UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

       X      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended June 30, 2000

                                       OR

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

                        (Commission File Number 1-11965)

                            ICG COMMUNICATIONS, INC.

                        (Commission File Number 1-11052)

                            ICG HOLDINGS (CANADA) CO.

                        (Commission File Number 33-96540)

                               ICG HOLDINGS, INC.

         (Exact names of registrants as specified in their charters)


--------------------------------------------------------------------------------
Delaware                                   84-1342022
Nova Scotia                                Not Applicable
Colorado                                   84-1158866
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)
--------------------------------------------------------------------------------
161 Inverness Drive West                   Not applicable
Englewood, Colorado 80112
161 Inverness Drive West                   c/o ICG Communications, Inc.
Englewood, Colorado 80112                  161 Inverness Drive West
                                           Englewood, Colorado 80112

161 Inverness Drive West                   Not applicable
Englewood, Colorado 80112
(Address of principal executive offices)   (Address of U.S. agent for service)
--------------------------------------------------------------------------------
Registrants' telephone numbers, including area codes: (888) 424-1144 or (303)
414-5000

      Indicate by check mark whether the  registrants (1) have 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
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes |X| No

      The number of  registrants'  outstanding  common shares as of August 11,
2000  were  51,933,460,  31,931,588  and  1,918,  respectively.  ICG  Canadian
Acquisition,  Inc., a wholly owned  subsidiary  of ICG  Communications,  Inc.,
owns all of the issued and outstanding  common shares of ICG Holdings (Canada)
Co. ICG Holdings  (Canada) Co. owns all of the issued and  outstanding  shares
of ICG Holdings, Inc.


                                        1

<PAGE>

                                TABLE OF CONTENTS

PART I ...................................................................    3
      ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ................    3
              Consolidated Balance Sheets as of December 31, 1999 and June
                30, 2000 (unaudited)......................................    3
              Consolidated Statements of Operations  for the Three Months
                and Six Months Ended June 30, 1999 and 2000 (unaudited)...    5
              Consolidated Statement of Stockholders' Deficit for the Six
               Months Ended June 30, 2000(unaudited)......................    7
              Consolidated Statements of Cash Flows for the Six Months Ended
               June 30, 1999 and 2000 (unaudited).........................    8
              Notes to Consolidated Financial Statements,(unaudited)......   10
      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS ...................................  21
      ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..  38

PART II ...................................................................  40
      ITEM 1.   LEGAL PROCEEDINGS .........................................  40
      ITEM 2.   CHANGES IN SECURITIES .....................................  40
      ITEM 3.   DEFAULTS UPON SENIOR SECURITIES ...........................  41
      ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS .....  41
      ITEM 5.   OTHER INFORMATION .........................................  42
      ITEM 6.   EXHIBITS AND REPORT ON FORM 8-K ...........................  42
                Exhibits ..................................................  42
                Report on Form 8-K ........................................  42







                                        2

<PAGE>

                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                         Consolidated Balance Sheets
               December 31, 1999 and June 30, 2000 (unaudited)

<TABLE>
<CAPTION>

                                                      December 31,       June 30,
                                                          1999             2000
                                                     ---------------   --------------
                                                             (in thousands)
<S>                                                      <C>                 <C>
Assets

Current assets:
   Cash and cash equivalents                             $  103,288          496,688
   Short-term investments available for sale                 22,219           31,283
   Receivables:
     Trade, net of allowance of $78.7 million
      and $31.6 million at December 31, 1999
      and June 30, 2000, respectively (note 6)              167,273          192,611
     Other                                                    1,458           12,119
                                                     ---------------   --------------
      Total net receivables                                 168,731          204,730


   Prepaid expenses, deposits and inventory                  11,388           14,968
                                                     ---------------   --------------
      Total current assets                                  305,626          747,669
                                                     ---------------   --------------
Property and equipment                                    1,805,378        2,363,160
  Less accumulated depreciation                            (279,698)        (399,184)
                                                     ---------------   --------------
   Net Property and equipment                             1,525,680        1,963,976
                                                     ---------------   --------------
Restricted  cash                                             12,537            9,811
Investments                                                  28,939            2,402
Other assets, net of accumulated amortization:
  Goodwill                                                   95,187           80,190
  Deferred financing costs                                   35,884           33,563
  Other, net                                                 16,768           20,498
                                                     ---------------   --------------
                                                            147,839          134,251
                                                     ---------------   --------------
      Total Assets                                       $2,020,621        2,858,109
                                                     ===============   ==============
</TABLE>

                                                                   (Continued)


                                       3

<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Consolidated Balance Sheets (unaudited), Continued


                                                         December 31,  June 30,
                                                           1999          2000
                                                        ------------   ---------
                                                            (in thousands)

Liabilities and Stockholders' Deficit

Current liabilities:
  Accounts payable                                          112,291      36,547
  Payable pursuant to IRU agreement)                        135,322      84,516
  Accrued liabilities                                        85,709     107,831
  Deferred revenue (note 6)                                  25,175     154,249
  Deferred gain on sale  (note 3)                             5,475           -
  Current portion of capital lease obligations                8,090      49,676
  Current portion of long-term debt (note 4)                    796         796
  Current liabilities of discontinued operations                529         329
                                                        ------------   ---------
   Total current liabilities                                373,387     433,944
                                                        ------------   ---------

Capital Lease obligations, less current portion              63,348     127,088
Long-term debt, net of discount, less current
  portion (note 4)                                        1,905,901   2,106,658
Other long-term liabilities                                   2,526       3,389
                                                        ------------   ---------
   Total liabilities                                      2,345,162   2,671,079

Redeemable  preferred  stock of subsidiary
  ($397.9  million and $426.6  million
  liquidation value at December 31, 1999
  and June 30, 2000, respectively) (note 5)                 390,895     420,011


Company-obligated  mandatorily  redeemable
  preferred  securities  of subsidiary
  limited  liability  company which holds
  solely Company Preferred stock ($133.4
  million liquidation value at December 31, 1999
  and June 30, 2000, respectively)                          128,428     128,621

8% Series A Convertible Preferred Stock ($764.5
  million liquidation value at June 30, 2000)
  (note 5)                                                        -     641,566

Stockholders' deficit:
  Common stock, $0.01 par value,  100,000,000 and
  200,000,000 shares authorized at  December  31, 1999
  and  June 30, 2000, respectively; 47,761,337 and
  48,909,665 shares issued and outstanding at
  December 31, 1999 and June 30, 2000, respectively             478         489
  Additional paid-in capital                                599,282     858,169
  Accumulated deficit                                    (1,443,624) (1,861,826)
                                                        ------------ -----------
   Total stockholders' deficit                             (843,864) (1,003,168)
                                                        ------------ -----------
Commitments and contingencies (note 6)

   Total liabilities and stockholders' deficit           $2,020,621   2,858,109
                                                        ============  ==========


         See accompanying notes to consolidated financial statements.


                                       4

<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                    Consolidated Statements of Operations
     Three Months and Six Months Ended June 30, 1999 and 2000 (unaudited)

<TABLE>
<CAPTION>

                                                Three months ended   Six months ended
                                                     June 30,            June 30,
                                               ----------------------------------------
                                                  1999      2000      1999       2000
                                               ---------  --------  --------  ---------
                                                (in thousands, except per share data)

<S>                                             <C>       <C>       <C>        <C>
Revenue                                         117,654   175,753   221,985    332,977
Operating costs and expenses:
  Operating costs                                59,458   102,589   113,107    185,491
  Selling, general and administrative
    expenses                                     42,975    49,676    85,783    104,765
  Depreciation and amortization                  44,683    72,892    81,058    137,491
  Provision for impairment of long-lived
    assets                                       29,300         -    29,300          -
  Net loss on disposal of long-lived assets           -       545         -        545
  Other, net                                        398       828     (535)      1,259
                                               ---------  --------  --------  ---------
   Total operating costs and expenses           176,814   226,530   308,713    429,551
                                               ---------  --------  --------  ---------

Operating loss                                  (59,160)   (50,777)  (86,728)  (96,574)

Other income (expense):
  Interest expense                              (51,308)   (66,759)  (98,746)  (129,393)
  Interest income                                 3,793     11,263     7,897     14,539
  Other income (expense), net                    (1,843)      (155)   (2,343)         3
                                               ---------  --------  --------  ---------
                                                (49,358)   (55,651)  (93,192)  (114,851)
                                               ---------  --------  --------  ---------
Loss from continuing operations before
   preferred dividends and extraordinary
   gain                                        (108,518)  (106,428) (179,920)  (211,425)
Accretion and preferred dividends on
   preferre securities of subsidiaries          (15,241)   (17,135)  (30,045)   (33,772)
                                               ---------  --------  --------  ---------

Loss from continuing operations before
   extraordinary gain                          (123,759)  (123,563) (209,965) (245,197)

Discontinued operations (note 3):
  Net income (loss) from discontinued
    operations                                     (692)       736     (803)        736
  Loss on disposal of discontinued
    operations, including provision
    of $0.3 million for operating losses
    during phase out period                      (7,959)         -   (7,959)          -
                                               ---------  --------  --------  ---------
                                                 (8,651)       736   (8,762)        736
                                               ---------  --------  --------  ---------
Extraordinary gain on sales of operations of
   NETCOM, net of income taxes of $6.4
   million (note 3)                                   -         -   193,029          -
                                               ---------  --------  --------  ---------
   Net loss                                    (132,410)  (122,827) (25,698)  (244,461)

Accretion and dividends of 8% Series A
  Convertible Preferred Stock to liquidation
  value (note 5)                                      -    (14,462)       -    (14,462)
Charge for beneficial conversion feature of
  8% Series A Convertible Preferred Stock
  (note 5)                                            -   (159,279)       -   (159,279)
                                               ---------  --------  --------  ---------

   Net loss attributable to common
     stockholders                              (132,410)  (296,568) (25,698)  (418,202)
                                               =========  ========  ========  =========
                                                                            (Continued)
                                       5

</TABLE>

<PAGE>

                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

         Consolidated Statements of Operations (unaudited), Continued

<TABLE>
<CAPTION>

                                              Three months ended  Six months ended
                                                   June 30,           June 30,
                                              --------------------------------------
                                               1999      2000      1999      2000
                                              --------  --------  --------  --------
                                                  (in thousands, except per share data)
Net loss per share - basic and diluted:
<S>                                           <C>        <C>       <C>       <C>
Net loss attributable to common
  stockholders, before net income
  (loss) from discontinued operations
  and extraordinary gain                      $ (2.63)   (6.11)    (4.49)    (8.65)
Net income (loss) from discontinued
  operations                                    (0.19)      0.02    (0.19)      0.02
Extraordinary gain on sales of
  operations of NETCOM                              -         -      4.13          -
                                              --------  --------  --------  --------
   Net loss per share - basic and diluted      $(2.82)    (6.09)    (0.55)    (8.63)
                                              ========  ========  ========  ========

Weighted average number of shares
  outstanding - basic and diluted              46,988    48,723    46,763    48,455
                                              ========  ========  ========  ========
</TABLE>

         See accompanying notes to consolidated financial statements.


                                      6
<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

               Consolidated Statement of Stockholders' Deficit
                  Six Months Ended June 30, 2000 (unaudited)

<TABLE>
<CAPTION>

                                       Common Stock  Additional              Total
                                     ---------------- paid-in  Accumulated stockholders'
                                     Shares  Amount   capital   deficit     Deficit
                                     ---------------- -------- ----------- -----------

<S>                                   <C>        <C>  <C>      <C>          <C>
Balances at January 1, 2000           47,761     478  599,282  (1,443,624)  (843,864)
Shares issued for cash in
  connection with the
  Exercise of options and warrants       908       9   13,924           -     13,933
Shares issued for cash in
  connection with the Employee stock
  purchase plan                          106       1    1,852           -      1,853
Shares issued as contribution to
  401 (k) plan                           134       1    3,236           -      3,237
Warrants issued in connection with
  8% Series A Convertible Preferred
  Stock                                    -       -   80,596           -     80,596
Value ascribed to beneficial
  conversion feature of 8%
  Series A Convertible
  Preferred Stock                          -       -  159,279    (159,279)         -
Accretion and dividends of 8%
   Series A Convertible Preferred Stock    -       -        -     (14,462)   (14,462)
Net loss
                                           -       -        -    (244,461)  (244,461)
                                     ---------------- -------- ----------- -----------
Balances at June 30, 2000             48,909     489  858,169  (1,861,826)(1,003,168)
                                     ================ ======== =========== ===========

</TABLE>

         See accompanying notes to consolidated financial statements.


                                      7
<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

             Six Months Ended June 30, 1999 and 2000 (unaudited)

<TABLE>
<CAPTION>

                                                                 Six months ended
                                                                        June 30,

                                                                --------------------
                                                                   1999       2000
                                                                ---------  ---------
                                                                  (in thousands)
<S>                                                           <C>           <C>
Cash flows from operating activities:
  Net loss                                                    $(25,698)     (244,461)
  Net (income) loss from discontinued operations                 8,762          (736)
  Extraordinary gain on sales of discontinued operations      (193,029)            -
  Adjustments to reconcile net loss to net cash used by
    operating activities:
   Recognition of deferred gain                                (10,498)       (6,239)
   Accretion and preferred dividends on preferred securities
    of subsidiaries                                             30,045        33,773
   Depreciation and amortization                                81,058       137,491
   Provision for impairment of long-lived assets                29,300             -
   Deferred compensation                                           431           862
   Net loss (gain) on disposal of long-lived assets               (966)          545
   Gain on sale of securities                                     (439)         (634)
   Provision for uncollectible accounts                          8,103         2,813
   Interest expense deferred and included in long-term debt,
    net of amounts capitalized on assets under construction     87,765       102,531
   Interest expense deferred and included in capital lease
    obligations                                                  2,672         2,554
   Amortization of deferred financing costs included in
    interest expense                                             2,283         2,627
   Contribution to 401(k) plan through issuance of common
    stock                                                        2,077         3,237
   Other noncash expenses                                            -           301
   Change in operating assets and liabilities, excluding the
    effects of dispositions and noncash transactions:
      Receivables                                              (60,100)      (38,813)
      Prepaid expenses, deposits and inventory                   3,243          (775)
      Accounts payable and accrued liabilities                  (9,690)      (23,152)
      Deferred revenue                                          34,090        31,155
                                                              ---------     ---------
        Net cash provided (used) by operating activities       (10,591)      103,079
                                                              ---------     ---------
Cash flows from investing activities:

  Acquisition  of  property,  equipment  and  other
    assets                                                    (229,747)     (347,315)
  Payments  for  construction  of  corporate  headquarters           -        (5,492)
  Change in accounts payable for purchase of long-term
    assets                                                     (11,405)      (43,484)
  Proceeds from sales of operations of NETCOM, net of
    cash included in sale                                      252,881             -
  Proceeds from disposition of property, equipment and
    other assets                                                 4,302             -
  Proceeds from sales of short-term investments available
    for sale                                                    21,354         8,621
  Proceeds from sale of marketable securities, net of
    realized gain                                               30,439        10,634
  Decrease in restricted cash                                    3,540         2,728
  Purchase of investments                                      (27,686)       (1,150)
  Purchase of minority interest in subsidiary                   (4,189)            -
                                                              -----------   -----------
    Net cash provided (used) by investing activities            39,489      (375,458)
                                                              -----------   -----------
                                                                           (Continued)

</TABLE>

                                       8
<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

         Consolidated Statements of Cash Flows (unaudited), Continued

<TABLE>
<CAPTION>

                                                            Six months ended June 30,
                                                             -----------------------
                                                                 1999        2000
                                                             -----------  ----------
                                                                 (in thousands)
<S>                                                           <C>         <C>
Cash flows from financing activities:
  Proceeds from issuance of common stock:
   Exercise of options and warrants                           $ 7,095       13,939
   Employee stock purchase plan                                 2,134        1,847
  Proceeds of  8% Series A Convertible Preferred Stock,
    net of issuance costs                                           -      720,330
  Proceeds from issuance of long-term  debt                         -       95,000
  Principal payments on capital lease obligations              (9,589)     (10,973)
  Payments on IRU agreement                                         -     (149,729)
  Principal payments on long-term debt                            (23)        (404)
  Payments of preferred dividends                              (4,463)      (4,463)
  Deferred debt issuance costs                                      -         (304)
                                                             -----------   ----------
   Net cash provided (used) by financing activities            (4,846)     665,243
                                                             -----------  -----------

   Net increase in cash and cash equivalents                   24,052      392,864
   Net cash provided by discontinued operations                   354          536
Cash and cash equivalents, beginning of period                210,307      103,288
                                                             -----------  -----------
Cash and cash equivalents end of period                      $234,713      496,688
                                                             ===========  ===========

Supplemental disclosure of cash flows information of
  continuing operations:

  Cash paid for interest                                     $  6,026        9,626
                                                             ===========  ===========
  Cash paid for income taxes                                 $    931          220
                                                             ===========  ===========

Supplemental schedule of noncash investing activities of
  continuing operations:
  Acquisition of corporate headquarters assets through
    the issuance of long-term debt and conversion of
    security deposit                                         $ 33,077            -
                                                             ===========  ===========

  Assets acquired pursuant to IRU agreement                  $      -       98,147
  Assets acquired under capital leases                          6,190      111,414
                                                             -----------  -----------
   Total                                                     $  6,190      209,561
                                                             ===========  ===========
</TABLE>

         See accompanying notes to consolidated financial statements.


