<PAGE>
                                       
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

[ x ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
                                       
                 For the Quarterly Period ended March 31, 1998

                                      or

[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

For the transition period from _________ to _________

                        Commission File Number: 333-3288
                                       
                           CS Wireless Systems, Inc.
              (Exact name of Registrant as specified in its charter)

           Delaware                                              23-2751747
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

200 Chisholm Place, Suite 202, Plano, Texas                         75075
 (Address of principal executive offices)                         (Zip Code)
                                       
                               (972) 633-4000
               (Registrant's telephone number, including area code)

     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 [   ]

Number of shares outstanding of each of the Registrant's classes of common 
stock, as of the latest practicable date:

<TABLE>
                                                Shares Outstanding
                     Class                      as of May 14, 1998
                     -----                      ------------------
<S>                                             <C>
          Common Stock, $.001 par value              10,700,506
</TABLE>

<PAGE>
                                       
                       PART I  -  FINANCIAL INFORMATION
                        ITEM 1 -  FINANCIAL STATEMENTS

                   CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
                                                        MARCH 31,     DECEMBER 31,
                                                          1998            1997
                                                       -----------    ------------
                                                       (Unaudited)
<S>                                                    <C>            <C>
     ASSETS
Current assets:
 Cash and cash equivalents                               $ 65,010       $ 74,564
 Restricted cash                                            5,030          5,030
 Subscriber receivables, net                                1,028          1,026
 Accounts receivable from affiliates                           67             --
 Prepaid expenses and other                                 1,008            939
                                                         --------       --------
   Total current assets                                    72,143         81,559

Plant and equipment, net                                   52,625         50,519
License and leased license investment, net                169,228        170,689
Goodwill, net                                              47,310         48,243
Investment in and loans to equity affiliates                7,732          8,503
Debt issuance costs and other assets, net                  10,975         11,190
                                                         --------       --------
                                                         $360,013       $370,703
                                                         --------       --------
                                                         --------       --------

 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued expenses                   $  8,300       $  8,370
 Accounts payable to affiliates                                --            282
 Current portion of long-term debt                            217            217
 Current portion of BTA auction payable                       561          1,122
 Other current liabilities                                    676          1,523
                                                         --------       --------
   Total current liabilities                                9,754         11,514

Long-term debt, less current portion                      291,502        283,686
BTA auction payable, less current portion                   3,196          3,274
                                                         --------       --------
   Total liabilities                                      304,452        298,474
                                                         --------       --------

Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000
  shares, no shares issued and outstanding                     --             --
Common stock, $.001 par value; authorized 40,000,000 shares,
  issued and outstanding 10,702,609 shares in 1998 and 1997    11             11
Treasury stock, at cost; 2,103 shares in 1998 and 1997        (40)           (40)
Additional paid-in capital                                154,557        154,557
Accumulated deficit                                       (98,967)       (82,299)
                                                         --------       --------
   Total stockholders' equity                              55,561         72,229
                                                         --------       --------
                                                         $360,013       $370,703
                                                         --------       --------
                                                         --------       --------
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

<PAGE>
                                       
                   CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In thousands, except share data)

<TABLE>
                                                           THREE MONTHS ENDED
                                                       --------------------------
                                                        MARCH 31,      MARCH 31,
                                                          1998           1997
                                                       -----------    -----------
                                                       (Unaudited)    (Unaudited)
<S>                                                    <C>            <C>
Revenue                                                  $  6,823       $  6,678
                                                       ----------     ----------
Operating expenses:
   Systems operations                                       3,908          3,695
   Selling, general and administrative                      4,119          3,815
   Depreciation and amortization                            7,224          6,585
                                                       ----------     ----------
      Total operating expenses                             15,251         14,095
                                                       ----------     ----------
      Operating loss                                       (8,428)        (7,417)
Other income (expense):
   Interest income                                          1,017          1,450
   Equity in losses of affiliates                            (986)            --
   Interest expense                                        (8,271)        (7,996)
                                                       ----------     ----------
Total other expense, net                                   (8,240)        (6,546)
                                                       ----------     ----------
Loss before income taxes                                  (16,668)       (13,963)
Income tax benefit                                             --          1,357
                                                       ----------     ----------
Net loss                                                 $(16,668)      $(12,606)
                                                       ----------     ----------
                                                       ----------     ----------

