<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       OR

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

                        FOR THE TRANSITION PERIOD FROM TO

                           COMMISSION FILE NO. 0-24521

                                CORECOMM LIMITED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
                            BERMUDA                                                  13-4068932
                (STATE OR OTHER JURISDICTION OF                                   (I.R.S. EMPLOYER
                INCORPORATION OR ORGANIZATION)                                   IDENTIFICATION NO.)

                              CEDAR HOUSE                                     SECRETARY CORECOMM LIMITED
                            41 CEDAR AVENUE                                      110 EAST 59TH STREET
                       HAMILTON, HM 12, BERMUDA                                   NEW YORK, NY 10022
                            (441) 295-2244                                          (212) 906-8485
                   (ADDRESS, INCLUDING ZIP CODE, AND                      (NAME, ADDRESS, INCLUDING ZIP CODE,
                 TELEPHONE NUMBER, INCLUDING AREA CODE                 AND TELEPHONE NUMBER, INCLUDING AREA CODE
             OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)                        OF AGENT FOR SERVICE)
</TABLE>

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                (TITLE OF CLASS)

                     COMMON STOCK, PAR VALUE $.01 PER SHARE

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

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

     The aggregate market value of the Registrant's common stock held by
non-affiliates at March 23, 2000, valued in accordance with the Nasdaq Stock
Market's National Market closing sale price for the Registrant's common stock,
was approximately $1,572,478,000.

     Number of shares of Common Stock outstanding as at March 23, 2000:
39,297,458

                       DOCUMENTS INCORPORATED BY REFERENCE

     DOCUMENT                                             PART OF 10-K IN WHICH
                                                              INCORPORATED

Definitive proxy statement for the 2000 Annual Meeting
of the Stockholders of CoreComm Limited                         Part III


<PAGE>   2









     This Annual Report on Form 10-K for the year ended December 31, 1999, at
the time of filing with the Securities and Exchange Commission, modifies and
supersedes all prior documents filed pursuant to Section 13, 14 and 15(d) of the
Securities Exchange Act of 1934 for purposes of any offers or sales of any
securities after the date of such filing pursuant to any Registration statement
or Prospectus filed pursuant to the Securities Act of 1933 which incorporated by
reference this Annual Report.

         "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
                              REFORM ACT OF 1995:

     Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995. When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Registrant, or industry results, to be materially different from those
contemplated or projected, forecasted, estimated or budgeted, whether expressed
or implied, by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions, industry
trends, the Registrant's ability to continue to design and build its network,
install facilities, obtain and maintain any required government licenses or
approvals and finance construction and development, all in a timely manner, at
reasonable costs and on satisfactory terms and conditions, as well as
assumptions about customer acceptance, churn rates, overall market penetration
and competition from providers of alternative services, the impact of new
business opportunities requiring significant up-front investment, Year 2000
readiness and availability, terms and deployment of capital.


<PAGE>   3




                                TABLE OF CONTENTS

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<CAPTION>
                                                                                                           PAGE

<S>            <C>                                                                                         <C>
PART I
ITEM 1.        BUSINESS                                                                                      2
ITEM 2.        PROPERTY                                                                                     29
ITEM 3.        LEGAL PROCEEDINGS                                                                            29
ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS                                              29
PART II
ITEM 5.        MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
               STOCKHOLDER MATTERS                                                                          30
ITEM 6.        SELECTED FINANCIAL DATA                                                                      30
ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
               OPERATIONS AND FINANCIAL CONDITION                                                           31
ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                                    36
ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                  37
ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE                                                          37
PART III
ITEMS 10, 11, 12 AND 13                                                                                     37
PART IV
ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
               FORM 8-K                                                                                     37
EXHIBIT INDEX                                                                                               38
SIGNATURES                                                                                                  39
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                                 F-1
</TABLE>



                                       1


<PAGE>   4



                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION


    We are a holding company whose main asset is our wholly-owned subsidiary,
CoreComm, Inc. We intend to pursue other opportunities (in addition to those
through CoreComm, Inc.) in the telecommunications industry as they arise.

    We are an innovative communications company that provides integrated
telephone, Internet and data services to business and residential customers in
targeted markets throughout the United States. We are exploiting the convergence
of telecommunications and information services through our "Smart LEC(SM)"
network strategy. Our Smart LEC (Local Exchange Carrier) network strategy
involves the ownership of switches and the leasing of the unbundled local loop
combined with the provisioning of an IP-based, national network. This
configuration of local and national owned and leased facilities allows us to
deliver a wide range of communications services over a network architecture
which we design to be capital efficient and primarily requires success-based
incremental capital. Our goal is to expand our facilities, geography and
services to become a leading switch-based communications provider in selected
major markets across the United States.

    We currently offer local and long distance telephone, Internet access and
high-speed data services to business and residential customers located
principally in the following states: Ohio, Illinois, Michigan, New York and
Massachusetts. As of December 31, 1999, we had more than 100,000 business and
residential local telephony access lines in service and approximately 95,000
Internet customers. We currently operate an asynchronous transport mode (ATM)
network, which connects approximately 90 cities using approximately 50,000 route
miles of leased broadband circuits. This network will allow us to take advantage
of economies of scale in the delivery of voice, video and data. We have been
developing our multi-service offerings since 1996 and have recently expanded our
products to include high speed services utilizing Digital Subscriber Line (DSL)
technology. With DSL, a single copper loop can be used to deliver telephony and
high speed data services simultaneously. We are currently in various stages of
constructing our Smart LEC network in six of the largest markets in the U.S.,
which represent approximately 18 million access lines.

    Management's approach to its network, back office and customer acquisition
will be critical to our success, as well as the following key components of our
strategy:

    o    target large, underserved segments in concentrated metropolitan areas,
         addressing the underlying demand for consumer choice in traditional
         telephony as well as growing demand for high-speed data services;

    o    capture multiple revenue streams through offering customers bundled
         service offerings, differentiated from other providers;

    o    deliver "Internet Centric" product offerings and support to our
         customers;

    o    leverage proven management talent; and

    o    utilize Smart LEC strategy to maximize speed to market, minimize
         investment risk and increase returns on capital.

Business Strategy Overview

    A core part of our business strategy is to offer bundled communications
services, including local and long distance telephony services, Internet access
and high speed data services, all with a single bill. We believe that an
integrated telephony and Internet strategy utilizing DSL technology will be
particularly appealing to our targeted customer base and will significantly
enhance our ability to attract, retain and gain additional revenues from our
subscribers.