                                      9

<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

                    Notes to Consolidated Financial Statements
                 December 31, 1999 and June 30, 2000 (unaudited)

(1)  Organization and Basis of Presentation

     ICG Communications,  Inc., a Delaware corporation ("ICG"), was incorporated
     on April 11, 1996 and is the  publicly-traded  U.S.  parent  company of ICG
     Funding,  LLC, a special purpose Delaware limited  liability  company ("ICG
     Funding"),  ICG Holdings  (Canada) Co., a Nova Scotia  unlimited  liability
     company  ("Holdings-Canada"),  ICG Holdings,  Inc., a Colorado  corporation
     ("Holdings"),   and  ICG  Services,  Inc.,  a  Delaware  corporation  ("ICG
     Services"),   and  their   subsidiaries.   ICG  and  its  subsidiaries  are
     collectively  referred to as the  "Company."

     The  Company  is a  facilities  -based  communications  provider  and local
     exchange   carrier.   The   Company   primarily   offers   voice  and  data
     communications  services,  including  local,  long  distance  and  enhanced
     telephony, to small - to medium-sized business customers and offers network
     facilities and data management to ISP customers.  The Company also provides
     interexchange  services such as special access and switched access services
     to long distance carriers and other customers.  The Company began marketing
     competitive local dial-tone  services to business  customers in early 1997,
     subsequent  to the  passage of the  Telecommunications  Act of 1996,  which
     permitted  competitive  interstate and intrastate  telephone services.  The
     Company   began   offering    network    services   to   ISPs   and   other
     telecommunications providers in February 1999.

     During 1999,  the Company sold the retail  customer ISP business of NETCOM,
     but retained the national Tier 1 data network assets. Additionally,  during
     1999, the Company sold ICG Fiber Optic  Technologies,  Inc. and Fiber Optic
     Technologies of the Northwest,  Inc., (collectively "Network Services") and
     ICG Satellite Services, Inc. and Maritime  Telecommunications Network, Inc.
     (collectively "Satellite Services").  Network Services provided information
     technology  services and selected networking  products.  Satellite Services
     provided  satellite  voice,  data and video  services to major  cruise ship
     lines,  the U.S.  Navy,  the offshore  oil and gas industry and  integrated
     communications  providers.  (See note 3, " Sale of Assets and  Discontinued
     Operations".)


(2)  Significant Accounting Policies

     (a)  Basis of Presentation

          The Company's financial  statements should be read in conjunction with
          ICG's Annual Report on Form 10-K for the year ended December 31, 1999,
          as certain  information  and note  disclosures  normally  included  in
          financial  statements  prepared in accordance with generally  accepted
          accounting  principles have been condensed or omitted  pursuant to the
          rules and  regulations  of the United States  Securities  and Exchange
          Commission.  The interim financial  statements reflect all adjustments
          which  are,  in  the  opinion  of  management,  necessary  for a  fair
          presentation  of financial  position,  results of operations  and cash
          flows as of and for the interim periods  presented.  Such  adjustments
          are of a normal recurring nature. Operating results for the six months
          ended June 30, 2000 are not necessarily indicative of the results that
          may be expected for the fiscal year ending December 31, 2000.

          All  significant  intercompany  accounts  and  transactions  have been
          eliminated in consolidation.


                                       10
<PAGE>


                  ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements, Continued

(2)  Significant   Accounting   Policies   (continued)

     (b)  Recent Accounting Pronouncements

          In March 2000,  the  Financial  Accounting  Standards  Board  ("FASB")
          issued FASB Interpretation No. 44 "Accounting for Certain Transactions
          involving Stock  Compensation - and  interpretation of APB Opinion No.
          25" ("FIN 44"). This opinion  provides  guidance on the accounting for
          certain stock option  transactions and subsequent  amendments to stock
          option  transactions.  FIN 44 is effective  July 1, 2000,  but certain
          conclusions cover specific events that occur after either December 15,
          1998 or January  12,  2000.  To the extent  that FIN 44 covers  events
          occurring  during the period  from  December  15, 1998 and January 12,
          2000,   but  before  July  1,  2000,  the  effects  of  applying  this
          Interpretation  are  to be  recognized  on a  prospective  basis.  The
          Company has not yet  assessed  the impact,  if any,  that FIN 44 might
          have on its financial  position or results of operations.  The Company
          does not  believe  that the  adoption  of FIN 44 will have a  material
          effect on the Company's financial position or results of operation.

          In December 1999, the SEC released Staff  Accounting  Bulletin ("SAB")
          No. 101, "Revenue Recognition in Financial Statements", which provides
          guidance on the recognition, presentation and disclosure of revenue in
          financial  statements  filed  with  the  SEC.  Subsequently,  the  SEC
          released SAB 101B,  which delayed the  implementation  date of SAB 101
          for the company  until the  quarter  ending  December  31,  2000.  The
          Company has not  completed  its  assessment  of the impact of SAB 101,
          however, based on our initial analysis, if implemented, implementation
          would result in an increase in accumulated deficit at January, 1, 2000
          of approximately $14 million and a reduction in revenue  recognized in
          the three and six months  ended June 30,  2000 of  approximately  $2.0
          million and $3.3 million, respectively.

          In  June  1998,  the  Financial   Accounting  Standards  Board  issued
          Statement of Financial  Accounting  Standards No. 133, "Accounting for
          Derivative  Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
          establishes   accounting   and  reporting   standards  for  derivative
          instruments  and  hedging  activities.  As  amended  by SFAS No.  137,
          "Accounting for Derivative Instruments and Hedging Activities-Deferral
          of Effective  Date of FASB  Statement No. 133",  SFAS 133 is effective
          for all fiscal years  beginning  after June 15, 2000. The Company will
          adopt SFAS 133 effective at the beginning of its fiscal year end 2001.
          The Company does not believe that the adoption of SFAS 133 will have a
          material  effect on the  Company's  financial  position  or results of
          operations.

     (c)  Reclassifications

          Certain 1999 amounts have been  reclassified  to conform with the 2000
          presentation.

(3)  Sale of Assets and Discontinued Operations

     To  better  focus its  efforts  on its core  operations,  the  Company  has
     disposed of certain assets which management believes did not complement its
     overall business strategy.  The Company will from time to time evaluate all
     of its assets as to its core needs and, based on such analysis, may sell or
     otherwise  dispose of assets which  management does not believe  complement
     its overall business strategy.

     NETCOM

     On November 3, 1998 the  Company's  board of  directors  adopted the formal
     plan to dispose of the  operations  of NETCOM.  Once this  formal  plan was
     adopted, all historical revenue, operating costs,  depreciation,  interest,
     and other costs of NETCOM's  operations  were classified as discontinued in
     the Company's consolidated statements of operations.

                                     11
<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(3)  Sale of Assets and Discontinued Operations (continued)

     On February 17, 1999, the Company sold certain of the operating  assets and
     liabilities  of NETCOM to  MindSpring  Enterprises,  Inc.,  predecessor  to
     EarthLink, Inc. ("MindSpring") for total proceeds of $245.0 million. Assets
     and liabilities  sold to MindSpring  included those directly related to the
     domestic operations of NETCOM's Internet dial-up,  dedicated access and Web
     site hosting  services.  The carrying  value of the assets  retained by the
     Company was  approximately  $21.7 million,  including  approximately  $17.5
     million of network  equipment,  on February  17,  1999.  The  Company  also
     retained  approximately  $11.3 million of accrued  liabilities  and capital
     lease obligations. Additionally, on March 16, 1999, the Company sold all of
     the capital stock of NETCOM's  international  operations  (including NETCOM
     Canada and NETCOM U.K.) for total proceeds of approximately $41.1 million.

     In  conjunction  with the sale to MindSpring,  the Company  entered into an
     agreement  to lease to  MindSpring  for a one-year  period the  capacity of
     certain network  operating  assets formerly owned by NETCOM and retained by
     the Company (the  "MindSpring  Capacity  Agreement").  Under the agreement,
     MindSpring  utilized the  Company's  network  capacity to provide  Internet
     access to the  dial-up  services  customers  formerly  owned by NETCOM.  In
     addition,  the  Company  received  for a  one-year  period 50% of the gross
     revenue earned by MindSpring from the dedicated access  customers  formerly
     owned by NETCOM. As the Company expected to generate operating losses under
     the MindSpring Capacity Agreement, and the terms of the sale agreement were
     dependent upon and negotiated in conjunction  with the terms of the sale of
     the operating assets of NETCOM,  the Company deferred  approximately  $35.5
     million of the proceeds from the sale agreement to be applied on a periodic
     basis  to  losses  incurred  under  the  MindSpring   Capacity   Agreement.
     Accordingly,  the Company did not recognize any revenue, operating costs or
     selling,  general and  administrative  expenses from  services  provided to
     MindSpring  for  the  twelve-month  term  of the  agreement  which  expired
     February  17, 2000.  Any  incremental  revenue or costs  generated by other
     customers,  or by other  services  provided to MindSpring was recognized in
     the Company's consolidated statement of operations as incurred.

     As discussed  above,  the terms of the MindSpring  Capacity  Agreement were
     negotiated in  conjunction  with and were  dependent  upon the terms of the
     sale of the  operating  assets  of  NETCOM to  MindSpring.  As such,  these
     transactions are  collectively  referred to as "Sale of Operating Assets of
     NETCOM".

     Network Services

     On July 15, 1999, the Company's board of directors adopted a formal plan to
     dispose of the Company's investments in its wholly-owned subsidiaries,  ICG
     Fiber  Optic  Technologies,  Inc.  and  Fiber  Optic  Technologies  of  the
     Northwest,  Inc.  (collectively,   "Network  Services").  Accordingly,  the
     Company's  consolidated  financial  statements  reflect the  operations  of
     Network Services as discontinued for all periods presented.  On October 22,
     1999, the Company completed the sale of all of the capital stock of Network
     Services for total proceeds of $23.9 million in cash.

     Satellite Services

     On July 15, 1999, the Company's board of directors adopted a formal plan to
     dispose of the Company's  investments in ICG Satellite  Services,  Inc. and
     Maritime   Telecommunications   Network,  Inc.  (collectively,   "Satellite
     Services").  Accordingly,  the Company's  consolidated financial statements
     reflect  the  operations  of  Satellite  Services as  discontinued  for all
     periods presented.  On November 30, 1999, the Company completed the sale of
     all of the capital stock of Satellite  Services to ATC Teleports,  Inc. for
     total proceeds of $98.1 million in cash.


                                     12
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(3)  Sale of Assets and Discontinued Operations (continued)

     Zycom

     The Company  owns a 70%  interest  in Zycom  Corporation  ("Zycom")  which,
     through its wholly owned subsidiary, Zycom Network Services, Inc. ("ZNSI"),
     operated an 800/888/900 number services bureau and a switch platform in the
     United States and supplied  information  providers and commercial  accounts
     with  audiotext  and customer  support  services.  In June 1998,  Zycom was
     notified by its largest  customer of the customer's  intent to transfer its
     call traffic to another service bureau.  Accordingly,  effective October 1,
     1998,  Zycom  assigned the  majority of its revenue and the related  volume
     purchase  agreements to ICN Limited.  Zycom's board of directors approved a
     plan to wind down and ultimately  discontinue  Zycom's operations on August
     25, 1998. On October 22, 1998, Zycom completed the transfer of all customer
     traffic to other providers.  On January 4, 1999, the Company  completed the
     sale  of  the  remainder  of  Zycom's  long-lived  operating  assets  to an
     unrelated third party for total proceeds of $0.2 million. As Zycom's assets
     were recorded at estimated  fair market value at December 31, 1998, no gain
     or loss was recorded on the sale during the year ended December 31, 1999.

     The Company's  consolidated  financial statements reflect the operations of
     Zycom as discontinued  for all periods  presented.  The Company has accrued
     for all expected future net losses of Zycom.

(4)  Long-term Debt

     Long-term debt is summarized as follows:

<TABLE>
<CAPTION>

                                                       December 31,      June 30,
                                                           1999            2000
                                                       --------------  -------------
                                                              (in thousands)
<S>                                                      <C>             <C>
        Senior Facility due on scheduled maturity
          dates, secured by  substantially all
          of the assets of ICG Equipment and
          NetAhead with weighted average interest
          rates ranging from 9.56% to 9.87% for
          the six months ended June 30, 2000             $  79,625       174,250
        9 7/8% Senior discount notes of ICG Services,
          net of discount                                  293,925       308,439
        10% Senior discount notesof ICG Services,
          net of discount                                  361,290       379,354
        11 5/8% Senior discount notes of Holdings,
          net of discount                                  137,185       145,159
        12 1/2% Senior discount notes of Holdings,
          net of discount                                  468,344       497,616
        13 1/2% Senior discount notes of Holdings,
          net of discount                                  532,252       568,589
        Mortgage loan payable with interest at 8
          1/2%, due monthly into 2009, secured by
          building                                             999           970
        Mortgage loan payable with variable rate of
          interest (15.21% at June 30, 2000) due
          monthly into 2013, secured by corporate
          headquarters                                      33,077        33,077
                                                       --------------  -------------
                                                         1,906,697     2,107,454
          Less current portion                                (796)         (796)
                                                       --------------  -------------
                                                       $ 1,905,901     2,106,658
                                                       ==============  =============
</TABLE>
                                       13

<PAGE>
                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(5)   Redeemable Preferred Stock of Subsidiary and Mandatorily Redeemable 8%
      Series A Convertible Preferred Stock

      Redeemable preferred stock of subsidiary is summarized as follows:




                                                    December 31,       June 30,
                                                        1999             2000
                                                   ----------------  -----------
                                                             (in thousands)

        14% Exchangeable preferred stock of
          Holdings, mandatorily redeemable in 2008  $  144,144          154,804

        14 1/4% Exchangeable preferred stock of
          Holdings, mandatorily redeemable in 2007     246,751          265,207
                                                   ----------------  -----------
                                                    $  390,895          420,011
                                                   ================  ===========

      Mandatorily Redeemable 8% Series A Convertible Preferred Stock

      On  April  10,  2000,  the  Company  sold  75,000  shares  of  mandatorily
      redeemable 8% Series A-1, A-2 and A-3  Convertible  Preferred Stock of ICG
      (the "8% Series A Convertible Preferred Stock") and 10,000,000 warrants to
      purchase  ICG Common  Stock to  affiliates  of Liberty  Media  Corporation
      ("Liberty Media"),  Hicks, Muse, Tate & Furst Incorporated  ("Hicks Muse")
      and Gleacher Capital Partners  ("Gleacher  Capital")  (collectively,  "the
      Investors").  The sale of the 8%  Series  A  Convertible  Preferred  Stock
      resulted in net proceeds to the Company of $707.7  million.  Each share of
      8%  Series  A  Convertible  Preferred  Stock  has an  initial  liquidation
      preference of $10,000 per share and bears a cumulative dividend rate of 8%
      per  annum,   compounded  daily.  Dividends  accrete  to  the  liquidation
      preference on a daily basis for five years and are  thereafter  payable in
      cash or additional liquidation preference.

