike that they will pursue smaller markets in the
foreseeable  future.   While  other  cable  television   operators  may  pose  a
competitive threat,  they also are a source of strategic business  partnerships.
The Company has been  pursuing and will  continue to pursue  strategic  business
relationships with other cable operators.

            The Company intends to distinguish  itself to customers on the basis
of functionality,  creative product  implementation,  and price. The competition
proposes  end-user  services  based  upon the  telephony  model,  which is a T-1
(1.54Mb) that provides inferior video quality, or T-3 (45Mb) which provides full
motion video but is limited to 4 channels as compared to GRADES  which  provides
up to 80 channels.  The T-1 telephony  model for data services is 7 times slower
than the 10Mb standard with GRADES and the GRADES  pricing  structure has proved
lower in all applications to date.

Legislation And Regulation

      The following summary of regulatory  developments and legislation does not
purport  to  describe  all  present  and  proposed  federal,   state  and  local
regulations  and  legislation  affecting the cable  television  industry.  Other
existing  federal,  state and local  regulations  are  currently  the subject of
judicial  proceedings,  legislative hearings and administrative  proposals which
could change,  in varying degrees,  the manner in which this industry  operates.
Neither  the  outcome  of these  proceedings,  nor their  impact  upon the cable
television industry or the Company, can be predicted at this time.

      The cable  television  industry is subject to extensive  regulation at the
federal,  local and, in some instances,  state levels. The industry currently is
regulated by the FCC, some state  governments  and most local  governments.  The
Telecommunications  Act of 1996 (the "1996 Telecom Act")  substantially  altered
federal, state and local laws pertaining to cable television, telecommunications
and other services.  Congress and the FCC have frequently  revisited the subject
of cable regulation.

      Cable Communications Policy Act of 1984. The 1984 Cable Act, which amended
the  Communications  Act  of  1934  (the  "Communications   Act"),   established
comprehensive  national  standards and for the  regulation  of cable  television
systems and identified the  boundaries of permissible  federal,  state and local
government regulation. Among other things, the 1984 Cable Act affirmed the right
of  franchising  authorities  (state  or local,  depending  on the  practice  in
individual  states) to award one or more franchises within their  jurisdictions.
It also prohibited  non-grandfathered  cable  television  systems from operating
without a franchise in such  jurisdictions.  The 1984 Cable Act provides that in
granting  or  renewing   franchises,   franchising   authorities  may  establish
requirements for cable-related  facilities and equipment,  but may not establish
or enforce requirements for video programming or information services other than
in broad categories.

      The Cable Television  Consumer  Protection and Competition Act of 1992. In
October 1992,  Congress enacted the 1992 Cable Act. Although certain of the 1992
Act's  provisions  were amended by the 1996 Telecom Act (as described in greater
detail  below),  many of the 1992 Cable Act's  provisions  remain intact and are
summarized  herein.  The 1992  Cable  Act  permitted  a much  greater  degree of
regulation of the cable industry with respect to, among other things;  (i) cable
system rates for both basic and certain cable programming services; (ii) program
access and exclusivity  arrangements;  (iii) leased access terms and conditions;
(iv) customer and service  requirements;  and (v)  television  broadcast  signal
carriage and retransmission  consent.  Additionally,  the legislation encouraged
competition with existing cable television systems by allowing municipalities to
own and  operate  their  own  cable  television  systems  without  a  franchise,
preventing  franchising   authorities  from  granting  exclusive  franchises  or
unreasonably  refusing to award additional franchises covering an existing cable
system's  service area, and  prohibiting  (with certain  exceptions)  the common
ownership  of cable  systems and  co-located  MMDS or SMATV  systems.  This last
prohibition  was  limited  by the 1996  Telecom  Act to cases in which the cable
operator is not subject to effective competition. In addition, the FCC permits a
cable system to acquire a co-located  SMATV system if it provides  cable service
to the  SMATV  system  in  accordance  with the  terms of its  cable  television
franchise.  The legislation required the FCC to initiate a number of rule-making
proceedings to implement various provisions of the statute.

      Various cable operators have challenged the  constitutionality  of several
sections of the 1992 Cable Act (including the must carry requirements), although
the  courts  have  disposed  of  most  of  these   challenges.   The  must-carry
requirements remained in effect during the judicial  proceedings.  After several
appeals, the United States Supreme court upheld the must-carry requirements.

      Rate Regulation. Prior to implementation of the 1992 Cable Act, most cable
systems were largely free to adjust cable  service  rates  without  governmental
approval.  The 1992 Cable Act  authorized  rate  regulation  for  certain  cable
communications  services and  equipment in  communities  that are not subject to
"effective  competition," which as defined,  encompassed most cable systems. The
1992 Cable Act requires the FCC to resolve rate  complaints for non-basic  cable
services and to reduce any such rates found to be  unreasonable.  It also limits
the ability of many cable systems to raise rates for basic and certain non-basic
cable  programming  services  (collectively,  the "Regulated  Services").  Cable
services  offered on a per channel or on a per program  basis  generally are not
subject  to rate  regulation  by  either  franchising  authorities  or the  FCC.
Notwithstanding  the above,  the 1996 Telecom Act  deregulated  the CPS rates of
"small cable operators" as of February 8, 1996, and deregulates the CPS rates of
all other cable operators by March 31, 1999, and deregulated basic service rates
for cable  systems  serving  50,000 or fewer  subscribers,  where  such  systems
offered only a basic tier as of December 31, 1994.

      The 1992 Cable Act  requires  communities  to certify  with the FCC before
regulating basic cable rates.  Upon  certification,  the local community obtains
the right to approve basic rates.  Certified  franchising  authorities  are also
empowered  to  regulate  rates  charged  for  additional  outlets  and  for  the
installation, lease and sale of equipment used by customers to receive the basic
service tier, such as converters and remote control units. These equipment rates
must be based on actual cost plus a  reasonable  profit,  as defined by the FCC.
Cable operators may be required to refund  overcharges  with interest.  The 1992
Cable Act permits  communities  to certify at any time,  so it is possible  that
Galaxy's franchising authorities may choose in the future to certify to regulate
Galaxy's  basic  rates.  As modified by the 1996  Telecom Act, FCC review of CPS
rates is triggered by franchising  authority  complaints which may be filed with
the FCC only if the local franchising  authority  receives  multiple  subscriber
complaints within 90 days of a rate increase.

      The  FCC's  rate   regulations   do  not  apply  where  a  cable  operator
demonstrates that it is subject to "effective competition." Under the 1992 Cable
Act, a system is subject to effective  competition  where: (i) fewer than 30% of
the  households in the franchise  area subscribe to the cable service of a cable
system;  (ii)  the  franchise  area  is  served  by at  least  two  unaffiliated
comparable video  programming  distributors  offering service to at least 50% of
the households in the franchise area and the number of households subscribing to
programming  services  offered by the MVPDs other than the largest  MVPD exceeds
15% of the  households  in the  franchise  area; or (iii) a MVPD operated by the
franchising authority offers video programming to at least 50% of the households
in the  franchise  area.  The 1996  Telecom  Act also  provides  that  effective
competition  exists  if a  local  exchange  carrier  or its  affiliate  provides
comparable   video   programming   in  the   franchise   area  (except   through
direct-to-home satellite services).

      In  implementing   the  1992  Cable  Act,  the  FCC  adopted  a  benchmark
methodology as the principal method of regulating rates for Regulated  Services.
Cable  operators with rates above the allowable  level under the FCC's benchmark
methodology   may  attempt  to  justify  such  rates  using  a   cost-of-service
methodology. The FCC has instituted rate relief for small cable operators. Cable
operators with fewer than 400,000 nationwide  subscribers are eligible to file a
streamlined cost-of service analysis to justify their per-channel rates in those
systems serving 15,000 or fewer subscribers. Per-channel rates that fall below a
prescribed benchmark are presumed reasonable.

      The 1992 Cable Act also  requires  cable  systems to permit  customers  to
purchase  video  programming  offered by the  operator on a per channel or a per
program basis without the necessity of subscribing to any tier of service, other
than the basic service tier,  unless the system's lack of addressable  converter
boxes or  other  technological  limitations  does not  permit  it to do so.  The
statutory  exemption  for  cable  systems  that do not  have  the  technological
capability  to offer  programming  in the  manner  required  by the  statute  is
available  until a system obtains such  capability,  but not later than December
2002.  Systems  facing  effective  competition  are  not  subject  to  the  tier
buy-through prohibition.

      The 1996 Telecom Act allows cable operators to pass through franchise fees
and regulatory fees to subscribers without any prior notice. Cable operators are
allowed under the 1996 Telecom Act to offer bulk  discounts  for  multi-dwelling
units. In addition,  a cable operator need not maintain uniform rates throughout
a franchise area where there is effective competition.  Franchising  authorities
may not  file  complaints  with  the FCC  unless  they  have  actually  received
subscriber  complaints,  and individual subscribers may not file complaints with
the FCC.

      Carriage of Broadcast  Television Signals.  The 1992 Cable Act established
new signal carriage requirements. These requirements allow commercial television
broadcast  stations  which are "local" to a cable  system,  to elect every three
years  whether  to require  the cable  system to carry the  station,  subject to
certain  exceptions,  or whether to require the cable  system to  negotiate  for
"retransmission     consent"    to    carry    the     station.     The    first
must-carry/retransmission  consent  elections  were made in June  1993,  and the
second  elections  were made in October  1996.  The third  election  was made in
October,  1999.  The next election will be made in October,  2002.  Stations are
generally  considered local to a cable system where the system is located in the
station's Area of Dominant  Influence ("ADI"),  as determined by Arbitron.  This
method for determining whether a station is local to a cable system will change.
The FCC has  determined  that,  effective  January 1,  2000,  the market of a TV
station will be its  designated  market area ("DMA"),  as determined by Nielsen.
Cable  systems  must  obtain  retransmission  consent  for the  carriage  of all
"distant"  commercial  broadcast  stations,  except for certain  "superstations"
(i.e.,  commercial  satellite-delivered  independent  stations such as WGN). All
commercial stations entitled to carriage were to have been carried by June 1993,
and  any   non-must-carry   stations  (other  than   superstations)   for  which
retransmission  consent had not been  obtained  could no longer be carried after
October 5, 1993.  Galaxy carries some stations pursuant to must-carry and others
pursuant to retransmission  consent agreements.  In some cases, Galaxy agreed to
carry  additional  services,   like  fX,  pursuant  to  retransmission   consent
agreements.

      Local non-commercial television stations are also given mandatory carriage
rights,  subject  to  certain  exceptions,  within  the larger of: (i) a 50-mile
radius of the station's city of license;  or (ii) the station's  Grade B contour
(a measure of signal strength). Non-commercial stations are not given the option
to negotiate for retransmission consent. All non-commercial stations entitled to
carriage were to have been carried by December 1992.

      Other Requirements Imposed on Cable Operators.

      Registration  Procedures and Reporting  Requirements.  Prior to commencing
operation in a particular  community,  all cable television  systems must file a
registration  statement  with the FCC listing the  broadcast  signals  they will
carry and certain other information.  Additionally, cable operators periodically
are required to file various informational reports with the FCC. Cable operators
that operate in certain  frequency bands are required on an annual basis to file
the results of their periodic cumulative leakage testing measurements. Operators
that  fail to make this  filing or who  exceed  the FCC's  allowable  cumulative
leakage index risk being  prohibited  from operating in those frequency bands in
addition to other sanctions.

      Technical  and  Service  Requirements.  Historically,  the FCC has imposed
technical standards applicable to the cable channels on which broadcast stations
are carried, and has prohibited franchising  authorities from adopting standards
which were in conflict with or more  restrictive  than those  established by the
FCC. The FCC has applied its  standards  to all classes of channels  which carry
downstream National Television System Committee ("NTSC") video programming.  The
FCC also has adopted  standards  applicable  to cable  television  systems using
frequencies in the 108-137 MHz and 225-400 MHz bands in order to prevent harmful
interference  with cable system signal leakage.  The 1992 Cable Act requires the
FCC to  update  periodically  its  technical  standards.  The 1996  Telecom  Act
requires regulations to assure  compatibility among televisions,  VCRs and cable
systems,  leaving  all  features,  functions,  protocols  and other  product and
service options for selection  through open competition in the market.  The 1996
Telecom Act also prohibits States or franchising  authorities from  prohibiting,
conditioning  or  restricting  a cable  system's  use of any type of  subscriber
equipment or transmission technology.

      The 1996  Telecom  Act exempts  from cable  franchise  requirements  those
telecommunications  services  provided  by a cable  operator  or its  affiliate.
Franchise   authorities   may  not   require  a  cable   operator   to   provide
telecommunications service or facilities,  other than institutional networks, as
a condition  of  franchise  grant,  renewal or  transfer.  Similarly,  franchise
authorities may not impose any conditions on the provision of such service under
the cable franchise.

      Franchise Fees and Renewal.  Although  franchising  authorities may impose
franchise  fees under the 1984 Cable Act,  as amended by the 1996  Telecom  Act,
such payments cannot exceed 5% of a cable system's annual gross revenues derived
from the operation of the cable system to provide cable services. Franchise fees
apply only to revenues for cable  services  and do not apply to revenues  that a
cable   operator   derives  from  providing  new   telecommunication   services.
Franchising authorities are permitted to charge a fee for any telecommunications
provider's use of public right-of-way.

      The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. These formal
procedures  are mandatory only if timely invoked by either the cable operator or
the franchising authority. Even after the formal renewal procedures are invoked,
franchising  authorities and cable operators  remain free to negotiate a renewal
outside  the  formal  process.   Although  the  procedures  provide  substantial
protection  to incumbent  franchisees,  renewal is by no means  assured,  as the
franchisee  must  meet  certain  statutory  standards.  Even if a  franchise  is
renewed,  a franchising  authority may impose new and more onerous  requirements
such as upgrading facilities and equipment,  although the municipality must take
into account the cost of meeting such requirements.

      The 1992 Cable Act made several  changes to the process  which may make it
easier in some cases for a  franchising  authority  to deny  renewal.  The cable
operator's timely request to commence renewal proceedings must be in writing and
the franchising  authority must commence renewal  proceedings not later than six
months after receipt of such notice.  Within a four-month  period beginning with
the submission of the renewal  proposal the franchising  authority must grant or
deny  the  renewal.   Franchising   authorities  may  consider  the  "level"  of
programming  service  provided by a cable operator in deciding whether to renew.
Franchising  authorities  are no longer  precluded from denying renewal based on
failure to  substantially  comply with the material terms of the franchise where
the franchising authority has "effectively  acquiesced" to such past violations.
Rather,  the  franchising  authority is estopped only if, after giving the cable
operator  notice and  opportunity to cure,  the authority  fails to respond to a
written  notice from the cable  operator of its  failure or  inability  to cure.
Courts may not reverse a denial of renewal based on procedural  violations found
to be "harmless error." To date, all of the material  franchises relating to the
Company's Systems eligible for renewal have been renewed or extended at or prior
to their stated  expirations.  At any given time,  one or more of the  Company's
franchises  may be involved in the renewal  process.  There can be no  assurance
that all franchise  authorities  will continue to consent to franchise  renewals
and/or  franchise  transfers  to the Company in the future or that the terms and
conditions  or any such  renewals  and/or  transfers  will be  acceptable to the
Company and will not have a material adverse effect.

      Channel   Set-Asides.   The  1984  Cable  Act  permits  local  franchising
authorities to require cable operators to set aside certain channels for public,
educational  and  governmental  access  programming.  The 1984 Cable Act further
requires  cable  television  systems  with  36 or  more  activated  channels  to
designate a portion of their channel  capacity for  commercial  leased access by
unaffiliated  third parties.  The 1992 Cable Act requires leased access rates to
be set according to an FCC-prescribed  formula.  The 1996 Telecom Act explicitly
gives cable  operators  the right to refuse to carry any public access or leased
access program containing "obscenity, indecency or nudity."

      Ownership.  The 1996 Telecom Act  eliminates the 1984 Cable Act provisions
prohibiting  local exchange  carriers  ("LECs") from providing video programming
directly to customers within their local exchange telephone service areas. Under
the 1996 Telecom Act, LECs may provide video programming by radio-based systems,
common carrier systems,  "open video" systems or cable systems.  LECs that elect
to provide  "open video"  systems must allow others to use up to  two-thirds  of
their  activated  channel  capacity.  These LECs are relieved of  regulation  as
"common  carriers,"  and are not  required to obtain local  franchises,  but are
still  subject to many  other  regulations  applicable  to cable  systems.  LECs
operating as cable  systems are subject to all rules  governing  cable  systems,
including franchising requirements.

      The 1996 Telecom Act prohibits a LEC or its affiliate  from acquiring more
than a 10  percent  financial  or  management  interest  in any  cable  operator
providing cable service in its telephone service area. It also prohibits a cable
operator or its affiliate  from  acquiring  more than a 10 percent  financial or
management  interest  in any LEC  providing  telephone  exchange  service in its
franchise area. A LEC and cable operator whose telephone  service area and cable
franchise  area are in the same  market  may not enter  into a joint  venture to
provide telecommunications  services or video programming.  There are exceptions
to these limitations for rural facilities,  very small cable systems,  and small
LECs in non-urban areas, and the FCC has granted temporary waivers of this ban.

      The 1984 Cable Act and the FCC's  rules  prohibit  the  common  ownership,
operation,  control  or  interest  in a  cable  system  and a  local  television
broadcast  station  whose  predicted  Grade B contour  covers any portion of the
community  served  by the  cable  system.  The 1996  Telecom  Act  repeals  this
statutory restriction on broadcast-cable  cross-ownership,  but does not require
the FCC to repeal its cross-ownership rule. The 1996 Telecom Act also eliminates
the FCC's  restriction  against  the  ownership  or control of both a  broadcast
network and cable system,  but it authorizes the FCC to adopt  regulations which
will ensure carriage,  channel  positioning and  nondiscriminatory  treatment of
non-affiliated  broadcast  stations  by  cable  systems  which  are  owned  by a
broadcast network.

      To prevent large, vertically integrated cable systems from unduly favoring
their  affiliated  programmers,  the FCC  imposes a 40%  limit on the  number of
channels  which  can be  occupied  by  video  programmers  affiliated  with  the
particular cable system.

      Anti-Trafficking.  Transfers. The 1996 Telecom Act repealed the 1992 Cable
Act's three year holding  requirement,  which  prevented a cable  operator  from
selling  or  transferring  ownership  of a cable  system  within  36  months  of
acquisition.  However,  a local  franchise may still require prior approval of a
transfer or sale. The 1992 Cable Act requires franchising  authorities to act on
a franchise  transfer  request within 120 days after receipt of all  information
required by FCC regulations and the  franchising  authority.  Approval is deemed
granted if the franchising authority fails to act within such period.

      Copyright.  Cable  television  systems  are  subject to federal  copyright
licensing  carriage of broadcast  signals.  In exchange  for making  semi-annual
payments  to  a  federal  copyright  royalty  pool  and  meeting  certain  other
obligations,  cable operators obtain a statutory license to retransmit broadcast
signals.  The amount of the royalty payment  varies,  depending on the amount of
system revenues from certain sources, the number of distant signals carried, and
the  location  of the cable  system  with  respect  to  over-the-air  television
stations.  Cable  operators  are liable for  interest  on  underpaid  and unpaid
royalty fees, but are not entitled to collect  interest on refunds  received for
overpayment of copyright  fees.  Adjustments in copyright  royalty rates are now
made through an arbitration process supervised by the U.S. Copyright Office.