Weighted average basic and diluted loss 
  per common share                                       $  (1.56)      $  (1.21)
                                                       ----------     ----------
                                                       ----------     ----------

Basic and diluted weighted average shares outstanding  10,700,506     10,448,000
                                                       ----------     ----------
                                                       ----------     ----------
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

<PAGE>
                                       
                  CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE>
                                                                    THREE MONTHS ENDED
                                                                --------------------------
                                                                 MARCH 31,      MARCH 31,
                                                                    1998           1997
                                                                -----------    -----------
                                                                (Unaudited)    (Unaudited)
<S>                                                             <C>            <C>
Cash flows from operating activities:
 Net loss                                                        $(16,668)      $(12,606)
   Adjustments to reconcile net loss to net cash 
    provided by (used in) operating activities:
     Depreciation and amortization                                  7,224          6,585
     Deferred income taxes                                             --         (1,357)
     Accretion on discount notes and amortization of debt
      issuance costs                                                8,100          7,250
     Non-cash interest expense on other long-term debt                164            699
     Equity in losses of affiliates                                   986             --
     Changes in assets and liabilities, net of effects of
      contributions:
       Subscriber receivables                                          (2)            81
       Prepaid expenses and other                                    (246)          (116)
       Accounts payable, accrued expenses and other liabilities      (305)           263
                                                                 --------      ---------

         Net cash provided by (used in) operating activities         (747)           799
                                                                 --------      ---------
     Cash flows from investing activities:
     Purchases of plant and equipment                              (5,964)        (1,737)
     Additions to license and leased license investment              (956)        (1,669)
     Investment in equity affiliates                                 (998)            --
     Investment in assets held for sale                                --         (1,002)
     Other                                                             --           (175)
                                                                 --------      ---------
         Net cash used in investing activities                     (7,918)        (4,583)
                                                                 --------      ---------
Cash flows from financing activities:
     Payments on notes payable                                       (156)        (2,103)
     Payments on BTA auction payable                                 (733)            --
                                                                 --------      ---------
        Net cash used in financing activities                        (889)        (2,103)
                                                                 --------      ---------

Net decrease in cash and cash equivalents                        $ (9,554)      $ (5,887)
Cash and cash equivalents at beginning of period                   74,564        113,072
                                                                 --------      ---------
Cash and cash equivalents at end of period                       $ 65,010      $ 107,185
                                                                 --------      ---------
                                                                 --------      ---------
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements
<PAGE>
                                       
                  CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                March 31, 1998
                                  (Unaudited)

(1)  GENERAL

     (a)  DESCRIPTION OF BUSINESS

     THE COMPANY. CS Wireless Systems, Inc. (together with its subsidiaries, 
"CS" or the "Company") is one of the largest wireless cable television 
companies in the United States in terms of line-of-sight ("LOS") households 
and subscribers.  The Company's 21 markets encompass approximately 7.7 
million television households, approximately 6.4 million of which are LOS 
households, as estimated by the Company.  The Company has commenced a limited 
commercial offering of Internet access service in its Dallas, Texas market.  
Further, the Company is offering certain telephony products through 
interconnection agreements with Southwestern Bell Telephone Company and GTE 
Southwest Incorporated and a long distance reseller agreement with WorldCom, 
Inc.

     At May 14, 1998, CAI Wireless Systems, Inc. ("CAI") and Heartland 
Wireless Communications, Inc. ("Heartland") owned 60% and 36%, respectively, 
of the outstanding Common Stock of the Company.  CAI is one of the largest 
developers, owners and operators of wireless cable television systems in the 
United States.  Heartland is a leading developer, owner and operator of 
wireless cable systems in small to mid-size markets located in the central 
United States.