      In the event of a change in  control  of the  Company,  as  defined in the
      agreement,  occurring prior to five years from the date of issuance of the
      8%  Series  A  Convertible  Preferred  Stock,  the  Company  is,  in  most
      instances,  required to make a special dividend payment to the 8% Series A
      Convertible  Preferred  Stockholders  equal to the difference  between the
      fully  accreted  liquidation  preference  of the 8%  Series A  Convertible
      Preferred  Stock  five years from the date of  issuance  and the  existing
      liquidation  preference on the date of the change in control. In addition,
      the Company has the right, but not the obligation,  to offer to repurchase
      the 8% Series A  Convertible  Preferred  Stock at 101% of the  liquidation
      preference  on the date of the change in control  (after  giving effect to
      the special dividend, if applicable).

      The 8% Series A Convertible  Preferred  Stock is  immediately  convertible
      into shares of ICG Common Stock at a conversion  rate of $28.00 per share,
      subject  to  adjustment,  and will  have  voting  rights  with the  common
      stockholders on an as-converted  basis.  The holders of the Series A-1 and
      A-2 8% Series A Convertible  Preferred Stock collectively will be entitled
      to  elect up to  three  directors  to the  Company's  Board of  Directors.
      Additionally, certain material transactions outside the ordinary course of
      business  will  require an  affirmative  vote of at least one of the three
      directors  elected  by the  holders  of the Series A-1 and A-2 8% Series A
      Convertible  Preferred  Stock.  The  Company  may  redeem  the 8% Series A
      Convertible  Preferred Stock at any time after five years from the date of
      issuance through their mandatory redemption on June 15, 2015. The warrants
      to purchase ICG Common Stock are  immediately  convertible  into shares of
      ICG Common  Stock at a  conversion  rate of $34.00 per share and expire in
      five years from the date of issuance.  The  affiliates  of Liberty  Media,
      Hicks Muse and Gleacher Capital  purchased $500.0 million,  $230.0 million
      and $20.0  million,  respectively,  in 8% Series A  Convertible  Preferred
      Stock and received a ratable portion of the total 10,000,000 warrants. The
      value  allocated  to the  warrants  was $80.6  million  at the time of the
      transaction.

                                       14
<PAGE>


                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(5)   Redeemable  Preferred  Stock of  Subsidiary  and 8% Series A Convertible
      Preferred Stock (continued)

      In accordance  with Emerging  Issues Task Force ("EITF") 98-5  "Accounting
      for  Convertible   Securities  with  Beneficial   Conversion  Features  or
      Contingently  Adjustable  Conversion Ratios", the Company allocated $159.3
      million of the proceeds  from the issuance of the 8% Series A  Convertible
      Preferred  Stock  to  the  intrinsic  value  of  the  embedded  beneficial
      conversion feature of the convertible  preferred  securities to additional
      paid-in  capital.  As the 8%  Series  A  Convertible  Preferred  Stock  is
      immediately  convertible  into shares of ICG common stock,  the beneficial
      conversion   feature  was   recognized   as  a  return  to  the  preferred
      shareholders and included as an element of net loss attributable to common
      shareholders   during  the  three  months  ended  June  30,  2000  in  the
      accompanying consolidated statement of operations.

(6)   Commitments and Contingencies

     (a)  Network Capacity and Construction

          In January 2000, Qwest  Communications  Corporation  ("Qwest") and the
          Company  signed an agreement,  whereby the Company will  provide,  for
          $126.5  million over the initial  six-year term of the  agreement,  an
          indefeasible  right of use  ("IRU")  for  designated  portions  of the
          Company's  local  fiber optic  network.  The  Company  will  recognize
          revenue  ratably  over  the  term  of the  agreement,  as the  network
          capacity is available for use. The agreement was amended in March 2000
          to include  additional  capacity for  proceeds of $53.8  million to be
          received in installments through September 18, 2000. Qwest may, at its
          option,  extend the initial term of the  agreement  for an  additional
          four-year  period and an  additional  10-year  period for  incremental
          payment  at the time of the  option  exercises.  In the event that the
          Company  fails to deliver  any of the  network  capacity  by March 31,
          2001,  Qwest is entitled to cancel any  undelivered  network  capacity
          segments and receive  immediate  refund of any amounts already paid to
          the Company for such segments.

          In June 1999, the Company signed a minimum ten-year agreement to lease
          certain  portions  of its  fiber  optic  network  to Qwest  for  $32.0
          million,  which was received, in full by the Company in June 1999. The
          Company has accounted  for the agreement as a sales-type  lease and is
          recognizing revenue and operating costs in its consolidated  financial
          statements  on  a  percentage  of  completion  basis  as  the  network
          build-out  is completed  and is available  for use. On March 23, 2000,
          the final network  facilities to be included  under the agreement were
          identified  and  made  available  for  use  allowing  the  Company  to
          recognize all remaining  revenue  under the agreement  except  amounts
          deferred  related to  maintenance  services.  For the six months ended
          June 30, 2000, the Company  included $11.5 million in revenue and $1.1
          million  in  operating  costs,   respectively,   in  its  consolidated
          financial  statements  related  to the  agreement,  including  revenue
          attributed to maintenance  services,  which is recognized ratably over
          the term of the  agreement.  Approximately  $2.3  million of the total
          proceeds  received related to maintenance  services remain in deferred
          revenue in the Company's consolidated balance sheet at June 30, 2000.

      (b) Telecommunications and Line Purchase Commitments

          Effective  September  1998,  the  Company  entered  into  two  service
          agreements with three-year terms with WorldCom Network Services,  Inc.
          ("WorldCom"). Under the Telecom Services Agreement, WorldCom provides,
          at designated rates,  switched  telecommunications  services and other
          related  services  to the  Company,  including  termination  services,
          toll-free  origination,  switched access,  dedicated access and travel
          card services. Under the Carrier Digital Services Agreement,  WorldCom
          provides the Company,  at designated  rates, with the installation and
          operation  of  dedicated  digital   telecommunications   interexchange
          services,  local access and other related services,  which the Company
          believes  expedites  service  availability  to  its  customers.   Both
          agreements require that the Company provide WorldCom with

                                       15
<PAGE>

                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(6)  Commitments and Contingencies (continued)

          certain  minimum  monthly  revenue,  which if not met,  would  require
          payment  by  the  Company  for  the  difference  between  the  minimum
          commitment  and  the  actual  monthly  revenue.   Additionally,   both
          agreements  limit the Company's  ability to utilize vendors other than
          WorldCom  for certain  telecommunications  services  specified  in the
          agreements.  The  Company  met  all  minimum  revenue  commitments  to
          WorldCom under these agreements through June 30, 2000.

      (c) Other Commitments

          The Company  formalized  two vendor  financing  agreements  with Cisco
          Systems,  Inc. for financing of certain  future  capital  expenditures
          during the six months ended June 30,  2000.  The two  agreements  will
          together  provide  $180.0  million  in  financing  with a  three  year
          repayment term. As of June 30, 2000, $99.1 million was drawn under the
          facilities.

          The Company has  entered  into  various  equipment  and line  purchase
          agreements with certain of its vendors. Under these agreements, if the
          Company does not meet a minimum  purchase level in any given year, the
          vendor may discontinue  certain  discounts,  allowances and incentives
          otherwise provided to the Company. In addition,  the agreements may be
          terminated  by either the  Company or the  vendor  upon prior  written
          notice.

          Additionally,  the Company has entered  into  certain  commitments  to
          purchase   capital   assets  with  an  aggregate   purchase  price  of
          approximately $272.3 million at June 30, 2000.

      (d) Transport and Termination Charges

          ICG records  revenue  earned  under  interconnection  agreements  with
          incumbent local exchange carriers ("ILECs") as an element of its local
          services  revenue.  Some of the  ILECs  have not paid all of the bills
          they have received  from ICG and have disputed  these charges based on
          the belief that dial-up calls to ISPs are not local traffic as defined
          by the various  agreements and not subject to payment of transport and
          termination  charges under state and federal law and public  policies.
          In  addition,  some  ILECs,  while  paying  a  portion  of  reciprocal
          compensation  due to ICG, have disputed  other portions of the charges
          related to reciprocal compensation.

          ICG has, as of June 30, 2000, a net receivable for  terminating  local
          traffic in the approximate amount of $54 million, $29 million of which
          is due from one ILEC  and will be paid,  pursuant  to the  terms of an
          agreement  between  the  parties,  when  regulatory  approval  of  the
          amendments to the parties' interconnection agreements is obtained. ICG
          has received cash of approximately $26 million and $84 million, during
          the three  months and six months  ended June 30,  2000,  respectively,
          from certain ILECs for  terminating  local traffic.  The allowance for
          doubtful  accounts has  decreased  from  December 31, 1999 to June 30,
          2000.  This  decrease is primarily  due to the  settlement of disputes
          regarding amounts owed to ICG between ICG and two separate ILECs,


                                     16
<PAGE>


                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(6)  Commitments and Contingencies (continued)

          The  following  table   represents  the  amount  of  revenue  ICG  has
          recognized for terminating local traffic during the respective periods
          ($ in millions):

                Three months ended June 30,   Six months ended June 30,
                   1999          2000            1999         2000
              -------------  ------------    -----------  ------------
                  $40.1          $38.4          $70.9         $74.0

          Revenue  for the three  months  and six  months  ended  June 30,  1999
          includes approximately $12 million and $22 million,  respectively, for
          the tandem switching and common  transport rate elements.  ICG ceased,
          effective July 1, 1999,  recognition of these rate elements as revenue
          until cash receipts are either  received or the uncertainty of receipt
          has been removed (such as the execution of a binding  agreement).  ICG
          has continued to bill and vigorously  pursue collection of all amounts
          due under the agreements.

          Revenue  for the three and six  months  ended June 30,  2000  includes
          approximately $9 million and $13 million,  respectively,  derived from
          the  resolution  of  previously  disputed  issues  not  related to the
          respective periods and approximately $4 million of revenues in each of
          the periods from rates earned pursuant to the previous interconnection
          agreement, neither of which will recur subsequent periods.

     (e)  Litigation

          On April 4, 1997,  certain  shareholders  of Zycom filed a shareholder
          derivative suit and class action  complaint for  unspecified  damages,
          purportedly on behalf of all of the minority shareholders of Zycom, in
          the District Court of Harris County, Texas (Case No. 97-17777) against
          the Company, Zycom and certain of their subsidiaries.  In this action,
          the   plaintiffs   alleged   that  the  Company  and  certain  of  its
          subsidiaries breached certain fiduciary duties owed to the plaintiffs.
          The Company  denied all such  allegations.  In April 2000, the Company
          reached a tentative  arrangement to settle all claims asserted in this
          litigation.  The  trial  court is  currently  reviewing  the  proposed
          settlement agreement. The Company anticipates that the settlement will
          not be finalized until the fourth quarter of 2000, if at all.

          The Company is a party to certain other litigation which has arisen in
          the ordinary  course of business.  In the opinion of  management,  the
          ultimate  resolution of these matters will not have a material adverse
          effect on the Company's financial condition,  results of operations or
          cash flows.

(7)  Summarized Financial  Information of ICG Holdings,  Inc.

     The 11 5/8% Senior  Discount Notes due 2007 (the "11 5/8% Notes") issued by
     Holdings  during 1997 are  guaranteed  by ICG. The 12 1/2% Senior  Discount
     Notes due 2006 (the "12 1/2% Notes") and the 13 1/2% Senior  Discount Notes
     due 2005 (the "13 1/2%  Notes")  issued by  Holdings  during 1996 and 1995,
     respectively,  are  guaranteed  by ICG and  Holdings-Canada.

     The  separate  complete  financial  statements  of  Holdings  have not been
     included herein because such disclosure is not considered to be material to
     the holders of the 11 5/8% Notes, the 12 1/2% Notes and the 13 1/2% Notes.


                                       17
<PAGE>


                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(7)  Summarized Financial Information of ICG Holdings, Inc. (continued)

     However,  summarized  combined  financial  information for Holdings and its
     subsidiaries is as follows:

               Summarized Consolidated Balance Sheet Information


                                         December 31,       June 30,
                                             1999             2000
                                         --------------   --------------
                                                 (in thousands)
                                         -------------------------------

 Current assets                          $   263,870          539,947
 Property and equipment, net                 675,613          825,209
 Other non-current assets, net               128,489          100,118
                                         --------------   --------------
       Total assets                      $ 1,067,972        1,465,274
                                         ==============   ==============

 Current liabilities                     $   148,042          317,662
 Long-term debt, less current portion      1,138,734        1,212,289
 Capital lease obligations, less
   current portion                            57,564           50,441
 Other long-term liabilities                   1,233            1,233
 Due to parent                               256,348          518,241
 Due to ICG Services                         128,893          239,104
 Redeemable preferred stock                  390,895          420,011
 Stockholder's deficit                    (1,053,737)      (1,293,707)
                                         --------------   --------------
       Total liabilities and
         stockholders' deficit            $1,067,972        1,465,274
                                         ==============   ==============


           Summarized Consolidated Statement of Operations Information




                                  Three months ended     Six months ended
                                       June 30,              June 30,
                                  -------------------- ---------------------
                                    1999       2000      1999       2000
                                  ---------  --------- ---------- ----------
                                               (in thousands)


      Total revenue               $ 119,026    167,428   224,759    320,305
      Total operating costs and
        expenses                    181,509    232,828   319,614    439,487
                                  ---------  --------- ---------- ----------
      Operating loss              $ (62,483)   (65,400)  (94,855)  (119,182)
                                   =========  ========= ========== ==========
      Loss from continuing        $
        operations                 (101,381)  (120,581) (168,751)  (240,325)
                                  =========  ========= ========== ==========
      Net loss                    $(122,712)  (120,226) (204,962)  (239,970)
                                  =========  ========= ========== ==========

                                       18
<PAGE>


                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued



(8)   Condensed Financial Information of ICG Holdings (Canada) Co.

      Condensed financial information for Holdings-Canada only is as follows:

                       Condensed Balance Sheet Information

                                      December 31,       June 30,
                                          1999             2000
                                      --------------   -------------
                                             (in thousands)
                                      ------------------------------


      Current assets                  $        82               82
      Advances to subsidiaries            256,348          518,241
                                      --------------   -------------
        Total assets                  $   256,430           518,323
                                      ==============   =============

      Current liabilities             $        73               73
      Due to parent                       246,609          508,514
      Share of losses of subsidiaries   1,053,737        1,293,707
      Shareholders' deficit            (1,043,989)      (1,283,971)
                                      --------------   -------------
        Total liabilities and
          shareholders' deficit       $   256,430          518,323
                                      ==============   =============


                  Condensed Statement of Operations Information


                                      Three months ended    Six months ended
                                            June 30,             June 30,
                                      --------------------- --------------------
                                        1999       2000       1999       2000
                                      ---------- ---------- ---------  ---------
                                                   (in thousands)


      Total revenue                  $      -          -          -          -
      Total operating costs and
       expenses                           603         12      1,206         12
                                    ----------- ---------  ---------  ---------
      Operating loss                     (603)       (12)    (1,206)       (12)
      Losses of subsidiaries         (122,712)  (120,226)  (204,962)  (239,970)
                                    ----------- ---------  ---------  ---------
      Net loss attributable to
        common shareholders         $(123,315)  (120,238)  (206,168)  (239,982)
                                    =========== ========== =========  =========


(9)   Condensed Financial Information of ICG Communications, Inc. (Parent
      company)

      The primary assets of ICG are its investments in ICG Services,  ICG Tevis,
      ICG Funding and Holdings-Canada, including advances to those subsidiaries.
      Certain  corporate  expenses of the parent  company are  included in ICG's
      statement  of  operations  and were  approximately  $0.4  million and $0.9
      million  for the  three  months  and  six  months  ended  June  30,  1999,
      respectively,  and $0.5  million and $1.0 million for the three months and
      six months ended June 30, 2000, respectively.  ICG has no operations other
      than those of ICG  Services,  ICG  Funding and  Holdings-Canada  and their
      subsidiaries.