      Various  bills have been  introduced in Congress in the past several years
that would eliminate or modify the cable television compulsory license.  Without
the compulsory license,  cable operators might need to negotiate rights from the
copyright  owners  for each  program  carried on each  broadcast  station in the
channel line-up.

      Copyrighted  music performed in programming  supplied to cable  television
systems by pay cable networks (such as HBO) and cable programming networks (such
as USA Network) has  generally  been  licensed by the networks  through  private
agreements with the American  Society of Composers and Publishers  ("ASCAP") and
BMI, Inc. ("BMI"),  the two major performing rights  organizations in the United
States.  ASCAP and BMI  offer  "through  to the  viewer"  licenses  to the cable
networks which cover the  retransmission  of the cable networks'  programming by
cable television systems to their subscribers.

      Regulatory  Fees and Other  Matters.  The FCC  requires  payment of annual
"regulatory  fees" by the various  industries it regulates,  including the cable
television  industry.  In 1999,  cable  television  systems were required to pay
regulatory fees of $0.48 per subscriber.  Per-subscriber  regulatory fees may be
passed on to subscribers as "external cost" adjustments to rates for basic cable
service.  Fees are also  assessed  for other FCC licenses  that cable  operators
often use, including licenses for business radio, cable television relay systems
("CARS") and earth stations.  These fees, however, may not be collected directly
from subscribers as long as the FCC's rate regulations  remain applicable to the
cable system.

      FCC  regulations  also address among other  things,  the carriage of local
sports programming; restrictions on origination and cablecasting by cable system
operators;  privacy  requirements;  application of the rules governing political
broadcasts;  non-duplication  of network  programming;  deletion  of  syndicated
programming;  Equal Employment Opportunity (EEO) requirements;  customer service
standards;   home  wiring;  record  retention  and  limitations  on  advertising
contained in  children's  programming.  The FCC has the authority to enforce its
regulations  through the imposition of substantial  fines, the issuance of cease
and desist orders and/or the imposition of other administrative sanctions.

      Telecommunications  Act of 1996. On February 8, 1996, the 1996 Telecom Act
was enacted. This legislation  substantially altered the regulatory  environment
for  cable  television,  telecommunications  and  other  services.  Some  of the
provisions  of the 1996  Telecom  Act became  effective  immediately,  but other
provisions  will not take effect  until they are  implemented  by the FCC.  This
legislation  reverses some of the cable rate regulation  established by the 1992
Cable Act over a  three-year  period.  The rates for cable  programming  service
("CPS" or "non-basic") tiers offered by certain small cable operators in certain
small cable systems are deregulated immediately. The FCC's authority to regulate
the CPS tier rates of all other cable operators expired on March 31, 1999. Rates
for  basic  tiers  (except  for the small  cable  operator  exception  described
previously) will continue to be subject to regulation. The legislation also: (i)
eliminates the uniform rate  requirements  of the 1992 Cable Act where effective
competition  exists;  (ii) requires  cable  operators to fully block or scramble
both the  audio  and  video on  sexually-explicit  or  indecent  programming  or
channels primarily dedicated to sexually-oriented programming; (iii) adjusts the
pole   attachment   laws;   and   (iv)   allows   cable   operators   to   enter
telecommunications  markets which  historically  have been closed to them, while
also allowing most  telecommunications  providers to begin providing competitive
cable service in their local service areas,  although  buyouts of existing cable
operators are prohibited.

      Cable programmers challenged the constitutionality of the provision of the
1996 Telecom Act  requiring  cable  operators to scramble  sexually-explicit  or
indecent adult programming.  Following a judicial challenge,  the FCC's rules on
the scrambling of such programming became effective in May 1997.

      Telecommunications  Regulation.  The 1996  Telecom  Act has  substantially
revised  communications  regulation in the United  States.  The  legislation  is
intended  to  allow  providers  to  enter   communications   markets  that  have
historically been closed to them as a result of legal  restrictions,  as well as
practical and economic considerations.  At the same time,  implementation of the
1996 Telecom Act may leave  incumbent  providers in  previously  closed  markets
sufficiently free from regulation that they will be able to defend their markets
aggressively.  Galaxy is unable to predict the outcome of the  proceedings  that
will implement the legislation.

      For example,  the 1996 Telecom Act establishes local exchange  competition
as a national policy by preempting  laws that prohibit  competition in the local
exchange  and  by   establishing   uniform   requirements   and   standards  for
interconnection,  unbundling and resale.  These  standards will be developed and
implemented  by the FCC in conjunction  with the states in numerous  proceedings
and through a process of negotiation and arbitration.  By establishing  national
standards  for  interconnection,  unbundling,  and resale of  competitive  local
exchange  services,   the  1996  Telecom  Act  significantly  enhances  Galaxy's
opportunity to enter this market.

      At the same time, Galaxy's ability to compete in offering certain services
may be  adversely  affected,  depending  on the  degree  and form of  regulatory
flexibility  ultimately  afforded LECs by the FCC and the states,  as well as on
the pricing, scope and applicability of these interconnection  requirements.  In
addition,  if Galaxy offers local  exchange  services  within the meaning of the
1996  Telecom  Act,   other  service   providers  may  take   advantage  of  the
interconnection  duty to require Galaxy to use its local exchange  facilities to
carry their customer traffic.

      The 1996  Telecom  Act also  opens  the way for Bell  operating  companies
("BOCs")  and their  affiliates  to  provide  long  distance  telecommunications
services between a local access and transport area and points outside that area.
Prior to the 1996 Telecom Act, BOCs were generally prohibited from offering such
"interLATA"  services.  Under the 1996 Telecom Act such  services may be offered
outside of a BOC's local  exchange  service states  immediately.  BOCs may offer
interLATA services inside such states (in-region) when the FCC determines either
that the BOC is providing  access and  interconnection  to a competent  exchange
service provider under a  state-approved  agreement or that no such provider has
requested such access and interconnection within ten months after enactment, and
the state has approved the BOC's  general  terms for  providing  such access and
interconnection.  In either case,  the FCC also must  conclude  that the BOC has
satisfied a "competitive  checklist" of  interconnection  and other requirements
specified  in the 1996  Telecom  Act.  These  BOC  preconditions  have been held
unlawful by at least one federal court and are still being litigated.  If Galaxy
decides  itself to provide  interLATA  service,  it will  likely  face  vigorous
competition from BOC entrants, as well as from existing long distance carriers.

      Telecommunications  common carriers subject to the jurisdiction of the FCC
generally  must file tariffs  detailing  the prices and terms and  conditions of
services,  and whether the terms offered by the carrier are just, reasonable and
nondiscriminatory.  The 1996 Telecom Act provides that the FCC, in response to a
petition from a carrier,  shall forbear from  enforcing  regulations,  including
those requiring tariffs,  under certain  circumstances.  Such actions could free
Galaxy from regulatory burdens,  but might also increase the pricing flexibility
of its competitors.

      State and Local  Regulation.  Cable systems are subject to state and local
regulation,  typically  imposed through the franchising  process because a cable
television   system   uses   local   streets   and   rights-of-way.   Regulatory
responsibility  for  essentially  local  aspects of the cable  business  such as
franchisee  selection,  billing practices,  system design and construction,  and
safety and consumer protection remains with either state or local officials and,
in some  jurisdictions,  with  both.  Cable  television  systems  generally  are
operated pursuant to nonexclusive  franchises,  permits or licenses granted by a
municipality or other state or local government  entity. The Company holds cable
franchises in all areas in which they provide service where cable franchises are
required. Franchises generally are granted for fixed terms and in many cases are
terminable for noncompliance with material provisions.  The terms and conditions
of franchises vary materially from jurisdiction to jurisdiction.  Each franchise
generally  contains  provisions  governing cable service rates,  franchise fees,
franchise term, system construction and maintenance obligations,  system channel
capacity,   design  and  technical  performance,   customer  service  standards,
franchise  renewal,  sale  or  transfer  of  the  franchise,  territory  of  the
franchisee,  indemnification of the franchising authority,  use and occupancy of
public streets and types of cable services provided. State and local franchising
jurisdiction must be exercised consistently with federal law.

      In the offering of its  telecommunications  services,  the Company is also
subject to state  regulation.  The Company has been  certified as an  intrastate
interexchange  carrier for a private line  network in Nebraska and Kansas.  As a
certificated carrier, the Company will have a variety of regulatory obligations.
State regulatory  authorities generally have the authority to sanction a carrier
for  non-compliance  with  applicable  telecommunications  laws and  regulations
through  the  imposition  of  fines,  sanctions,  the  revocation  of  operating
authority, and other penalties.  There can be no assurance that the Company will
be able to obtain all necessary authorizations in the future.

      Proposed Changes

      Congress  and the FCC have  under  consideration,  and in the  future  may
consider and adopt, new laws,  regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly,  the operation,  ownership
and  profitability  of Galaxy's  broadcast and cable  programming  networks.  In
addition to the changes and proposed changes noted above,  such matters include,
for  example,   spectrum  use  fees,  political  advertising  rates,   potential
restrictions on the advertising of certain products (beer, wine and hard liquor,
for  example),  proposals  to  change  the  rates  and  structure  of the  cable
compulsory  copyright  license,  and the rules and  policies  to be  applied  in
enforcing  the FCC's equal  opportunity  regulations.  Other  matters that could
affect Galaxy's regulated media businesses include technological innovations and
developments   generally  affecting   competition  in  the  mass  communications
industry,  such as direct radio and television  broadcast satellite service, the
continued establishment of wireless cable systems,  digital television and radio
technologies, and the advent of telephone company participation in the provision
of video programming service.

      Employees

      As of December 31, 1999, Galaxy had approximately 342 full-time  employees
and 67 part-time employees,  none of whom are subject to a collective bargaining
agreement. Galaxy considers its relations with its employees to be excellent. In
addition,  Galaxy  Management  employs 40 people who are dedicated  primarily to
servicing Galaxy.

      Item 2.  Properties.

      Galaxy owns or leases parcels of real property for signal  reception sites
(antenna towers and headends),  microwave  facilities and business offices,  and
owns most of its service  vehicles.  Galaxy believes that its  properties,  both
owned and leased,  are in good  condition  and are  suitable  and  adequate  for
Galaxy's business operations.

      Galaxy's cables  generally are attached to utility poles under pole rental
agreements with local public utilities,  although in some areas the distribution
cable is buried in  underground  ducts or trenches.  The physical  components of
Galaxy's  systems require  maintenance and periodic  upgrading to keep pace with
technological advances.

      Item 3.  Legal Proceedings.

Except as described below,  there are no material  pending legal  proceedings to
which  either of the  Issuers is a party or to which any of its  properties  are
subject.

            Certain  customers in  Mississippi  have filed a class action in the
U.S.  District  Court for the Northern  District of  Mississippi  alleging  that
Galaxy  illegally  charges a late fee on monthly cable bills.  Galaxy has denied
any liability with respect to this claim and is defending  this action.  Similar
class actions  against other cable  companies have been filed in several states,
some of which have been successful.  At this point,  Galaxy is unable to predict
the likely outcome or the potential for an adverse judgment,  if any. An adverse
judgment  against  Galaxy could have a material,  adverse affect on its business
and its ability to make timely payments of principal and interest on the Notes.

      Item 4.  Submission of Matters to a Vote of Security Holders.

      Not applicable.


<PAGE>

                                     PART II

      Item 5.  Market for  Registrant's Common  Equity and  Related  Stockholder
               Matters.

      There is no  established  public  trading  market for Galaxy's  classes of
common equity.

      Item 6.  Selected Financial Data.

      The combined  statement  of  operations  data for the calendar  years 1996
through  1999 and the balance  sheets data as of December  31, 1996 through 1999
set forth below have been derived from Galaxy's  audited  financial  statements.
The data should be read in conjunction with the historical financial statements,
the notes related  thereto and the other financial  information  included in the
exhibits and elsewhere herein.

<TABLE>
<CAPTION>

                                                          1995           1996             1997            1998            1999
                                                      ------------     ---------        ---------       ---------       ---------
            (Dollars in thousands)

      Statements of Operations Data:
<S>                                                         <C>       <C>             <C>                   <C>             <C>
      Revenues                                              29,995    $     62,337    $     68,808          67,291          56,914
                                                      ------------    ------------    ------------    ------------    ------------
      Operating expenses:
        Systems operations                                  13,219          28,353          31,503          31,343          26,938
        Selling, general and administrative                  3,681           6,439           8,130           8,087           6,072
        Management fee to affiliate                          1,348           2,804           3,092           3,028           2,052
        Depreciation and amortization                       14,755          21,739          24,673          24,415          20,916
                                                      ------------    ------------    ------------    ------------    ------------
          Total operating expenses                          28,711          59,335          67,398          66,873          55,978
                                                      ------------    ------------    ------------    ------------    ------------
      Operating income                                       1,284           3,002           1,410             418             935

        Interest expense                                   (10,422)        (20,133)        (21,037)        (20,914)        (18,847)
        Other income (expense)                                 608             219            (421)         (4,350)          5,676
                                                      ------------    ------------    ------------    ------------    ------------
      Net loss                                        $     (8,530)   $    (16,912)   $    (20,048)   $    (24,846)   $    (12,236)
                                                      ============    ============    ============    ============    ============
      EBITDA (a)                                      $     11,490    $     24,741    $     26,083    $     24,833    $     21,851
                                                      ============    ============    ============    ============    ============


      Balance Sheet Data (at end of period):

      Total assets                                         199,913    $    217,498    $    207,048         151,743    $    137,530
      Total long-term debt and other obligations           145,527         169,738         179,250         152,446         148,177
      Partners' capital (deficit)                           42,171          25,259           5,211         (19,635)        (31,872)

Net cash provided by operating activities                7,646,964      13,520,488       4,104,091       1,384,698       5,455,226
Net cash provided by (used in) investing activities    (98,492,590)    (37,597,396)    (13,279,244)     26,197,766      (2,807,995)
Net cash provided by (used in) financing activities     91,386,051      22,984,418       9,239,906     (27,771,785)     (4,474,523)
</TABLE>

(a)   EBITDA  represents  income (loss) before interest  expense,  income taxes,
      depreciation and amortization, and other income (expense). Although EBITDA
      is not a measure of  performance  calculated in accordance  with generally
      accepted accounting  principles  ("GAAP"),  management believes that it is
      useful to an investor in evaluation the performance Galaxy because it is a
      measure  widely used in the cable  industry to evaluate a cable  company's
      performance.  Nevertheless, it should not be considered in isolation or as
      a substitute for operating income, cash flows from operating activities or
      any other  measure  for  determining  Galaxy's  operating  performance  or
      liquidity  that is calculated in accordance  with GAAP. As EBITDA is not a
      measure  calculated  in  accordance  with GAAP,  this  measure  may not be
      comparable to similarly titled measures employed by other companies.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

      Results of Operations

      Going Concern Uncertanties

      The  Partnership has incurred losses each year since its inception and has
a partnership  deficit of $31.9 million at December 31, 1999.  During 1999,  the
Partnership  continued  implementation  of a strategy  whereby it would sell its
cable  television  systems in its non-core  regions and focus on  improving  and
acquiring  cable  television  systems in its core  regions,  which are primarily
located in Illinois,  Kansas,  Kentucky,  Mississippi and Nebraska.  In 1999 and
1998,  the  Partnership  received  proceeds  from  sales of its  non-core  cable
television  systems of $10.1million and $38.6 million,  respectively,  which was
primarily used to pay down the amounts due under its revolving line of credit.

      At December 31, 1999, the  Partnership  was not in compliance with certain
covenants  under its term loan  agreement.  As discussed in Note 7, on March 31,
2000 the  Partnership  amended  its term  loan  agreement  to  modify  financial
covenants and change the maturity date of all outstanding  borrowings  under the
term loan agreement.

      Additionally, as part of this amended term loan agreement, the Partnership
must  have a  definitive  sale  agreement  in  force  by May  31,  2000  to sell
substantially all the interests of the Partnership  sufficient for the repayment
of  all  Partnership  loans  including  the  Senior   Subordinated  Notes.  This
definitive  agreement  shall not contain  any such  contingencies  allowing  the
purchaser to terminate  such an agreement  arising from: (a) the failure of such
purchaser to obtain the financing  necessary  for  purchase,  (b) the failure of
such  purchaser  to obtain the  approvals  necessary  for such  purchase  or (c)
relating to the completion of any due diligence  review by such purchaser  other
than completion of reasonable due diligence  customarily to be completed in such
transaction  after signing such  agreement.  Absent of such an agreement to sell
substantially  all the assets of the Company  triggers an event of default under
the terms of the amended loan agreement.

      Management  is  actively  pursuing  the  sale  of  the  interests  of  the
Partnership  in  accordance  with the  amended  term  loan  agreement.  However,
entering into a definitive  agreement as described  above by May 31, 2000 is not
assured.

      In light of the Partnership's  current  projected  earnings and cash flow,
the  Partnership  believes it will have the financial  resources to maintain its
current  level of  operations  until  December 31, 2000,  the term loan maturity
date.  However,  cash generated from operations  alone will not be sufficient to
pay the term loan on December 31, 2000 without  proceeds from the sale of assets
or refinancing of the term loans.  Additionally,  such a sale as required by the
loan  agreement  would  represent  a change in  control as defined in the Senior
Subordinated Loan Agreement and would represent an event of redemption.

      Absence of the completion of the aforementioned  definitive agreement, and
the  Partnership's  inability  to meet its cash flow needs,  raises  substantial
doubt about its ability to continue as a going concern.

      Overview

      In each of the past three years, the Systems have generated  substantially
all of their revenues from fees for monthly basic and premium  subscriptions and
from  one-time  charges  such  as  installation  and  service  charges.  Minimal
additional  revenues were generated  from the sale of advertising  and from home
shopping networks.

      Total revenues decreased from 1997 through 1999,  primarily as a result of
system dispositions.  Total systems operations expenses and selling, general and
administrative  expenses decreased from 1997 through 1999, primarily as a result
of system  dispositions.  Although  Galaxy  expects to  experience  increases in
programming expenses for the foreseeable future, Galaxy believes it will be able
to increase  its rates for cable  services to recover  increases in the costs of
programming to the extent such  increases  exceed the general rate of inflation.
The high level of depreciation and amortization associated with the acquisitions
and capital expenditures related to continued  construction and upgrading of the
Systems,  together with interest costs related to Galaxy's financing activities,
have caused  Galaxy to report net losses.  Galaxy  believes that such net losses
are common for cable television companies.