    Our service offerings are based on the following customer proposition:
"Customers buy what they need and pay for what they get." We combine and price
our products to give the customer increased flexibility, choice, and "value for
money," while also enhancing convenience and simplicity. With this strategy, we
believe that we can capture a larger share of our customers' communications
expenditures and increase customer retention. In addition, we are currently
investigating ways to add video services, including multichannel television, as
a part of our bundled offerings. Our bundling of services is differentiated from
other incumbent operators because we face fewer regulatory requirements, and can
often be differentiated from other operators because we are not constrained by
the technical limits or cost structure of a less advanced or less capital
efficient network architecture. We believe that our DSL proposition is
especially important as we compete against data service providers utilizing
cable modems, who have difficulty guaranteeing a direct correlation between
price paid and speed of access received.


                                       2


<PAGE>   5




    The Internet is a key management tool in the marketing, provisioning and
billing of our services, as well as in the ongoing support of our customers. We
also use the Internet as a sales tool by attracting customers through our web
site, www.core.com. We are actively developing and incorporating systems to
deliver "Internet Centric" operational support systems which are planned to add
functionality in the areas of electronic billing, web-based customer care and
e-commerce and e-services. We use the Internet as an efficient means of
communication with our business and residential customers, providing on-line
sign-up and self-provisioning of services. We believe that using the Internet to
communicate with the customer will be not only convenient for the customer, but
will also increase our operating efficiency. We believe that by encouraging the
self-provisioning of communications products, especially in the broader
residential market, we will particularly attract the most data-intensive and
higher margin customers at lower customer acquisition and operating costs.

    We intend to focus on both residential and small to medium-sized business
customers, including the Small Office/Home Office (SOHO) market, located in
major metropolitan areas in the United States. These segments contain many
communications-intensive customers that we believe are often underserved by both
existing incumbent carriers and new entrants. We seek to attract customers in
these segments by offering innovative services, superior customer service and
overall value. By targeting both of these sectors, we expand our potential
revenue base, leverage our marketing costs over a greater number of potential
customers and increase network utilization with more subscribers. We believe
that marketing and provisioning through the Internet will allow us to deploy our
strategy more rapidly than we could with only a direct sales force.

Continuity of Management

    Our management has extensive experience in developing and marketing bundled
communications services, building proprietary back office systems to support
residential and business customers, and designing and constructing large
integrated communications networks. Our management team's accomplishments in the
telecommunications industry span nearly 20 years. There are several members of
this team that have worked together for a decade or more:

    o    Our President and Chief Executive Officer, Barclay Knapp, was a member
         of the original management team at Cellular Communications, Inc. (CCI),
         which was an original applicant for cellular licenses in the United
         States in 1982. Mr. Knapp is also the President and CEO of NTL
         Incorporated.

    o    Our Chairman, George Blumenthal,  was a member of the original
         management team of Cellular Communications,  Inc. Mr.
         Blumenthal also serves as the Chairman of NTL.

    o    Our Chief Operating Officer, Patty Flynt, joined Cellular
         Communications, Inc. in 1989, where she was the director of its
         Management Information Services division. Ms. Flynt also served as the
         MIS director at NTL.

    In the key areas of our operations, our management includes individuals who
have worked with CCI, NTL and their historical affiliates for many years and
have significant telecommunications industry experience. Below is a partial list
of several of those individuals and their area of expertise:



<TABLE>
<CAPTION>
                                                              PREVIOUS HISTORICAL
    NAME                              OPERATIONAL AREA        AFFILIATES             YEAR JOINED
    ----                              ----------------        -------------------    -----------

<S>                                  <C>                      <C>                        <C>
    Thomas S. DellaRocco.....        Networks                 CCI, NTL                   1984
    Stefan Eckert............        Sales                    CCI                        1985
    Beth K. Fisher...........        Customer Operations      CCI                        1985
    Kimberly K. Liston.......        MIS                      CCI, NTL                   1990
    Donald B. Miller.........        Marketing                CCI                        1986
    Paul J. Nelson...........        Sales                    CCI                        1991
    Chris Y. Skudder.........        Customer Operations      CCI, NTL                   1992
    Richard J. Lubasch.......        General Counsel          CCI, NTL                   1986
    Gregg N. Gorelick........        Financial Controller     CCI, NTL                   1986
</TABLE>


    The continuity of this team is due to their success in working together
throughout the corporate lineage that began with Cellular Communications, Inc.
in 1981. In addition to these individuals, there are other members of our
management team and staff who were part of CCI, or part of a later joint venture
between CCI and AirTouch Communications, Inc. that was formed in 1991. Several
of our directors have also been involved with each of these companies. CCI was
acquired by AirTouch Communications, Inc. in 1996.



                                       3


<PAGE>   6




    Out of Cellular Communications, Inc., several publicly traded companies
were spun-off.  Our management team developed these other communications
companies:

    o    NTL Incorporated, a telecommunications, cable television and Internet
         provider which operates principally in the United Kingdom and
         Continental Europe. Giving effect to recently announced acquisition
         agreements, NTL's franchise areas cover approximately 12 million homes,
         representing approximately 50% of the homes and an even larger share of
         the businesses in the United Kingdom. NTL has already achieved an
         industry leading customer penetration rate of 48% in the original areas
         it built-out and marketed.

    o    Cellular Communications of Puerto Rico, Inc. (CCPR), which operated the
         dominant cellular business in Puerto Rico and the U.S. Virgin Islands,
         and from which CoreComm Limited was spun-off in 1998.

    o    Cellular Communications International, Inc. (CCIL), which was a
         co-founder of Ominitel Pronto Italia, S.p.A., which owns the second
         cellular license in Italy.

    The core management team remained intact and guided the above companies to
substantial success, culminating in the acquisitions of each of CCI, CCIL and
CCPR by major telecommunications companies.


<TABLE>
<CAPTION>
     COMPANY                                             TRANSACTION
     -------                                             -----------

<S>                                                      <C>
       Cellular Communications, Inc.                     Acquired by AirTouch for $2.5 billion (August
                                                         1996)
       Cellular Communications International, Inc.       Acquired by Mannesman and Olivetti for $1.8
                                                         billion (March 1999)
       Cellular Communications of Puerto Rico, Inc.      Acquired by SBC Communications, Inc. for $814
                                                         million (August 1999)
</TABLE>


Communications Industry

    We are participating in the large and rapidly changing U.S. wireline
telecommunications industry. We believe that the wireline telecommunications
industry benefits from positive price elasticity, as well as growing,
non-cyclical demand for services. According to the U.S. Census Bureau, the total
wireline segment of the U.S. telecommunications market was estimated to be
approximately $208 billion in 1998. Approximately 50% of this revenue is derived
from local service and network access. In addition, demand for access to the
Internet and data services is having a significant effect on the U.S.
communications industry, and is expected to continue its rapid growth. Various
estimates project this segment to grow significantly over the next several
years.