                                       19
<PAGE>


                    ICG COMMUNICATIONS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(10)  Event subsequent to June 30, 2000

      On July 6, 2000, ICG Tevis,  Inc., a subsidiary of the Company,  purchased
      1,000,000  shares of common  stock of  Teligent,  Inc.,  a fixed  wireless
      broadband  communications  provider  ("Teligent"),  from a  subsidiary  of
      Teligent in exchange for 2,996,076  shares of ICG Common Stock.  The value
      the  Company  assigned  to the  stock  acquired  was  approximately  $21.6
      million.

                                       20
<PAGE>


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

      The following discussion includes certain  forward-looking  statements and
information  that is based on the beliefs of management  as well as  assumptions
made by management based on information currently available to the Company. When
used in  this  document,  the  words  "anticipate",  "believe",  "estimate"  and
"expect"  and  similar  expressions,  as  they  relate  to  the  Company  or its
management,   are  intended  to  identify  forward-looking   statements.   These
forward-looking  statements  are  intended  to  qualify  as  safe  harbors  from
liability as  established  by the Private  Securities  Litigation  Reform Act of
1995. Such  statements  reflect the current views of the Company with respect to
future events and are subject to certain risks,  uncertainties  and assumptions.
Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those described in this document. These forward-looking  statements are affected
by important factors,  including, but not limited to, the ability of the Company
to obtain  adequate  financing to fund  expansion,  the  dependence on increased
traffic  on the  Company's  facilities,  the  successful  implementation  of the
Company's  strategy  of  offering an  integrated  telecommunications  package of
local,  long distance,  data and enhanced  telephony and network  services,  the
continued  development of the Company's  network  infrastructure  and actions of
competitors and regulatory authorities that could cause actual results to differ
materially from the  forward-looking  statements.  The results of operations for
the three and six months ended June 30, 1999 and 2000 represent the consolidated
operating  results of the Company.  (See the  unaudited  consolidated  financial
statements  of the  Company  for the three and six months  ended  June 30,  2000
included  elsewhere herein).  The Company's  consolidated  financial  statements
reflect the operations of Network Services, Satellite Services, Zycom and NETCOM
as discontinued for all periods presented.  The terms "fiscal" and "fiscal year"
refer to the Company's fiscal year ending December 31. All dollar amounts are in
U.S. dollars.

COMPANY OVERVIEW

      ICG  Communications  Inc.  ("ICG" or the "Company") is a  facilities-based
communications   provider.   The  Company   primarily   offers  voice  and  data
communication services directly to small- to medium-sized business customers and
offers network facilities and data management to ISP customers. In addition, the
Company also offers special access and switched access services to long-distance
companies and other customers.

      ICG's  business  has been  transformed  over the  past  few  years  from a
regional  competitive  access provider  primarily  providing  access services to
interexchange  carriers  and  medium- to  large-sized  business  customers  to a
competitive local exchange carrier with a nationwide  backbone  providing a full
array of voice and data services to small- to medium-sized business customers as
well as network  facilities and data management to ISP customers.  The Company's
business  transformation  was initially  driven by the deregulation of the local
telephony markets in 1996 and subsequently by changing  technology and growth of
the Internet.  ICG's focus,  originally  regional in scope, is now  increasingly
national in scope.

      Total  revenue for the  Company has grown from $222.0  million for the six
months  ended June 30, 1999 to $333.0  million for the six months ended June 30,
2000 primarily due to an increase in the number of local access lines in service
between  June  1999  and  June  2000.  As of June  30,  2000,  the  Company  had
approximately 1.1 million customer lines in service.

Network and Service Offerings

      At June 30, 2000, the Company's data network included:

o    24 ATM data switches;
o    18,000 miles of leased long-haul fiber optic lines;
o    43 voice switches;
o    4,767 miles of local fiber and connections to 9,152 buildings.

      The data network connects to major public peering  connections  located in
Washington  D.C.,  California,  New Jersey,  and Illinois and the local  network
covers approximately 30 metropolitan areas in California,  Colorado, Ohio, Texas
and the Southeast.

                                     21

<PAGE>

      The Company  provides data access and transport  services to ISPs that, in
many cases,  rely on the Company to provide  network  ownership and  management.
Current product  offerings to the ISP market include dial-up products as well as
broadband  access services  including T-1 and T-3  connections and DSL.  Dial-up
products include:

o        Primary rate interfaces  ("PRI"):  PRI has been the traditional product
         that  allows an ISP to connect  to its  customers  using the  Company's
         local access network;

o        Remote access services  ("RAS"):  RAS uses our switches and modem banks
         to provide access to our own switch locations for connection to an ISP,
         eliminating the need for the ISP to physically deploy modems at each of
         its POPs; and

o        Internet  remote  access  services  ("IRAS"):   IRAS  combines  access,
         transport  and routing  services to all Internet  Protocol  ("IP") data
         packets  either  directly  to the  ISP  or  directly  to the  Internet,
         bypassing the ISP.

      The Company's voice and data  communication  services  offered to business
customers include local, long distance and enhanced  telephony  services through
its Internet  protocol,  circuit switched and regional fiber optic networks.  In
regional markets,  the Company is generally a less expensive  alternative to the
area's incumbent local telephone company for businesses.

      The Company also provides interexchange services to long-distance carriers
and other  customers  such as connecting  end-users to  long-distance  carriers'
facilities,  connecting  a  long-distance  carrier's  facilities  to  the  local
telephone  company's  central  office and  connecting  facilities of the same or
different long distance carriers.

Sale of Assets and Discontinued Operations

      The Company has disposed of certain assets which  management  believes did
not complement its overall business strategy. The Company will from time to time
evaluate all of its assets as to its core needs and, based on such analysis, may
sell or otherwise dispose of assets which management does not believe complement
its overall business  strategy.  Following is a discussion of the Company's sale
of assets of NETCOM, Network Services, and Satellite Services.

NETCOM

      On November 3, 1998 the  Company's  board of directors  adopted the formal
plan to dispose of the operations of NETCOM.  Once this formal plan was adopted,
all historical revenue, operating costs, depreciation, interest, and other costs
of  NETCOM's  operations  were  classified  as  discontinued  in  the  Company's
consolidated statements of operations.

      On February 17, 1999, the Company sold certain of the operating assets and
liabilities of NETCOM to MindSpring Enterprises, Inc., predecessor to EarthLink,
Inc. ("MindSpring") for total proceeds of $245.0 million. Assets and liabilities
sold to MindSpring included those directly related to the domestic operations of
NETCOM's Internet dial-up,  dedicated access and Web site hosting services.  The
carrying  value of the assets  retained by the Company was  approximately  $21.7
million, including approximately $17.5 million of network equipment, on February
17,  1999.  The Company also  retained  approximately  $11.3  million of accrued
liabilities and capital lease obligations.  Additionally, on March 16, 1999, the
Company  sold all of the  capital  stock of  NETCOM's  international  operations
(including  NETCOM Canada and NETCOM U.K.) for total  proceeds of  approximately
$41.1 million.

      In conjunction  with the sale to MindSpring,  the Company  entered into an
agreement to lease to MindSpring  for a one-year  period the capacity of certain
network  operating  assets  formerly owned by NETCOM and retained by the Company
(the "MindSpring Capacity Agreement"). Under the agreement,  MindSpring utilized
the  Company's  network  capacity  to  provide  Internet  access to the  dial-up
services customers  formerly owned by NETCOM. In addition,  the Company received
for a one-year  period 50% of the gross revenue  earned by  MindSpring  from the
dedicated access customers  formerly owned by NETCOM. As the Company expected to
generate operating losses under the MindSpring Capacity Agreement, and the terms
of the sale agreement were dependent upon and negotiated in conjunction with the
terms of the sale of the  operating  assets  of  NETCOM,  the  Company  deferred
approximately  $35.5  million  of the  proceeds  from the sale  agreement  to be
applied on a periodic basis to losses  incurred  under the  MindSpring  Capacity
Agreement.  Accordingly,  the Company did not recognize  any revenue,  operating
costs or selling,  general and administrative expenses from services provided to
MindSpring for the twelve month term of the agreement which expired February 17,
2000. Any incremental revenue or costs generated by other customers, or by other
services  provided to MindSpring  was  recognized in the Company's  consolidated
statement of operations as incurred.

                                       22
<PAGE>

     As discussed  above,  the terms of the MindSpring  Capacity  Agreement were
negotiated in conjunction  with and were dependent upon the terms of the sale of
the operating assets of NETCOM to MindSpring.  As such,  these  transactions are
collectively referred to as "Sale of Operating Assets of NETCOM".

Network Services

     On July 15, 1999, the Company's board of directors adopted a formal plan to
dispose of the Company's investments in its wholly-owned subsidiaries, ICG Fiber
Optic  Technologies,  Inc. and Fiber Optic  Technologies of the Northwest,  Inc.
(collectively,  "Network  Services").  Accordingly,  the Company's  consolidated
financial  statements reflect the operations of Network Services as discontinued
for all periods  presented.  On October 22, 1999, the Company completed the sale
of all of the  capital  stock of Network  Services  for total  proceeds of $23.9
million in cash.

Satellite Services

     On July 15, 1999, the Company's board of directors adopted a formal plan to
dispose  of the  Company's  investments  in ICG  Satellite  Services,  Inc.  and
Maritime Telecommunications Network, Inc. (collectively,  "Satellite Services").
Accordingly,   the  Company's  consolidated  financial  statements  reflect  the
operations of Satellite Services as discontinued for all periods  presented.  On
November 30, 1999, the Company completed the sale of all of the capital stock of
Satellite Services to ATC Teleports, Inc. for total proceeds of $98.1 million in
cash.

Zycom

     The Company  owns a 70%  interest  in Zycom  Corporation  ("Zycom")  which,
through its wholly owned  subsidiary,  Zycom Network  Services,  Inc.  ("ZNSI"),
operated an  800/888/900  number  services  bureau and a switch  platform in the
United States and supplied  information  providers and commercial  accounts with
audiotext and customer support services. In June 1998, Zycom was notified by its
largest  customer  of the  customer's  intent to  transfer  its call  traffic to
another service bureau.  Accordingly,  effective October 1, 1998, Zycom assigned
the majority of its revenue and the related  volume  purchase  agreements to ICN
Limited.  Zycom's board of directors approved a plan to wind down and ultimately
discontinue  Zycom's  operations on August 25, 1998. On October 22, 1998,  Zycom
completed the transfer of all customer traffic to other providers. On January 4,
1999,  the Company  completed  the sale of the  remainder of Zycom's  long-lived
operating assets to an unrelated third party for total proceeds of $0.2 million.
As Zycom's  assets were recorded at estimated  fair market value at December 31,
1998,  no gain or loss was  recorded on the sale during the year ended  December
31, 1999.

     The Company's  consolidated  financial statements reflect the operations of
Zycom as discontinued for all periods presented. The Company has accrued for all
expected future net losses of Zycom.

                                       23
<PAGE>

Financial Impacts of Asset Sales and Discontinued Operations

     The following table illustrates the financial impacts of the sale of assets
of NETCOM,  Network Services and Satellite  Services and the  discontinuance  of
operations of Zycom for the three and six months ended June 30, 1999 and 2000:


                                       Three Months Ended     Six Months Ended
                                            June 30,              June 30,
                                       --------------------  -------------------
                                         1999       2000       1999       2000
                                       ---------  ---------  ---------   -------
                                                    (in thousands)

   Income (loss) from discontinued operations:

        Network Services (1)           $ (8,662)         -    (9,074)         -
        Satellite Services                   11          -       312          -
        Zycom (2)                             -        736         -        736

   Sale of Operating Assets of NETCOM:

        Extraordinary   gain  recorded
         on   the   sale   of   NETCOM
         operations (3)                       -          -   193,029          -
        Taxes   on  sale   of   NETCOM
         operations                           -          -    (6,400)         -

        Losses    from    discontinued
         operations   offset   against
         gain  (including  losses from
         November  3, 1998 - February
         17, 1999) (3)                        -          -   (16,600)         -
        Recognition of Deferred Gain      3,800          -    10,500      6,239
   Summary   Results   of   Operations
     (February 17, 2000 - June 30, 2000):
         Revenue                              -      8,300         -     12,600
         Operating Costs                      -    (13,800)        -    (23,200)
         SG&A                                 -       (700)        -     (1,700)


(1)   Included in the loss from discontinued  operations of Network Services for
      both the three  and six  months  ended  June 30,  1999 is an $8.0  million
      estimate of the loss on its disposal.

(2)   Income  from  discontinued  operations  for both the three and six  months
      ended June 30, 2000 relate to legal fees incurred prior to January 1, 2000
      by Zycom  which were  reimbursed  as part of the final  settlement  of the
      litigation  outstanding (see note 6 "Commitments and Contingencies" in the
      unaudited  consolidated  financial  statements  of the Company for the six
      months ended June 30, 2000 included elsewhere herein).

(3)   Offsetting  the gain  recorded on the Sale of  Operating  Assets of NETCOM
      during the six months ended June 30, 1999 is  approximately  $16.6 million
      of net losses from operations of NETCOM from November 3, 1998 (the date on
      which the Company's board of directors  adopted the formal plan to dispose
      of the operations of NETCOM) through the dates of the sales.  Also, as the
      operations  sold were acquired by ICG in a transaction  accounted for as a
      pooling of interests, the gain on the sales of the operations of NETCOM is
      classified  as  an  extraordinary  item  in  the  Company's   consolidated
      statement of operations.


                                     24
<PAGE>



RESULTS OF OPERATIONS

      The following  table provides a breakdown of revenue,  operating costs and
selling,  general and  administrative  expenses  for the Company for the periods
indicated.  The table also shows  certain  revenue,  expenses,  operating  loss,
EBITDA and EBITDA (before  nonrecurring  and noncash charges) as a percentage of
the Company's total revenue.

<TABLE>
<CAPTION>

                                Three months ended June 30,           Six months ended June 30,
                                ---------------------------------- ---------------------------------
                                      1999             2000             1999             2000
                                 ---------------------------------- ---------------------------------
                                    $          %       $         %        $       %        $       %
                                 ---------------------------------- ---------------------------------
                                                              (unaudited)
                                                             (in thousands)
Statement  of  Operations Data:
Revenue:
   <S>                            <C>         <C>    <C>        <C>    <C>      <C>    <C>       <C>
   Local service (1)               76,770     65     127,502     73    144,169   65    230,097    69
   Special access (2)              23,438     20      33,926     19     46,000   20     73,757    22
   Switched access (3)             12,353     10       9,953      6     21,592   10     20,467     6
   Long  distance & other(4)        5,093      5       4,372      2     10,224    5      8,656     3
                                 ---------- ------- -------- --------- -------  ------ -------- ------------
     Total Revenue                117,654    100     175,753    100    221,985  100    332,977   100
Operating costs                    59,458     51     102,589     58    113,107   51    185,491    56
Selling, general and
  administrative                   42,975     37      49,676     29     85,783   37    104,765    32
Depreciation and
  amortization                     44,683     38      72,892     42     81,058   36    137,491    41
Provision for  impairment
  of long-lived assets             29,300     25           -      -     29,300   13          -     -
Net loss on  disposal  of
  long-lived assets                     -      -         545      -          -    -        545     -
Other, net                            398      -         828      -       (535)   -      1,259     -
                                ----------- ------- -------- --------- -------- ------ -------- -----------
   Operating loss                 (59,160)   (50)    (50,777)   (29)   (86,728) (39)   (96,574)  (29)

Other Data:
Net cash provided (used)
  by operating activities          31,611             79,949           (10,591)        103,079
Net cash provided (used)
  by investing activities         (87,908)          (223,626)           39,489        (375,458)
Net cash provided (used)
  by financing activities          (4,390)           599,036            (4,846)        665,243
EBITDA (5)                        (14,477)   (12)     22,115     13     (5,670)  (3)    40,917    12
EBITDA (before nonrecurring
  and noncash charges)(5)          15,221     13      23,488     13     23,095   10     42,721    13
Capital expenditures of
  continuing operations (6)       133,025            343,668           235,937         556,876
Capital expenditures of
   discontinued operations (6)      3,354                  -             6,159               -
</TABLE>

                                                                     (Continued)


                                     25

<PAGE>


<TABLE>
<CAPTION>

                              June 30,    September    December       March       June 30,
                                1999      30, 1999     31, 1999      31, 2000      2000
                             ----------- ------------  -----------  ----------  ----------
                                                     (unaudited)
<S>                            <C>         <C>         <C>         <C>          <C>
Statistical Data (7):
Full time employees              2,753       3,054       2,853       2,930          2,975
Access lines in service (8)    494,405     584,827     730,975     904,629      1,112,964
Buildings connected:
  On-net (9)                       874         939         963       1,046            924
  Hybrid (10)                    5,915       6,476       7,115       7,746          8,228
                             -----------  -----------  ----------  ----------   ----------
   Total buildings connected     6,789       7,415       8,078       8,792          9,152
Operational switches:
  Circuit                           29          29          31          35             43
  ATM                                -           -          24          24             24
  Frame Relay (11)                  16          16          16          16              -
                             -----------  -----------  ----------  ----------   ----------
   Total operational switches       45          45          71          75             67
Regional fiber route miles (12):
  Operational                    4,406       4,449       4,596       4,807          4,767
  Under construction                 -           -           -           -            495
Regional fiber strand miles (13):
  Operational                  164,416     167,067     174,644     177,103        184,064
  Under construction                 -           -           -           -         12,254
Long-haul broadband route miles      -           -      18,000      18,000         18,000
Collocations with ILECs            126         139         147         183            188

</TABLE>


(1)  Local service revenue  includes  revenue earned from providing  competitive
     voice and data services to business  customers and network  facilities  and
     data  management  services to ISP  customers.  Local  service  revenue also
     includes  revenue earned from  terminating  local traffic under  agreements
     with ILECs.