     PRINCIPAL MARKETS OF THE COMPANY.  On February 23, 1996, in exchange for 
approximately 60% of the Company's Common Stock, CAI, directly or indirectly, 
contributed to the Company the wireless cable television assets and all 
related liabilities, or the stock of subsidiaries owning wireless cable 
television assets associated with the wireless cable television markets of 
Bakersfield and Stockton/Modesto, California; Charlotte, North Carolina; and 
Cleveland, Ohio.  Simultaneously, in exchange for approximately 40% of the 
Company's Common Stock, cash, a short-term note  and a long-term note (the 
"Heartland Long-Term Note"), Heartland, directly or indirectly, contributed 
or sold to the Company the wireless cable television assets and all related 
liabilities associated with the wireless cable television markets of Grand 
Rapids, Michigan; Minneapolis, Minnesota; Kansas City (suburbs), Missouri; 
Dayton, Ohio; Dallas, Fort Worth and San Antonio, Texas; and Salt Lake City, 
Utah. The Company subsequently acquired wireless cable television rights and 
related assets in certain Midwest markets, including but not limited to, the 
Effingham and Wellsville, Kansas; Story City, Iowa; Scottsbluff, Nebraska; 
Kalispell, Montana and Rochester, Minnesota markets in connection with the 
Company's merger acquisition of USA Wireless Cable, Inc. on October 11, 1996 
("USA Wireless Acquisition"). The Company consummated on September 3, 1997 an 
exchange of its wireless cable rights and related assets in Salt Lake City, 
Utah for wireless cable rights and related assets in Kansas City, Missouri 
pursuant to an agreement dated as of November 6, 1996 with People's Choice TV 
Corp.

     (b)  BASIS OF PRESENTATION

          The unaudited condensed consolidated financial statements include 
the accounts of the Company and its subsidiaries.  All significant 
intercompany accounts and transactions have been eliminated in consolidation.

     (c)  INTERIM FINANCIAL INFORMATION

          In the opinion of management, the accompanying unaudited condensed 
consolidated financial statements of the Company contain all adjustments, 
consisting only of those of a normal recurring nature, necessary to present 
fairly the Company's financial position as of March 31, 1998, and the results 
of operations and cash flows for the three months ended March 31, 1998 and 
1997. These results are not necessarily indicative of the results to be 
expected for the full fiscal year.

     (d)  COMMON SHARES OUTSTANDING AND NET LOSS PER COMMON SHARE

          The Company adopted the provisions of Statement of Financial 
Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share, in the fourth 
quarter of 1997, which requires companies to present basic earnings per share 
and diluted earnings per share. Basic earnings per share is computed by 
dividing income available to common stockholders by the weighted average 
number of common shares outstanding during the period.  Diluted earnings per 
share reflects the potential dilution that could occur if securities or other 
contracts to issue common stock were exercised or converted into common 
stock. The Company has restated its March 31, 1997 earnings per share 
calculation to reflect the adoption of SFAS 128.

<PAGE>

                  CS WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                March 31, 1998
                                  (Unaudited)

(2)  CONTINGENCIES

     The Company is a party to legal proceedings incidental to its business.  
A discussion of certain of these legal proceedings is contained in Part II, 
Item 1 "Legal Proceedings" of this Form 10-Q.  The Company believes that the 
ultimate resolution of the legal proceedings will not have a material adverse 
effect on the Company's consolidated financial position, operating results or 
liquidity.

(3) RECENT ACCOUNTING PRONOUNCEMENTS

     The Company adopted the provisions of Statement of Financial Accounting 
Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income, in the first 
quarter of 1998, which requires companies to disclose comprehensive income 
separately of net income from operations. Comprehensive income is defined as 
the change in equity during a period from transactions and other events and 
circumstances from non-ownership sources.  It includes all changes in equity 
during a period, except those resulting from investments by owners and 
distributions to owners.  The adoption of this statement had no effect on the 
Company for the quarters ended March 31, 1998 or 1997.

<PAGE>

                                     ITEM 2.

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                              AND RESULTS OF OPERATIONS

OVERVIEW

     CS Wireless Systems, Inc. and its subsidiaries develop, own and operate 
a network of wireless cable television systems providing subscription 
television services. The Company intends to use a portion of its wireless 
spectrum for high-speed Internet access and has commenced a limited 
commercial offering of such services in Dallas, Texas.  Additionally, the 
Company offers certain telephony services through agreements with certain 
local exchange carriers and a long distance carrier. The Company had systems 
in operation in eleven markets at March 31, 1998 compared to ten systems in 
the corresponding prior year period.  Effective December 30, 1997, the 
Company assumed operational control over the Story City (also known as 
Radcliffe), Iowa market.  Prior to December 30, 1997, Heartland Wireless 
Communications, Inc. operated the Story City system under a Management 
Agreement.  Systems in other markets are currently under construction and 
development by the Company.