    As demonstrated on the chart below, as a wireline telecommunications
services provider, CoreComm is operating in the largest of the communications
related industries, which represents significant market opportunities for us:

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<CAPTION>
       INDUSTRY                                      U.S. MARKET SIZE                HISTORY
       --------                                      ----------------               --------
<S>                                                  <C>                            <C>
       Wireline Telecommunications                   $208 billion(1998)(1)          120 years
       TV Broadcasting                                 35 billion(1998)(2)           60 years
       Cellular                                        42 billion(1998)(1)           17 years
       Cable & Satellite                               34 billion(1998)(2)           50 years
       Radio                                           15 billion(1998)(2)           70 years
--------------
</TABLE>

(1) Source: U.S. Census Bureau

(2) Source: Euromonitor International Inc.


The Smart LEC(SM) Overview

    Our Smart LEC strategy is designed to allow us to enter communications
markets rapidly and to offer a variety of operating benefits, including:
improved operating margins, enhanced control of the customer experience,
success-based capital expenditures, and higher overall returns on capital. In
addition, we believe that the efficiency and broad reach of this network
strategy, in conjunction with our diversified product offering, enable us to
operate under a business plan which requires only a small share of each of our
target markets for a successful return on investment.



                                       4


<PAGE>   7



    The Smart LEC network strategy combines the building and owning of key
network facilities with the leasing of other services from the Incumbent Local
Exchange Carriers (ILECs) and other telecommunications carriers under the
following general principles:

    We build those parts of the network which we believe:

    o    significantly improve operating margins;

    o    are necessary to enhance the services to the customer; and

    o    are not generally available from other providers.

    Conversely, we lease those portions of the network which we believe:

    o    are disproportionately expensive to build;

    o    are readily available to be leased economically from other providers;
         and

    o    do not impact our ability to interact with the customer.

    We have deployed our Smart LEC facilities in Columbus, Ohio, Cleveland, Ohio
and Chicago, Illinois and are currently developing three additional markets:
Detroit, Michigan, New York, New York and Boston, Massachusetts. These six
markets comprise approximately 18 million total access lines. In connection with
these markets, we are in the process of establishing collocation facilities in
approximately 133 ILEC central offices. We have also identified approximately 30
additional markets where we intend to deploy our Smart LEC network in 2000-2002.
We currently deliver our Internet services over our broadband ATM network, which
has approximately 125 points of presence and approximately 50,000 route miles of
leased broadband circuits throughout the United States.

    Based upon our historical experience we are developing sophisticated
proprietary integrated systems and procedures that support all aspects of our
business, including customer provisioning systems, billing systems, and customer
care and collections support systems. Additionally, our systems support
electronic bonding with the ILEC in each of our markets. We believe that an
effective back office is essential to efficiently serving our customers and
achieving successful overall customer satisfaction and retention.

BUSINESS STRATEGY

    Our objective is to become a leading provider of integrated communications
services in our target markets. We believe that we will successfully compete
with the incumbent operators and achieve attractive returns on capital by
pursuing the following key strategies:

    Provide Services to both Business and Residential Customers. We focus on
marketing and packaging our services with product offerings that are tailored to
small-to-medium-sized business customers and communications-intensive
residential markets. Because our networks are capital efficient and because we
lease the "last mile" to the customer, we believe that our business model
uniquely allows us to serve profitably both the business and residential
communities. We believe that each segment offers certain advantages: the
small-to-medium-sized business market offers high volume and revenue per
customer, as well as increased geographical concentration of users; the
residential market offers a large, undeserved, growing market with significantly
less competition from other providers. For example, in Ohio we are one of only a
few competitive providers that market local telecommunications services to the
residential market. In addition, targeting both sectors allows us to leverage
the fixed cost aspects of our network and operations.

    Offer Bundled Services. We provide our customers with "one-stop shopping,"
offering local and long distance telephony, Internet and data services. Our
services are packaged and priced in bundles which give the customer increased
flexibility, choice, and "value for money". We emphasize offerings which are
easy to value by the consumer, and allow them to "buy what they need and pay for
what they get." We typically offer a platform of basic services and then create
ways for customers to add additional services easily and conveniently according
to customer preferences. Our current service offerings include: local dial tone
and local calling; enhanced telephony features, such as call waiting; long
distance calling services; dial-up and dedicated Internet access; and data
services. Our integrated offerings enhance convenience by giving the customer
one point of contact for all of these services, providing the services on a
single bill and simplifying the decision-making process. In addition to
attracting customers, we believe this strategy also improves our profitability
by increasing our average revenue per customer with additional higher margin
services, reducing customer acquisition and other operating costs, and improving
customer retention.


                                       5


<PAGE>   8

    Own and Operate Capital Efficient Networks. Our strategy is to provide our
full range of communications services over our capital efficient, switch-based
network infrastructure which combines the building of key network facilities
with the leasing of other elements from the ILEC or other telecommunications
carriers. We believe that our network strategy offers a variety of benefits
including: attractive operating margins, control of the customer experience,
greater speed to market, broad geographic reach, ability to serve both
businesses and residential customers, success-based capital expenditures, and
higher overall returns on capital.

    "Internet Centric" Strategy. We use the Internet as a key tool of our
business strategy. First, Internet access is one of our core service offerings.
We believe that demand for access to the Internet will continue to grow rapidly
in both the business and residential markets, and that our bundled Internet and
telephony product offerings will be attractive to potential customers. Second,
we currently use our www.core.com web site as a sales tool where customers can
sign up for service, to increase awareness about CoreComm and our products and
services, and to access the large and growing number of users of the World Wide
Web. We also intend to use the Internet to be able to efficiently communicate
with virtually every CoreComm customer. We will provide on-line sign-up, feature
selection, billing, moves/adds/changes, and customer care. We currently offer
customers the ability to sign up online and the option to receive their bills
via e-mail, and are in the process of expanding our systems for these additional
on-line services. We believe that communicating with the customer electronically
will significantly increase our operating efficiency by reducing our sales
costs, customer service costs and billing costs, as well as our bad debt
expense. We also believe that this strategy will provide added convenience for
the customer, which will further differentiate us from our competitors.

    Effective Marketing Over Wide Areas. We develop and utilize effective and
efficient marketing techniques to attract customers. We believe that our network
will allow us to leverage our fixed cost infrastructure to reach wide geographic
areas within our target markets. In addition, the ability to resell ILEC
services expands our overall potential service area even further. Our ability to
offer targeted, customer-convenient services over wide areas enables us to
utilize mass marketing strategies and other efficient methods of communicating
our offerings to our potential customers. We believe that these initiatives will
increase the awareness of the CoreComm brand and attract new customers in our
target markets.