(2)  Special  access  revenue  includes  revenue  earned from  providing  direct
     intra-state  and  intra-city  private line  broadband  connections  to long
     distance carriers, ISP and end user business customers.

(3)  Switched  access  revenue   includes  revenue  earned  from  both  switched
     terminating access and SS7 gateway services.

     Switched  terminating access:  Switched terminating access services provide
     long distance customers connectivity to the ILEC's local switched network.

     SS7 gateway  services:  SS7 gateway services allow for rapid call setup via
     high-speed  circuit switched  connections.  ICG services include nationwide
     signaling with access to SS7 networks in every LATA.

(4)  Long distance revenue includes revenue earned from providing voice services
     outside the customers local calling area.

(5)  EBITDA  consists  of  earnings  (loss) from  continuing  operations  before
     interest  expense,  income  taxes,  depreciation  and  amortization,  other
     expense,  net and accretion and preferred dividends on preferred securities
     of subsidiaries,  or otherwise  defined as operating loss plus depreciation
     and  amortization.   EBITDA  (before   nonrecurring  and  noncash  charges)
     represents EBITDA before certain  nonrecurring charges such as the net loss
     (gain) on disposal of long-lived  assets and other, net operating costs and
     expenses,  including  deferred  compensation.  EBITDA  and  EBITDA  (before
     nonrecurring  and noncash  charges) are provided  because they are measures
     commonly used in the telecommunications industry. EBITDA and EBITDA (before
     nonrecurring and noncash charges) are presented to enhance an understanding
     of the Company's  operating  results and are not intended to represent cash
     flows or  results of  operations  in  accordance  with  generally  accepted
     accounting principles ("GAAP") for the periods indicated. EBITDA and EBITDA
     (before  nonrecurring and noncash charges) are not measurements  under GAAP
     and are not necessarily  comparable with similarly titled measures of other
     companies.   Net  cash  flows  from  operating,   investing  and  financing
     activities  of  continuing  operations  as  determined  using GAAP are also
     presented in Other Data.

(6)  Capital  expenditures  include  assets  acquired  with cash,  under capital
     leases, and pursuant to IRU agreement. Capital expenditures of discontinued
     operations includes the capital expenditures of Network Services, Satellite
     Services, Zycom and NETCOM combined for all periods presented.


                                       26
<PAGE>

(7)  Amounts  presented are for  three-month  periods ended, or as of the end of
     the period presented.

(8)  Access  lines  in  service  at June 30,  2000  includes  approximately  75%
     provisioned  through the Company's  switch with the  remainder  provisioned
     through resale and other  agreements with various local exchange  carriers.
     Resale lines  typically  generate  lower margins and are used  primarily to
     obtain  customers.  Although  the Company  plans to migrate most lines from
     resale to higher margin on-switch lines, there is no assurance that it will
     be successful in executing this strategy.

(9)  Beginning in the three months ended June 30, 2000, on-net buildings will be
     defined to exclude facilities used exclusively for ICG network operations.

(10) Hybrid buildings  connected  represent buildings connected to the Company's
     network via another carrier's facilities.

(11) Frame  relay   switches   are  no  longer   included  in  switch  count  as
     functionality is now handled by ATM switches.

(12) Regional  fiber  route  miles  refers to the number of miles of fiber optic
     cable,  including  leased fiber. As of June 30, 2000, the Company had 4,767
     regional fiber route miles.  Regional fiber route miles under  construction
     represents  fiber under  construction,  which is expected to be operational
     within six months.

(13) Regional  fiber strand  miles refers to the number of regional  fiber route
     miles,  including leased fiber, along a telecommunications  path multiplied
     by the number of fiber strands  along that path.  As of June 30, 2000,  the
     Company had 184,064  regional  fiber strand  miles.  Regional  fiber strand
     miles under  construction  represents  fiber under  construction,  which is
     expected to be operational within six months.

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999

                                      Three Months Ended June 30,
                                 ---------------------------------------
                                       1999                 2000
                                 ------------------  -------------------
                                    $         %         $          %
                                 --------  --------  ---------   -------
                                        ($ values in thousands)

Local service                     76,770     65       127,502      73
Special access                    23,438     20        33,926      19
Switched access                   12,353     10         9,953       6
Long distance & other              5,093      5         4,372       2
                                 --------  --------  ---------   -------
    Total Revenue                117,654     100      175,753     100
                                 ========  ========  =========   =======

Operating costs                   59,458     51       102,589      58
                                 ========  ========  =========   =======
Selling, general and
  administrative                  42,975     37        49,676      29
                                 ========  ========  =========   =======
Depreciation and amortization     44,683     38        72,892      42
                                 ========  ========  =========   =======

Revenue

      Most of ICG's  revenue  is earned  from  small- to  medium-sized  business
customers who purchase  voice and data  communications  services or by providing
network facilities and data management services to ISPs. The Company also offers
special access and switched access services to long-distance companies and other
customers.  Total revenue  increased  $58.1 million or 49% from the three months
ended June 30, 1999 to 2000.

      Local service  revenue  increased  from $76.8 million for the three months
ended June 30, 1999 to $127.5  million for the same period in 2000, a 66% annual
increase  primarily due to an increase in the average local access lines of 120%
offset by a reduction in the average revenue per line. This reduction in revenue
per line is driven by a higher  percentage of ISP lines in 2000, which typically
earn lower revenue per line. Local service revenue includes  approximately $40.1
million (or 34% of revenue) and $38.4  million (or 22% of revenue) for the three
months ended June 30, 1999 and 2000,  respectively,  for  terminating  local ISP
traffic.  Revenue for  terminating  local ISP traffic for the three months ended
June 30, 2000, includes  approximately $9 million derived from the resolution of
previously  disputed  issues not  related to the  period  and  approximately  $4
million of revenues  from rates  earned  pursuant to a previous  interconnection
agreement,  neither  of which will recur in  subsequent  periods.  Additionally,
approximately  $3 million  recognized  in the three  months  ended June 30, 2000
relates to nonrecurring elements of terminating other traffic, which is also for
services not provided within the period.  For further discussion on nonrecurring
reciprocal  compensation  revenue earned, see "Liquidity and Capital Resources -
Transport and Termination Charges".

                                       27
<PAGE>

      Special access  revenue  increased from $23.4 million for the three months
ended June 30, 1999 to $33.9 million for the same period in 2000, an increase of
45%. The increase in special  access  revenue is primarily due to increased unit
sales.

      Switched access revenue  decreased from $12.4 million for the three months
ended  June  30,  1999 to  $10.0  million  for the same  period  in 2000,  a 19%
decrease. The decrease is due to the expected attrition of switch customers.

      Revenue from long distance  services  decreased  from $5.1 million for the
three  months ended June 30, 1999 to $4.4 million for the same period in 2000, a
14%  decline.  ICG's long  distance  revenue for the three months ended June 30,
2000 was impacted by planned  attrition of resale access  lines,  which had high
long distance  service  penetration  rates as well as a reduction in revenue per
minute.

      Additionally,  the increase in revenue  during the three months ended June
30, 2000 over 1999 is also due to the recognition of approximately  $8.3 million
of revenue  during the three  months ended June 30, 2000 which prior to February
17, 2000 had been offset  against the deferred gain on the sale of NETCOM assets
(see further discussion in "Sale of Assets and Discontinued Operations" above).

Operating costs

      Total  operating  costs  increased from $59.5 million for the three months
ended  June 30,  1999 to  $102.6  million  for the same  period  in 2000,  a 72%
increase. Operating costs increased as a percentage of revenue from 51% for 1999
to 58% for 2000.  Operating costs consist primarily of payments to ILECs,  other
CLECs, and long distance  carriers for the use of network  facilities to support
local, special,  switched access services and, long distance services as well as
internal network  operating costs,  right of way fees and other operating costs.
Internal network  operating costs include the cost of engineering and operations
personnel  dedicated to the  operations and  maintenance of the network.  During
periods of rapid market expansion, such as ICG is experiencing in 2000, backhaul
and intracity facilities are leased on an interim basis until such time as owned
facilities  are in service,  resulting in an increase of  operating  expenses as
percent of revenue.  During the three months  ended June 30, 2000,  ICG incurred
approximately  $7 million  associated  with the advanced  deployment of lines in
expansion  cities  to  accommodate   customer   requirements.   The  lines  were
provisioned using either ILEC or other CLEC capacity to meet customer demand. As
ICG completes  installation  of switches in these markets,  operating  costs are
expected  to  decline  as the  number of leased  lines  decreases  and ICG earns
revenue from terminating local traffic.  Additionally, the increase in operating
costs  during  the  three  months  ended  June 30,  2000 over 1999 is due to the
recognition of approximately  $13.8 million of operating  expenses for the three
months  ended June 30,  2000 which  prior to  February  17, 2000 had been offset
against the deferred gain on the sale of NETCOM  assets (see further  discussion
in "Sale of Assets and Discontinued Operations" above). ICG expects the ratio of
operating  costs to revenue will  decrease as ICG  provides a greater  volume of
higher margin services,  carries more traffic on its own facilities  rather than
leased  facilities and obtains the right to use unbundled  leased  facilities on
satisfactory terms, any or all of which may not occur.

Selling, general and administrative expenses

      Total selling, general and administrative ("SG&A") expenses increased from
$43.0  million for the three months ended June 30, 1999 to $49.7 million for the
same period in 2000, a 16% increase.  SG&A expenses decreased as a percentage of
revenue from 37% for 1999 to 29% for 2000.  The increase in absolute  dollars is
principally due to an increase in average staff levels and increased  salary and
benefits per employee  attributable to the new compensation  plan implemented in
2000 to remain competitive in the marketplace. The number of full time employees
increased from 2,753 at June 30, 1999 to 2,975 at June 30, 2000.  Certain of the
SG&A increase can also be  attributed  to increases in facilities  costs for new
office space as well as increased  sales and property taxes as well as legal and
professional  fees.  These increases were offset by a net recovery of previously
reserved  uncollectible amounts. SG&A costs as a percent of revenue are expected
to continue to decline as ICG benefits from a larger  revenue base for which the
most  significant  new  product  development  costs  have been  incurred  and as
efficiencies from new systems and processes are experienced.


                                     28
<PAGE>

Depreciation and amortization

      Depreciation and  amortization  increased from $44.7 million for the three
months  ended June 30, 1999 to $72.9  million  for the same period in 2000.  The
increase  is  primarily  due  to  increased  investment  in  depreciable  assets
resulting from the continued  expansion of the Company's  networks and services,
as  well  as  a  reduction  in  the  overall  weighted-average  useful  life  of
depreciable  assets in service as ICG invests a larger portion of its capital in
assets with  shorter  lives such as routers  and  computers.  ICG  expects  that
depreciation  and  amortization  will  continue to increase as ICG  continues to
build out its network.

Provision for impairment of long-lived assets

      During  the three  months  ended June 30,  1999,  the  Company  recorded a
provision for impairment of long-lived  assets of $29.3 million.  This provision
relates to the  impairment of software and other  capitalized  costs  associated
with the Company's billing and provisioning  system projects under  development.
The provision for  impairment  of  long-lived  assets was based on  management's
decision to abandon the billing and provisioning solutions under development and
to select new vendors for these  systems,  which vendors are expected to provide
the Company with billing and provisioning  solutions with improved functionality
and earlier  delivery  dates at lower costs than what was proposed by the former
vendors. The provision for impairment of long-lived assets was recorded based on
management's estimate of the net realizable value.

Other, net

      Other,  net operating  costs and expenses  increased  from $0.4 million of
expense for the three  months  ended June 30, 1999 to $1.3  million for the same
period in 2000.  For both the three months ended June 30, 1999 and 2000,  other,
net  operating  costs and  expenses  primarily  includes  deferred  compensation
expense  related to the Company's  deferred  compensation  arrangement  with its
chief executive officer.

Interest expense

      Interest  expense  increased from $51.3 million for the three months ended
June 30, 1999 to $66.8 million for the same period in 2000. Included in interest
expense for the three months ended June 30, 1999 and 2000 was $47.1  million and
$57.4 million of noncash interest,  respectively. The Company's interest expense
will continue to increase as the principal amount of its indebtedness  increases
due to the accretion of noncash interest. The Company's senior indebtedness does
not begin to pay interest in cash until 2001.  Interest  expense also  increased
due to the increase in debt issued under the senior secured  financing  facility
(the  "Senior  Facility").  Additionally,  interest  expense is net of  interest
capitalized  related to construction in process of $3.5 million and $2.2 million
during the three months ended June 30, 1999 and 2000, respectively.

Interest income

      Interest  income  increased  from $3.8  million for the three months ended
June 30,  1999 to $11.3  million for the same  period in 2000.  The  increase is
attributable  to  the  increase  in  cash,   cash   equivalents  and  short-term
investments  resulting  from the cash proceeds to the Company of the 8% Series A
Convertible Preferred Stock.

Accretion and preferred dividends on preferred securities of subsidiaries

      Accretion and preferred dividends on preferred  securities of subsidiaries
increased  from $15.2  million for the three months ended June 30, 1999 to $17.1
million  for the same  period in 2000.  The  increase  is due  primarily  to the
periodic  payment  of  dividends  on  the  14%   Exchangeable   Preferred  Stock
Mandatorily  Redeemable  2008  (the  "14%  Preferred  Stock")  and  the 14  1/4%
Exchangeable Preferred Stock Mandatorily Redeemable 2009 (the "14 1/4% Preferred
Stock") in  additional  shares of 14%  Preferred  Stock and 14 1/4% of Preferred
Stock. Accretion and preferred dividends on preferred securities of subsidiaries
recorded  during the three months ended June 30, 2000  consists of the accretion
of  issuance  costs  and  the  accrual  of the  preferred  securities  dividends
associated with the 6 3/4%  Exchangeable  Limited  Liability  Company  Preferred
Securities Mandatorily Redeemable 2009 (the "6 3/4% Preferred Securities"),  the
14% Preferred Stock and the 14 1/4% Preferred Stock.


                                     29
<PAGE>

Loss from continuing operations

      Loss from  continuing  operations  decreased  from $123.8  million for the
three months  ended June 30, 1999 to $123.6  million for same period in 2000 due
to the  increases  in  operating  costs,  SG&A  expenses  and  depreciation  and
amortization,  offset by an increase in revenue and a decrease in the  provision
for impairment of long-lived assets, as noted above.