      The following table sets forth for the periods indicated certain statement
of operations  items expressed in dollar amounts (in thousands) and a percentage
of total revenues from continuing operations on a combined historical basis:
<TABLE>
<CAPTION>

                                                                 1997                      1998                     1999
                                                           --------------             -------------            -------------
                                                                      % of                     % of                    % of
                                                         Amount     Revenues       Amount     Revenues      Amount     Revenues
                                                         -------     ------        -------     ------       -------     ------
   (Dollars in Thousands)

<S>                                                     <C>          <C>          <C>          <C>          <C>         <C>
Revenues                                                $68,808      100.0%       $67,291      100.0%       56,914      100.0%
                                                        -------      ------       -------      ------      -------      ------
Operating expenses:
  System operations                                      31,503       45.8%        31,343       46.6%       26,938       47.3%
  Selling, general and administrative                     8,130       11.8%         8,087       12.0%        6,072       10.7%
  Management fee to affiliate                             3,092        4.5%         3,028        4.5%        2,052        3.6%
 Depreciation and amortization                           24,673       35.9%        24,415       36.3%       20,916       36.7%
                                                        -------      ------       -------      ------      -------      ------
Total operating expenses                                 67,398       98.0%        66,873       99.4%       55,978       98.3%
                                                        -------      ------       -------      ------      -------      ------
Operating income (loss)                                   1,410        2.0%           418        0.6%          935        1.7%

  Interest expense                                      (21,037)    (30.5%)       (20,914)    (31.1%)      (18,847)    (33.1%)
  Interest income                                            24        0.0%            53        0.1%           77        0.1%
  Gain (loss) on sale of assets                            (226)     (0.3%)        (4,088)     (6.1%)        5,599        9.8%
  Other income (expense),net                               (219)     (0.3%)          (315)     (0.4%)          -          0.0%
                                                        -------      ------       -------      ------      -------      ------
Net loss                                               $(20,048)    (29.1%)      $(24,846)    (36.9%)     $(12,236)    (21.5%)
                                                        =======      ======       =======      ======      =======      ======
EBITDA (a)                                               26,083       37.9%        24,833       36.9%       21,851       38.4%
                                                        =======      ======       =======      ======      =======      ======
</TABLE>



(a)   EBITDA  represents  income (loss) before interest  expense,  income taxes,
      depreciation and amortization, and other income (expense). Although EBITDA
      is not a measure of  performance  calculated in accordance  with generally
      accepted accounting  principles  ("GAAP"),  management believes that it is
      useful to an investor in evaluation the performance Galaxy because it is a
      measure  widely used in the cable  industry to evaluate a cable  company's
      performance.  Nevertheless, it should not be considered in isolation or as
      a substitute for operating income, cash flows from operating activities or
      any other  measure  for  determining  Galaxy's  operating  performance  or
      liquidity  that is calculated in accordance  with GAAP. As EBITDA is not a
      measure  calculated  in  accordance  with GAAP,  this  measure  may not be
      comparable to similarly titled measures employed by other companies.

      1999 Compared to 1998

      Revenues  decreased  15.4%, or approximately  $10.4 million,  from 1998 to
1999.  The  decrease in  revenues  resulted  primarily  from the sale of certain
Systems during 1999, resulting in a reduction in the number of basic subscribers
during 1999, offset somewhat by an increase in basic rates during the year.

      Systems  operations   expenses  decreased  14.1%,  or  approximately  $4.4
million,  from 1998 to 1999. The decrease in these expenses was due primarily to
the sale of certain  Systems during 1999.  Programming  expenses  increased from
24.4%  of  revenue  in 1998 to 25.6% in 1999.  As a  result,  system  operations
expenses as a  percentage  of revenue  increased  from 46.6% in 1998 to 47.3% in
1999, respectively.

      Selling,   general  and   administrative   expenses  decreased  24.9%,  or
approximately   $2.0  million,   from  1998  to  1999.   Selling,   general  and
administrative expenses, as a percentage of revenues, decreased to 10.7% in 1999
from 12.0% in 1998. The decrease was a result of closing a call center, the sale
of some systems and the reimbursement of certain costs from affiliated companies
for shared services.

      Management  fees to  affiliate  decreased  32.2%,  or  approximately  $1.0
million,  from 1998 to 1999.  Management  fees are calculated as a percentage of
revenue.  The  decrease  was a result of the  reduction  of this  percentage  in
accordance with the Management  Agreement and a reduction in revenues  discussed
above.

      Depreciation  and amortization  expense  decreased 14.3%, or approximately
$3.5 million,  from 1998 to 1999. This decrease in expenses was due primarily to
the  sale  of  certain  Systems  during  1999.  As  a  percentage  of  revenues,
depreciation and amortization increased from 36.3% in 1998 to 36.7% in 1999.

      Interest expense decreased 9.9%, or approximately $2.1 million,  from 1998
to 1999.  This  decrease  was a  result  of  payments  made to  reduce  Galaxy's
revolving  note as a result  of the sale of  certain  Systems  during  the year,
offset by an  increase  in  amortization  of  intangible  loan  costs.  Interest
expense,  as a percentage of revenues,  increased from 31.1% in 1998 to 33.1% in
1999.  Interest  income  increased  45.3%  from 1998 to 1999 due to higher  cash
balances in 1999.

      Gain (loss) on sale of assets went from a loss of 4.1 million,  or 6.1% of
revenues  in 1998 to a net gain of $5.6  million,  or 9.8% of  revenues in 1999.
This increase is directly  attributable  to the sale of certain  Systems  during
1999.

      Other  expense,  net,  was zero in 1999,  as  compared to a net expense of
$315,000 during 1998. During 1998, there were one-time  non-operating charges to
write off current assets and liabilities realized at the time of the purchase of
the Initial Systems. There were no such expenses during 1999.

      Galaxy pays no income  taxes,  although it is required to file federal and
state income tax returns for  informational  purposes  only.  All income or loss
flowed  through  to the  partners  of  Galaxy  as  specified  in  the  governing
partnership agreement.

      As a combined  result of the items  discussed  above,  net loss  decreased
45.5%,  or  approximately  $11.3 million,  from 1998 to 1999. As a percentage of
revenues, net loss decreased from 36.9% in 1998 to 23.8% in 1999.

      EBITDA decreased 12.0%, or approximately $3.0 million,  from 1998 to 1999,
due  primarily  to the sale of certain  systems.  As a  percentage  of revenues,
EBITDA  increased from 36.9% in 1998 to 38.4% in 1999,  primarily as a result of
the decrease in selling,  general and  administrative  costs.  EBITDA represents
income  (loss)  before  interest   expense,   income  taxes,   depreciation  and
amortization,  and other income  (expense).  Although EBITDA is not a measure of
performance   calculated  in  accordance  with  generally  accepted   accounting
principles  ("GAAP"),  management  believes  that it is useful to an investor in
evaluation  the  performance  Galaxy  because it is a measure widely used in the
cable  industry  to evaluate a cable  company's  performance.  Nevertheless,  it
should not be considered in isolation or as a substitute  for operating  income,
cash  flows from  operating  activities  or any other  measure  for  determining
Galaxy's  operating  performance  or liquidity  that is calculated in accordance
with GAAP. As EBITDA is not a measure  calculated in accordance  with GAAP, this
measure may not be comparable  to similarly  titled  measures  employed by other
companies.

      1998 Compared to 1997

      Revenues decreased 2.2%, or approximately $1.5 million, from 1997 to 1998.
The decrease in revenues  resulted  primarily  from the sale of certain  Systems
during 1998, offset somewhat by an increase in basic rates during the year.

      System operations  expenses decreased 0.5%, or approximately $0.2 million,
from 1997 to 1998.  The decrease in these expenses was due primarily to the sale
of certain Systems during 1998. Systems operations expenses,  as a percentage of
revenues,  increased  from 45.8% in 1997 to 46.6% in 1998. The increase in these
expenses  was  primarily  the  result  of  increases  in  programming  and other
subscriber  related expenses that typically vary with revenues and the increased
number of channels carried.

      Selling,   general  and   administrative   expenses   decreased  0.5%,  or
approximately  $43,000,  from 1997 to 1998. Selling,  general and administrative
expenses, as a percentage of revenues,  increased from 11.8% in 1997 to 12.0% in
1998.  These  changes  were   attributable  to  a  decrease  in  the  amount  of
reimbursements  from programmers for marketing campaigns from 1.3% of revenue in
1997 to 0.2% in 1998, offset by a decrease in other marketing expenses from 3.5%
of revenue in 1997 to 2.9% of revenue in 1998.

      Management  fees to affiliate  decreased 2.1%, or  approximately  $64,000,
from 1997 to 1998.  Management  fees are  calculated as a percentage of revenue.
The decrease was directly proportionate to the decrease in revenue.

      Depreciation  and  amortization  expense  decreased 1.0%, or approximately
$258,000,  from 1997 to 1998.  This  decrease was due to the  reduction of fixed
assets  as  a  result  of  the  sale  of  certain  Systems,  offset  by  capital
expenditures.  As  a  percentage  of  revenues,  depreciation  and  amortization
increased from 35.9% in 1997 to 36.3% in 1998.

      Interest expense decreased 0.6%, or approximately  $123,000,  from 1997 to
1998. This decrease was a result of payments made to reduce  Galaxy's  revolving
note as a result of the sale of certain  Systems  during the year,  offset by an
increase in amortization of intangible loan costs.

      Loss on sale of assets  went from a net loss of $0.2  million,  or 0.3% of
revenues during 1997 to a net loss of $4.1 million, or 6.1% of revenues in 1998.
This increase is directly  attributable  to the loss on sale of certain  Systems
during 1998.

      Other expense,  net,  increased from a net expense of $219,000 during 1997
to a net  expense of $315,000  during  1998.  This change of $0.1  million was a
result of  one-time  non-operating  charges  to write  off  current  assets  and
liabilities realized at the time of the purchase of the Initial Systems.

      Galaxy pays no income  taxes,  although it is required to file federal and
state income tax returns for  informational  purposes  only.  All income or loss
flowed  through  to the  partners  of  Galaxy  as  specified  in  the  governing
partnership agreement.

      As a combined  result of the items  discussed  above,  net loss  increased
23.9%,  or  approximately  $4.8  million,  from 1997 to 1998. As a percentage of
revenues, net loss increased from 29.1% in 1997 to 36.9% in 1998.

      EBITDA decreased  approximately $1.2 million,  or 4.8%, from 1997 to 1998,
primarily due to the decrease in revenues.  As a percentage of revenues,  EBITDA
decreased from 37.9% in 1997 to 36.9% in 1998.  EBITDA  represents income (loss)
before interest expense, income taxes, depreciation and amortization,  and other
income (expense).  Although EBITDA is not a measure of performance calculated in
accordance with generally accepted accounting  principles  ("GAAP"),  management
believes that it is useful to an investor in evaluation the  performance  Galaxy
because it is a measure  widely  used in the cable  industry to evaluate a cable
company's performance. Nevertheless, it should not be considered in isolation or
as a substitute for operating  income,  cash flows from operating  activities or
any other measure for determining  Galaxy's  operating  performance or liquidity
that  is  calculated  in  accordance  with  GAAP.  As  EBITDA  is not a  measure
calculated  in  accordance  with GAAP,  this  measure may not be  comparable  to
similarly titled measures employed by other companies.

      1997 Acquisitions and Dispositions

      Galaxy acquired and disposed of various assets comprising cable television
systems during 1997. Following is a brief discussion of each transaction.

      TCI Cable of the Midland - Sarpey  County  Systems.  On September 1, 1997,
Galaxy acquired certain assets  comprising the cable  television  systems of TCI
Cable of the  Midland  (the  "Sarpey  County  Systems"),  located  in Sarpey and
Douglas counties,  Nebraska for a purchase price of approximately  $875,000.  At
September 1, 1997, the Sarpey County Systems  passed  approximately  3,000 homes
located in Nebraska,  with  approximately 80 miles of plant, for a density of 39
homes per mile.  The Sarpey  County  Systems  served  approximately  1,613 basic
subscribers and had a basic penetration rate of approximately 52%.

            On April 7, 1997, Galaxy sold its cable television system located in
Five Points, South Carolina, representing 311 basic subscribers for $372,645, or
approximately $1,200 per subscriber.  Galaxy used most of the proceeds from this
sale to pay down principal of the revolving note.

      On August 1, 1997,  Galaxy sold its cable  television  systems  located in
Lake Murray, South Carolina, representing 587 subscribers for $587,000 or $1,000
per subscriber.  Galaxy retained  ownership of all related  equipment located in
the two head-end facilities. Galaxy used the proceeds from this sale to pay down
principal of the revolving note.

      On December 31, 1997, Galaxy sold its cable television  systems located in
Lauderdale County,  Mississippi,  representing 833 subscribers for $1.12 million
or $1,350 per  subscriber.  Galaxy used the proceeds  from this sale to pay down
principal of the revolving note.

      On December 31, 1997, Galaxy sold its cable television  systems located in
South  Kansas,  representing  1,346  subscribers  for $1.25  million or $932 per
subscriber. Galaxy used the proceeds from this sale to pay down principal of the
revolving note.

      1998 Acquisitions, Dispositions and Trades

      Galaxy acquired and disposed of various assets comprising cable television
systems during 1998. Following is a brief discussion of each transaction.

      On January 15, 1998,  Galaxy sold its cable television  systems located in
Wyoming and Idaho, representing 4,000 subscribers for $4.9 million or $1,225 per
subscriber. Galaxy used the proceeds from this sale to pay down principal of the
revolving note.

      On February 1, 1998,  Galaxy sold its cable  television  system located in
Hooper,  Nebraska,  representing 242 subscribers for approximately  $262,000, or
approximately $1,080 per subscriber.  Galaxy used the proceeds from this sale to
pay down principal of the revolving note.

      On March 31, 1998,  Galaxy sold two cable  television  systems  located in
Olathe,  Kansas,  and Independence,  Missouri,  representing 269 subscribers for
approximately  $190,000,  or approximately $706 per subscriber.  Galaxy used the
proceeds from this sale to pay down principal of the revolving note.

      On March 31, 1998, Galaxy sold six cable television systems located in and
around Ottawa County,  Kansas,  representing  752 subscribers for  approximately
$623,000, or approximately $830 per subscriber.

      On March 31, 1998, Galaxy purchased one cable television system located in
Brooks  and  Colquitt  Counties  in  Georgia,   representing  approximately  300
subscribers for approximately $141,000, or approximately $470 per subscriber.

      On March 31, 1998, Galaxy traded four cable television  systems located in
and around Sheridan County, Nebraska, representing approximately 850 subscribers
for  one  cable  television  system  located  in  Jefferson  County,   Colorado,
representing approximately 730 subscribers.

       On April 30, 1998, Galaxy sold seven cable television  systems located in
and around Lincoln County,  Kansas,  representing  approximately 500 subscribers
for approximately  $395,000,  or approximately $790 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

      On June 30,  1998,  Galaxy  sold one cable  television  system  located in
Goessel,  Kansas,  representing  approximately 100 subscribers for approximately
$110,000, or approximately $1,100 per subscriber.  Galaxy used the proceeds from
this sale to pay down principal of the revolving note.

      On June 30, 1998, Galaxy sold all of its cable television  systems located
in  central   Georgia,   representing   approximately   5,100   subscribers  for
approximately  $6,120,000,  or approximately $1,200 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

       On July 31, 1998, Galaxy two cable television  systems located in Kansas,
representing 201 subscribers for approximately  $171,000,  or approximately $850
per subscriber.

      On August 20, 1998,  Galaxy sold 25 cable television  systems,  13 systems
located in Iowa and 12 systems located in Missouri,  representing  approximately
3,972  subscribers  for  approximately  $3,178,000,  or  approximately  $800 per
subscriber. Galaxy used the proceeds from this sale to pay down principal of the
revolving note.

       On August 31, 1998, Galaxy sold nine cable television  systems located in
Southwest   Georgia,    representing   approximately   2,225   subscribers   for
approximately  $2,760,000,  or approximately $1,240 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

      On August 31, 1998,  Galaxy sold 23 cable television  systems,  14 systems
located in  Illinois  and nine in  Nebraska,  representing  approximately  3,210
subscribers for approximately  $2,758,000, or approximately $860 per subscriber.
Galaxy used the proceeds  from this sale to pay down  principal of the revolving
note.

      On November 30, 1998, Galaxy sold its cable television  systems located in
Louisiana,  representing  5,575  subscribers for  approximately  $9,500,000,  or
approximately $1,700 per subscriber.  Galaxy used the proceeds from this sale to
pay down principal of the revolving note.

      On December 31, 1998,  Galaxy sold one cable television  system located in
Hawkins County,  Tennessee,  representing  approximately  1,740  subscribers for
approximately  $2,050,000,  or approximately $1,177 per subscriber.  Galaxy used
the proceeds from this sale to pay down principal of the revolving note.

      On December 31, 1998,  Galaxy sold 72 cable television  systems located in
Illinois,  Missouri and Kansas, representing approximately 8,300 subscribers for
approximately  $6,200,000,  or approximately  $750 per subscriber.  In addition,
Galaxy  realized a 40% equity position in Galaxy  American  Communications,  LLC
("GAC").  This equity has no current  market value at the present  time.  Galaxy
used the proceeds from this sale to pay down principal of the revolving note.

      1999 Acquisitions, Dispositions and Trades

      On February 12, 1999, Galaxy sold one satellite master antenna  television
system ("SMATV") located in Spring Creek,  Georgia,  representing  approximately
1,000  subscribers for  approximately  $1,220,000,  or approximately  $1,220 per
subscriber,  and recorded a gain on sale of approximately  $1.0 million.  Galaxy
used the proceeds from this sale to pay down principal of the revolving note.

            On  May  1,  1999,   Galaxy  traded  6  cable  television   systems,
representing approximately 7,500 subscribers for seven cable television systems,
representing approximately 7,100 subscribers from Mississippi Cablevision,  Inc.
("MCI"),  an affiliate of  Telecommunications,  Inc. The Galaxy cable television
systems are located primarily in Colorado,  Iowa and South Dakota, while the MCI
cable television systems are located in Mississippi. The trade was accounted for
as a business  combination in accordance  with the Accounting  Principles  Board
Opinion No. 16 "Business  Combinations."  The estimated fair market value of the
cable   television   systems   received  was   approximately   $9.4  million  or
approximately  $1,300  per  subscriber.  The  fair  market  value  of the  cable
television systems received was estimated by using the purchase price (price per
subscriber) for similar cable television systems bought from MCI by an affiliate
of Galaxy.  The net historical cost of the cable television systems given up was
approximately  $6.9  million,  resulting  in Galaxy  recording a gain on sale of
approximately $2.5 million, net of expenses.

      On  June  23,  1999,  Galaxy  sold 8  cable  television  systems,  located
primarily  in  Alabama,   representing   approximately   5,500  subscribers  for
approximately $8.4 million, or approximately $1,540 per subscriber, and recorded
a gain on sale of approximately $1.8 million. Galaxy used the proceeds from this
sale to pay down principal of the revolving note.

      On October 1, 1999, Galaxy sold seven satellite master antenna  television
systems("SMATV's")  and two cable systems  located  primarily in the Kansas City
area,  representing  approximately  1,165  subscribers for  approximately  $1.36
million, or approximately $1,161 per subscriber,  and recorded a gain on sale of
approximately  $244,000.  Galaxy  used the  proceeds  from this sale to pay down
principal of the revolving note.

      Pending Dispositions

      On March 31, 2000,  Galaxy sold one cable  television  system,  located in
Kansas,  representing  approximately  1,424 subscribers for  approximately  $3.5
million,  or approximately  $2,492 per subscriber.  Galaxy will use the proceeds
from this sale to pay down principal of the term loans.