    Distinguish CoreComm From Its Competitors. Our strategies seek to
differentiate us from other communications providers. To satisfy customer needs,
we offer an integrated bundle of services that is not typically offered by a
single provider, and package these services into product offerings that are
unique in their emphasis on simplicity, choice and flexibility. We can
differentiate our service offerings in part because we are less constrained by
regulatory requirements than ILECs, and not as limited by less capital efficient
networks as other operators. In addition, we offer customer service and support
which is superior to what customers have often experienced in the past with
their ILEC or other providers. We have developed our own sophisticated back
office systems to enable us to do so effectively and efficiently. We believe
that our on-line billing and customer service will further differentiate the way
we interact with customers. Through these and other factors, we try to create an
image for CoreComm that emphasizes us as an important member of the community,
offering our services over broad areas, to both business and residential
customers, with superior reliability and service. We believe differentiating
CoreComm in this manner will help us attract and retain our customers.

    Leverage Experience of Proven Management. Our management team has had
significant experience in developing several successful communications companies
in the U.S., the United Kingdom and other countries. We believe that our
management's experience will enhance our ability to execute our business plan,
and will contribute to our overall operational success and results. Our
management has designed attractive, bundled communications services and product
offerings. In addition, our management has previously developed its own internal
systems for billing, MIS and customer care. We believe that a high quality back
office is critical for effectively and efficiently serving the customer. Many
members of our management team have worked together for 10 to 15 years. Our
senior management founded and operates NTL Incorporated, a large
telecommunications, cable television and Internet provider which operates
principally in the United Kingdom and Continental Europe. At NTL, management has
had experience competing against incumbent operators by offering business and
residential customers bundled packages of integrated communications services,
including telephony, cable TV and Internet access. NTL has developed creative
marketing and packaging strategies which have delivered industry leading
customer penetration rates (48% versus the industry average of 32%) and churn
rates which are less than half the industry average. Our senior management has
also been involved with other communications ventures, including Cellular
Communications, Inc., Cellular Communications of Puerto Rico, Inc., and Cellular
Communications International, Inc. which operated cellular businesses in Ohio
and Michigan, Puerto Rico, and Italy, respectively. In these ventures, our
management has typically achieved successful operating results, developed
significant experience competing against incumbent operators, built and
maintained sophisticated communications networks and back office support
systems, and gained recognition in the communications industry and the capital
markets. CoreComm represents an effort to capitalize on this history of
experience and operational success to exploit the significant communications
opportunities in the U.S.


                                       6
<PAGE>   9
    Expand Through Strategic Acquisitions. We have expanded and grown our
operations through strategic acquisitions. We look for acquisitions that enhance
our ability to execute our business strategy, including adding complementary
network and facilities, increasing revenues, and gaining management talent. To
this end, in 1999 we completed the acquisitions of MegsINet Inc. ("MegsINet"), a
Chicago based Internet service provider, and the assets of USN Communications,
Inc. ("USN"), a CLEC in the midwest and northeast providing service to business
customers. In addition, we recently announced that we have entered into
definitive agreements to acquire ATX Telecommunications, Inc. ("ATX"), a "smart
build" CLEC and integrated communications provider serving the mid-Atlantic
states, and Voyager.net, Inc. ("Voyager.net"), the largest independent full
service Internet communications company in the midwest and Great Lakes region.
We intend to continue to pursue acquisition opportunities which would accelerate
the growth and success of our operations.

THE SMART LEC(SM) NETWORK

    The Smart LEC strategy allows us to implement our own switch-based
telecommunications network without the significant additional expense, time
commitment and general financial risk of building our own complete local loops
and transmission facilities. We believe this strategy will improve our overall
return on capital and lower the level of risk associated with the execution of
our business plan, based on the following general advantages:

     o   reduced capital expenditures associated with leasing rather than
         building complete local loop and transport facilities;

     o   greater certainty of return from success-based capital spending;

     o   increased network utilization as a result of the access to multiple
         revenue streams and the ability to increase leased capacity
         incrementally; and

     o   lower overall market penetration requirements as a result of reduced
         network costs.

Advantages of the Smart LEC network

        We believe that this network strategy offers a variety of specific
benefits including:

        Lower Overall Cost -- We believe that the Smart LEC network can be
    deployed at a much lower cost than building conventional networks. The cost
    of conventional networks includes the cost of all of the network facilities
    included in the Smart LEC build, plus the construction of conduit, transport
    capacity and associated infrastructure to connect network access points,
    switch facilities and customers. The deployment of these transmission route
    components involves significant expense, and their elimination under our
    strategy considerably decreases our capital expenditure requirements.
    Whereas the construction of full network facilities has been estimated to
    cost between $1,000 to $3,000 per line, depending on the specifications of
    the network, we estimate that our Smart LEC network will cost less than $500
    per line, while still providing comparable basic telephony services and
    additional advanced services.

        Lower Required Customer Penetration -- Due to the reduced cost of
    building the Smart LEC network, our business model requires a lower level of
    customer penetration to be successful as compared to a full-facilities
    network. Because there is a reduced amount of up-front investment, we
    believe that we can gain profitability and a sufficient return on capital
    with a relatively small percentage of market share. This advantage not only
    lowers our exposure to risk, but also gives us the flexibility to design our
    offerings to target a specific subscriber base of communications-intensive
    users without the requirement of necessarily attracting a large portion of
    the market. The ability to serve both business and residential customers
    also increases our potential overall market.

        Success-based Capital Expenditures -- An additional benefit of our Smart
    LEC network is the "success-based" cost structure of the capital
    expenditures. Conventional full-facilities networks typically require the
    network construction to be fully completed in advance of obtaining
    customers, generating high initial capital expenditures. Under our Smart LEC
    strategy, certain switch and access facilities are installed ahead of time,
    but the majority of capital is invested to increase the capacity of the
    network based on our success in attracting customers. We can therefore enter
    a market with a significantly lower up-front investment, and add facilities
    and leased capacity over time as we grow our customer base. A significant
    portion of our network expenses can therefore be incurred later and with
    more certain returns.

        Control of the Customer Experience -- We believe that having greater
    control over the services that we offer enhances our ability to improve the
    overall customer experience. Through the facilities which we install, we
    have control over the services provided to customers, including the
    operation of features, phone numbers, and line testing and servicing.
    Control over the implementation of the products enables us to better manage
    the service and to more easily offer custom packages of products and
    features. We believe that our delivery and marketing of targeted,
    customer-convenient, easy-to-understand packages differentiates us from our
    competition.


                                       7
<PAGE>   10




        Ability to Serve Business and Residential Customers -- Our Smart LEC
    network architecture is designed to reach both business and residential
    customers. Because we are leasing rather than building the local connection
    to the customer, we believe we can economically reach the residential market
    despite its lower density relative to the business market. As a result, we
    are able to reach and serve the significant consumer segment, which has
    typically had significantly fewer competitors than the business segment. In
    addition, there are significant synergies which accrue from the ability to
    serve both business and residential market segments, including benefits to
    our marketing, service operations and network utilization.