Income (loss) from discontinued operations

      Income (loss) from  discontinued  operations  was an $8.7 million loss for
the three months ended June 30, 1999 and $0.7 million income for the same period
in 2000. The loss from discontinued operations for 1999 consists of the combined
net  losses  of  Network  Services  and  Satellite   Services.   Net  loss  from
discontinued  operations  for the three months ended June 30, 1999  including an
estimated loss on the disposal of Network Services of $8.0 million.  Income from
discontinued  operations in 2000 is from the Zycom legal expenses  reimbursed as
part of the settlement outstanding with the minority shareholders. (See "Sale of
Assets and Discontinued Operations" for further discussion.)

Accretion  and  dividends  of  8%  Series  A  Convertible   Preferred  Stock  to
liquidation value

      Accretion  and  dividends of 8% Series A  Convertible  Preferred  Stock to
liquidation value is comprised of the dividends and the accretion to liquidation
value of the 8% Series A Convertible Preferred Stock of $14.4 million.

Charge for beneficial  conversion feature of 8% Series A Convertible Preferred
Stock

      Charge for  beneficial  conversion  of 8% Series A  Convertible  Preferred
Stock  during  the three  months  ended June 30,  2000  relates to the charge of
$159.3  million of the proceeds of the 8% Series A Convertible  Preferred  Stock
which was allocated to the intrinsic value of the beneficial  conversion feature
of the convertible preferred securities to additional paid-in capital. As the 8%
Series A Convertible  Preferred Stock is immediately  convertible into shares of
ICG common stock, the beneficial  conversion feature was recognized  immediately
as a return to the preferred shareholders during the three months ended June 30,
2000.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999

                                       Six Months Ended June 30,
                                 ---------------------------------------
                                       1999                 2000
                                 ------------------  -------------------
                                    $         %         $          %
                                 --------  --------  ---------   -------
                                        ($ values in thousands)

Local service                    144,169     65       230,097      69
Special access                    46,000     20        73,757      22
Switched access                   21,592     10        20,467       6
Long distance & other             10,224      5         8,656       3
                                 --------  --------  ---------   -------
    Total Revenue                221,985     100      332,977     100
                                 ========  ========  =========   =======

Operating costs                  113,107     51       185,491      56
                                 ========  ========  =========   =======
Selling, general and
  administrative                  85,783     37       104,765      32
                                 ========  ========  =========   =======
Depreciation and amortization     81,058     36       137,491      41
                                 ========  ========  =========   =======


                                     30
<PAGE>



Revenue

     Most of ICG's  revenue  is  earned  from  small- to  medium-sized  business
customers who purchase  voice and data  communications  services or by providing
network facilities and data management services to ISPs. The Company also offers
special access and switched access services to long-distance companies and other
customers.  Total revenue  increased  $111.0  million or 50% from the six months
ended June 30, 1999 to 2000.

     Local  service  revenue  increased  from $144.2  million for the six months
ended June 30, 1999 to $230.1  million for the same period in 2000, a 60% annual
increase  primarily  due to an increase in the average local access lines offset
by a reduction in the average  revenue per line.  This  reduction in revenue per
line is driven by a higher percentage of ISP lines in 2000, which typically earn
lower  revenue per line.  Local service  revenue  includes  approximately  $70.9
million (or 32% of revenue)  and $74.0  million (or 22% of revenue)  for the six
months ended June 30, 1999 and 2000,  respectively,  for  terminating  local ISP
traffic. Revenue for terminating local ISP traffic for the six months ended June
30, 2000,  includes  approximately  $13 million  derived from the  resolution of
previously   disputed   issues  not  related  to  the   respective   period  and
approximately  $4 million of revenues from rates earned pursuant to the previous
interconnection  agreement,  neither of which will recur in subsequent  periods.
Additionally,  approximately  $3.0 million  recognized in the three months ended
June 30, 2000 relates to  nonrecurring  elements of  terminating  other traffic,
which  is also  for  services  not  provided  within  the  period.  For  further
discussion  on  nonrecurring   reciprocal   compensation   revenue  earned,  see
"Liquidity and Capital Resources - Transport and Termination Charges" below.

     Special  access  revenue  increased  from $46.0  million for the six months
ended June 30, 1999 to $73.8 million for the same period in 2000, an increase of
60%. The increase in special  access  revenue is due to increased  unit sales as
well as $12.5 million of revenue recognized during the six months ended June 30,
2000  under  ICG's  fiber  optic   sales-type   lease  agreement  with  a  major
interexchange carrier.

     Switched  access  revenue  decreased  from $21.6 million for the six months
ended June 30, 1999 to $20.5 million for the same period in 2000, a 5% decrease.
The decrease is due to the expected attrition of switch customers.

     Revenue from long distance  services  decreased  from $10.2 million for the
six months  ended June 30, 1999 to $8.7  million for the same period in 2000,  a
15% decline.  ICG's long distance revenue for the six months ended June 30, 2000
was impacted by planned  attrition of resale access  lines,  which had high long
distance service penetration rates as well as a reduction in revenue per minute.

     Additionally, the overall increase in revenue can also be attributed to the
recognition  of $12.6  million of revenue  which prior to February  17, 2000 had
been offset  against the deferred gain on the sale of NETCOM assets (see further
discussion in "Sale of Assets and Discontinued Operations" above).

Operating costs

     Total  operating  costs  increased  from $113.1  million for the six months
ended  June 30,  1999 to  $185.5  million  for the same  period  in 2000,  a 64%
increase. Operating costs increased as a percentage of revenue from 51% for 1999
to 56% for  2000.  During  periods  of rapid  market  expansion,  such as ICG is
experiencing in 2000, backhaul and intracity facilities are leased on an interim
basis  until  such  time as owned  facilities  are in  service  resulting  in an
increase  of  operating  expenses  as a percent  of  revenue.  As ICG  completes
installation of switches in these markets  operating costs may decline for these
lines and ICG will earn revenue from  terminating  local traffic.  Additionally,
the increase in  operating  costs during the six months ended June 30, 2000 over
1999 is due to the  recognition  of  approximately  $23.2  million of  operating
expenses for the six months ended June 30, 2000 which prior to February 17, 2000
had been offset  against  the  deferred  gain on the sale of NETCOM  assets (see
further discussion in "Sale of Assets and Discontinued  Operations"  above). ICG
expects the ratio of operating  costs to revenue will decrease as ICG provides a
greater  volume of higher  margin  services,  carries  more  traffic  on its own
facilities  rather  than the  leased  facilities  and  obtains  the right to use
unbundled leased  facilities on satisfactory  terms, any or all of which may not
occur.


                                     31
<PAGE>



Selling, general and administrative expenses

      Total selling, general and administrative ("SG&A") expenses increased from
$85.8  million for the six months ended June 30, 1999 to $104.8  million for the
same period in 2000. SG&A expenses decreased as a percentage of revenue from 39%
for 1999 to 32% for 2000. The increase in absolute dollars is principally due to
an  increase in average  staff  levels and  increased  salary and  benefits  per
employee attributable to the new compensation plan implemented in 2000 to remain
competitive in the marketplace. The number of full time employees increased from
2,753 at June 30, 1999 to 2,975 at June 30, 2000.  Certain of the SG&A  increase
can also be  attributed  to  increases  in  facilities  costs for new office and
switch  space as well as  increased  sales  and  property  taxes  and  legal and
professional fees offset by a net recovery of previously reserved  uncollectible
amounts. Additionally, the increase in SG&A expenses during the six months ended
June 30,  2000  over  1999 is due to the  recognition  of $1.7  million  of SG&A
expenses  which prior to February 17, 2000 had been offset  against the deferred
gain on the sale of NETCOM assets (see further discussion in "Sale of Assets and
Discontinued Operations" above). SG&A costs as a percent of revenue are expected
to continue to decline as ICG benefits from a larger  revenue base for which the
most  significant  new  product  development  costs  have been  incurred  and as
efficiencies from new systems and processes are experienced.

Depreciation and amortization

      Depreciation  and  amortization  increased  from $81.1 million for the six
months  ended June 30, 1999 to $137.5  million for the same period in 2000.  The
increase  is  primarily  due  to  increased  investment  in  depreciable  assets
resulting from the continued expansion of the Company's networks and services as
well as a reduction in the overall  weighted-average  useful life of depreciable
assets in service as ICG invests a larger  portion of its capital in assets with
shorter lives such as routers and computers.  ICG expects that  depreciation and
amortization  will  continue  to  increase  as ICG  continues  to build  out its
network.

Provision for impairment of long-lived assets

      During  the six  months  ended  June 30,  1999,  the  Company  recorded  a
provision for impairment of long-lived  assets of $29.3 million.  This provision
relates to the  impairment of software and other  capitalized  costs  associated
with the Company's billing and provisioning  system  development  projects under
development.  The  provision for  impairment  of long-lived  assets was based on
management's  decision to abandon the billing and  provisioning  solutions under
development  and to select new  vendors  for these  systems,  which  vendors are
expected to provide the Company with  billing and  provisioning  solutions  with
improved  functionality  and earlier delivery dates at lower costs than what was
proposed by the former  vendors.  The  provision  for  impairment  of long-lived
assets was recorded based on management's estimate of the net realizable value.

Other, net

      Other,  net operating  costs and expenses  decreased  from $0.5 million of
income for the six months ended June 30, 1999 to $1.3 million of expense for the
same  period in 2000.  For both the six  months  ended  June 30,  1999 and 2000,
other, net operating costs and expenses primarily includes deferred compensation
expense  related to the Company's  deferred  compensation  arrangement  with its
chief executive officer.

Interest expense

      Interest  expense  increased  from $98.7  million for the six months ended
June 30,  1999 to  $129.4  million  for the same  period  in 2000.  Included  in
interest  expense  for the six  months  ended  June 30,  1999 and 2000 was $92.7
million and $111.3  million of noncash  interest,  respectively.  The  Company's
interest  expense  will  continue  to increase  as the  principal  amount of its
indebtedness  increases due to the accretion of noncash interest.  The Company's
senior  indebtedness does not begin to pay interest in cash until 2001. Interest
expense  also  increased  due to the  increase in debt  issued  under the senior
secured  financing  facility  (the "Senior  Facility").  Additionally,  interest
expense is net of interest  capitalized  related to  construction  in process of
$6.7  million  and $3.6  million  during the six months  ended June 30, 1999 and
2000, respectively.

                                       32
<PAGE>

Interest income

      Interest income  increased from $7.9 million for the six months ended June
30,  1999 to  $14.5  million  for the  same  period  in 2000.  The  increase  is
attributable  to  the  increase  in  cash,   cash   equivalents  and  short-term
investments  resulting  from the cash proceeds to the Company of the 8% Series A
Convertible Preferred Stock.

Accretion and preferred dividends on preferred securities of subsidiaries

      Accretion and preferred dividends on preferred  securities of subsidiaries
increased  from $30.0  million  for the six months  ended June 30, 1999 to $33.8
million  for the same  period in 2000.  The  increase  is due  primarily  to the
periodic  payment  of  dividends  on  the  14%   Exchangeable   Preferred  Stock
Mandatorily  Redeemable  2008  (the  "14%  Preferred  Stock")  and  the 14  1/4%
Exchangeable Preferred Stock Mandatorily Redeemable 2009 (the "14 1/4% Preferred
Stock") in  additional  shares of 14%  Preferred  Stock and 14 1/4% of Preferred
Stock. Accretion and preferred dividends on preferred securities of subsidiaries
recorded  during the six months ended June 30, 2000 consists of the accretion of
issuance costs and the accrual of the preferred  securities dividends associated
with the 6 3/4% Exchangeable  Limited  Liability  Company  Preferred  Securities
Mandatorily  Redeemable  2009  (the  "6  3/4%  Preferred  Securities"),  the 14%
Preferred Stock and the 14 1/4% Preferred Stock.

Loss from continuing operations

      Loss from continuing  operations increased from $210.0 million for the six
months ended June 30, 1999 to $245.2  million for same period in 2000 due to the
increases in operating costs,  SG&A expenses,  depreciation and amortization and
provision for impairment of long-lived assets,  offset by an increase in revenue
and a decrease in the provision for  impairment of long-lived  assets,  as noted
above.

Income (loss) from discontinued operations

      Income (loss) from discontinued  operations was a loss of $8.8 million for
the six months  ended  June 30,  1999 and  income of $0.7  million  for the same
period in 2000. The loss from  discontinued  operations for the six months ended
June 30,  1999  consists  of the  combined  net losses of Network  Services  and
Satellite  Services  including  an  estimated  loss on the  disposal  of Network
Services of $8.0 million.  Income from  discontinued  operations in 2000 is from
the Zycom legal expenses  reimbursed as part of the settlement  outstanding with
the minority  shareholders.  (See "Sale of Assets and  Discontinued  Operations"
above for further discussion.)

Extraordinary gain on sales of operations of NETCOM

      The Company reported an extraordinary  gain on the sales of the operations
of NETCOM  during the six months ended June 30, 1999 of $193.0  million,  net of
income taxes of $6.4 million.  Offsetting the gain on the sales is approximately
$16.6  million of net  losses of  operations  of NETCOM  from  November  3, 1998
through the dates of the sales and  approximately  $35.5 million of the proceeds
was deferred and recognized  over the one year term of the  MindSpring  Capacity
Agreement.  (See "Sale of Assets and Discontinued  Operations" above for further
discussion.)

Accretion  and  dividends  of  8%  Series  A  Convertible   Preferred  Stock  to
liquidation value

      Accretion  and  dividends of 8% Series A  Convertible  Preferred  Stock to
liquidation value is comprised of the dividends and the accretion to liquidation
value of the 8% Series A Convertible Preferred Stock of $14.4 million.


                                       33
<PAGE>


Charge for beneficial  conversion feature of 8% Series A Convertible Preferred
Stock

      Charge for  beneficial  conversion  of 8% Series A  Convertible  Preferred
Stock  during  the three  months  ended June 30,  2000  relates to the charge of
$159.3  million of the proceeds of the 8% Series A Convertible  Preferred  Stock
which was allocated to the intrinsic value of the beneficial  conversion feature
of the convertible preferred securities to additional paid-in capital. As the 8%
Series A Convertible  Preferred Stock is immediately  convertible into shares of
ICG common stock, the beneficial  conversion feature was recognized  immediately
as a return to the preferred shareholders during the three months ended June 30,
2000.

LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  growth to date has been funded  through a  combination  of
equity,  debt and lease  financing  and non-core  asset  sales.  The Company has
incurred  losses  since  inception.  As  of  June  30,  2000,  the  Company  had
approximately   $528.0   million  of  cash  and  short  term   investments   and
approximately  $25.0  million of credit  available  under the  Senior  Facility,
amounts adequate to fund operations and capital expansion through early 2001.

      Management  believes that  financing,  including  bank  financing,  vendor
financing,  and/or the  issuance of high yield debt will likely be  available to
fund  operations and achieve the Company's  targeted  future growth beyond early
2001.  While the  Company  believes  that it will be able to  obtain  additional
financing,  there can be no assurance that such financing will be available on a
timely basis, on acceptable terms or at all.

Net Cash Provided (Used) By Operating Activities

      The Company's operating  activities used $10.6 million and provided $103.1
million for the six months ended June 30, 1999 and 2000, respectively.  Net cash
provided (used) by operating  activities  increased primarily due to the advance
payments received pursuant to the IRU agreements.

Net Cash Provided (Used) By Investing Activities

      Investing activities provided $39.5 million and used $375.5 million in the
six months  ended June 30,  1999 and 2000,  respectively.  Net cash  provided by
investing  activities  for the six months ended June 30, 1999 includes  proceeds
from the sales of the  operations of NETCOM of $252.9  million and proceeds from
the sales of short-term investments available for sale and marketable securities
of $51.8  million,  offset by cash  expended  for the  acquisition  of property,
equipment and other assets of $229.7 million and the change in accounts  payable
for the  purchase  of  long-term  assets  of $11.4  million.  Net  cash  used by
investing  activities for the six months ended June 30, 2000 primarily  includes
cash  expended for the  acquisition  of property,  equipment and other assets of
$352.8 million and the change in accounts  payable for the purchase of long-term
assets  of  $43.5  million,  partially  offset  by  proceeds  from  the  sale of
short-term  investments  available for sale and  marketable  securities of $19.3
million.  The Company will continue to use cash in 2000 and  subsequent  periods
for the  construction of new networks,  the expansion of existing  networks and,
potentially, for acquisitions.  The Company acquired assets under capital leases
and pursuant to IRU  agreements  of $209.6  million  during the six months ended
June 30, 2000.