      Liquidity and Capital Resources

      The  cable  television   business  requires   substantial   financing  for
construction,  expansion and  maintenance  of plant.  Galaxy intends to continue
pursuit of a business  strategy  that  includes  selective  acquisitions.  Since
December of 1994 Galaxy  received  cash equity  contributions  of  approximately
$44.6  million from the Equity  Investors and the Senior  Managers.  Galaxy also
received equity from Vantage Cable totaling  approximately $6.4 million.  Galaxy
had an  aggregate  of $148.1  million of  indebtedness  as of December 31, 1999,
representing  $119.6  million of senior  subordinated  notes (net of unamortized
discount of $0.4 million),  $25.3 million drawn under Galaxy's revolving line of
credit (See "The Revolving Credit Facility and Term Loan"),  and $3.2 million in
various other obligations.  Net payments were made under Galaxy's revolving line
of credit  of  approximately  $5.1  million  during  1999.  Except  for the debt
repayments  required  under term loan,  Galaxy  anticipates  that operating cash
flows,  sales proceeds of assets sold outside its Core Areas and debt and equity
restructuring  will provide  sufficient  funds  necessary to meet debt  service,
working capital and capital expenditure needs.

      Galaxy  provided net cash by operating  activities of $1.4 million in 1998
and $5.5  million in 1999,  respectively,  an increase  in net cash  provided by
operating activities of $4.1 million.  This increase is mainly due to a decrease
in the cash used for accounts payable and accrued expenses during 1999.

      Galaxy provided net cash by investing activities of $26.2 million in 1998,
and used net cash in investing  activities  of $2.8 million in 1999, an increase
in net cash used in investing  activities  of $29.0  million.  This  increase is
mainly due to a decrease in proceeds  from sale of assets and an increase in the
acquisition of capital assets.

      Galaxy used net cash in  financing  activities  of $27.7  million and $4.5
million in 1998 and 1999, respectively, a decrease in net cash used in financing
activities  of $23.2  million,  mainly due a decrease in net  borrowings  on the
Revolver.

      At December 31, 1999,  Galaxy was not in compliance with certain covenants
under its term loan  agreement.  On March 31, 2000 Galaxy  amended its term loan
agreement to modify  financial  covenants  and change the  maturity  date of all
outstanding  borrowing  under the term loan  agreement and entered into a new $5
million Term Loan  Agreement  from three of the four lenders under the term loan
agreement.  As discussed  in Note 2 to the  consolidated  financial  statements,
based on current  estimates of operating cash flow,  management does not believe
it will have  sufficient  cash to fund  required  debt  payments on December 31,
2000.  As  required  by the  terms of  Galaxy's  amended  term loan and new loan
agreement  described in Note 2, Galaxy's  partners are negotiating to sell their
Galaxy  partnership  interests  to a  third  party.  However,  closing  of  such
transaction  is  not  assured.  Absent  the  completion  of  the  aforementioned
transaction and the  partnership's  inability to meet its cash flow needs raises
substantial doubt about its ability to continue as a going concern.

      Capital Expenditures

      During  1999,   Galaxy's   capital   expenditures   (exclusive  of  system
acquisitions) were approximately $12.5 million.  These capital expenditures were
used to add channels,  construct  wide-area  networks for distance  learning and
data  services  and  purchase  new  computer  equipment  and software to enhance
communications and data traffic between employees and Galaxy subscribers. Galaxy
anticipates   capital   expenditures   over  the  next  two  years   will  total
approximately $15.0 million.  These capital  expenditures will be used primarily
to continue the installation of fiber optic cable,  purchase  digital  equipment
and to allow for the  reduction  in the number of headends.  These  expenditures
also  include  expansion  and  replacement  of  headend  buildings;  rewires  of
associated  electronic  equipment  and for the  purchase of new  vehicles,  test
equipment  and computer  equipment.  The  remaining  capital  items  include the
expenditures  required to add new  subscribers  and the expansion and upgrade of
the cable  television  facilities.  Absent  the  requirements  of the term loan,
Galaxy  would have  expected to finance  the  anticipated  capital  expenditures
described above with cash flows generated from operations,  proceeds from system
sales and other debt as necessary.

      The Revolving Credit Facility and Term Loan

      Galaxy's   September  1995  Amended  and  Restated  Loan  Agreement  ("the
Revolver") has been  periodically  amended and subsequently  converted to a Term
Loan, with the latest  amendment  occurring in March 2000. Net proceeds from any
system sale will be used to reduce the commitment  available under the Revolver.
On  December  31,  2000,  Galaxy is required  to pay the  outstanding  principal
balance  together with all accrued and unpaid interest,  fees and expenses.  The
Revolver  requires Galaxy to maintain  compliance with certain  financial ratios
and other covenants,  such as annualized cash flow to interest expense,  capital
expense  limits and basic  subscribers  to total  long term debt.  Galaxy is not
permitted  to borrow  additional  funds  under the  Revolver  without  the prior
written  consent  of the  lenders.  At  December  31,  1999,  Galaxy  was not in
compliance with certain  covenants  under its term loan agreement.  On March 31,
2000 Galaxy  amended its term loan agreement to modify  financial  covenants and
change  the  maturity  date of all  outstanding  borrowing  under  the term loan
agreement

      On  March  31,  2000,  Galaxy  entered  into a new $5  million  Term  Loan
Agreement  from three of the four lenders under the Revolver  ("New Loan").  The
New Loan also  requires  Galaxy to maintain  compliance  with certain  financial
ratios and other  covenants,  such as annualized cash flow to interest  expense,
capital  expense  limits and basic  subscribers to total long term debt. The New
Loan  restricts  Galaxy's  ability to borrow without the consent of the lenders.
The New Loan is due the earlier of December 31, 2000 or upon the  occurrence  of
certain events set forth in the Loan Agreement.

      Under the March 2000  amendment to the Revolver and the New Loan, it is an
"Event of Default"  with respect to each if a definitive  agreement for the sale
of Galaxy and an entity  affiliated  with the  Company or system  asset sales of
substantially  all the systems  owned by Galaxy and the  affiliate  has not been
executed and delivered by May 31, 2000 with an unaffiliated third party buyer in
a  form  reasonably  satisfactory  to  the  majority  lenders.  There  can be no
assurances that a definitive  purchase  agreement will be delivered by this date
or, in the event of Galaxy and the  affiliate's  failure or inability to comply,
that such provisions will be waived by the majority lenders.

      Senior Subordinated Notes

      Pursuant  to an  indenture  dated  September  28,  1995 (the  "Indenture")
between  Galaxy and Capital Corp.,  and the Bank of New York as trustee,  Galaxy
issued  $120.0  million  aggregate   principal  amount  of  senior  subordinated
obligations  (the  "Notes").  Absent a sale of assets as required of the term of
the term loan as  discussed  above  which sale would be  considered  an event of
redemption,  such notes mature  October 2005. The Notes bear an interest rate of
12.375% per annum  payable  semiannually  on April 1 and  October 1,  commencing
April 1, 1996.

      The payment of  principal  and  interest on the Notes is  subordinated  in
right of payment to the Revolver.  The Notes will rank pari passu with all other
senior  subordinated  indebtedness  of  Galaxy,  if any,  and is  senior  to all
subordinated debt of Galaxy.

      The  Indenture   contains   various   restrictive   covenants,   including
limitations  on  indebtedness,   certain   restricted   payments  and  affiliate
transactions  as defined,  purchases,  asset sales and capital  expenditures  in
addition to reporting requirements.

      Inflation

      Galaxy  does not believe  that  inflation  in the United  States in recent
years has had a significant effect on results on operations.

            Recent Accounting Pronouncements

      In June 1998,  the FASB issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current  earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a  hedge  transaction  and,  if it is,  the  type  of  hedge  transaction.  This
statement,  as amended,  is effective for the Partnership  beginning  January 1,
2001,  Management of the Partnership  anticipates that the adoption of SFAS #133
will not have a significant effect on the Partnerships' results of operations or
its financial position.

Safe Harbor under the Private Securities Litigation Reform Act Of 1995

      The statements  contained in the Form 10-K relating to Galaxy's  operating
results, and plans and objectives of management for future operations, including
plans or  objectives  relating to Galaxy's  products  and  services,  constitute
forward  looking  statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995.  Actual results of Galaxy may differ  materially
from those in the forward-looking  statements and may be affected by a number of
factors. These factors include the receipt of regulatory approvals,  the success
of  Galaxy's   implementation  of  digital  technology,   subscriber   equipment
availability, tower space availability, and the absence of interference, as well
as other factors contained herein and in Galaxy's securities filings.

      Galaxy's future revenues and profitability are difficult to predict due to
a variety of risks and  uncertainties,  including  (i) business  conditions  and
growth in Galaxy's existing  markets,  (ii) the successful launch of systems and
technologies in new and existing markets,  (iii) Galaxy's existing  indebtedness
and the need for additional  financing to fund subscriber  growth and system and
technological   development,   (iv)   government   regulation,   including   FCC
regulations,  (v) Galaxy's  dependence on channel  leases,  (vi) the  successful
integration  of future  acquisitions  and (vii)  numerous  competitive  factors,
including alternative methods of distributing and receiving video transmissions.

      Notwithstanding  any  disposition  of cable systems,  modest  increases in
revenues and subscribers are anticipated in 2000; however,  the rate of increase
cannot be estimated  with precision or certainty.  Galaxy  believes that general
and  administrative  expenses and  depreciation  and  amortization  expense will
continue to increase to support overall growth.

      Because of the foregoing uncertainties affecting Galaxy's future operating
results, past performance should not be considered to be a reliable indicator of
future performance, and investors should not use historical results or trends as
determinative   of  Galaxy's   future   performance.   In   addition,   Galaxy's
participation in a developing  industry  employing  rapidly changing  technology
will result in significant volatility in the market value of the Notes.

      In addition to the matters noted above,  certain other  statements made in
this Form 10-K are forward  looking.  Such statements are based on an assessment
of a variety of factors,  contingencies  and  uncertainties  deemed  relevant by
management,  including technological changes,  competitive products and services
and management  issues. As a result, the actual results realized by Galaxy could
differ materially from the statements made herein. Readers of this Form 10-K are
cautioned not to place undue reliance on the forward looking  statements made in
this Form 10-K or in Galaxy's other securities filings.

      Item 7a.    Qualitative and Quantitative Disclosures about Market Risks.

      Galaxy is not directly  exposed to any foreign exchange rates or commodity
price fluctuations.

      Galaxy  is  exposed  to  changes  in  domestic  interest  rates due to our
floating-rate of interest (LIBOR interest rate) on certain debt.

      Based on Galaxy's  fixed/floating debt at December 31, 1999, a 1% increase
in market interest rates would increase our yearly interest expense and decrease
income  by  approximately   $266,000.  This  amount  was  calculated  using  the
hypothetical  interest  rate on our  floating  rate debt at December  31,  1999,
assuming a constant level of  variable-rate  debt.  This amount does not include
other  results  that could  result  from  increased  interest  rates,  such as a
downturn in overall economic  activity,  or actions the management could take to
lessen  our  risk.  This  also does not take into  account  any  changes  in our
financial structure that may result from higher interest rates.

<PAGE>

F-25

<PAGE>

      Item 8.   Financial Statement and Supplementary Data.

                       GALAXY TELECOM, L.P. AND SUBSIDIARY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                        AND FINANCIAL STATEMENT SCHEDULE

                                                                            Page

Consolidated Financial Statements:

     Reports of Independent Accountants                                F-2

     Consolidated Balance Sheets as of December 31, 1999 and 1998      F-4

     Consolidated Statements of Operations for the Years Ended
       December 31, 1999, 1998 and 1997                                F-5

     Consolidated Statements of Changes in Partners' Capital (Deficit)
       for the Years Ended December 31, 1999, 1998 and 1997            F-6

     Consolidated Statements of Cash Flows for the Years Ended
       December 31, 1999, 1998 and 1997                                F-7

     Notes to Consolidated Financial Statements                        F-8

     Financial Statement Schedule:

     Reports of Independent Accountants on Financial Statement Schedule F-20

     Schedule II - Valuation and Qualifying Accounts

F-22

All other schedules are omitted as the required information is not applicable or
the information is presented in the consolidated  financial statements,  related
notes or financial statement schedule.

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners of
  Galaxy Telecom, LP:

We have audited the accompanying  consolidated  balance sheet of Galaxy Telecom,
L.P. and subsidiary ("the  Partnership") as of December 31, 1999 and the related
consolidated  statements of operations,  changes in partners' capital (deficit),
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
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,  such  financial  statements  present  fairly,  in all material
respects, the financial position of the Partnership at December 31, 1999 and the
results  of its  operations  and its  cash  flows  for the  year  then  ended in
conformity with accounting principles generally accepted in the United States of
America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 2 to the
consolidated financial statements,  the Partnership's inability to meet its cash
flow needs and to comply with certain debt  covenants  raise  substantial  doubt
about its ability to continue as a going concern.  Management's  plan concerning
these matters is also described in Note 2. The 1999 financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

Deloitte & Touche LLP

March 17, 2000

(April 11, 2000 as to Notes 2,4 and to the term loan described in Note 7)

St. Louis, Missouri

<PAGE>

                        Report of Independent Accountants

To the Partners
Galaxy Telecom, L.P.

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements  of  operations,  cash flows and  changes in  partners'
capital  (deficit)  as of and for  each of the two  years  in the  period  ended
December  31, 1998  present  fairly,  in all material  respects,  the  financial
position,  results of operations and cash flows of Galaxy Telecom,  L.P. and its
subsidiary (the "Partnership") as of and for each of the two years in the period
ended  December 31, 1998, in conformity  with  accounting  principles  generally
accepted in the United States. These financial statements are the responsibility
of the Partnership's management;  our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States,  which  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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable  basis for the opinion  expressed above. We have not
audited the consolidated  financial statements of the Partnership for any period
subsequent to December 31, 1998.

PricewaterhouseCoopers LLP

Austin, Texas
February 19, 1999

<PAGE>
<TABLE>
<CAPTION>

                       GALAXY TELECOM, L.P. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                                                            December 31,
                                                                    ------------------------------
                                                                       1999               1998
                                                                     -------------    -------------
                                  ASSETS

<S>                                                                 <C>              <C>
Cash and cash equivalents                                           $     386,485    $   2,213,777
Subscriber receivables, net of allowance for doubtful accounts of
     $87,449 and $116,572, respectively                                 4,431,946        4,334,563
Systems and equipment, net                                             94,568,015      104,197,674
Intangible assets, net                                                 34,266,208       38,260,678
Prepaids and other                                                      3,877,975        2,735,940
                                                                    -------------    -------------
        Total assets                                                $ 137,530,629    $ 151,742,632
                                                                    =============    =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Accounts payable and accrued expenses                               $  17,198,650    $  14,854,052
Subscriber deposits and deferred revenue                                4,026,920        4,078,407
Long-term debt and other obligations                                  148,176,701      152,445,620
                                                                    -------------    -------------
        Total liabilities                                             169,402,271      171,378,079

        Total partners' capital (deficit)                             (31,871,642)     (19,635,447)
                                                                    -------------    -------------
        Total liabilities and partners' capital (deficit)           $ 137,530,629    $ 151,742,632
                                                                    =============    =============

</TABLE>

    The                           accompanying notes are an integral part of the
                                  consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                       GALAXY TELECOM, L.P. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    Years Ended December 31,
                                               --------------------------------------
                                                1999             1998              1997
                                           ------------    ------------    ------------

<S>                                        <C>             <C>             <C>
Revenues                                   $ 56,913,515    $ 67,291,506    $ 68,807,763
                                           ------------    ------------    ------------

Operating expenses:
     Systems operations                      26,938,188      31,343,006      31,502,762
     Selling, general and administrative      6,071,542       8,086,624       8,129,733
     Management fee to affiliate              2,052,074       3,028,118       3,092,354
     Depreciation and amortization           20,916,494      24,415,370      24,672,569
                                           ------------    ------------    ------------
        Total operating expenses             55,978,298      66,873,118      67,397,418
                                           ------------    ------------    ------------

Operating income (loss)                         935,217         418,388       1,410,345

Interest expense                            (18,847,367)    (20,914,341)    (21,036,934)
Interest income                                  77,188          52,533          23,710
Gain (loss) on sale of assets                 5,598,767      (4,088,370)       (226,185)
Other income (expense), net                        --          (314,587)       (218,818)
                                           ------------    ------------    ------------

        Net loss                           $(12,236,195)   $(24,846,377)   $(20,047,882)
                                           ============    ============    ============

</TABLE>



  The                             accompanying notes are an integral part of the
                                  consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                       GALAXY TELECOM, L.P. AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF CHANGES

                         IN PARTNERS' CAPITAL (DEFICIT)

                          General                                  Limited Partners
                          Partners       Class B        Class C        Class D         Class E         Total          Total
                        ------------    ------------    ------------    ------------    ------------    ------------   ------------
<S>                      <C>            <C>             <C>             <C>             <C>             <C>             <C>

Balance, December 31,
                 1996   $ 18,257,812    $      1,000    $    416,000    $  6,384,000    $    200,000    $  7,001,000   $ 25,258,812

Net loss                 (18,257,812)           (256)       (106,366)     (1,632,311)        (51,137)     (1,790,070)   (20,047,882)
                        ------------    ------------    ------------    ------------    ------------    ------------   ------------
Balance, December 31,
                 1997           --               744         309,634       4,751,689         148,863       5,210,930      5,210,930

Net Loss                 (19,635,447)           (744)       (309,634)     (4,751,689)       (148,863)     (5,210,930)   (24,846,377)
                        ------------    ------------    ------------    ------------    ------------    ------------   ------------

Balance, December 31,
                 1998    (19,635,447)           --              --              --              --              --      (19,635,447)

Net Loss                 (12,236,195)           --              --              --              --              --      (12,236,195)
                        ------------    ------------    ------------    ------------    ------------    ------------   ------------
Balance, December 31,
                 1999   $(31,871,642)   $       --      $       --      $       --      $       --      $       --     $(31,871,642)
                        ============    ============    ============    ============    ============    ============   ============

</TABLE>



















  The                             accompanying notes are an integral part of the
                                  consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                       GALAXY TELECOM, L.P. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Years Ended December 31,
                                                                  ------------------------
                                                           1999            1998           1997
                                                       ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>
Cash flows from operating activities:
   Net loss                                            $(12,236,195)   $(24,846,377)   $(20,047,882)
   Adjustments to reconcile net loss to net cash
     provided by operating activities:
     Depreciation expense                                18,363,959      20,572,418      20,554,588
     Amortization expense                                 2,552,535       3,842,952       4,117,981
     Amortization included in interest expense            1,320,000       1,269,126         934,770
     Provision for doubtful accounts receivable             991,364       1,209,797       1,992,318
     Loss (gain) on disposal of cable systems            (5,598,766)      4,088,370         226,185
     Changes in assets and liabilities:
      Subscriber receivables                             (1,088,747)       (120,100)     (1,418,451)
      Prepaids and other                                 (1,142,035)        561,633      (1,288,805)
      Accounts payable and accrued expenses               2,344,598      (3,837,431)     (1,637,383)
      Subscriber deposits and deferred revenue              (51,487)     (1,355,690)        670,770
                                                       ------------    ------------    ------------
         Net cash provided by operating activities        5,455,226       1,384,698       4,104,091
                                                       ------------    ------------    ------------

Cash flows from investing activities:

   Acquisition of cable systems - net of trades                --          (999,452)       (825,000)
   Proceeds from sales of cable systems                  10,118,327      38,619,045       3,304,334
   Purchase of capital assets                           (12,509,465)    (11,337,085)    (15,222,381)
   Other intangible assets                                 (416,857)        (84,742)       (536,197)
                                                       ------------    ------------    ------------
         Net cash provided by (used in) investing
           activities                                    (2,807,995)     26,197,766     (13,279,244)
                                                       ------------    ------------    ------------

Cash flows from financing activities:

   Borrowings under term debt and revolver                3,000,000      10,825,000      12,400,000
   Payments under term debt and revolver                 (8,175,000)    (39,550,000)     (3,051,377)
   Borrowings under other debt                            3,151,427       4,014,110         259,386
   Payments under other debt                             (2,305,346)     (2,153,802)       (368,103)
   Payment of debt issue costs                             (145,604)       (907,093)           --

         Net cash provided by (used in) financing
           activities                                    (4,474,523)    (27,771,785)      9,239,906
                                                       ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents     (1,827,292)       (189,321)         64,753
Cash and cash equivalents, beginning of year              2,213,777       2,403,098       2,338,345
                                                       ------------    ------------    ------------

Cash and cash equivalents, end of year                 $    386,485    $  2,213,777    $  2,403,098
                                                       ============    ============    ============
</TABLE>

  The                             accompanying notes are an integral part of the
                                  consolidated financial statements.