        Higher Operating Margins -- We believe that deploying key network
    infrastructure will enable us to achieve significantly higher gross margins
    than the margins obtained under total service resale. Total service resale,
    which is the resale of complete services from ILECs without installing owned
    facilities, typically generates gross profit margins of approximately
    20-25%. Under the Smart LEC strategy, rather than reselling the entire
    service, we will be leasing only certain unbundled network elements, such as
    local loops and transport. We will use our own facilities for network
    interconnection, switching, features, and other network elements. By design,
    the facilities which we own and install are those which have a significant
    positive impact on our gross margins. By utilizing our own facilities for
    certain key portions of the network, we believe that we can increase our
    operating margins significantly above the margins which can be achieved with
    resale.

        Increased Speed to Market -- The Smart LEC strategy will also increase
    the speed at which we can enter additional markets. The time needed to
    construct a conventional network is extended by factors such as civil
    construction, the permit application process, certifications, and network
    management. Although constructing the Smart LEC network involves certain
    similar procedures, the majority of the installation work takes place in our
    own facilities and leased collocations of the ILECs, and significant route
    network construction elements are eliminated, which should contribute to an
    increased speed to market under our strategy. Whereas conventional networks
    typically take between 18 to 24 months to construct, we believe our networks
    can generally be installed in a 6 to 12 month time frame.

        Access to Wide Geographical Areas -- We believe the cost structure of
    the Smart LEC network will enable us to enter target areas which may not be
    economical for a full facilities network. When building a conventional
    network, density is a critical factor because the distance between the local
    switch and customers has a significant impact on build costs. In the Smart
    LEC network, although density is still important, it is less critical
    because the local loops are already built and are simply leased from ILECs.
    The ability to lease certain portions of the network therefore expands the
    potential territories that can be economically served by our network. In
    addition, we can offer total service resale in areas that are not yet served
    by our network, which expands our operating territory even further. Because
    ILECs are typically connected to all businesses and residences in its
    region, our ability to lease or resell these connections gives us
    considerable geographic flexibility and reach within our target markets. We
    believe that we will realize several advantages from having the ability to
    serve broad geographical areas, including operating synergies, marketing
    efficiencies and the enhancement of our overall company image presented to
    potential customers.

Network Development and Architecture

    Under our Smart LEC strategy, we build those portions of the network that we
believe will significantly increase our gross margins, are necessary to control
the services provided to the customer, and can be deployed rapidly and
efficiently. We lease those portions of the network that are readily available
to be leased economically from other providers. Accordingly, we are building the
Smart LEC network in each target market through a combination of the following
three central elements:

    o    Installing telephony and data equipment in our target metropolitan
         areas, including: Class 5 telephony switches, ATM switches and Internet
         point-of-presence equipment in our own facilities, along with telephony
         access devices, DSL access equipment, modems and other equipment in
         facilities collocated with the ILEC. These devices switch and route
         voice and data transmissions across the network.

    o    Leasing the "last mile" or "local loop" (the portion of the network
         extending from the end-office to the customer's premises). This local
         connection is leased by us from the ILECs as an "Unbundled Network
         Element" as provided under the Telecommunications Act of 1996. These
         local loops are used to transport voice and data services, for Internet
         access services, as well as for DSL and other high capacity voice and
         data applications. For larger customers or concentrated groups of users
         (such as multi-dwelling units), we lease circuits with greater
         bandwidth for this local connection.


                                       8


<PAGE>   11




    o    Leasing the transport capacity to carry voice and data both regionally
         (between our collocated facilities and our regional switch) and
         nationally (between our regional switches, our national Internet
         points-of-presence, other carriers, and the Internet). We lease these
         services from ILECs, Competitive Local Exchange Carriers (CLECs), Inter
         Exchange Carriers (IXCs), Competitive Access Providers (CAPs) and other
         providers. We use these leased circuits to transport our own voice and
         data traffic and deliver it to the most economical point of
         interconnection with other carriers. These leased circuits are
         interconnected using our national ATM facilities.

    As a complement to the network described above, we also resell complete
services from ILECs (total service resale). Although we intend to serve
customers primarily over our own network, resale allows us to expand our target
markets by adding service areas where our facilities are not yet installed. This
enables us to market our services prior to and during the installation of our
network, and then connect customers to our facilities once they are in place.
Resale also allows us to serve customers that may not be within the current
reach of our switch-based network. Although providing service on a resale basis
generates lower gross margins, we believe that there are advantages to offering
comprehensive geographical coverage within our target markets, particularly when
competing with an ILEC.

    We believe that the quantity of existing and planned fiber transport
facilities available from other carriers will be sufficient to satisfy our need
for leased transport facilities and permit us to obtain these facilities at
competitive prices for the foreseeable future. Several factors contribute to
this view: there is significant transport capacity in place today and we often
have the ability to choose from multiple providers including the ILECs; the
number of new providers building networks continues to increase; most providers
are consistently increasing their network capacity; and advances in wave
division multiplexing technology have continued to increase the capacity of
existing fiber plant. In addition, the ability to lease transport from the ILECs
gives us broad geographic coverage. As the volume of our traffic grows, however,
in the future it may become economical to build our own transport facilities in
certain markets.

    We currently lease transport capacity from multiple carriers across our
regional and national networks, including, among others:


               ILECs                       OTHER CARRIERS
               -----                       --------------
               Ameritech                   ICG
               Bell Atlantic               IXC
               Bell South                  Level 3
               Frontier                    MCI WorldCom
               SBC                         NEXTLINK
               US West                     Qwest

    Nationally, as we construct regional Smart LEC networks, our ATM network
will interconnect these local networks and other points-of-presence across the
U.S. over leased circuits to provide national data, voice and Internet
connectivity.

Network Technologies

    Our Smart LEC network is capable of carrying both voice and data
communications using the following technologies:

    o    Standard Telephony -- the traditional, reliable transmission of voice
         over local loop copper wire and regional and national fiber optical
         transmission path which, through the use of switches, becomes a
         dedicated end-to-end circuit.

    o    Internet Protocol (IP) -- the structure of data transmitted over the
         Internet. Because Internet Protocol involves splitting data into
         "packets" which are transmitted independently and reassembled at their
         destination, Internet Protocol does not require a dedicated end-to-end
         circuit and many different communications messages can be routed
         simultaneously over the same transmission facilities, resulting in
         greatly improved efficiency. This technology is currently being
         developed to be used reliably for voice service.

    o    Digital Subscriber Line (DSL) -- a transmission technology that allows
         for the transport of significant levels of voice and data at high
         speeds over conventional, copper phone lines. These higher transmission
         rates can be used for high-speed Internet access, to transport multiple
         voice lines over a single loop, or for both simultaneously.

    o    Asynchronous Transfer Mode (ATM) -- a transport protocol that supports
         many types of high-speed transmissions including voice, data, video,
         audio and imaging. ATM allows for the use of individual circuits for
         multiple simultaneous purposes, increasing network efficiency.