RESULTS OF OPERATIONS

     REVENUE.  The Company's revenue primarily consists of monthly fees paid 
by subscribers for basic programming, premium programming and equipment 
rental.  Revenue for the three months ended March 31, 1998 was $6.8 million, 
compared to $6.7 million for the corresponding prior year period, an increase 
of 1.5%.  The increase in revenue is primarily due to average subscribers 
increasing to 67,650 for the three months ended March 31, 1998 compared to 
approximately 65,350 for the prior year period.  The increase in subscriber 
levels is primarily attributed to the Company assuming operational control of 
the Story City, Iowa market on December 30, 1997.

     SYSTEMS OPERATIONS.  Systems operations expenses primarily include 
programming costs, channel lease payments, transmitter site and tower 
rentals, and other costs of providing service.  Programming costs (with the 
exception of minimum payments) and channel lease payments (with the exception 
of certain fixed payments) are variable expenses which generally increase as 
the number of subscribers increases.  Systems operations expenses were $3.9 
million for the three months ended March 31, 1998, compared to $3.7 million 
for the corresponding prior year period, an increase of 5.4%. The increase in 
systems operations expenses is primarily due to (i) increasing programming 
rates, (ii) incremental costs associated with the Company assuming 
operational control of the Story City, Iowa system on December 30, 1997 and 
(iii) additional costs associated with the preparations for the launch of 
digital video and high speed Internet access service in Dallas, Texas.

     SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and 
administrative expenses ("SG&A") were $4.1 million for the three months ended 
March 31, 1998, compared to $3.8 million for the corresponding prior year 
period, an increase of 7.9%. The increase in SG&A is principally due to (i) 
incremental costs associated with the Company assuming operational control of 
the Story City system on December 30, 1997 and (ii) additional costs 
associated with the preparations for the launch of digital video and high 
speed Internet access service in Dallas, Texas.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense 
includes depreciation of systems and equipment, amortization of licenses and 
leased license investment and goodwill.  Depreciation and amortization 
expenses were $7.2 million for the three months ended March 31, 1998, 
compared to $6.6 million for the corresponding prior year period.  The 
increase in depreciation and amortization expense is attributed to a 
corresponding increase in the underlying capital assets.

     OPERATING LOSS.  The Company incurred operating losses of $8.4 million 
for the three months ended March 31, 1998, compared to $7.4 million for the 
corresponding prior year period.  Consolidated earnings before interest, 
taxes, depreciation and amortization ("EBITDA") were a negative $1.2 million 
for the three months ended March 31, 1998, compared to a negative $0.8 
million for the prior year period.  EBITDA is a financial measure commonly 
used in the industry but is not intended to represent cash flows, as 
determined in accordance with Generally Accepted Accounting Principles 
("GAAP"), or as an indicator of operating performance.  EBITDA should not be 
considered a substitute for measures of performance  prepared in accordance 
with GAAP.  The increase in the Company's operating loss is due to increasing 
system operations expenses, SG&A and depreciation and amortization expense as 
described above.   The decrease in EBITDA is primarily due to costs 
associated with the preparations for the launch of digital video and high 
speed Internet access service in Dallas, Texas.  EBITDA at the 

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS - (Continued)

analog system level improved to approximately $1.6 million for the three 
months ended March 31, 1998 compared to approximately $1.2 million for the 
corresponding prior year period.

     INTEREST INCOME.  Interest income was $1.0 million for the three months 
ended March 31, 1998, compared to $1.5 million for the corresponding prior 
year period.  The decrease in interest income is primarily due to a decrease 
in the average invested balance.  The average invested balance is comprised 
mainly of the proceeds remaining from the private placement of $400.0 million 
of 11 3/8% Senior Discount Notes (the "Senior Discount Notes") on February 
23, 1996, which resulted in net proceeds of $162.9 million (net of debt 
issuance, payments on notes and certain distributions to Heartland and CAI).

     INTEREST EXPENSE.  The Company incurred interest expense of $8.3 million 
for the three months ended March 31, 1998, compared to $8.0 million for the 
corresponding prior year period.  Interest expense during the three months  
ended March 31, 1998 included (i) non-cash interest and accretion of deferred 
debt issuance costs of $8.1 million related to the Senior Discount Notes, 
(ii) interest expense of $72,000 related to the Heartland Long-Term Note and 
(iii) interest relating to other notes payable totaling $128,000.  Interest 
expense during the three months ended March 31, 1997 included (i) non-cash 
interest and accretion of deferred debt issuance costs of $7.3 million 
related to the Senior Discount Notes, (ii) interest expense of approximately 
$449,000 related to the Heartland Long-Term Note and (iii) interest relating 
to other notes payable totaling $251,000.