<PAGE>

                       GALAXY TELECOM, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION

     Galaxy Telecom, LP (the "Partnership"), a Delaware limited partnership, was
     formed in December  1994 to acquire,  develop,  hold,  improve,  construct,
     manage,  operate and use cable television systems and related businesses in
     fifteen states,  predominantly  including  Mississippi,  Nebraska,  Kansas,
     Missouri, Illinois, Kentucky, Iowa, Alabama, Georgia and Florida.

     Partners - The general partners include Galaxy Telecom Investments,  L.L.C.
     and Galaxy  Telecom,  Inc.  with 99% and 1%  interests,  respectively.  The
     limited  partners  include Galaxy Telecom  Investments,  L.L.C.  (Class B),
     Galaxy  Telecom,  Inc.  (Class C and E), and Vantage Cable  Associates,  LP
     (Class D). Class C, D and E limited  partnership  interests  are subject to
     reductions  resulting from potential set-off  adjustments to the respective
     cable television system acquisitions.

     Property Returns - The Partnership  agreement  establishes priority returns
     for the general and certain  limited  partners  compounded  annually on the
     respective  partners'  unreturned  contributions.  Limited partner priority
     returns range from 9 percent to 10 percent  through 1999, and thereafter up
     to a maximum of 18 percent in annual 2 percent increments.  General partner
     priority returns increase to a maximum of 35 percent. The cumulative unpaid
     priority  return  totaled  approximately   $144,543,000,   $95,487,000  and
     $57,553,000 at December 31, 1999, 1998 and 1997, respectively.

     Distributions - First,  to Class C, D and E limited  partners in proportion
     to their  respective  capital  contributions  to the extent of such capital
     contributions and priority returns.

     Second,  to General  and Class B limited  partners in  proportion  to their
     respective   capital   contributions   to  the   extent  of  such   capital
     contributions.

     Third, to general  partners in proportion to their  percentage  interest to
     the  extent  all  distributions  to the  general  partners  equal the first
     priority return.

     Fourth, 94.05 percent to general partners in proportion to their percentage
     interest  and 5.95  percent  to Class B limited  partner  to the extent all
     distributions to the general partners equal to the second priority return.

     Thereafter,  88.10  percent to the general  partners in proportion to their
     percentage interest and 11.90 percent to the Class B limited partner.

     Distributions are restricted by the Senior  Subordinated Notes and the Term
     Loan  agreement to those  amounts  which are  necessary  for the  partners'
     federal and state income taxes and certain fees.

     Allocations - Partnership profits are allocated to the general partners and
     the Class B limited  partner in the same  manner as the  third,  fourth and
     subsequent  distributions.  Profits are  allocated  to the Class C, D and E
     limited partners to the extent of their capital  contributions and priority
     return distributions to such partners.  Partnership losses are allocated as
     follows:  first, to the general  partners in proportion to their percentage
     interest up to their capital amounts;  secondly, to the limited partners in
     proportion to their percentage  interest up to their capital  amounts;  and
     thereafter,  to the general  partners  in  proportion  to their  percentage
     interest.

2.  Going Concern Uncertainties

     The Partnership has incurred losses each year since its inception and has a
     partnership deficit of $31.9 million at December 31, 1999. During 1999, the
     Partnership  continued  implementation  of a strategy whereby it would sell
     its cable television systems in its non-core regions and focus on improving
     and  acquiring  cable  television  systems in its core  regions,  which are
     primarily located in Illinois, Kansas, Kentucky,  Mississippi and Nebraska.
     In 1999 and 1998,  the  Partnership  received  proceeds  from  sales of its
     non-core  cable  television  systems  of  $10.1million  and $38.6  million,
     respectively,  which was  primarily  used to pay down the amounts due under
     its revolving line of credit.

     At December 31, 1999, the  Partnership  was not in compliance  with certain
     covenants under its term loan  agreement.  As discussed in Note 7, on March
     31,  2000  the  Partnership  amended  its term  loan  agreement  to  modify
     financial  covenants  and  change  the  maturity  date  of all  outstanding
     borrowings under the term loan agreement.

     Additionally,  as part of this amended term loan agreement, the Partnership
     must have a  definitive  sale  agreement  in force by May 31,  2000 to sell
     substantially  all the  interests  of the  Partnership  sufficient  for the
     repayment of all Partnership loans including the Senior Subordinated Notes.
     This definitive agreement shall not contain any such contingencies allowing
     the purchaser to terminate such an agreement  arising from: (a) the failure
     of such purchaser to obtain the financing  necessary for purchase,  (b) the
     failure  of such  purchaser  to obtain  the  approvals  necessary  for such
     purchase or (c) relating to the  completion of any due diligence  review by
     such   purchaser   other  than   completion  of  reasonable  due  diligence
     customarily  to  be  completed  in  such  transaction  after  signing  such
     agreement. Absent of such an agreement to sell substantially all the assets
     of the Company  triggers an event of default under the terms of the amended
     loan agreement.

     Management  is  actively   pursuing  the  sale  of  the  interests  of  the
     Partnership in accordance  with the amended term loan  agreement.  However,
     entering into a definitive  agreement as described above by May 31, 2000 is
     not assured.

     In light of the Partnership's current projected earnings and cash flow, the
     Partnership  believes it will have the financial  resources to maintain its
     current level of operations until December 31, 2000, the term loan maturity
     date. However,  cash generated from operations alone will not be sufficient
     to pay the term loan on December 31, 2000 without proceeds from the sale of
     assets  or  refinancing  of the term  loans.  Additionally,  such a sale as
     required  by the loan  agreement  would  represent  a change in  control as
     defined in the Senior  Subordinated  Loan Agreement and would  represent an
     event of redemption.

     Absence of the completion of the aforementioned  definitive agreement,  and
     the Partnership's inability to meet its cash flow needs, raises substantial
     doubt about its ability to continue as a going concern.

3.  Significant Accounting Policies

     The significant policies followed are summarized below:

     a.  Basis of Consolidation - The consolidated financial statements include
         the accounts of the Partnership and its wholly owned subsidiary, Galaxy
         Telecom Capital Corp. ("Capital Corp.").  All intercompany transactions
         have been eliminated in consolidation.  Capital Corp. was formed in
         July 1995 and maintains a capitalization of $1,000 for the purpose of
         co-issuing, with the Partnership, the Senior Subordinated Notes (see
         Note 7).  Capital Corp. does not have any operations other than its
         related purpose as co-issuer.  Investments in 20- to 50-percent-owned
         affiliates are accounted for using the equity method (see Note 9).

     b.  Cash Equivalents - Cash equivalents  include highly liquid  investments
         purchased with an original maturity of three months or less. There were
         no cash equivalents at December 31, 1999 and 1998.

     c.  Concentrations of Credit Risk - Financial instruments which potentially
         subject the Partnership to  concentrations  of credit risk are cash and
         cash equivalents and subscriber and other receivables.  The Partnership
         invests excess cash in short-term  liquid money  instruments  issued by
         significant  financial  institutions.  Cash  balances  in excess of the
         federally   insured   limit  were   negligible   in  1999  and  totaled
         approximately  $3.0  million  at  December  31,  1998.  Though  limited
         primarily to cable television subscribers,  the concentration of credit
         risk  with  respect  to  receivables   is  minimized  by   geographical
         dispersion through approximately 255individual cable television systems
         ranging in size from  approximately  10  subscribers  to  approximately
         3,000  subscribers  located in small  communities  in the  Midwest  and
         Southeast  United  States,  and the  large  number  of  customers  with
         individually small balances on short payment terms.

     d.  Fair Value of Financial Instruments - Statement of Financial Accounting
         Standards  ("SFAS") No. 107,  Disclosures about Fair Value of Financial
         Instruments,  requires certain disclosures  regarding the fair value of
         financial   instruments.   Cash   and  cash   equivalents,   subscriber
         receivables,  accounts payable and accrued expenses as reflected in the
         financial  statements  approximate fair value because of the short-term
         maturity of these instruments. The fixed rate Senior Subordinated Notes
         (see Note 7) are valued using the closing bid price market quotes,  and
         as a result,  the fair value of the Notes at December 31, 1999 and 1998
         were  $125,472,000 and $127,020,000,  respectively.  Based on borrowing
         rates currently available to Galaxy for similar debt, the fair value of
         the revolver  debt and term loan  approximates  its  carrying  value at
         December 31, 1999 and 1998.

     e.  Revenue  Recognition - Revenues from  subscribers are recognized in the
         month that service is provided.  Installation  revenues are  recognized
         upon  completion  of the  service  provided to the  subscriber,  to the
         extent of direct selling costs, with any remaining balance deferred and
         recognized as revenue over the estimated  period that  subscribers  are
         expected to remain connected to the cable television system.

     f.  Marketing  Costs -  Marketing  costs are charged to  operations  in the
         period incurred and totaled  approximately  $1,045,000,  $1,822,000 and
         $1,516,000  for the  years  ended  December  31,  1999,  1998 and 1997,
         respectively.

     g.  Federal  Income  Taxes - The  Partnership  as an entity  pays no income
         taxes,  although it is required  to file  federal and state  income tax
         returns  for  informational  purposes  only.  All  income or loss flows
         through to the  individual  partners as  specified  in the  Partnership
         agreement.  The differences between the results of operations presented
         in these consolidated financial statements and taxable loss for federal
         income  tax  reporting  purposes  result  primarily  from  the  use  of
         accelerated methods for computing tax depreciation.

     h.  Systems  and  Equipment - Systems and  equipment  are  recorded at cost
         including amounts for material and labor. Direct costs, including labor
         associated with  installations in homes not previously  served by cable
         television,  are  capitalized  as subscriber  drops.  Expenditures  for
         maintenance  and  repairs  are charged to  operations  as incurred  and
         equipment replacements and betterments are capitalized. When assets are
         sold or retired,  the related  cost and  accumulated  depreciation  are
         removed from the respective accounts, and any resulting gain or loss is
         credited or charged to operations.

i.       Intangible  Assets  -  Goodwill  related  to the  acquisition  of cable
         television systems represents the excess of purchase price plus related
         direct  costs  over the fair value of the net  assets  acquired.  Other
         intangible  assets  consist  primarily  of debt  issuance  costs.  Debt
         issuance costs and original  issue  discounts are amortized to interest
         expense using the interest method.  The intangible assets are amortized
         over the life of the  borrowings or the  estimated  useful lives of the
         assets of 15 years using the straight-line method.

j.       Impairment  of  Long-Lived  Assets  -  In  the  event  that  facts  and
         circumstances  indicate that the cost of  long-lived  assets other than
         financial  instruments may be impaired, an evaluation of recoverability
         would be performed.  If an  evaluation  of impairment is required,  the
         estimated  future  undiscounted  cash flows  associated  with the asset
         would be compared  to the asset's  carrying  amount to  determine  if a
         write-down is required.

k.       Use  of  Estimates  -  The  preparation  of  financial   statements  in
         conformity with accounting  principles generally accepted in the United
         States  of  America   requires   management   to  make   estimates  and
         assumptions.  These  assumptions  affect the reported amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

l.       Reclassifications -  Certain prior year balances have been reclassified
         to conform to the current year's presentation.

m.       Recent  Accounting   Pronouncements  -  In  June  1998,  the  Financial
         Accounting  Standards Board issued a Statement of Financial  Accounting
         Standards No. 133 ("SFAS 133"),  Accounting for Derivative  Instruments
         and Hedging  Activities.  This  statement  establishes  accounting  and
         reporting   standards  for  derivative   instruments  and  for  hedging
         activities.  It  requires  that  derivatives  be reported as assets and
         liabilities  at fair value and that  changes in fair value be accounted
         for depending on the intended use of the  derivative  and the resulting
         designation.   This  statement,   as  amended,  is  effective  for  the
         Partnership  beginning  January 1, 2001.  Management of the Partnership
         anticipates  that  the  adoption  of  SFAS  No.  133  will  not  have a
         significant  effect on the  Partnership's  results of operations or its
         financial position.

n.       Reporting  Comprehensive Income - In 1998, Galaxy adopted SFAS No. 130,
         Reporting   Comprehensive   Income,  which  establishes  standards  for
         reporting and display of  comprehensive  income and its components in a
         full set of general-purpose  financial  statements.  Comprehensive loss
         was the same as net loss reported at December 31, 1999 and 1998.

  4.  ACQUISITIONS AND DISPOSITIONS OF CABLE TELEVISION SYSTEMS

Acquisition  - On May 1,  1999,  Galaxy  traded  18  cable  television  systems,
representing approximately 7,500 subscribers for seven cable television systems,
representing approximately 7,100 subscribers from Mississippi Cablevision,  Inc.
("MCI"),  an affiliate of  Telecommunications,  Inc. The Galaxy cable television
systems are located primarily in Colorado,  Iowa and South Dakota, while the MCI
cable television  systems are located in Mississippi.  The estimated fair market
value of the cable television systems received was approximately $9.4 million or
approximately  $1,300  per  subscriber.  The  fair  market  value  of the  cable
television systems received was estimated by using the purchase price (price per
subscriber) for similar cable television systems bought from MCI by an affiliate
of Galaxy.  The net historical cost of the cable television systems given up was
approximately  $6.9  million,  resulting  in Galaxy  recording a gain on sale of
approximately $2.5 million, net of expenses.

The excess of the  purchase  price  over the fair  value of the assets  acquired
(franchise  costs) was  approximately  $4.8 million and is being  amortized on a
straight-line  basis over 15 years.  The trade was  accounted  for as a business
combination in accordance with the Accounting  Principles  Board Opinion No. 16,
Business Combinations, accordingly, the results of the acquired cable television
systems have been included in the statement of operations  since the acquisition
date.  Management  believes that the pro forma results of the Partnership  would
have been insignificant if the trade had occurred on January 1, 1999.

Dispositions  - On February 12, 1999,  Galaxy sold one satellite  master antenna
television  system  ("SMATV")  located in Spring  Creek,  Georgia,  representing
approximately 1,000 subscribers for approximately  $1,220,000,  or approximately
$1,220  per  subscriber,  and  recorded  a gain on sale  of  approximately  $1.0
million.  Galaxy used the proceeds  from this sale to pay down  principal of the
revolving note.

On June 23, 1999, Galaxy sold 8 cable television  systems,  located primarily in
Alabama,  representing  approximately  5,500 subscribers for approximately  $8.4
million, or approximately $1,540 per subscriber,  and recorded a gain on sale of
approximately  $1.8  million.  Galaxy used a majority of the proceeds  from this
sale to pay down principal of the revolving note.

On October 1,  1999,  Galaxy  sold seven  satellite  master  antenna  television
systems("SMATV's")  and one cable  system  located  primarily in the Kansas City
area, representing approximately 1,165 subscribers for approximately $1,360,000,
or  approximately  $1,161  per  subscriber,  and  recorded  a gain  on  sale  of
approximately  $244,000.  Galaxy  used the  proceeds  from this sale to pay down
principal of the revolving note.

1998  Acquisitions and Dispositions - During 1998, the Partnership  acquired one
cable  television  system serving  approximately  300 subscribers in Georgia for
approximately  $141,000,  and  traded  four  cable  television  systems  serving
approximately  850  subscribers  in  Nebraska  for one cable  television  system
serving approximately 730 subscribers in Colorado.

During 1998, the Partnership disposed of the following cable systems:

                                Number Cash Paid

                      of Cable                by Partnership    Net
                       Systems    Selling      for Selling     Cash
   Region               Sold       Price         Expense     Received
   ------               ----       -----         -------     --------

Alabama                   18   $ 2,760,000   $   179,480   $ 2,580,520
Central                   27     6,120,000       136,289     5,983,711
Illinois                  36     2,596,300        48,780     2,547,520
Iowa                      18     2,572,629        40,815     2,531,814
Kansas                    20     1,579,146        24,896     1,554,250
Louisiana                  5     9,500,000        39,701     9,460,299
Missouri                  63     5,201,444        91,454     5,109,990
Nebraska                  10     2,125,100        15,146     2,109,954
South Carolina             2     2,050,000        60,055     1,989,945
Wyoming                   17     4,930,000       178,958     4,751,042
                 -----------   -----------   -----------   -----------
Total                    216   $39,434,619   $   815,574   $38,619,045
                 ===========   ===========   ===========   ===========

The aggregate sales price and related loss were as follows:

Systems and equipment                                           $ 27,141,381
Intangible assets                                                 15,566,034
                                                                  ----------
           Assets sold                                            42,707,415

Net sales price                                                   38,619,045
                                                                  ----------
           Total loss on sale                                   $ (4,088,370)

     1997 Acquisition and Trades - During 1997, the Partnership acquired certain
     cable  television  systems  serving   approximately  1,610  subscribers  in
     Nebraska  for  approximately  $875,000.  In 1998,  the  purchase  price was
     adjusted in accordance  with the amended asset  purchase  agreement and the
     Partnership  paid an  additional  $853,000  in  cash.  The  effect  of this
     adjustment  on  systems  and  equipment,  franchise  cost  and net loss was
     immaterial.

     During 1997, the Partnership sold certain non-core cable television systems
     serving approximately 3,080 subscribers in South Carolina,  Mississippi and
     Kansas for approximately $3.3 million.

      Pending  Transaction - On March 31, 2000, Galaxy sold one cable television
system,  located in Kansas,  representing  approximately  1,424  subscribers for
approximately $3.5 million, or approximately $2,492 per subscriber.  Galaxy will
use the proceeds from this sale to pay down principal of the term loan.