                                       9

<PAGE>   12




    o    Digital Loop Carrier (DLC) -- an access technology allowing us to
         aggregate and concentrate the voice traffic collected at the
         collocation facility to more efficiently transport this traffic to our
         switches.

Local and Regional Network Deployment

    We have identified six major metropolitan areas as the initial target
markets for the rollout of our regional Smart LEC networks. Our switches in
Columbus and Cleveland are currently active and we have begun provisioning our
residential and business customers that are on our footprint through these two
switches. Our Chicago switch has been installed, and we expect to begin
migrating customers in the second quarter of 2000. In addition, we are currently
constructing our network in three additional markets: Detroit, Michigan; New
York, New York; and Boston, Massachusetts. We expect the networks in these
markets to be installed in 2000. These six markets comprise approximately 18
million total access lines. We are in the process of establishing collocation
facilities in approximately 133 ILEC central offices in these markets. The
significant majority of these are physical collocations, under which we have
space within the central office that is dedicated to our exclusive use.

    We have also identified more than 30 additional markets where we intend to
deploy our Smart LEC network in 2000, 2001, and 2002. These markets are in
several states, including: Pennsylvania, Maryland, Connecticut, Indiana,
Wisconsin, Missouri, Florida, Texas and California, among others. The buildout
schedule, as well as the final selection of our markets, will depend on a number
of factors, including the success and speed of the rollout of the initial six
markets, ILEC interconnection agreements, and other factors. We will continue to
offer our Internet services nationally over our leased ATM network.

    Key data for our initial six markets is listed in the following table:

<TABLE>
<CAPTION>
                                  ESTIMATED
                                   BUSINESS         ESTIMATED                            COLLOCATIONS IN
                   CITY            LINES(2)    RESIDENTIAL LINES(2)     TOTAL LINES(2)     PROGRESS(3)
<S>                                  <C>                 <C>                 <C>                <C>
              Cleveland, OH          423,733             922,473             1,346,206          18
              Columbus, OH           273,345             597,662               871,007          12
              Chicago, IL          1,893,902           3,022,030             4,915,932          33
              Detroit, MI            851,821           1,775,068             2,626,889          24
              New York, NY         1,782,190           3,858,804             5,640,994          26
              Boston, MA             859,422           1,492,218             2,351,640          20
                                  ----------        ------------          ------------         ---
                        Total      6,084,413          11,668,255            17,752,668         133
--------------
</TABLE>

(1) Based on our current buildout schedule.

(2) Company estimates based on FCC, iMarket and TargetPro. Represents estimated
    lines within the MSA.

(3) We are in various stages of the collocation process depending on the market
    and its priority in our buildout schedule. Our collocation process consists
    of the following basic phases:

    o    Gathering of demographic data for each region and selection of specific
         ILEC facilities for collocation;

    o    Filing applications with the appropriate ILECs for collocation rights
         at each selected location;

    o    Upon receipt of each approval, doing an evaluation of each facility;

    o    Building by the ILEC of a "cage" or preparation of space in which our
         equipment will be placed; and

    o    Installing and testing of our equipment.

    We have at least obtained approval of our applications for all collocations
in progress.

    In determining our target markets, we prepare detailed analyses of
telecommunications and demographic data. Our target markets are chosen based on
a number of factors, including:

    o    Overall size of the telecommunications market;

    o    Concentration of business and residential customers;

    o    The availability of local transport networks and providers;

    o    Demographic statistics;

    o    The location of our existing resale customers;

    o    Our relationship with the ILEC and interconnection terms; and

    o    Regulatory environment.


                                       10

<PAGE>   13




    We are currently authorized to operate as a CLEC and/or long distance
telecommunications provider in 24 U.S. states.

    We believe that our Smart LEC strategy enables us to enter and construct our
network into new cities with relatively low up-front capital expenditures, and a
significant proportion of success-based capital expenditures. Depending on the
size of the market and other factors, our up-front costs to enter a market are
expected to be approximately $7 to $10 million, which includes initial set-up
costs associated with entering a market, such as the installation of our switch
and collocation facilities. Additional capital expenditures will be based on
subscriber levels and services offered and are estimated to be approximately
$400-$500 per line. Therefore, a significant portion of the total capital
expenditures in a given market will be incurred only as we increase our
subscriber base and the related capacity of the network.

National Network

    We currently have in place an ATM network which connects approximately 90
U.S. cities. We have facilities located in each of these points of presence, and
have leased DS-1 to OC-3 circuits to interconnect this network and to reach the
major national Internet access points. Approximately 49 owned ATM switches are
now being used across our network. The ATM switches allow us to carry multiple
services efficiently over our circuits. We directly peer with major backbone
providers including MCI WorldCom and PSINet. These peering arrangements help us
maintain a competitive low cost network. This national network interconnects our
local Smart LEC networks as they are deployed.

    Our national network currently interconnects our point-of-presence
facilities in the following cities:

<TABLE>
<S>                            <C>                  <C>                         <C>
    Akron, OH                  Detroit, MI          Memphis, TN                 Rochester, NY
    Albany, NY                 El Paso, TX          Merriville, IN              Rockford, IL
    Albuquerque, NM            Flint, MI            Milwaukee, WI               Sacramento, CA
    Atlanta, GA                Grand Rapids, MI     Minneapolis/St. Paul, MN    Salt Lake City, UT
    Austin, TX                 Green Bay, WI        Montgomery, AL              San Antonio, TX
    Billings, MT               Greensboro, NC       Nashville, TN               San Diego, CA
    Birmingham, AL             Greenville, SC       Newark, NJ                  San Francisco, CA
    Boise, ID                  Hartford, CT         New Orleans, LA             San Jose/Mae West, CA
    Boston, MA                 Houston, TX          New York, NY                Seattle, WA
    Buffalo, NY                Indianapolis, IN     Norfolk, VA                 South Bend, IN
    Champaign, IL              Irvine, CA           Oklahoma City, OK           Spokane, WA
    Charlotte, NC              Jackson, MS          Omaha, NE                   Springfield, IL
    Chicago, IL                Kansas City, MO      Pensauken, NJ               St. Louis, MO
    Cincinnati, OH             Knoxville, TN        Peoria, IL                  Stamford, CT
    Cleveland, OH              Lansing, MI          Philadelphia, PA            Syracuse, NY
    Colorado Springs, CO       Las Vegas, NV        Phoenix, AZ                 Toledo, OH
    Columbia, SC               Laurel, MD           Pittsburgh, PA              Topeka, KS
    Columbus, OH               Lexington, KY        Portage, IN                 Traverse City, MI
    Corpus Christie, TX        Little Rock, AR      Portland, OR                Tucson, AZ
    Dallas/Ft. Worth, TX       Los Angeles, CA      Raleigh/Durham, NC          Tulsa, OK
    Dayton, OH                 Louisville, KY       Reno, NV                    Washington, DC
    Denver, CO                 Madison, WI          Richmond, VA                Wichita, KS
    Des Moines, IA
</TABLE>


    Our national leased circuits currently cover approximately 2,500 miles of
OC-3 circuits, approximately 27,000 miles of DS-3 circuits and approximately
20,000 miles of DS-1 circuits.