Net Cash Provided (Used) By Financing Activities

      Financing  activities used $4.8 million and provided $665.2 million in the
six months ended June 30, 1999 and 2000, respectively.  Net cash provided (used)
by financing  activities for the six months ended June 30, 1999 and 2000 include
proceeds from the issuance of common stock in  conjunction  with the exercise of
options and warrants and the Company's  employee stock purchase plan,  offset by
principal  payments  on  long-term  debt and  capital  leases  and  payments  of
preferred dividends on preferred  securities of subsidiaries.  Net cash provided
by financing  activities  for the six months  ended June 30, 2000 also  includes
$95.0 million in proceeds from the issuance of long-term debt and $720.3 million
in proceeds  from the issuance of the 8% Series A  Convertible  Preferred  Stock
partially offset by $149.7 million of payments made on the IRU agreement.


                                     34
<PAGE>

      On August 12,  1999,  ICG  Equipment  and  NetAhead  entered into a $200.0
million senior secured financing facility (the "Senior Facility")  consisting of
a $75.0  million  term  loan,  a $100.0  million  term loan and a $25.0  million
revolving line of credit.  As of June 30, 2000,  $174.3 million was  outstanding
under the loans at weighted  average  interest rates ranging from 9.56% to 9.87%
for the six  months  ended  June  30,  2000.  Quarterly  repayments  on the debt
commence  at  various  dates   beginning   September  30,  1999  with  remaining
outstanding  balances maturing on June 30, 2005 for the $100.0 million term loan
and the $25.0  million  line of credit and March 31, 2006 for the $75.0  million
term loan.

      As of June 30,  2000,  the  Company  had an  aggregate  accreted  value of
approximately  $1.9 billion  outstanding under the 13 1/2% Senior Discount Notes
due 2005 (the "13 1/2 % Notes"), the 12 1/2% Senior Discount Notes due 2006 (the
"12 1/2 % Notes"),  the 11 5/8%  Senior  Discount  Notes due 2007 (the "11 5/8 %
Notes"),  the 10% Notes and the 9 7/8% Notes. The 13 1/2% Notes require payments
of interest to be made in cash commencing March 15, 2001 and mature on September
15,  2005.  The 12 1/2% Notes  require  payments  of interest to be made in cash
commencing November 1, 2001 and mature on May 1, 2006. The 11 5/8% Notes require
payments of interest to be made in cash commencing September 15, 2002 and mature
on March 15, 2007. The 10% Notes require payments of interest in cash commencing
August 15,  2003 and  mature on  February  15,  2008.  The 9 7/8% Notes  require
payments of interest  in cash  commencing  November 1, 2003 and mature on May 1,
2008.  With respect to fixed rate senior  indebtedness  outstanding  on June 30,
2000, the Company has cash interest payment obligations of approximately  $113.3
million  in 2001,  $158.0  million  in 2002,  $212.6  million in 2003 and $257.2
million in 2004.

      As of June 30, 2000, an aggregate  amount of $1.2 billion was  outstanding
under the 6 3/4%  Preferred  Securities,  the 14% Preferred  Stock,  the 14 1/4%
Preferred  Stock and the 8% Series A  Convertible  Preferred  Stock.  The 6 3/4%
Preferred  Securities  require  payments of dividends to be made in cash through
November 15, 2000. The 14% Preferred  Stock and 14 1/4% Preferred  Stock require
payments of dividends to be made in cash  commencing June 15, 2002 and August 1,
2001,  respectively.   Additionally,  the  8%  Series  A  Convertible  Preferred
Securities  require  dividend  payments  in  additional  liquidation  preference
through  June  30,  2005  and are  payable  in cash  or  additional  liquidation
preference  from  September  30, 2005  through  June 30,  2015.  With respect to
preferred  securities  currently  outstanding,  the  Company  has cash  dividend
obligations  of  approximately  $4.5  million  remaining  in 2000 for  which the
Company has restricted cash balances available for such dividend payments, $10.7
million in 2001 and $35.4 million in 2002 and each year thereafter through 2007.

Capital Expenditures

      The Company's  capital  expenditures  including assets acquired with cash,
under  capital  leases and  pursuant to IRU  agreement  were $235.9  million and
$556.9  million for the six months  ended June 30, 1999 and 2000,  respectively.
The Company anticipates that the expansion of existing networks, construction of
new networks and further development of the Company's products and services will
require  capital   expenditures  of  approximately  $500.0  million  during  the
remainder  of 2000.  In the event that the  Company's  efforts  to  acquire  new
customers and deploy new services are more successful then planned,  the Company
may be required to expand capital resources earlier in the year than expected to
accommodate customer demands.

      During the six months  ended June 30,  2000,  the Company  formalized  two
agreements  with Cisco Systems,  Inc. The Company  believes that these financing
agreements  will  better  enable  the  Company  to fund  its  scheduled  network
expansion  through the purchase of Cisco equipment.  The Cisco credit facilities
provide for up to $180.0 million of financing with a three-year repayment term.

      To facilitate the expansion of its services and networks,  the Company has
entered into equipment purchase  agreements with various vendors under which the
Company has  committed to purchase a  substantial  amount of equipment and other
assets,  including a full range of switching systems, fiber optic cable, network
electronics,  software and  services.  If the Company  fails to meet the minimum
purchase level in any given year, the vendor may discontinue  certain discounts,
allowances  and  incentives  otherwise  provided to the  Company.  Further,  the
Company's  ability to make capital  expenditures  to meet its business plan will
depend on numerous  factors,  including  certain  factors  beyond the  Company's
control.  These factors  include,  but are not limited to, economic  conditions,
competition,  regulatory  developments and the availability of equity,  debt and
lease financing.

                                       35
<PAGE>

Other Cash Commitments and Capital Requirements

      The  Company's  operations  have  required  and will  continue  to require
significant capital  expenditures for development,  construction,  expansion and
acquisition of  telecommunications  assets.  Significant  amounts of capital are
required to be invested  before  revenue is generated,  which results in initial
negative cash flows. In addition to the Company's planned capital  expenditures,
it has other cash  commitments  as described in the  footnotes to the  Company's
unaudited  consolidated  financial  statements for the six months ended June 30,
2000 included elsewhere herein.

      In  view of the  continuing  development  of the  Company's  products  and
services,  the expansion of existing networks and the construction,  leasing and
licensing of new networks,  the Company will require  additional amounts of cash
in the future from outside sources.  Changes in the Company's  business plan may
require  additional  sources of cash which may be  obtained  through  public and
private  equity  and debt  financings,  credit  facilities  and other  financing
arrangements.  In the past,  the  Company  has been  able to  secure  sufficient
amounts of  financing  to meet its  capital  needs.  There can be no  assurance,
however,  that  additional  financing  will be  available  to the Company or, if
available, that it can be obtained on terms acceptable to the Company.

      The failure to obtain sufficient  amounts of financing could result in the
delay or abandonment of some or all of the Company's  development  and expansion
plans, which could have a material adverse effect on the Company's business.  In
addition,  the  inability  to fund  operating  deficits  with  the  proceeds  of
financings  until  the  Company  establishes  a  sufficient   revenue-generating
customer base could have a material adverse effect on the Company's liquidity.

Receivables

     Net receivables  increased from December 31, 1999 to June 30, 2000 by $36.0
million.  The increase is primarily due to the following:  i) a receivable  from
the sale of the NorthPoint  stock for which the cash was received in early July,
ii) a decrease in the allowance for doubtful  accounts due to the elimination of
the uncertainty of collection of certain balances (see additional  discussion in
"Transport and Termination  Charges" below),  and iii) an increase in the number
of days outstanding of trade accounts  receivable which are all partially offset
by increased cash receipts during the six months.

Transport and Termination Charges

Terminating Local Traffic

     ICG records revenue earned under interconnection  agreements with incumbent
local exchange  carriers  ("ILECs") as an element of its local services revenue.
Some of the ILECs have not paid all of the bills they have received from ICG and
have  disputed  these charges based on the belief that dial-up calls to ISPs are
not local  traffic as  defined  by the  various  agreements  and not  subject to
payment of transport  and  termination  charges under state and federal laws and
public policies.  In addition,  some ILECs, while paying a portion of reciprocal
compensation due to ICG, have disputed other portions of the charges.

     ICG has,  as of June 30,  2000,  a net  receivable  for  terminating  local
traffic in the approximate  amount of $54 million,  $29 million of which will be
paid,  pursuant  to the  terms of an  executed  agreement  with one  ILEC,  when
regulatory  approval of  amendments to the parties'  interconnection  agreements
have been obtained.  ICG has received cash of approximately  $26 million and $84
million   during  the  three   months  and  six  months  ended  June  30,  2000,
respectively, from the ILECs for terminating local traffic.

     The following table represents the amount of revenue ICG has recognized for
terminating  local  traffic  of the ILECs  during the  respective  periods ($ in
millions):

                Three months ended June 30,        Six months ended June 30,
                   1999            2000              1999         2000
                -------------  ------------       -----------  ------------
                  $40.1          $38.4              $70.9        $74.0

                                       36
<PAGE>

     Revenue for the three  months and six months  ended June 30, 1999  includes
approximately  $12  million  and  $22  million,  respectively,  for  the  tandem
switching  and common  transport  rate  elements,  the  collection  of which was
determined to be uncertain in the quarter  commencing July 1, 1999. ICG recorded
a provision  of  approximately  $45  million  against  the  accounts  receivable
balances  recorded  prior to July 1, 1999 in the event the tandem  switching and
common transport rate element amounts were not ultimately  collected.  Effective
July 1, 1999,  ICG ceased  recognition  of these rate  elements as revenue until
cash is received but continued to bill and vigorously  pursue  collection of all
amounts due under its interconnection agreements.

      During the six months ended June 30, 2000, ICG entered into  agreements to
resolve   certain   disputes   with  two  ILECs  that   collectively   represent
approximately 75% of ICG's applicable terminating traffic. One of the agreements
has an  effective  date of  December  31,  1999 and the other June 1, 2000.  The
agreements  separately resolve the payment of certain past amounts.  The revenue
for the three months and six months ended June 30, 2000  includes  approximately
$9  million  and $13  million,  respectively,  derived  from the  resolution  of
previously   disputed   issues  not  related  to  the  respective   periods  and
approximately  $4 million in each of the periods from rates  earned  pursuant to
the  previous  interconnection  agreement,   neither  of  which  will  recur  in
subsequent periods.

     The resolution of ICG's disputes with the remaining  ILECs will continue to
be based on rulings by state public  utility  commissions  and/or by the Federal
Communications  Commission ("FCC"), or through negotiations between the parties.
ICG continues to pursue  collection of the remaining amounts owed by these ILECs
under ICG's existing  interconnection  agreements,  and certain  disputes remain
outstanding.

Other Transport and Terminating Traffic

      ICG has also  recognized  revenue  for  other  transport  and  terminating
traffic  of the  ILECs.  The amount of  revenue  recognized,  pursuant  to ICG's
interconnection agreements, during the respective periods ($ in millions):

        Three months ended June 30,        Six months ended June 30,
           1999          2000                 1999         2000
        -------------  ------------        -----------  ------------
           $2.3          $11.0                $7.6         $16.5

      The  revenue  for the three  months  and six months  ended  June 30,  2000
includes approximately  $3 million  derived from the  resolution  of  previously
disputed issues not related to the respective periods.

      ICG has,  as of June 30,  2000,  a net  receivable  for other  terminating
traffic in the  approximate  amount of $25 million,  $16 million of which is due
from one ILEC and  payment in this  amount  will be  received as it is part of a
binding agreement,  subject only to regulatory  approval of the  interconnection
agreements.  ICG has received cash of  approximately  $3 million and $7 million,
during the three months and six months ended June 30, 2000, respectively.

Future Reciprocal Compensation Revenue

      ICG has reached interconnection agreements with certain ILECs that provide
for the payment of compensation  for terminating ISP traffic.  These  agreements
expire at dates ranging from October 2000 through May 2003.  Upon  expiration of
its  interconnection  agreements,  the Company  expects to continue to negotiate
and/or arbitrate reasonable  compensation and collection terms for transport and
termination services, although there is no assurance that such compensation will
remain  consistent with current levels.  Additionally,  in those states in which
ICG has not reached a  negotiated  resolution  with the ILEC with respect to the
reciprocal  compensation rate to be applied on a going-forward basis, and/or for
subsequent  time  periods,  ongoing  state and  federal  regulatory  proceedings
addressing intercarrier compensation for Internet traffic also may impact future
rates of compensation.

      Subsequent  to quarter  end,  the  Colorado  PUC issued a ruling in an ICG
arbitration  decision that,  subject to the outcome of PUC  reconsideration  and
judicial  appellate  proceedings,  denies ICG the ability to collect  reciprocal
compensation  for  ISP-bound  traffic  initiated  on the  incumbent  network and
connected  on ICG's  network in Colorado  when a new  interconnection  agreement
between ICG and Qwest Communications  (formerly US West) becomes effective.  ICG
believes  that the new  interconnection  agreement  may become  effective by the
fourth quarter,  subject to the outcome of the PUC's decision on reconsideration
and after the parties  execute and receive PUC approval of a new interconnection
agreement  that  complies  with  the  PUC's  final  arbitration  decision.  Once
effective,   the  terms  in  the  new  agreement  concerning   compensation  for
terminating  ISP traffic  will then be applied  retroactively  beginning 45 days
prior  to the  effective  date  of the  new  agreement.  Pursuant  to the  PUC's
procedures,  ICG will file by August 28, 2000 for  reconsideration by the PUC of
the terminating ISP  compensation  provisions of the arbitration  decision,  and
will  vigorously  pursue judicial review of the final PUC decision if necessary.
In prior periods, the impacted traffic has represented  approximately 15% of the
applicable terminating traffic.

                                       37
<PAGE>

      While ICG intends to pursue the collection of all  receivables  related to
transport  and  termination  charges  and  believes  that  future  revenue  from
transport  and  termination  charges  recognized  under  ICG's   interconnection
agreements  will be realized,  there can be no assurance that future  regulatory
and judicial  rulings will be  favorable  to ICG, or that  different  reciprocal
compensation rates and rate structures will not be adopted when ICG's agreements
are  renegotiated  or  arbitrated,  or as a result  of FCC or  state  commission
proceedings on future compensation  methods. ICG believes that different pricing
plans will continue to be considered and adopted,  and although ICG expects that
revenue  from  transport  and  termination  charges  likely  will  decrease as a
percentage  of total local  services  revenue from local  services in subsequent
periods,  ICG's local  termination  services will still be required by the ILECs
and must be provided under the  Telecommunications  Act of 1996, and likely will
result in  increasing  volume in minutes due to the growth of the  Internet  and
related services markets.

      During the three months ended June 30, 2000, ICG  successfully  negotiated
agreements,  which  assured  the  recognition  and receipt of  compensation  for
terminating ISP traffic and resolved disputed issues with two ILECs as discussed
above.  The  future  rates  negotiated  are  generally  lower  than ICG has been
historically receiving and were negotiated for a three-year period subsequent to
the date of the agreements.  The rates negotiated in these agreements will apply
for the term of the agreement irrespective of any state or federal regulatory or
judicial  rulings that may be issued over the three-year  period  concerning the
applicability of compensation  obligations for ISP traffic.  ICG may not be able
to sustain its current position of earning revenue for terminating local traffic
in the state of Colorado. In addition,  approximately $13 million and $3 million
of the  revenue  recognized  during the three  months  ended  June 30,  2000 for
terminating local traffic and for terminating other traffic is nonrecurring.  As
a result of these factors,  ICG therefore expects its revenue from these sources
and the EBITDA  contribution from these sources may be significantly less in the
quarter ending September 30, 2000 than in the quarter ending June 30, 2000.