  5.  SYSTEMS AND EQUIPMENT

Systems and equipment consist of the following:
<TABLE>
<CAPTION>

                                                                       Estimated
                                                      Depreciation   Useful Life          December 31,
                                                        Method          Term         1999             1998
                                                        ------          ----         ----             ----
<S>                                                    <C>            <C>        <C>              <C>
Cable television distribution
    systems:

    Head-end                                          Straight-line   7 years    $  28,899,620    $  28,390,239
    Distribution plant                                Straight-line   12 years      97,040,462       91,011,687
    Subscriber drops                                  Straight-line   5 years       24,706,433       23,783,738
    Other distribution                                         --         --           668,140        1,029,403
                                                                                   -----------      -----------
                                                                                   151,314,655      144,215,067

Other:
    Vehicles                                          Straight-line   5 years        3,957,956        4,672,900
    Buildings                                         Straight-line   5 years        1,742,390        1,873,474
    Furniture, fixtures and equipment                 Straight-line   5 years        3,841,024        5,479,623
    Land                                                       --         --            60,000           91,000
                                                                                   -----------      -----------

                                                                                   160,916,025      156,332,064
Less accumulated depreciation                                                      (66,348,010)     (52,134,390)
                                                                                   -----------      -----------

Systems and equipment, net                                                       $  94,568,015    $ 104,197,674
                                                                                 =============    =============


6.  INTANGIBLE ASSETS

Intangible assets consist of the following:

                                                        Amortization    Amortization          December 31,
                                                           Method          Period           1999            1998
Goodwill, franchise costs and
 subscriber lists                                      Straight-line       15 years    $ 39,834,390    $ 41,306,900
Debt issuance costs:
 Senior Subordinated NotesLevel Yield                  10 years           5,403,197       5,403,197
 Revolver and Term Loan                                Level Yield          7 years       3,432,516       3,286,912
Other                                                  Straight-line       15 years         725,545       1,114,325
                                                                                        -----------     -----------
                                                                                         49,395,648      51,111,334

Less accumulated amortization                                                           (15,129,440)    (12,850,656)
                                                                                        -----------     -----------
Intangible assets, net                                                                 $ 34,266,208    $ 38,260,678
                                                                                       ============    ============
</TABLE>



  7.  LONG-TERM DEBT

Outstanding long-term debt is as follows:

<TABLE>

                                                                              December 31,
                                                                                                        1999              1998

<S>                                                                                          <C>               <C>
Term loan with interest payable monthly, at an
  adjusted LIBOR rate of LIBOR plus 3.25% (9.72125% at
  December 31, 1999)                                                                         $    25,325,000.00$          --
Revolving credit facility with interest payable monthly, at an
  adjusted LIBOR rate of LIBOR plus 3.25% (8.879% at
  December 31, 1998)                                                                              30,500,000.00
12.375% senior subordinated notes, net of unamortized
  discount of $345,000 and $405,000 at December 31, 1999
  and 1998, respectively, with interest payable semiannually
  on April 1 and October 1                                                                       119,655,000.00    119,595,000.00
Other, including capital leases                                                                    3,196,701.00      2,350,620.00

           Total                                                                             $   148,176,701.00$   152,445,620.00
</TABLE>

Revolving Credit Facility - In March 2000, the Partnership amended the Revolving
Credit Facility which  previously had been converted to a term loan in June 1999
whereby the amendment allowed the Partnership to borrow $5.0 million in addition
to their  $25,325,000  term loan  outstanding  at December  31,  1999.  Prior to
advancing funds under this agreement,  the Partnership had funds available in an
account  with  the  appropriate  administrative  agent  when  combined  with the
proceeds  of  $5.0  million  adequate  to fund  the  Senior  Subordinated  Notes
semi-annual  interest  payment due April 1, 2000. The new amended loan agreement
bears interest at the Alternate Base Rate (ABR), as defined in the amendment, of
ABR plus 2%, payable quarterly,  from the amendment date to June 30, 2000. After
June,  2000 the term loan bears  interest  at ABR plus 4% until  maturity of the
loan. The entire term loan matures on December 31, 2000.

The  partnership  will owe an $800,000  fee which will be due and  payable  upon
repayment of the additional  $5.0 million  borrowing.  The $800,000 fee shall be
reduced by 50% to $400,000 if the  additional  borrowing is paid in full by June
30, 2000. If the additional  borrowing is not paid in full by June 30, 2000, but
paid in full by September 15, 2000 such fee shall be reduced by 25% to $600,000.

The amended senior term loan sets forth modified financial covenants including a
maximum total leverage  ratio,  a maximum senior debt leverage  ratio, a maximum
senior debt to basic subscriber ratio,  minimum interest coverage,  debt service
coverage, fixed charge coverage ratios and restrictions on capital expenditures.

Senior  Subordinated  Notes - Pursuant to an indenture  dated September 28, 1995
(the  "Indenture")  between the  Partnership and Capital Corp.,  (together,  the
"Issuers"),  and the Bank of New York, which acquired Boatmen's Trust Company as
trustee (the "Trustee"), the Partnership issued $120 million aggregate principal
amount of senior subordinated obligations (the "Notes").

There are no mandatory  sinking fund  requirements for the Notes.  However,  the
Partnership may be obligated, under certain circumstances,  to (a) make an offer
to purchase all outstanding Notes at a redemption price of 101% of the principal
amount thereof,  plus accrued interest upon a change of control, as defined, and
(b) make an offer to purchase  Notes with a portion of the net cash  proceeds of
assets sales, as defined. Subsequent to September 2000, the Notes are subject to
optional redemption in whole or in part at annually decreasing redemption prices
ranging from 106.15% in 2000 to 100% in 2003 and thereafter.  Subject to certain
conditions, the Partnership may at any time defease the Notes.

The payment of principal and interest on the Notes is  subordinated  in right of
payment to the term loan.  The Notes will rank pari passu with all other  senior
subordinated  indebtedness  of the  Partnership,  if any,  and is  senior to all
subordinated  debt  of the  Partnership.  Absent  a  change  of  control  in the
Partnership (see Note 2) such notes are due 2005.

The Indenture contains various restrictive  covenants,  including limitations on
indebtedness, certain restricted payments and affiliate transactions as defined,
purchases,  asset  sales and  capital  expenditures  in  addition  to  reporting
requirements.  The Indenture requires certain equity contributions  ranging from
$5  million  to $15  million  based  upon  the  consummation  of  certain  cable
television system  acquisitions.  No such  contributions  were required in 1997,
1998 or 1999.

Five-Year  Maturities  -  The  required  principal  payments  on  the  Company's
long-term  debt and  obligations  under  capital  leases at December  31,  1999,
assuming  no  additional   borrowings  and  assuming  no   accelerated   payment
requirements of the Senior Subordinated Notes (see Note 2), are as follows:

      [OBJECT OMITTED]

  8.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest payments during 1999, 1998 and 1997 were  approximately  $17.5 million,
$20.0 million and $20.8 million, respectively.

Noncash  investing and financing  transactions  for the year ended  December 31,
1999 were as follows:

Acquisition of cable systems through trades of current systems    $9,440,402
Capital expenditures included in accounts payable                  1,582,482

Noncash  investing and financing  transactions  for the year ended  December 31,
1998 were as follows:

Acquisition of cable systems through trades of current systems     $ 975,099
Capital expenditures included in accounts payable                  1,539,197

Noncash  investing and financing  transactions  for the year ended  December 31,
1997 were as follows:

Capital expenditures included in accounts payable                 $1,051,408
Acquisition of equipment through issuance of capital leases payable  212,800


  9.  INVESTMENT IN AFFILIATES

At December 31, 1999, the  Partnership  has a 40% membership  interest in Galaxy
American  Communications,  L.L.C.  ("GAC")  for which the  Partnership  uses the
equity  method of  accounting.  GAC was  formed in  September  1998 to  acquire,
develop and operate cable television  systems.  During the period from inception
to  December  31,  1998,  GAC did not  have  any  significant  operations.  1999
summarized financial information for 100% of GAC is as follows:

 Results of operations:
  Revenue                                                $ 11,532,000
  Operating expenses                                       11,729,000
  Operating income                                           (194,000)
  Net loss                                                 (4,560,000)

Financial position:
  Total assets                                             33,028,000
  Total liabilities                                        37,600,000


At December 31, 1999, the Partnership's  investment  balance in GAC was $-0- and
the Partnership had a receivable balance from GAC of approximately $308,000.

10. COMMITMENTS AND CONTINGENCIES

Leases - The  Corporation  leases certain office  facilities and equipment under
capital and operating lease arrangements.

Future minimum  payments for capital and  noncancelable  operating  leases as of
December 31, 1999, are as follows:

                                                         Capital    Operating
                                                         Leases      Leases

2000                                                      $ 23,733   $ 305,791
2001                                                        25,274     293,278
2002                                                        13,243     262,357
2003                                                                   235,250
2004                                                                  215,170

Net minimum lease payments                                  62,250   $1,311,846

Less amounts representing interest                          4,935

Present value of minimum lease payments                  $ 57,315



The  Partnership  leases  computer  equipment  and vehicles  under capital lease
agreements  which generally  provide purchase options at the end of the original
lease terms.

Rent expense under the operating leases was $346,000,  $304,000 and $346,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.

In addition, the Partnership,  as an integral part of its cable operations,  has
entered into short-term  operating lease contracts for pole usage.  Rent expense
approximated $1,058,000,  $1,235,000 and $1,143,000 for the years ended December
31, 1999, 1998 and 1997, respectively, under such contracts.

Employee Benefits - The Partnership sponsors a defined  contribution  retirement
plan for  eligible  employees  with a minimum  six-months  of  service  with the
Partnership or certain affiliates.  The Partnership makes matching contributions
on  behalf  of  each  employee  of  an  amount  not  to  exceed  the  employee's
contribution  or 8% of  such  employee's  salary.  The  Partnership  contributed
approximately $329,000,  $217,000 and $198,000 to the plan during 1999, 1998 and
1997, respectively.

Franchises and Programming - Cable television systems are generally  constructed
and  operated  under  non-exclusive  franchises  granted  by local  governmental
authorities,  which in addition to imposing certain operating conditions, impose
franchise fees not to exceed 5% of gross revenues. While such franchises are not
perpetual,  renewal may not be unreasonably withheld without compensation to the
cable  system  operator.  The  Partnership  has  not  experienced  nor  does  it
anticipate non-renewal of existing franchise agreements.

The  Partnership has various  contracts to obtain basic and premium  programming
from program suppliers whose  compensation is typically based on a fixed fee per
subscriber.  The Partnership has negotiated  programming agreements with premium
service  suppliers  that offer cost  incentives to the  Partnership  under which
premium unit prices decline as certain  premium  service  growth  thresholds are
met. In addition to volume  pricing  discounts,  some  program  suppliers  offer
marketing  support  to  the  Partnership  in  the  form  of  advertising  funds,
promotional   materials,   rebates  and  other  incentives.   The  Partnership's
programming  contracts are generally for a fixed period of time, typically three
to five years, and are subject to negotiated renewal.

Cable Service Rate Regulation - Galaxy's operations are subject to regulation at
the  federal,  state and local  levels.  Many  aspects  of such  regulation  are
currently the subject of judicial  proceedings and administrative or legislative
proposals.

In October 1992,  Congress enacted the Cable Television  Consumer Protection and
Competition  Act of 1992 (the "1992 Cable Act").  In 1993 and 1994,  the Federal
Communications Commission ("FCC") adopted certain rate increases. As a result of
such actions,  the Partnership's  basic and tier service rates and its equipment
and  installation  charges  (the  "Regulated   Services")  are  subject  to  the
jurisdiction  of  local  franchising  authorities  and the FCC.  Basic  and tier
service rates are evaluated against competitive  benchmark rates as published by
FCC, and equipment and installation  charges are based on actual costs. The rate
regulations  do not apply to the  relatively  few  systems  which are subject to
"effective  competition" or to services offered on an individual  service basis,
such as premium movie and pay-per-view services.

The Partnership  believes that it has complied in all material respects with the
provisions  of the  1992  Cable  Act,  including  its rate  setting  provisions.
However, the Partnership's rates for Regulated Services are subject to review by
the FCC, if a complaint has been filed, or review by the  appropriate  franchise
authority,  if such authority has been certified.  If, as a result of the review
process,  a system  cannot  substantiate  its  rates,  it could be  required  to
retroactively  reduce  its rates to the  appropriate  benchmark  and  refund the
excess  portion of rates  received.  Any  refunds of the excess  portion of tier
service rates would be retroactive to the date of complaint.  Any refunds of the
excess portion of all other Regulated  Service rates would be retroactive to one
year prior to the implementation of the rate reductions.

In February  1996, a  telecommunications  bill was signed into federal law which
significantly  impacts the cable industry.  Most notably,  the bill allows cable
system operators to provide telephony  services,  allows telephone  companies to
offer video services, and provides for deregulation of cable programming service
rates by 1999.  The impact of the new bill  cannot be  determined  at this time;
however,  management does not expect the new bill to have a significant  adverse
impact on the financial position or results of operations of the Partnership.

Management of Galaxy believes that it has complied in all material respects with
the  provisions  of the FCC rules and  regulations  and the  provisions of local
franchising  authorities.  Accordingly,  no  provision  has  been  made  in  the
financial statements for any potential refunds. These rules and regulations are,
however, subject to judgmental interpretations, and the impact of potential rate
changes or refunds  ordered by local  franchising  authorities  or the FCC could
cause Galaxy to make refunds  and/or lower its rates for  regulated  services in
the future.

Litigation - Galaxy is subject to various legal and  administrative  proceedings
in the ordinary course of business.  Management believes the outcome of any such
proceedings  will  not  have a  material  adverse  effect  on the  Partnership's
consolidated financial position, or future results of operations or cash flows.

Certain  customers in Mississippi  have filed a class action lawsuit in the U.S.
District  Court for the  Northern  District  of  Mississippi  alleging  that the
Partnership illegally charged a late fee on monthly cable bills. The Partnership
has denied any  liability  with  respect  to this  claim and is  defending  this
action.  Similar class actions  against other cable companies have been filed in
several states, some of which have been successful. At this point, management is
unable to predict the likely  outcome or the potential for an adverse  judgment,
if any. An adverse judgment against us could have a material,  adverse affect on
the  Partnership's   consolidated  financial  position,  or  future  results  of
operations  or cash flows.  Management  has not  recorded  any  liability in the
consolidated  financial  statements that may arise from the adjudication of this
lawsuit.

11. RELATED PARTY TRANSACTIONS

Management  Fee to  Affiliate  - The  Partnership  incurs  management  fees  and
expenses  pursuant to the terms of a management  agreement  with Galaxy  Systems
Management,  Inc.  ("GSMI"),  an affiliate of a general partner,  under which it
manages the Partnership's  business. In addition to reimbursing GSMI's expenses,
the Partnership pays GSMI a management fee monthly,  in arrears based upon 3% of
gross  revenues  as defined in the  management  agreement.  Management  fees and
reimbursed expenses approximated  $2,263,000,  $3,294,000 and $3,409,000 for the
years ended December 31, 1999, 1998 and 1997. The management agreement's initial
term through  December 31, 1999 was  automatically  extended for one year and is
subject to early termination upon the  Partnership's  sale or disposition of the
acquired cable television systems.  Partnership obligations under the management
agreement are  subordinate to the  Partnership's  long-term  debt.  There was no
management  fee payable at  December  31, 1999 and 1998.  The  Partnership  also
provides and receives certain operational  services from affiliates of a general
partner.  Included  in  prepaids  and  other  are  advances  to such  affiliates
approximating   $820,000  and  $515,000  as  of  December  31,  1999  and  1998,
respectively,  of which  approximately  $750,000 and $205,000 as of December 31,
1999 and 1998, respectively, represent receivables from GSMI.

On December 31, 1998, GAC issued debt of approximately $31 million.  On December
31, 1998, the Partnership  sold cable systems,  comprising  approximately  8,300
subscribers,  to GAC for  approximately  $6.2 million and recorded a loss on the
sale of $4.3 million.

In December 1998, GSMI entered into a management agreement with GAC whereby GSMI
will operate and manage the GAC cable systems. For its management services, GSMI
will be paid a monthly fee of 2.5 percent of the gross monthly receipts from the
GAC cable systems.

In January 1999, the  Partnership  entered into a shared cost agreement with GAC
whereby  the   Partnership   will  provide   services  in  connection  with  the
administration  of  the  GAC  cable  systems.  The  Partnership  was  reimbursed
approximately  $500,000 for costs incurred for administrative  services provided
to GAC.

12. QUARTERLY DATA - UNAUDITED

The  results of  operations  for each of the  quarters  in 1999 and 1998 were as
follows (thousands of dollars):

                                    1999
                                   First      Second      Third      Fourth
                                  Quarter    Quarter     Quarter     Quarter

Revenue                            $ 14,569    $14,517     $14,184    $ 13,644
Operating income (loss)                 516        543         706        (830)
Net income (loss)                    (3,323)     1,518      (3,901)     (6,530)

                                    1998
                                   First      Second      Third      Fourth
                                  Quarter    Quarter     Quarter     Quarter

Revenue                            $ 17,331    $17,472     $16,853    $ 15,636
Operating income (loss)                 145        366          86        (179)
Net income (loss)                    (3,858)    (6,571)     (8,348)     (6,069)


<PAGE>

INDEPENDENT AUDITORS' REPORT To the Partners of Galaxy Telecom L.P.

We have audited the financial statements of Galaxy Telecom,  L.P. and subsidiary
("the  Partnership")  as of December 31, 1999, and for the period ended December
31,  1999,  and have issued our report  thereon  dated March 17, 2000 (April 11,
2000 as to Notes 2,4 and to the term loan  described  in Note 7);  such  report,
which  includes an explanatory  paragraph as to the  uncertainty of the entity's
ability to continue as a going concern, is included elsewhere in this Form 10-K.
Our audit also included the financial  statement schedule of Galaxy Telecom L.P.
and  subsidiary,  listed  in the  accompanying  index  on  F-1.  This  financial
statement schedule is the responsibility of the Partnernship's  management.  Our
responsibility is to express an opinion based on our audit. In our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements  taken  as a whole,  present  fairly  in all  material  respects  the
information set forth therein.

DELOITTE & TOUCHE LLP



St. Louis, Missouri
March 17, 2000



<PAGE>

                      Report of Independent Accountants on

                          Financial Statement Schedule

To the Partners
Galaxy Telecom, L.P.