Technology Management Center

    We opened our state-of-the-art Technology Management Center (TMC) during the
first quarter of 2000. The TMC monitors CoreComm's national facilities-based
network, including its Internet backbone. Using the latest network management
software, the TMC is able to provide real-time information to ensure network
reliability and instant network upgrades to meet consumer demand. The TMC houses
the latest in call routing and switching equipment for local and long distance
telephone services and features, and Digital Subscriber Line (DSL) technology.
The facility operates 24 hours, seven days a week and has a staff of 25
professionals.


                                       11

<PAGE>   14





The Telecommunications Act of 1996

    Our ability to lease unbundled network elements from incumbent providers is
the result of the Telecommunications Act of 1996. The Telecommunications Act
opened up the local telecommunications exchange market to competition, creating
an attractive opportunity for us and other carriers. The Telecommunications Act
requires that ILECs offer the use of their networks for total resale or the
lease of unbundled network elements, and that ILECs permit other carriers to
collocate and interconnect their equipment within the ILECs' central offices.
Moreover, an ILEC that is also a Bell operating company (BOC) is prohibited from
entering the long distance market in its home region until it is determined that
there is a significant level of competition in its local service market.


LMDS Broadband Wireless Spectrum

    As a complement to our Smart LEC network, we own Local Multipoint
Distribution Service (LMDS) licenses for the broadband wireless spectrum. Our
licenses cover nearly all of the state of Ohio and represent more than 10.5
million "POPs". With 1,150 MHz of spectrum, these licenses have much greater
bandwidth than cellular or PCS licenses (up to 30 MHz) or other fixed wireless
licenses (80-400 MHz). We are the fourth largest holder of this spectrum in
North America. NEXTLINK Communications, Inc. is the largest license holder, and
has licenses for major U.S. population centers outside of Ohio.

    LMDS is a newly authorized fixed broadband wireless service that may be used
to provide high-speed data transfer, telephone service, telecommunications
network transmission, Internet access, video broadcasting, video conferencing,
and other services. LMDS uses frequencies in the 28GHz to 31GHz range. The
spectrum is useable for communication services from a fixed antenna, but is not
suitable for mobile or portable communications. The service is subject to line
of site limitations and rain attenuation, but current systems seek to reduce
these impediments through advanced system architecture and the strategic
placement of transmitters. The point-to-multipoint technology of LMDS allows a
single hub site antenna to be used to form multiple paths with customer antennas
at numerous locations. LMDS can thus be used to provide a wireless high-capacity
broadband service for the "last mile" to a subscriber's home or office.

    As LMDS technology advances, we intend to use this spectrum to offer
additional communications services and to expand the reach of our network. For
some locations, we believe that LMDS may offer a substantially lower cost
solution for providing high-quality broadband services than other competing
delivery systems such as fiber or copper extensions. LMDS equipment is not in
general commercial service at this time, but technology is currently in
development and we have established relationships with several equipment
vendors.

    Through a wholly owned subsidiary, in June 1998, we were awarded A-Block
licenses in 15 markets in Ohio with a total of 10,573,982 POPs (representing
more than 95% of the POPs in Ohio). Each LMDS license covers a defined Basic
Trading Area, and our A-Block LMDS licenses consist of 1,150 MHz of spectrum.
CoreComm bid $25.2 million for such licenses, for an average of $2.39 per POP.
POPs are the estimated population of a market. The number of POP's owned by an
operator does not represent the number of users of its services and is not
necessarily indicative of the number of potential subscribers.


PRODUCTS AND SERVICES

    We currently offer our business and residential customers an extensive array
of voice and data services in order to satisfy and capture all of their
communications needs.

Bundled Packages

    In our current service offerings, we bundle communications products and
services in order to give our customers increased convenience, flexibility and
choice, at good "value for money." We typically offer a platform of basic
services, which represents a minimum selection of services to be offered, and
then create ways for the customers to easily and conveniently increase the other
services purchased according to their tastes.


                                       12

<PAGE>   15




    For example in our current residential offering, we combine a basic package
of voice services with Internet access, which we call the "e-Chat" service.
Under the e-Chat service, customers are offered a bundled package of
communications services that includes local, long distance and Internet service.
Although the details of the offerings vary somewhat by region, the service
typically includes:

    o    Local dial tone

    o    Local calls

    o    Call waiting

    o    Caller-ID

    o    Personal "800" number

    o    Premium Internet Service

         o    56K unlimited access

         o    5 e-mail accounts

         o    personal web space

    o    Long distance service option (10 cents per minute)

    Additional options and features (such as voice mail, three-way calling, an
additional line, and additional web site space) can be easily and flexibly added
to the service. The pricing for e-Chat varies by region, but in all areas our
price is based on the exact retail pricing from the RBOC for the same local
telephony services.

    This marketing strategy has been based on the successful experience of
management in penetrating the residential market and competing with incumbent
operators in its other communications companies. We believe that this type of
marketing strategy has many benefits for both potential customers and CoreComm.

    We believe that potential customers will be attracted to the simplicity of
both how we offer and price the service, and of having consolidated services
with one provider on one invoice. In addition, we believe that our proposition
will be viewed as good "value for money". For the same price that customers
currently pay the incumbent operator for telephone alone, from CoreComm they can
get the same telephone service, plus Internet access. We price the service at
the same rates as the RBOC's telephone service so that it can be perceived
simply, easily and quickly as a valuable service. The ability to add additional
features conveniently enhances the overall flexibility, and allows customers to
tailor the service for their individual needs.

    In addition, we believe that these types of bundled services will improve
our operating results. The structure and strategy of our residential product
offerings will have a significant impact on our ability to penetrate our target
markets successfully. We believe that bundled offerings like our e-Chat service
will be attractive to potential customers. In addition, we believe bundled
packages improve customer retention because customers typically must approach
multiple providers in order to replace the bundled CoreComm services. Finally,
we believe that combining a feature-rich telephony service with Internet access
service will attract communications-intensive users, who typically generate
higher average revenue and are more likely to subscribe to additional
communications services, such as high speed access.

    Although the specific components of our offerings will change, we will
continue our strategy of designing attractive marketing packages which give the
customer flexibility and choice, with convenient ways to subscribe to additional
services.