     NET LOSS.  The Company has recorded net losses since inception. The 
Company incurred net losses of $16.7 million during the first quarter of 1998 
compared to $12.6 million during the corresponding prior year period.  
Although the Company's total revenue increased during the quarter ended March 
31, 1998, the Company's net losses have increased due to increased SG&A, 
system operations, depreciation and amortization and interest expense.

LIQUIDITY AND CAPITAL RESOURCES

     The wireless cable television business is a capital-intensive business. 
Funds are required for the lease or acquisition of channel rights, the 
acquisition of wireless cable systems, the construction of system headend and 
transmission equipment, the conversion of analog systems to digital 
technology, and start-up costs related to the commencement of operations and 
subscriber installation costs.  To date, the primary source of capital of the 
Company has been from the net proceeds from the sale of the Senior Discount 
Notes. The Company intends to finance its future capital requirements through 
a combination of the issuance of debt and equity securities, the disposition 
of wireless cable systems that are inconsistent with the Company's business 
strategy, the incurrence of loans and the assumption of debt and other 
liabilities in connection with acquisitions.

     During 1997, the Company's strategy had been to conserve capital pending 
(i) the implementation of digital video compression technology and (ii) the 
launch of the Company's high speed Internet access product.  The Company 
intended to launch digital television services in its Dallas market in 1997.  
Towards that goal, the Company signed an agreement in 1997 with General 
Instrument Corp. ("General Instrument") for the purchase of equipment 
necessary to deliver digital signals to subscribers; the timely delivery of 
commercially viable equipment was an integral component of the Company's 
plans to offer digital video service.  General Instruments experienced 
certain system integration problems with respect to the digital headend 
equipment and converter boxes.  Due to the delay in delivery of the required 
product, the Company and General Instrument agreed in February 1998 to amend 
certain contractual obligations relating to delivery dates, performance 
requirements, penalties and responsibilities in consideration for certain 
pricing concessions.  In connection with the amendment, the Company released 
General Instrument from any claims it may have had with respect to the 
failure of General Instrument to perform certain obligations prior to the 
deadlines prescribed in the original agreement.  The Company anticipates that 
General Instrument will commence shipment of equipment required for the 
launch of digital services in Dallas during the second quarter of 1998, 
provided General Instrument successfully resolves certain outstanding 
integration problems. In the event such problems are not successfully 
resolved, the intended commercial launch of digital video services could be 
delayed. Based on its own analysis and advice from its equipment vendors, the 
Company believes that these system integration issues will be resolved. The 
Company expects the launch of a compressed digital video product to occur 
during the second quarter of 1998.

     For 1998, the Company has budgeted approximately $45.2 million in 
capital expenditures, including approximately $13.1 million for digital 
subscriber installations, $9.3 million for analog subscriber installations, 
$2.6 million for headend and transmission equipment, $0.9 million relating to 
the build-out of markets to accommodate a new line of business, Internet 
access, $3.7 million to begin conversion of the Company's San Antonio analog 

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS - (Continued)

markets to a hybrid digital format, and $15.6 for strategic investments in 
items such as channel capacity.  The level of capital expenditures incurred 
for customer installations is primarily variable and dependent on the 
customer installation activities of the Company.  Therefore, actual customer 
installation expenditures may be more or less than the Company's estimates.  
Further significant capital expenditures for customer installations are 
expected to be incurred by the Company in 1999 and subsequent years.  Based 
upon the Company's current operating plans, the Company believes that its 
available cash will provide sufficient funds to meet its needs for at least 
the next 12 months.

     The Company expects to launch its first digital video market in the 
second quarter of 1998 in Dallas, depending on the availability of digital 
equipment and the successful integration and construction of the necessary 
infrastructure. The Company will commit additional resources to its marketing 
efforts with respect to its Internet access business.  In addition, the 
Company has begun to convert its analog system in San Antonio, Texas to a 
hybrid digital format. The Company is evaluating its other markets to 
determine where and when to convert existing analog markets to digital or 
offer hybrid digital services in conjunction with existing or planned analog 
services.  However, in the interim, the Company intends to minimize capital 
expenditures in its analog markets.