Our audits of the consolidated  financial  statements  referred to in our report
dated  February  19, 1999,  appearing on page F-3 of this 1999 Annual  Report on
Form 10-K, also included an audit of the financial  statement schedule listed in
the  accompanying  index on page F-1 for the years ended  December  31, 1998 and
1999.. In our opinion, this financial statement schedule presents fairly, in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Austin, Texas
February 19, 1999

<PAGE>
<TABLE>
<CAPTION>

                             SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                    GALAXY TELECOM, LP AND SUBSIDIARY




           Column A                Column B            Column C                Column D         Column E
-------------------------------- ------------- -------------------------  -------------------  -----------
                                               -------------------------
                                                      Additions
                                               -------------------------
                                                               Charged
                                  Balance at    Charged to     to Other                         Balance
                                  Beginning      Cost and      Accounts        Deductions      at End of
          Description             of Period      Expenses      Describe         Describe         Period
-------------------------------- ------------- --------------  ---------  --------------------------------

<S>                                <C>             <C>          <C>        <C>                  <C>
Year ended December 31, 1999:
  Reserve and allowances
    deducted from asset
    accounts-allowance for
    uncollectible accounts          $ 116,572      $ 991,364        $ -     $ 1,020,487  (1)     $ 87,449

Year ended December 31, 1998:
  Reserve and allowances
    deducted from asset
    accounts-allowance for
    uncollectible accounts          $ 154,692    $ 1,614,118        $ -     $ 1,652,238  (1)    $ 116,572

Year ended December 31, 1997:
  Reserve and allowances
    deducted from asset
    accounts-allowance for
    uncollectible accounts          $ 411,950    $ 1,992,318        $ -     $ 2,249,576  (1)    $ 154,692
</TABLE>

(1) Uncollectible accounts written off, net of recoveries.



<PAGE>

                                      -61-

      Item 9.  Changes In and Disagreements  with  Accountants on Accounting and
               Financial Disclosure.

      On January 20, 2000, the Company dismissed  PricewaterhouseCoopers  LLP as
the Company's independent accountant. The reports of PriceweaterhouseCoopers LLP
on the financial statements of the Company for each of the past two fiscal years
ending  12/31/98 and  12/31/97,  respectively,  contained no adverse  opinion or
disclaimer  of opinion and were not  qualified  or  modified as to  uncertainty,
audit scope or accounting principles.

      Item 10.    Directors and Executive Officers of the Registrants.

      The general  partners of Galaxy,  Galaxy Telecom,  Inc.  ("Galaxy GP") and
Galaxy Telecom Investments,  L.L.C. ("Galaxy  Investments")  (collectively,  the
"General  Partners"),  have designated Galaxy GP as the managing general partner
of Galaxy, and, as such, Galaxy GP has responsibility for the overall management
of the business and operations of Galaxy.  Galaxy Investments  retains the right
to become the managing general partner at any time upon written notice to Galaxy
GP. The directors of Galaxy GP are also the managers of Galaxy Investments.

      Galaxy is party to a Management  Agreement with Galaxy Systems Management,
Inc.  ("Galaxy  Management")  with  respect  to the  day-to-day  management  and
operation of Galaxy's cable systems.

      The executive officers of Galaxy Management and the directors of Galaxy GP
are:

        Tommy L. Gleason, Jr.......54.....Chairman,  Chief Executive Officer
                                          and Director of Galaxy Management
                                          and Galaxy GP

        J.  Keith  Davidson........44.....Executive Vice President, CFO,
                                          Secretary and Director of Galaxy
                                          Management and Galaxy GP

        James M.  Gleason..........36.....President and Chief Operating Officer
                                          of Galaxy Management  and  Galaxy GP

        William  P.  Collatos......45.....Director of Galaxy GP
        Kenneth T. Schiciano.......37.....Director of Galaxy GP
        Richard D.Tadler...........43.....Director of Galaxy GP

     Tommy L. Gleason, Jr. has served as Chaiman,  Chief Executive Officer and a
director of Galaxy Management and Galaxy GP, and a manager of Galaxy Investments
since  December  1994.  Mr.  Gleason is past  President  of  CableMaxx,  Inc., a
wireless cable  television  company.  Since 1987, he has served as president and
director  of Galaxy  Cablevision  Management,  Inc.,  a general  partner  of the
managing general partner of Galaxy Cablevision,  L.P. from which Galaxy acquired
the Galaxy  Cablevision  Systems.  He was a director of Capital  Bancorporation,
Inc. of Cape Girardeau, Missouri, and an individual general partner of Community
Investment Partners, a venture capital fund in St. Louis,  Missouri. Mr. Gleason
began his cable  television  career in 1964,  and from then  until 1971 he was a
field  engineer  responsible  for the  operation of 45 headend  facilities in 11
states.  From 1971 through  1976,  he was a product sales manager for Essex Wire
Corp. of Chicago,  Illinois.  From 1976 through 1982, he was President of Galaxy
Communications  Systems,  which  operated  29 cable  television  systems in four
states. Prior to 1979, he engineered and built eight cable television systems in
Illinois.  In 1988 and 1989, Mr. Gleason served as Secretary and Director of the
NCTC, he is currently a Director of the NCTC and the Immediate  Past  President.
Mr. Gleason was inducted into the Cable TV Pioneers in 1989.

     J. Keith Davidson has served as Executive Vice  President,  Chief Financial
Officer,  Secretary  and a  director  of Galaxy  Management  and Galaxy GP and a
manager  of Galaxy  Investments  since  December  1994.  From 1988 to 1994,  Mr.
Davidson  was the Chief  Financial  Officer and  Assistant  Secretary  of Galaxy
Cablevision  Management,  Inc. Mr.  Davidson has 18 years of  experience  in the
cable  television  industry.  James M. Gleason has served as President and Chief
Operating  Officer and a director of Galaxy  Management since December 1994. Mr.
Gleason also presently serves as Chief Operating Officer of Galaxy GP. From 1988
to 1994,  he served as Vice  President  -  Administrative  Operations  of Galaxy
Cablevision  Management,  Inc.  Mr.  Gleason  is  responsible  for field  office
administration and customer service,  computer  operations,  and was responsible
for implementing Galaxy Management's MIS operations.  He has prior experience in
cable television  system  construction,  mapping,  marketing and operations.  In
1992,  Mr.  Gleason served as Chairman of the Board of the NCTC. Mr. Gleason has
16 years of  experience in the cable  television  industry and is the brother of
Tommy L. Gleason,  Jr. William P. Collatos has served as a director of Galaxy GP
and a manager of Galaxy  Investments  since  December  1994 and  currently  is a
managing  general  partner of Spectrum  Equity  Investors L.P., a private equity
firm that he  co-founded  in May 1994.  From 1990 to 1994,  Mr.  Collatos  was a
private equity  investor.  Mr.  Collatos was an Associate and General Partner of
funds  managed by Media  Communications  Partners  and TA  Associates,  Inc.,  a
private equity capital firm ("TA  Associates")  from 1980 to 1990.  From 1976 to
1980, Mr. Collatos worked in and  subsequently  ran the  media-lending  group at
Fleet National Bank.  Kenneth T. Schiciano has served as a director of Galaxy GP
and a manager of Galaxy Investments since December 1994 and has been a Principal
of TA Associates  since January 1995.  Mr.  Schiciano was a Vice President of TA
Associates  from August 1989 to December  1994.  Richard D. Tadler has served as
director of Galaxy GP and a manager of Galaxy  Investments  since December 1994.
Mr.  Tadler has been a Managing  Director of TA  Associates  since January 1994.
From 1987 to December 1993,  Mr. Tadler was a general  partner of TA Associates.
Mr. Tadler is a director of TechForce Corporation.

      Item 11.  Executive Compensation.

      Management Agreement

      Pursuant to the Management Agreement between Galaxy Management and Galaxy,
Galaxy Management,  including Messrs.  Tommy L. Gleason,  Jr., J. Keith Davidson
and James  Gleason,  who are  employed by Galaxy  Management  and are  otherwise
referred  to as the Senior  Managers,  manages  all  aspects  of the  day-to-day
business and operations of Galaxy. In connection  therewith they undertake those
activities and services that are customary in the cable television  industry for
the  account and on behalf of Galaxy.  For a more  detailed  description  of the
Management Agreement,  see Item 13 of this Part III ("Certain  Relationships and
Related Transactions -- Management Agreement").

      Executive Compensation

      None of the  employees  of Galaxy are deemed to be  executive  officers of
Galaxy.  The Senior Managers are employees of Galaxy Management and the services
of such  individuals  are  provided to Galaxy,  for which  services  Galaxy pays
Galaxy  Management  a fee  pursuant  to the  Management  Agreement.  The  Senior
Managers  are  compensated  in their  capacity as  executive  officers of Galaxy
Management  and  therefore  receive no  compensation  from  Galaxy.  The general
partners of Galaxy receive no compensation  for their services to Galaxy in such
capacity.

      Director Compensation

      Galaxy GP pays an annual retainer of $15,000 to its directors,  other than
those who are salaried employees or executive officers of Galaxy Management.  In
addition, Galaxy pays to such directors the ordinary and necessary out-of-pocket
expenses incurred by them to attend meetings of the Board of Directors of Galaxy
GP and committees thereof.

      Item 12. Security Ownership of Certain Beneficial Owners and Management.

      The  following  table sets forth certain  information,  as of December 31,
1999,   concerning  the  beneficial  ownership  of  (i)  the  units  of  general
partnership  interests and limited partnership interests of Galaxy owned by each
person  known by  Galaxy  to own  beneficially  more  than  5.0% of any class of
Galaxy's partnership  interests,  (ii) equity securities of and member interests
in  Galaxy  GP and  Galaxy  Investments,  respectively,  owned by all  executive
officers  and  directors  of Galaxy GP and the  managers of Galaxy  Investments,
respectively, owned by all executive officers and directors of Galaxy GP and the
managers of Galaxy  Investments as a group, and (iii) member interests in Galaxy
Management owned by the Senior Managers.

<TABLE>
<CAPTION>

    Name and Address                                                                         No. of Units/   % of
   Of Beneficial Owner                              Type of Interest                           Shares(1)      Class
   -------------------                              ----------------                           ---------      -----
<S>                                       <C>                                                 <C>            <C>
Galaxy Telecom, Inc.                      Class A General Partnership Units of Company           133,333        *
  1220 North Main Street                  Class C Limited Partnership Units of Company           416,000     100.0
  Sikeston, Missouri   63801              Class E Limited Partnership Units of Company           200,000     100.0

Galaxy Telecom Investments, L.L.C.        Class A General Partnership Units of Company        44,491,667      99.7
  1220 North Main Street                  Class B  Limited Partnership Units of Company            1,000     100.0
  Sikeston, Missouri  63801

Farm Bureau Life Insurance Company        Class D Limited Partnership Units of Company         6,384,000     100.0
  Vantage Cable Associates, L.P.
  5400 University Avenue
  W. Des Moines, Iowa  50266

Galaxy Telecom Management, L.L.C.        Class A Voting Common Stock of Galaxy GP                 20,000      16.9
  1220 North Main Street                  Common Interests in Galaxy Investments                     990      99.0
  Sikeston, Missouri  63801               Voting Preferred Interests in Galaxy Investments       288,459       7.3

TA Associates Group (2)                   Class A Voting Common Stock of Galaxy GP                63,281      53.3
  c/o TA Associates, Inc.                 Common Interests in Galaxy Investments                       8        *
  125 High Street, Suite 2500             Voting Preferred Interests in Galaxy Investments     3,452,523      87.8
  Boston, Massachusetts  02110

Spectrum Equity Investors, L.P.           Class A Voting Common Stock of Galaxy GP                24,615      20.7
  125 High Street, Suite 2600             Common Interests in Galaxy Investments                       2       *
  Boston, Massachusetts  02110

Fleet Equity Partners(3)                  Class A Voting Common Stock of Galaxy GP                 5,810       4.9
  111 Westminster Street                  Class B Nonvoting Common Stock of Galaxy GP             14,703     100.0
  Providence, Rhode Island  02903         Common Interests in Galaxy Investments                       2       *
                                          Voting Preferred Interests in Galaxy Investments       192,646       4.9
                                          Nonvoting Preferred Interests in Galaxy Investments    570,368     100.0

Tommy L. Gleason, Jr.                     Common Interests of Galaxy Management Limited        1,030,000      38.5

James M. Gleason                          Common Interests of Galaxy Management Limited          925,000      33.8

J. Keith Davidson                         Common Interests of Galaxy Management Limited           45,000       2.0

All executive officers and directors of   Class A Voting Common Stock of Galaxy GP
  Galaxy GP as a group (6 persons) (4)    Common Interests in Galaxy Investments                 107,896      91.0

All managers of Galaxy Investments as                                                                998      99.8
  a group (4 persons) (5)                 Voting Preferred Interests in Galaxy Investments     3,740,995      95.1

</TABLE>

* Less than one percent.

      (1) Share and unit  ownership  amounts  have been  rounded to the  nearest
whole number.

      (2)  Includes  19,524  shares of Class A Voting  Common Stock of Galaxy GP
("Class A Stock") owned by Advent Atlantic and Pacific II L.P.,  7,040 shares of
Class A Stock owned by Advent  Industrial II L.P.,  3,282 Class A Stock owned by
Advent New York, L.P.,  32,820 shares of Class A Stock owned by Advent VII L.P.,
and  615  shares  of  Class  A  Stock  owned  by TA  Venture  Investors  Limited
Partnership. Includes 6 units of Common Interests in Galaxy Investments ("Common
Interests")  owned by Advent VII  Investor  Corp.  Includes  3,452,523  units of
Voting Preferred Interests in Galaxy Investments ("Voting Preferred  Interests")
owned by Advent VII Investor Corp. All of the above  beneficial  owners are part
of an affiliated  group of investment  partnerships  and companies  referred to,
collectively,  as  the  TA  Associates  Group.  Messrs.  Tadler  and  Schiciano,
Directors  of  Galaxy GP and  managers  of Galaxy  Investments,  are a  Managing
Director and a Principal,  respectively,  of TA Associates,  Inc.,  which is the
sole general  partner of TA  Associates  VII L.P.,  TA Associates VI L.P. and TA
Associates  AAP II Partners  L.P.  TA  Associates  VII L.P. is the sole  general
partner of Advent VII L.P. TA Associates  is the sole general  partner of Advent
New York L.P. and Advent  Industrial II L.P. TA Associates  AAP II Partners L.P.
is the  sole  general  partner  of  Advent  Atlantic  and  Pacific  II  L.P.  TA
Associates,  Inc. exercises sole voting and investment power with respect to all
of the  shares  or  units,  as the  case may be,  held of  record  by the  named
investment  partnerships,  with the  exception  of those shares of Class A Stock
held by TA Venture Investors Limited Partnership. Principals and employees of TA
Associates,  Inc. (including Messrs.  Tadler and Schiciano) comprise the general
partners of TA Venture Investors Limited Partnership.  In such capacity, each of
Messrs.  Tadler and Schiciano may be deemed to share voting and investment power
with  respect  to 615  shares  of Class A Stock  held of  record  by TA  Venture
Investors  Limited  Partnership.  Messrs.  Tadler and  Schiciano  each  disclaim
beneficial  ownership of such shares,  except to the extent of their  respective
pecuniary interests.

      (3)  Includes  581  shares of Class A Stock  and  1,470  shares of Class B
Nonvoting Common Stock of Galaxy GP ("Class B Stock") owned by Chisholm Partners
II L.P.,  and 5,229 shares and 13,233 shares of Class A Stock and Class B Stock,
respectively,  owned by Fleet Growth Resources, Inc. Also includes 0.18 units of
Common Interests,  15,460 units of Voting Preferred Interests,  and 45,775 units
of Nonvoting  Preferred  Interests in Galaxy Investments  ("Nonvoting  Preferred
Interests")  owned by Chisholm Partners II L.P., 1.14 units of Common Interests,
124,030  units of Voting  Preferred  Interests  and 367,215  units of  Nonvoting
Preferred  Interests  owned by Fleet Growth  Resources,  Inc., and 0.49 units of
Common Interests,  53,156 units of Voting Preferred  Interests and 157,378 units
of Nonvoting Preferred Interests owned by Fleet Equity Partners VII, L.P.

      (4)  Includes  (i)  20,000  shares  owned of record  by Galaxy  Management
Limited as to which Tommy L Gleason,  Jr. and J. Keith Davidson may be deemed to
have shared voting and investment  power,  (ii) 63,281 shares owned of record by
TA  Associates  Group as to which shares  Messrs.  Tadler and  Schiciano  may be
deemed to have shared voting and investment  power and (iii) 24,615 shares owned
of record by Spectrum Equity Investors, L.P. ("Spectrum") as to which shares Mr.
Collatos may be deemed to have shared voting and investment power.

      (5)  Includes  (i) 990  Common  Interests  and  288,459  Voting  Preferred
Interests  owned of record  by  Galaxy  Management  Limited  as to which  shares
Messrs.  Gleason,  Jr.  and  Davidson  may be deemed to have  shared  voting and
investment  power,  (ii) 6  Common  Interests  and  2,494,591  Voting  Preferred
Interests  owned of record by TA  Associates  Group as to which  shares  Messrs.
Tadler and Schiciano may be deemed to have shared  voting and  investment  power
and (iii) 2 Common  Interests and 915,583 Voting  Preferred  Interests  owned of
record by Spectrum as to which shares Mr.  Collatos may be deemed to have shared
voting and investment power.

      Item 13.  Certain Relationships and Related Transactions.

      Management Agreement

      Galaxy  Management,  which  is  owned by the  Senior  Managers,  currently
manages all aspects of the day-to-day business and operations of Galaxy pursuant
to the  Management  Agreement.  The  term of the  Management  Agreement  expired
December 31, 1999, but was automatically renewed for a successive one-year term.
Galaxy may terminate the Management Agreement with 90 days' written notice prior
to the expiration of the initial or any renewal term. Galaxy also has the option
to terminate the Management  Agreement in the event (i) of a material  breach of
the  Management  Agreement  by Galaxy  Management  and  failure  to cure same or
commence  cure within 30 days after  receipt of notice from  Galaxy,  (ii) of an
unwaived and uncured default by Galaxy of any substantive  covenant contained in
its financing documents,  (iii) of a 10% reduction in Galaxy's gross revenues or
operating  cash flow over the  prior  fiscal  year or (iv) that none of Tommy L.
Gleason,  Jr.,  nor James M.  Gleason is  involved in the  management  of Galaxy
Management. The Management Agreement also will terminate, with respect to any of
Galaxy's cable systems,  upon the sale of such system by Galaxy.  The Management
Agreement will terminate in its entirety upon the sale or other  distribution of
all of Galaxy's  systems or upon the dissolution or winding up of Galaxy,  which
may be effected by the Equity Investors in certain circumstances pursuant to the
terms of the Equity Holders Agreement described below.

      The Management  Agreement provides that Galaxy Management is authorized to
perform management services including, among other things: operation and control
of the physical assets of the Systems;  engineering and supervision of expansion
and construction activities relating to the Systems; negotiation, administration
and extension of franchise and pole  attachment  agreements and agreements  with
utility companies; management of programming agreements;  marketing; purchasing;
budgeting;  billing,  record-keeping,  accounting and financial  reporting;  tax
return  preparation;  and hiring,  supervision  and  termination of employees of
Galaxy.  Galaxy  Management  is also  authorized  to establish and maintain bank
accounts for Galaxy ("System Operating Accounts") to deposit all funds collected
by each system and to make  withdrawals  therefrom  for  purposes of payment and
reimbursement of expenses incurred by or on behalf of Galaxy.  Galaxy Management
is entitled to  reimbursement  from the System  Operating  Accounts on a monthly
basis of various  expenses  allocable  to its  management  and  operation of the
Systems and Galaxy,  including truck and automobile  expenses,  travel expenses,
meals and  entertainment,  and third-party  professional  fees. For 1999, Galaxy
paid Galaxy Management approximately $211,000 in reimbursed expenses.