     The revenue from reciprocal  compensation  is driven by three factors.  The
number of lines on switch,  the minutes of use per line,  and the rate under the
interconnnection  agreement.  These factors are in a large  measure  beyond  the
control of the Company.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company's  financial  position and cash flows are subject to a variety
of risks in the normal course of business, which include market risks associated
with  movements  in interest  rates and equity  prices.  The  Company  routinely
assesses  these risks and has  established  policies and  business  practices to
protect against the adverse effects of these and other potential exposures.  The
Company does not, in the normal  course of business,  use  derivative  financial
instruments for trading or speculative purposes.

Interest Rate Risk

      The Company's  exposure to market risk associated with changes in interest
rates relates  primarily to the Company's  investments in marketable  securities
and its senior indebtedness.

      The Company invests  primarily in high grade short-term  investments which
consist of money market instruments,  commercial paper, certificates of deposit,
and  government  and  agency  obligations,  all of which  are  considered  to be
available  for sale  and  generally  have  maturities  of one year or less.  The
Company's short-term investment  objectives are safety,  liquidity and yield, in
that order. As of June 30, 2000, the Company had approximately $528.0 million in
cash,  cash  equivalents,  and  short-term  investments  available for sale at a
weighted  average fixed interest rate of 6.58% for the six months ended June 30,
2000. A hypothetical 10% fluctuation in market rates of interest would not cause
a material  change in the fair value of the  Company's  investment in marketable
securities at June 30, 2000 and, accordingly,  would not cause a material impact
on the Company's financial position, results of operations or cash flows.

                                       38
<PAGE>

      At June 30, 2000, the Company's  indebtedness  included $1.9 billion under
the 13 1/2% Notes, 12 1/2% Notes, 11 5/8% Notes,  10% Notes and 9 7/8% Notes and
$641.6 million under the 14 1/4% Preferred  Stock,  14% Preferred  Stock, 6 3/4%
Preferred  Securities  and  8%  Series  A  Convertible  Preferred  Stock.  These
instruments contain fixed annual interest and dividend rates.  Accordingly,  any
change in market interest rates would have no impact on the Company's  financial
position,  results of  operations  or cash flows.  Future  increases in interest
rates could increase the cost of any new borrowings by the Company.  The Company
does not hedge against future changes in market rates of interest.

      On  August  12,  1999,  the  Company  entered  into the  Senior  Facility,
consisting of two term loans and a revolving  line of credit.  All components of
the Senior Facility bear variable annual rates of interest,  based on the change
in LIBOR,  the Royal  Bank of Canada  prime  rate and the  federal  funds  rate.
Consequently,  additional  borrowings under the Senior Facility and increases in
LIBOR,  the Royal  Bank of Canada  prime  rate and the  federal  funds rate will
increase the  Company's  indebtedness  and may increase the  Company's  interest
expense in future periods. Additionally, under the terms of the Senior Facility,
the Company is required to hedge the interest rate risk on $100.0 million of the
Senior  Facility if LIBOR exceeds 9.0% for 15  consecutive  days. As of June 30,
2000, the Company had $174.3 million  outstanding  under the Senior Facility.  A
hypothetical  change in annual  interest  rate of 1% per annum would result in a
change in  interest  expense of  approximately  $0.4  million for the six months
ended June 30, 2000.

Market Price Risk

      The fair value of the Company's Senior Discount Notes outstanding was $1.2
billion as of June 30, 2000 compared to the carrying value of $1.9 billion.  The
fair  value of the Senior  Discount  Notes was  calculated  using the quoted bid
price per bond as of June 30, 2000. A  hypothetical  10%  fluctuation  in market
rates of  interest  would not cause a  material  change in the fair value of the
Company's Senior Discount Notes at June 30, 2000.



                                       39
<PAGE>

                                     PART II

ITEM 1.   LEGAL PROCEEDINGS

          See  Note 6 (e)  to the  Company's  unaudited  condensed  consolidated
          financial  statements for the six months ended June 30, 2000 contained
          elsewhere in this Quarterly Report.

ITEM 2.   CHANGES IN SECURITIES

          In February  2000,  the Board of Directors  authorized the issuance of
          50,000 shares of 8% Series A-1  Convertible  Preferred  Stock,  due in
          2015,  par  value  $0.01 per  share;  23,000  shares of 8% Series  A-2
          Convertible  Preferred  Stock,  par value $0.01 per share;  and 75,000
          shares of 8% Series A-3 Convertible  Preferred Stock, par value $0.01.
          (The  Series  A-1  Convertible   Preferred   Stock,   the  Series  A-2
          Convertible  Preferred Stock and the Series A-3 Convertible  Preferred
          Stock  are,  unless  otherwise  noted,  referred  to herein as the "8%
          Series A Convertible Preferred Stock.")

          On April 10, 2000,  the Company  closed a Preferred  Stock and Warrant
          Purchase  Agreement (the "Purchase  Agreement")  with HMTF Bridge ICG,
          LLC ("HMTF"),  Liberty Media Corporation  ("Liberty") and Gleacher/ICG
          Investors,  LLC ("Gleacher")  wherein the Company sold an aggregate of
          75,000  shares of the  Company's  newly issued 8% Series A Convertible
          Preferred  Stock due 2015.  Pursuant to the  Purchase  Agreement,  the
          Company  issued  (i)  50,000  shares  of the 8%  Series A  Convertible
          Preferred  Stock to Liberty in exchange for $500 million;  (ii) 23,000
          shares  of the 8 % Series  A  Convertible  Preferred  Stock to HMTF in
          exchange  for $230  million;  (iii)  20,000  shares of the 8% Series A
          Convertible Preferred Stock to Gleacher in exchange for $20 million.

          Dividends on the 8% Series A Convertible  Preferred  Stock accrete and
          cumulate  daily from the date of  issuance  at an annual rate of 8% of
          the then-effective liquidation preference.  Dividends will be computed
          on the basis of a 360-day  year of twelve,  30-day  months and will be
          payable  quarterly;  however,  until  the  fifth  anniversary  of  the
          issuance of the 8% Series A  Convertible  Preferred  Stock,  dividends
          will  be  added  cumulatively  and  remain  part  of  the  liquidation
          preference.  After such date, dividends may be paid in cash. Dividends
          not  declared  and  paid in  cash  will  accrue  and be  added  to the
          liquidation  preference.  The 8% Series A Convertible  Preferred Stock
          will rank on a parity with the Preferred Stock Mandatorily  Redeemable
          2009 of the Company.  Each share of 8% Series A Convertible  Preferred
          Stock is  convertible,  at a  conversation  price of $28.00  per share
          (subject to certain  adjustments in the event of specified  changes in
          the  Company's  capital  structure),  at any time and at the  holder's
          option,  based upon the then-effective  liquidation  preference,  into
          shares of the Company's Common Stock.

          The 8% Series A Convertible  Preferred Stock had an initial preference
          value equal to the sum of $10,000 per share. Upon liquidation, holders
          of the 8% Series A  Convertible  Preferred  Stock will be  entitled to
          receive the greater of (i) the  liquidation  preference plus an amount
          equal to all accrued and unpaid dividends or (ii) the amount which the
          8%  Series  A  Convertible   Preferred   Stock  would  receive  on  an
          as-converted  basis.  The  issuance  of the 8%  Series  A  Convertible
          Preferred Stock is not registered under the Securities Act of 1933, as
          amended and such 8% Series A Convertible Preferred Stock was issued in
          a private placement pursuant to an exemption therefrom.

          Except  in  relation  to  director   appointment  rights,  the  power,
          preferences  and  relative,  participating,  option and other  special
          rights of the Series A-1  Preferred  Stock,  the Series A-2  Preferred
          Stock and the Series A-3 Preferred Stock are identical. As of June 30,
          2000,  the holders of the Series A-1 Preferred  Stock were entitled to
          elect two (2) directors to the Company's  Board of Directors,  and the
          holders of the Series A-2  Preferred  Stock were entitled to elect one
          (1) director to the Company's Board of Directors.

                                       40
<PAGE>

          In  conjunction  with the  issuance  of the 8%  Series  A  Convertible
          Preferred  Stock, in April the Company issued  10,000,000  warrants to
          HMTF,  Liberty and  Gleacher  pro rata  according  to the number of 8%
          Series  A  Convertible  Preferred  Stock  purchased  by  each  of  the
          shareholders. The Warrants are exercisable for shares of the Company's
          Common Stock at an exercise price of $34 per share (subject to certain
          adjustments in the event of specified changes in the Company's capital
          structure). The Warrants expire on April 10, 2005.

          The  holders  of the 8%  Series  A  Convertible  Preferred  Stock  and
          Warrants  have been  granted  registration  rights  for the  shares of
          Common Stock  issuable upon  conversion of the 8% Series A Convertible
          Preferred Stock and upon exercise of the Warrants, respectively.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

          The Annual Meeting of  stockholders  of ICG  Communications,  Inc. was
          held on June 7, 2000 (the "Annual  Meeting").  At the Annual  Meeting,
          four matters were considered and acted upon: (1) the election of three
          directors to serve until the 2003 Annual Meeting of  Stockholders  and
          until their  successors have been duly elected and qualified;  (2) the
          adoption of the ICG Communications, Inc. Year 2000 Executive Long-Term
          Incentive  Plan;  (3) the adoption of an  amendment  to the  Company's
          Certificate of Incorporation to increase the authorized  shares of the
          Company's  Common Stock from one hundred million  (100,000,000) to two
          hundred million (200,000,000) shares and to increase the number of the
          Company's  authorized  Preferred Stock from one million (1,000,000) to
          two million (2,000,000) and (4) the ratification of the appointment of
          KPMG LLP as independent  auditors of ICG Communications,  Inc. and its
          subsidiaries for the fiscal year ending December 31, 2000.

          Indicated below are the total votes in favor of each director  nominee
          and the total votes withheld:
                                                  Votes
                                 ----------------------------------------
                                           For              Withheld
                                 ----------------------------------------
          William S. Beans, Jr.         69,819,037            312,043
          John U. Moorhead II           69,817,637            313,443
          Carl E. Vogel                 50,000 (a)               0

          (a)  Represents  50,000 shares of 8% Series A-1 Convertible  Preferred
               Stock which, at the time of the annual meeting,  were convertible
               into  17,857,000  shares of common  stock.  The holders of the 8%
               Series A-1 Convertible Preferred Stock were entitled to elect one
               director at this  year's  annual  meeting.  All of the Series A-1
               Convertible  Preferred  shareholders  eligible  to vote  voted in
               favor of Mr. Vogel.

          In connection with the vote on the adoption of the ICG Communications,
          Inc. Year 2000 Executive  Long-Term  Incentive Plan,  57,010,030 votes
          were  cast in  favor  of the  adoption  and  12,997,751  were  cast in
          opposition thereto.

          In  connection  with the vote on the  adoption of an  amendment to the
          Company's  Certificate  of  Incorporation  to increase the  authorized
          shares  of  the  Company's  Common  Stock  from  one  hundred  million
          (100,000,000)  to two  hundred  million  (200,000,000)  shares  and to
          increase the number of the Company's  authorized  Preferred Stock from
          one million (1,000,000) to two million  (2,000,000),  56,771,696 votes
          were  cast  in  favor  of the  adoption  and  3,099,002  were  cast in
          opposition thereto.

          In connection with the vote on the  ratification of the appointment of
          KPMG LLP as independent  auditors of ICG Communications,  Inc. and its
          subsidiaries for the fiscal year ending December 31, 2000,  69,998,362
          votes  were cast in favor of the  adoption  and  113,480  were cast in
          opposition thereto.


                                       41
<PAGE>


ITEM 5.   OTHER INFORMATION

          None.

ITEM 6.   EXHIBITS AND REPORT ON FORM 8-K

          (A)  Exhibits.

               (10) Material Contracts.

                    10.1:Amendment to Employment Agreement,  dated as of May 10,
                         2000, by and between ICG Communications, Inc. and Carla
                         J. Wolin.

                    10.2:Amendment to Employment Agreement,  dated as of May 10,
                         2000, by and between ICG Communications, Inc. and James
                         Washington.

                    10.3:Amendment to Employment Agreement,  dated as of May 10,
                         2000, by and between ICG Communications, Inc. and Cindy
                         Z. Schonhaut

                    10.4:Amendment to Employment Agreement,  dated as of May 10,
                         2000, by and between ICG  Communications,  Inc. and Don
                         Teague.

               (27) Financial Data Schedule.

                    27.1:Financial Data Schedule of ICG Communications, Inc. for
                         the Six Months Ended June 30, 2000.

        (B) Report on Form 8-K.  The  following  report on Form 8-K was filed by
            the registrants during the six months ended June 30, 2000:

          (i)  Current  Report  on Form 8-K  dated May 4,  2000,  regarding  the
               announcement  of earnings  information  and results of operations
               for the quarter ended March 31, 2000 of ICG Communications, Inc.



                                       42
<PAGE>



                                INDEX TO EXHIBITS

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


<PAGE>


                                INDEX TO EXHIBITS

     10.1 Amendment to  Employment  Agreement,  dated as of May 10, 2000, by and
          between ICG Communications, Inc. and Carla J. Wolin.

     10.2 Amendment to  Employment  Agreement,  dated as of May 10, 2000, by and
          between ICG Communications, Inc. and James Washington

     10.3 Amendment to  Employment  Agreement,  dated as of May 10, 2000, by and
          between ICG Communications, Inc. and Cindy Z. Schonhaut.

     10.4 Amendment  to  Employment  Agreement,  dated as of May 10, 2000 by and
          between ICG Communications, Inc. and Don Teague.

     27.1 Financial Data Schedule of ICG Communications, Inc. for the Six Months
          Ended June 30, 2000.




<PAGE>



                                  EXHIBIT 10.1

 Amendment to Employment Agreement, dated as of May 10, 2000, by and between
                 ICG Communications, Inc. and Carla J. Wolin.


<PAGE>



                                  EXHIBIT 10.2

 Amendment to Employment Agreement, dated as of May 10, 2000, by and between
                      ICG Communications, Inc. and James Washington.


<PAGE>





                                  EXHIBIT 10.3

 Amendment to Employment Agreement, dated as of May 10, 2000, by and between
                     ICG Communications, Inc. and Cindy Z. Schonhaut.


<PAGE>



                                  EXHIBIT 10.4

 Amendment to Employment Agreement, dated as of May 10, 2000, by and between
                         ICG Communications, Inc. and Don Teague.







<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 14, 2000.

                                           ICG COMMUNICATIONS, INC.





Date:  August 14, 2000                  By:  /s/ Harry R. Herbst
                                            ------------------------------------
                                           Harry R. Herbst, Executive Vice
                                           President and
                                           Chief Financial Officer (Principal
                                           Financial Officer)






Date:  August 14, 2000                  By: /s/ John V. Colgan
                                            ------------------------------------
                                           John V. Colgan, Vice President of
                                           Finance and Controller
                                          (Principal Accounting Officer)






<PAGE>



                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 14, 2000.

                                           ICG HOLDINGS (CANADA) CO.





Date:  August 14, 2000                  By:  /s/ Harry R. Herbst
                                            ------------------------------------
                                           Harry R. Herbst, Executive Vice
                                           President and
                                           Chief Financial Officer (Principal
                                           Financial Officer)






Date:  August 14, 2000                  By:    /s/ John V. Colgan
                                            ------------------------------------
                                           John V. Colgan, Vice President of
                                           Finance and
                                           Controller (Principal Accounting
                                           Officer)









<PAGE>


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on August 14, 2000.

                                           ICG HOLDINGS, INC.





Date:  August 14, 2000                  By:   /s/ Harry R. Herbst
                                            ------------------------------------
                                           Harry R. Herbst, Executive Vice
                                           President and
                                           Chief Financial Officer (Principal
                                           Financial Officer)






Date:  August 14, 2000                  By:   /s/ John V. Colgan
                                            ------------------------------------
                                           John V. Colgan, Vice President of
                                           Finance and
                                           Controller (Principal Accounting
                                           Officer)