     The key components of a new digital headend system are (i) the 
compression center, (ii) the transmitter site and, (iii) repeater sites and 
microwave or other links, as necessary.  The Company estimates that the 
launch of a new digital wireless cable system in a typical market will 
require capital expenditures for the compression center of approximately $1.3 
million and approximately $1.3 million for the transmitter site, based on 
utilizing satellite services such as offered by TelQuest Satellite Services, 
LLC ("TelQuest"), in which the Company is a member. TelQuest's other members 
include CAI Wireless Systems, Inc. ("CAI") and TelQuest Communications, Inc., 
an affiliate of CAI.  The capital expenditures associated with facilities 
vary significantly by market as do capital expenditures associated with 
microwave and other links.  The capital associated with a typical high power 
repeater site is estimated at approximately $800,000. Without a satellite 
services solution, a new digital system is estimated to cost approximately 
$6.0 million.  In total, with a satellite services solution, a new digital 
system is estimated to cost approximately $3.3 million.  The capital 
expenditures associated with acquiring and installing each digital subscriber 
are estimated at approximately $750, based on a one terminal configuration.  
Also, the capital expenditures required to modify an existing analog headend 
to offer a hybrid digital service are estimated to range from $100,000 to 
$800,000 depending upon the number of local digitized channels required. The 
Company has estimated that the launch of a new analog wireless cable system 
in a typical market requires aggregate capital expenditures of less than 
$750,000.  The incremental capital associated with acquiring and installing 
each analog subscriber is estimated at $350, based on a one terminal 
configuration.

     The Company's Dallas/Fort Worth system is ultimately expected to require 
additional repeater sites and the construction of an additional transmitter 
site in Fort Worth.  In total, the capital expenditures estimated for the 
buildout of the Dallas/Fort Worth market are $7.5 million, inclusive of the 
compression center, transmitter site costs, repeater sites, microwave links, 
building and towers and warehouse and lab equipment.  Approximately $1.6 
million of the remaining total headend cost is budgeted for 1998.

     Although each of the Company's analog operating systems has incurred 
operating losses since inception, eight of the eleven operating systems 
achieved positive EBITDA in the three months ended March 31, 1998 compared to 
six of the ten operating systems in the corresponding prior year period. The 
combined cash flow from operating activities of the Company's analog 
operating systems has to date been insufficient to cover the combined 
operating expenses of such systems. Until sufficient cash flow is generated 
from operations, the Company will utilize its current capital resources and 
may seek external sources of funding to satisfy its capital needs.  There can 
be no assurance that the Company will be able to secure its capital 
requirements on terms and conditions satisfactory to the Company. 
Accordingly, in the event the Company is unable to secure funding for capital 
requirements on satisfactory terms and conditions, the ability of the Company 
to develop and expand operations and satisfy its indebtedness would be 
materially adversely affected.

     Net cash used in operating activities during the three months ended 
March 31, 1998 was $0.7 million versus cash provided by operating activities 
of $0.8 million during the corresponding prior year period.  The decrease was 
primarily due to (i) timing of payments to vendors, (ii) increased SG&A and 
system operating expense and (iii) to a lesser extent, increasing costs 
associated with the activities preparing for the launch of digital video and 
high speed Internet access services in Dallas, Texas.

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS - (Continued)

     Net cash used in investing activities was $7.9 million during the three 
months ended March 31, 1998 compared to $4.6 million during the corresponding 
prior year period.  Cash used in investing activities primarily relates to 
the acquisition and installation of subscriber receive-site equipment, the 
acquisition of certain wireless cable channel rights, the investments in 
assets held for sale and the investment in equity affiliates.  The increase 
in cash used in investing activities in the three months ended March 31, 1998 
is primarily due to investments in equity affiliates with no comparable 
amount in the prior year period.  Additionally, cash invested in plant and 
equipment increased to $6.0 million for the three months ended March 31, 1998 
from $1.7 million in the corresponding prior year period.  The increase in 
cash invested in plant and equipment is principally due to (i) capital 
expenditures of approximately $1.4 million relating to the preparation for 
the launch of digital video in Dallas, Texas, (ii) capital expenditures of 
approximately $1.0 million relating to the launch of high-speed Internet 
access service in Dallas, Texas and (iii) capital expenditures of 
approximately $2.5 million related to the conversion of the Company's San 
Antonio analog system to a hybrid digital format, all with no corresponding 
amounts in the prior year period.