      In return  for its  management  services,  Galaxy  Management  receives  a
management  fee,  payable  monthly,  equal to a percentage of the gross revenues
derived by Galaxy from the Systems,  excluding revenues from the sale of Systems
or franchises.  The Management Agreement also provides that, prior to January 1,
1998,  the dollar amount of the  management  fee may not increase as a result of
revenues  attributable to acquired cable  television  systems until such time as
the gross revenues of Galaxy reach a certain  minimum level.  The management fee
is  currently  3% of revenues.  For the year ended  December  31,  1999,  Galaxy
incurred a management  fee of  $2,052,074.  There can be no assurance  that such
amounts  are  representative  of the amount of annual  fees to be paid to Galaxy
Management in the future.

      The management  fee may be reduced in the event other entities  controlled
by Tommy L. Gleason,  Jr.,  James M. Gleason  and/or J. Keith  Davidson  acquire
other entertainment or telecommunications  business assets, with the calculation
to determine any such  reduction in the management fee based upon the percentage
of the gross  revenues of such other  assets  compared to the gross  revenues of
Galaxy.  None of such persons  presently  intends,  or intends to cause any such
entities,  to make any such  acquisitions.  The Loan Agreement  limits  Galaxy's
ability to pay any accrued management fee and Galaxy  Management's right to such
fee and  reimbursement  of expenses is  restricted by the terms of the Affiliate
Subordination Agreement as defined below.

      Galaxy   believes  that  the  terms  of  the   Management   Agreement  are
substantially  the same terms as could be obtained in arm's-length  arrangements
with unaffiliated third parties.

      Affiliate Subordination Agreement

      Galaxy, Galaxy GP, Galaxy Investments,  certain investors in Galaxy GP and
Galaxy  Investments,  Galaxy  Telecom  Management,  L.L.C.  ("Galaxy  Management
Limited"),  Tommy L. Gleason, Jr., James M. Gleason,  Tommy L. Gleason, J. Keith
Davidson and the sellers of the Galaxy Cablevision Systems, Vista Communications
Systems and Vantage Cable Systems (collectively, the "Subordinated Parties") are
parties to an Affiliate  Subordination  Agreement dated as of December 23, 1994,
as amended in March 2000 (the  "Subordination  Agreement")  with Fleet  National
Bank and the Lenders under Galaxy's Loan Agreement (the "Senior Parties"). Under
the terms of the  Subordination  Agreement,  all  obligations and liabilities of
Galaxy,  Galaxy GP and Galaxy  Investments to make any payments of cash or other
property to any of the other  Subordinated  parties are subordinated in right of
payment and remedies to the prior final payment in full of the  obligations  and
liabilities  of Galaxy,  Galaxy GP and Galaxy  Investments to the Senior Parties
under the Loan Agreement and the financing documents related thereto.

      Equity Holders Agreement

      Galaxy,  Galaxy GP, Galaxy  Investments,  the Senior Managers,  the Equity
Investors  and Vantage  Cable have  entered  into the Equity  Holders  Agreement
relating  to the  management  of Galaxy GP and Galaxy  Investments,  the general
partners  of  Galaxy,  and  certain  other  matters.  Under the  Equity  Holders
Agreement,  each stockholder of Galaxy GP and each member of Galaxy  Investments
has  agreed  to elect  as  directors  or  managers,  as the  case may be,  three
designees of the Equity Investors and Tommy Gleason,  Jr. and one other designee
of the Senior  Managers.  The  current  designees  of the Equity  Investors  are
William P.  Collatos,  Kenneth T.  Schiciano  and  Richard D.  Tadler.  J. Keith
Davidson  is the current  second  designee  of the Senior  Managers.  The Equity
Holders  Agreement  provides that James M. Gleason shall serve as a director and
manager if Tommy Gleason, Jr. is unable to serve.

      The Equity Holders Agreement also restricts  transfers of equity interests
in Galaxy GP and Galaxy  Investments  by the Senior  Managers  and  provides the
Equity  Investors with piggyback  registration  rights and, on or after December
23, 1998,  demand  registration  rights with respect to equity  interests in the
Company,  Galaxy GP and Galaxy Investments.  The Equity Investors have the right
to require the Company, Galaxy GP and Galaxy Investments to restructure in order
to facilitate a sale of the Company or its cable systems and to consummate  such
a sale on or after December 23, 1998 or the  occurrence of a payment  default on
notes issued by Galaxy Investments to the Equity Investors.

      The Equity Holders  Agreement  also provides that the Senior  Managers and
their   affiliates   will   first   offer  any   opportunity   to  invest  in  a
telecommunications  or  entertainment  business  to Galaxy  before  making  such
investment.  If Galaxy elects not to make such  investment,  the Senior Managers
and the Equity  Investors,  if they so elect, may make such investments  through
another  entity.  The  decision  of  Galaxy  as to  whether  or not to make such
investment  will be made by the  board  of  directors  of the  Managing  General
Partner.  Although the directors and executive  officers of the Managing General
Partner have certain fiduciary  obligations to its shareholders under applicable
corporate law and the Managing General Partner has fiduciary duties to the other
partners  of  Galaxy,  there can be no  assurance  that a conflict  of  interest
relating to any such  investment  will be  resolved  in favor of Galaxy.  Galaxy
presently does not have any agreements or policies  governing possible conflicts
of interest.

      Limited Partnership Interests in Galaxy

      Galaxy Investments owns 100% of the Class B Limited Partnership  Interests
in Galaxy,  which it received in connection  with the  organization  and initial
capitalization  of Galaxy in December 1994. Galaxy GP received 100% of the Class
C  Limited   Partnership   Interests  in  Galaxy  in  connection  with  Galaxy's
acquisitions  of the Vista  Communications  Systems  and the Galaxy  Cablevision
Systems,  respectively.  In connection with its acquisition of the Vantage Cable
Systems, Galaxy issued approximately $6.4 million in the form of Class D Limited
Partnership Interests in Galaxy, out of the total consideration of approximately
$38.4  million  paid for such  Systems.  Galaxy's  ability to declare or pay any
dividend or make any other  distributions to its general and limited partners is
restricted by the terms of the Indenture dated September 28, 1995.

      Subject  to  such  restrictions  and at  such  time  as  Galaxy  may  make
distributions  under the Loan  Agreement,  Galaxy  GP may  cause  Galaxy to make
distributions to its Class C Limited Partners and Class D Limited Partners prior
to making  distributions  to other  partners  of Galaxy in  accordance  with the
Limited Partnership  Agreement dated December 23, 1994, as amended, by and among
Galaxy GP, Galaxy  Investments and Vantage Cable (the "Partnership  Agreement").
Galaxy may make such  distributions  until the  aggregate of such  distributions
equals the  amount of the  capital  contributions  of each such class of limited
partners,   plus  certain  priority  rates  of  return.  Under  the  Partnership
Agreement,  Class C Limited  Partners  are  entitled  to a rate of return of 9%,
compounded  annually on the  previously  unreturned  capital  contribution.  The
Partnership  Agreement provides that Class D Limited Partners are entitled to an
annually  compounded  rate of return of 10.0% per annum from  December  23, 1994
until December 31, 1999,  which rate of return increases each year thereafter in
increments  of 2.0%,  up to a maximum  of 18.0%.  Class B Limited  Partners  are
entitled to up to 11.90% of any  distribution  remaining after allocation of the
capital  contributions  of and priority  rates of return to the Class C, D and E
Limited Partners and to the Class A General  Partners.  To date, Galaxy has made
no  distributions  to any of the  general or  limited  partners  of Galaxy.  The
interests of each of the general and limited partners of Galaxy are also subject
to the terms of the Affiliate  Subordination  Agreement  and the Equity  Holders
Agreement.

Relationship of Agent with Equity Investors

     Fleet National Bank, the Agent under the Revolving  Credit  Facility,  is a
wholly owned subsidiary of Fleet Financial  Group,  Inc., a bank holding company
("Fleet Financial").  Fleet Equity Partners,  one of the Equity Investors,  is a
marketing name for Fleet Growth  Resources,  Inc., a wholly owned  subsidiary of
Fleet Private Equity Company, Inc., which, in turn, is a wholly owned subsidiary
of Fleet Financial.

     On December 31,  1998,  Galaxy  acquired a 40% interest in Galaxy  American
Communications,  LLC ("GAC"). This interest was acquired in conjunction with the
sale of cable television  systems to GAC. There was no cash investment by Galaxy
and there is no present market value for this interest.

Galaxy Air Services, Inc.

      Galaxy leases an aircraft from Galaxy Air Services, Inc. ("Galaxy Air"), a
corporation jointly owned by James Gleason and Tommy Gleason,  Jr., at a rate of
$2,079.60  per  hour,  plus  $400 per  night for  incidental  costs  related  to
overnight  trips.  The  Company  paid a total of  $215,066  to Galaxy Air during
fiscal 1999.  Galaxy Air derives more than 75% of its revenues from the Company.
The Company believes that the  arrangements  with Galaxy Air are as favorable as
those  that  could  have  been  obtained  in   arms-length   negotiations   with
unaffiliated third parties.

<PAGE>

                                        PART IV

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

      (a)(1)   Financial  Statements. Reference is made to the Index on Page F-1
               for a list  of all  financial statements  filed  as  part of this
               Report.

      (a)(2)   Financial Statement Schedules.  Reference is made to the Index on
               Page F-1 for a list of all financial statement schedules filed as
               part of this Report.

      (a)(3)   Exhibits.  See Exhibit Index.

      (b)      Reports on Form 8-K.  No  reports  on Form 8-K were  filed during
               the last quarter of the period covered by this report.


<PAGE>

                                   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.

                                 GALAXY TELECOM, L.P.
                             By: Galaxy Telecom Inc.

                               As General Partner

      April 14, 2000               /s/ Tommy L. Gleason, Jr.
                                 ---------------------------
                          By:    Tommy L. Gleason, Jr.
                                 Chairman, Chief Executive Officer and Director


      April 14, 2000               /s/ J. Keith Davidson
                                 -----------------------
                              By: J. Keith Davidson

                                 Executive   Vice-President,  Chief Financial
                                 Officer and Director

      April 14, 2000               /s/ James M. Gleason
                                 ----------------------
                              By: James M. Gleason

                                 President, Chief Operating Officer and Director


<PAGE>

INDEX TO EXHIBITS


 2.1-      Asset purchase agreement by and between Douglas Cable Communications,
           Limited Partnership and Galaxy, dated as of July 19, 1995,
           incorporated herein by reference to Exhibit 2.1 to the Registration
           Statement on Form S-1 (Reg. No. 37-95278) (the "Form S-1").

 2.2-      Asset Purchase  Agreement by and between Friendship Cable of Florida,
           Friendship  Cable of  Georgia,  Friendship  Cable of South  Carolina,
           Buford  Group,   Inc.  and  Galaxy,   dated  as  of  July  19,  1995,
           incorporated herein by reference to Exhibit 2.2 to the Form S-1.

 2.3-      Asset Purchase Agreement by and between Vista Communications  Limited
           Partnership I and Galaxy,  dated as of August 31, 1995,  incorporated
           herein by reference to Exhibit 2.3 to the Form S-1.

 2.4-      Asset Purchase Agreement by and between Vista/Narragansett Cable,
           L.P. and Galaxy, dated as of August 8, 1995, incorporated herein by
           reference to Exhibit 2.4 to the Form S-1.

 2.5-      Asset Purchase  Agreement by and between  Phoenix Country Cable Joint
           Venture and Galaxy, dated as of July 19, 1995, incorporated herein by
           reference to Exhibit 2.5 to the Form S-1.

 2.6-      Agreement  by and between  Galaxy and Anderson  Pacific  Corporation,
           dated as of August 4,  1995,  incorporated  herein  by  reference  to
           Exhibit 2.6 to the Form S-1.

 3.1-      Limited  Partnership  Agreement  (the  "Partnership   Agreement")  of
           Galaxy,  dated  as of  December  23,  1994,  incorporated  herein  by
           reference to Exhibit 3.1 to the Form S-1.

 3.2-      Certificate of Limited Partnership of the Company, dated December 23,
           1994,  incorporated  herein by  reference  to Exhibit 3.2 to the Form
           S-1.

 3.3-      Certificate of Incorporation of Galaxy Telecom Capital Corp.
           ("Capital Corp."),  incorporated herein by reference to Exhibit 3.3
           to the Form S-1.

 3.4-      Bylaws of Capital Corp.,  incorporated herein by reference to Exhibit
           3.4 to the Form S-1.

 3.5-      Amendment  No.1 to the  Limited  Partnership  Agreement,  dated as of
           December 1, 1995,  filed as Exhibit 3.5 to Galaxy's  Annual Report on
           Form 10-K for the year  ended  December  31,  1995,  is  incorporated
           herein by reference.

 3.6-      Amendment  No.2 to the  Limited  Partnership  Agreement,  dated as of
           December 29, 1995,  filed as Exhibit 3.6 to Galaxy's Annual Report on
           Form 10-K for the year  ended  December  31,  1995,  is  incorporated
           herein by reference.

 4.1-      Indenture by and among Galaxy, Capital Corp. and Boatman's Trust
           Company, as Trustee, relating to the 12 3/8% Senior Subordinated
           Notes due 2005, incorporated herein by reference to Exhibit 4.1 to
           the Form S-1.

 4.2-      Form of Note (included in Exhibit 4.1).

10.1-      Management Agreement by and between Galaxy Systems Management, Inc.
           and Galaxy, dated as of December 23, 1994, incorporated herein by
           reference to Exhibit 10.1 to the Form S-1.

10.2-      Securities Purchase Agreement by and among Galaxy, Galaxy Telecom,
           Inc. and Galaxy Telecom Investments, L.L.C. and the Purchasers and
           other parties named therein, dated as of December 23, 1994 (the
           "Securities Purchase Agreement"),  incorporated herein by reference
           to Exhibit 10.2 to the Form S-1.

10.3-      Equity Holders Agreement by and among Galaxy, Galaxy Telecom, Inc.,
           Vantage Cable Associates, L.P. and the Management Stockholders and
           Purchasers named in the Securities Purchase Agreement, dated as of
           December 23, 1994, incorporated herein by reference to Exhibit 10.3
           to the Form S-1.

10.4-      Contract by and between Galaxy and QUALCOMM Incorporated, dated as of
           November 18, 1993,  as amended,  incorporated  herein by reference to
           Exhibit 10.5 to the Form S-1.

10.5-      Asset Purchase Agreement by and between Galaxy (as assignee of Galaxy
           Management, Inc.) and Galaxy Cablevision, L.P., dated as of May 16,
           1994, incorporated herein by reference to Exhibit 10.6 to the Form
           S-1.

10.6-      Asset Purchase Agreement by and between Galaxy (as assignee of Galaxy
           Management, Inc.) and Vantage Cable Associates, L.P., dated as of
           June 8, 1994, as amended as of December 23, 1994,  incorporated
           herein by reference to Exhibit 10.7 to the Form S-1.

10.7-      Asset Purchase Agreement by and between Galaxy (as assignee of Galaxy
           Management, Inc.) and Chartwell Cable of Colorado, Inc., dated
           November 11, 1994, incorporated herein by reference to Exhibit 10.8
           to the Form S-1.

10.8-      Asset Purchase Agreement by and between Galaxy and Galaxy
           Cablevision, L.P., dated as of December 23, 1994, incorporated herein
           by reference to Exhibit 10.9 to the Form S-1.

10.9-      Agreement of Purchase and Sale by and between  Galaxy (as assignee of
           Galaxy Management, Inc.) and Vista Communications Limited Partnership
           III, dated as of June 13, 1994,  incorporated  herein by reference to
           Exhibit 10.10 to the Form S-1.

10.10-     Affiliate  Subordination  Agreement by and among Galaxy and the other
           parties named  therein,  dated as of December 23, 1994,  incorporated
           herein by reference to Exhibit 10.11 the Form S-1.

10.11-     First  Amendment  to  Securities  Purchase  Agreement,  dated  as  of
           December 1, 1995, filed as Exhibit 10.11 to Galaxy's Annual Report on
           Form 10-K for the year  ended  December  31,  1995,  is  incorporated
           herein by reference.

10.12-     Amended and Restated Loan Agreement dated as of September 28, 1995 by
           and among  Galaxy  and Fleet  National  Bank,  as Agent,  Lender  and
           Co-Arranger,    and   Internationale   Nederlanden   (U.S.)   Capital
           Corporation,  as Lender  and  Co-Arranger,  and the  other  Financial
           Institutions party thereto. Filed as Exhibit 10.12 to Galaxy's Annual
           Report  on Form  10-K  for the  year  ended  December  31,  1996,  is
           incorporated herein by reference.

10.13-     Amendment No. 1 of the Amended and Restated Loan Agreement dated
           October 21, 1996 by and among Galaxy, Galaxy Telecom Capital Corp.
           and Fleet National Bank.  It was filed as Exhibit 10 to Galaxy's
           Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
           is incorporated herein by reference.

10.14-     Amendment No. 2 of the Amended and Restated Loan Agreement dated
           March 28, 1997 by and among Galaxy, Galaxy Telecom Capital Corp. and
           Fleet National Bank, is incorporated herein by reference.

10.15-     Amendment No. 3 of the Amended and Restated Loan Agreement dated
           November 14, 1997 by and among Galaxy, Galaxy Telecom Capital Corp.
           and Fleet National Bank, is incorporated herein by reference.

10.16-     Amendment No. 4 of the Amended and Restated Loan Agreement dated
           March 27, 1998 by and among Galaxy, Galaxy Telecom Capital Corp. and
           Fleet National Bank, is incorporated herein by reference.

10.17-     Amendment  No. 5 of the Amended and  Restated  Loan  Agreement  dated
           September 8, 1998 by and among Galaxy,  Galaxy Telecom Capital Corp.,
           Fleet National Bank,  State Street Bank and Trust Company,  The First
           National  Bank of Chicago and Union Bank.  It was filed as Exhibit 10
           to  Galaxy's  Quarterly  Report  on Form 10-Q for the  quarter  ended
           September 30, 1998, is incorporated herein by reference.

10.18-     Amendment  No. 6 of the Amended and  Restated  Loan  Agreement  dated
           March 31, 1999 by and among Galaxy,  Galaxy  Telecom  Capital  Corp.,
           Fleet National Bank,  State Street Bank and Trust Company,  The First
           National  Bank of Chicago and Union Bank.  It was filed as Exhibit 10
           to  Galaxy's  Quarterly  Report  on Form 10-Q for the  quarter  ended
           September 30, 1998, is incorporated herein by reference.

10.19-      Amendment No. 7 of the Amended and Restated Loan Agreement dated
           March 31, 2000 by and among Galaxy, Galaxy Telecom Capital Corp.,
           Fleet National Bank, State Street Bank and Trust Company, The First
           National Bank of Chicago and Union Bank.

10.20-      $5,000,000 Term Loan Agreement by and among Galaxy Telecom, L.P. and
           Fleet National Bank as Agent and Lender and certain other banks dated
           March 31, 2000.

12.1-      Computation of Ratio of Earnings to Fixed Charges.

21.1-      Subsidiaries of Galaxy incorporated herein by reference to Exhibit
           21.1 to the Form S-1.

27.1-      Financial Data Schedule.

<PAGE>