     Net cash used in financing activities was $0.9 million during the three 
months ended March 31, 1998 compared to $2.1 million during the corresponding 
prior year period.  Cash used in financing activities during the three months 
ended March 31, 1998 is attributed to the repayment of the payable relating 
to the Basic Trading Areas totaling approximately $0.7 million and the 
repayment of other notes payable totaling approximately $0.2 million.  Cash 
used in financing activities during the three months ended March 31, 1997 is 
attributed to the repayment of $2.1 million of indebtedness related to the 
USA Wireless Acquisition.

RECENTLY ISSUED ACCOUNTING PRINCIPLES

     In June 1997, Statement of Financial Accounting Standards (SFAS) NO. 
131, DISCLOSURE ABOUT SEGMENTS OF ENTERPRISE AND RELATED INFORMATION was 
issued.  This statement establishes standards for reporting information about 
operating segments in annual and interim financial statements, although this 
statement need not be applied to interim financial statements in the initial 
year of its application.  This statement is effective for fiscal years 
beginning after December 15, 1997.

FUTURE LOOKING INFORMATION AND RISK FACTORS

     The Company or its representatives may make forward looking statements, 
oral or written, including statements in this Report's Management's 
Discussion and Analysis of Financial Condition and Results of Operations, 
press releases and filings with the Commission, regarding estimated future 
operating results, planned capital expenditures (including the amount and 
nature thereof) and the Company's financing plans, if any, related thereto, 
increases in subscribers and the Company's financial position and other plans 
and objectives for future operations. There can be no assurance that the 
actual results or developments anticipated by the Company will be realized 
or, even if substantially realized, that they will have the expected effects 
on its business or operations.  Among the factors that could cause actual 
results to differ materially from the Company's expectations are general 
economic conditions, competition, government regulations and other factors 
set forth among the risk factors noted in the Company's Annual Report on 
Form 10-K for the year ended December 31, 1997.

     Generally, forward looking statements include words or phrases such as 
"management believes," the "Company anticipates," the "Company expects" and 
words and phrases of similar import.  Forward looking statements are made 
pursuant to the Private Securities Litigation Reform Act of 1995.

     All subsequent oral and written forward looking statements attributable 
to the Company or persons acting on its behalf are expressly qualified in 
their entirety by these factors.  The Company assumes no obligation to update 
any of these statements.

     The Company's future revenues and profitability are difficult to predict 
due to a variety of risks and uncertainties, including (i) business 
conditions and growth in the Company's existing markets, (ii) the costs and 
level of consumer acceptance associated with the launch of systems in new 
markets, (iii) the availability and performance of digital compression 
equipment, (iv) the Company's existing indebtedness and the need for 
additional financing to fund subscriber growth and system development, (v) 
government regulation, including FCC regulations, and receipt of regulatory 
approvals for alternative uses of spectrum, (vi) the Company's dependence on 
channel leases, (vii) the 

<PAGE>

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS - (Continued)

successful integration of potential future acquisitions and (viii) numerous 
competitive factors, including alternative methods of distributing and 
receiving video transmissions.

     Because of the foregoing uncertainties affecting the Company's future 
operating results, past performance should not be considered to be a reliable 
indicator of future performance, and investors should not use historical 
trends to anticipate results or trends in future periods.  In addition, the 
Company's participation in a highly dynamic industry often results in 
significant volatility in the price of the Company's Senior Discount Notes.


<PAGE>
                                       
                          PART II - OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS

     In the fourth quarter of 1996, the Company was named as a defendant in a 
state court action commenced by San Antonio Wireless Cable Company ("SAW") in 
San Antonio, Texas for the purpose of terminating the Company's rights to 
utilize eight Instructional Television Fixed Services ("ITFS") channels in 
the San Antonio market.  The Company recently entered into an agreement with 
SAW to settle the claims between the Company and SAW and acquire SAW's rights 
to the ITFS channels.  The litigation has not been terminated as of the date 
of this Report.

     The Company is a party to legal proceedings incidental to its business 
which, in the opinion of management, are not expected to have a material 
adverse effect on the Company's consolidated financial position, operating 
results or liquidity.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8 K

     (a)  Exhibits

          *27  Financial Data Schedule


*Filed herewith.

<PAGE>
                                       
                                   SIGNATURE

     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.


Dated:  May 14, 1998                         CS WIRELESS SYSTEMS, INC.

                                             By: /s/John M. Lund
                                                 -----------------------------
                                             John M. Lund
                                             Vice President - Finance
                                             and Controller
                                             (Principal Financial Officer)