Voice and Data Services

    We currently offer the following voice, data and Internet services to
business and residential customers in our markets:

    o    Local Exchange Services -- including standard dial tone, local calling,
         Centrex services, Emergency 911 services, operator assisted calling,
         access to the long distance network, and other related services.

    o    Custom Calling Features -- including call waiting, call forwarding,
         caller ID, voice mail, conference calling and other enhanced features.

    o    Long Distance Services -- including 1+ interLATA calls (which are calls
         across Local Access and Transport Areas), intraLATA calls,
         international calls, 800/888/877 toll free services, calling cards and
         other related services.

    o    Internet Access Services -- including dial-up and dedicated access to
         the Internet over conventional modems, ISDN, T-1, DS-3 and higher speed
         connections.


                                       13

<PAGE>   16




    o    Web Site Hosting and Design -- including dedicated and shared site
         hosting and, typically through third parties, web site design.

    o    Data Networking Services -- including a variety of data circuits and
         networking solutions.

DSL Offering

    DSL is a transmission technology that allows for the high speed transport of
significant levels of voice and data over conventional, copper phone lines. DSL
can deliver speeds of up to 7 Mbits per second, which is the equivalent of more
than 100 voice grade circuits, over a single copper loop.

    DSL technology enables consumers to transfer data or access the Internet at
high speeds. In addition to significantly increasing data transfer rates, DSL
technology offers an alternative for providing multiple voice lines or voice and
data carried over the same pair of twisted copper wire. By using DSL, businesses
can obtain the same number of voice lines over a single loop that would normally
be obtained using a more expensive standard T1 or other circuit. DSL technology
also makes it possible for business or residential customers to obtain telephone
service and high-speed data service simultaneously over a standard copper
telephone line.

    We believe there are several benefits to DSL, including:

     o   High bandwidth, high-speed, "always on" Internet connections;

     o   Dedicated, not shared bandwidth, which allows for "guaranteed"
         performance levels;

     o   Ratable service, which allows us to tailor the service to the
         customers' needs and allows the customers to determine how much money
         to expend for the amount of high speed bandwidth they need;

     o   Ability to use the same loop for voice and data simultaneously;

     o   Enhanced security;

     o   Utilization of existing copper infrastructure, which allows faster
         rollout and lowers deployment costs;

     o   Increased telephony margins as a result of providing multiple services
         over a single local loop; and

     o   Deployment with success-based capital expenditures.

    We believe our Smart LEC network is well suited to capitalize on DSL
technology. In our own switch facilities and our collocation facilities, we are
deploying DSL access equipment (including DSLAMs). DSLAMs are connected to the
copper loops at the end office, and aggregate and concentrate the data traffic
from the end user. DSL technology is limited by the length of the loop being
used, which typically must be less than three miles, as well as other factors
such as the condition and quality of the copper line. We rollout our DSL network
and services simultaneously with the telephony network. We use DSL to provide
high-speed Internet access and data services and intend to use DSL to provide
combined data and voice services over a single copper loop, and voice circuit
trunking to connect multiple access lines.

    We deploy multiple forms of DSL in order to provide a broad service offering
to our customers and to expand the DSL coverage of our target markets. Our
offerings include different forms of Asymmetric DSL (ADSL) including Rate
Adaptive DSL (RADSL), Symmetric DSL (SDSL) and Integrated DSL (IDSL). Our ADSL
offering is expected to include G.lite as well. We believe that a widely
accepted standard, such as G.lite, will enhance our ability to penetrate our
target markets with DSL services.

Other Related Services

    Cellular and Paging Services. As a complement to our voice and data
services, we also offer cellular and paging services. Although these are not
core products and do not utilize our own networks, they are offered as an
additional service for our business and residential customers for added choice
and convenience. We are currently offering cellular services in Ohio and
Michigan, and may choose to add other markets in the future. Our paging service
is available nationally. We have resale agreements with the three major
providers of cellular service in Michigan and Ohio: AirTouch Cellular, GTE
Mobilenet Inc. and Ameritech Mobile Communications, Inc. In addition, we sell
retail cellular long distance telephone services to cellular customers of
various local cellular service providers who have chosen us as their long
distance service provider.


                                       14

<PAGE>   17




    IP Telephony. With recent advancements in the development of telephony
equipment using Internet Protocol, the overall quality of telephone calls
delivered over an IP network has become increasingly reliable and has become
more equivalent to the circuit-switched network. Although we are not currently
using this technology to deliver our voice traffic, our local and national
networks have been designed to allow for the use of IP telephony when and if
reliable technology becomes available.

    Under this technology, our platform would compress and convert voice into IP
packets using voice compression algorithms, digital signal processors and
ancillary software. These packets would then be transmitted via our national IP
network. Due to its scalability and compression features, this technology would
allow a greater quantity of simultaneous voice calls and data to be carried over
the network compared to traditional circuit switching, thus utilizing
significantly less bandwidth. Potential services offered under this technology
would include local and long distance calling, fax transmission, call
termination, national voicemail, and other related services.

SALES AND MARKETING

    Our marketing strategy is to provide business and residential customers a
bundled package of high quality telecommunications services, delivered with
quality care and service to the customer at prices which offer "value for the
money".

    In its prior experience, our management has had significant success in
marketing integrated communications products in several other operations both in
the U.S. and abroad. We believe much of this success was due to our management's
ability to creatively and effectively design and market integrated
communications products and services. We intend to capitalize on this experience
to develop service offerings to attract and retain business and residential
customers in our target markets.

    A core part of our strategy is to offer our customers bundled
telecommunications, Internet and data services. Our integrated service offerings
are packaged and priced to give the customer increased flexibility, choice, and
value, while also enhancing convenience. Our offerings can be created to allow
flexibility to meet individual customer needs, and are conveniently offered on a
single bill. We believe that offering combined packages of local and long
distance telephony, Internet access and data services is attractive to the
potential business and residential customers in our target markets. In addition
to attracting customers, we believe this strategy also improves our
profitability by increasing average revenue per customer, reducing customer
acquisition costs and other operating costs, and improving customer retention.

    The broad reach of the Smart LEC network enables us to market our services
over wide geographical areas. By using a combination of resold and switch-based
services, we are not limited to offering services only in areas where we have
built our own networks. We capitalize on our ability to market over wide areas
by utilizing mass marketing strategies and other efficient methods of
communicating with our potential customer base. For example, we have contracted
to be one of only four gate sponsors for the new football stadium for the
Cleveland Browns. Under this agreement, we have prominent placement of
advertisements throughout the stadium, an entry gate known as the CoreComm Gate,
game giveaway opportunities, and other related advertising benefits. The broad
reach of our network across the Cleveland area allows us to take advantage of
such mass market opportunities. We believe that these and other initiatives will
increase the awareness of the CoreComm brand and will attract new business and
residential customers in our target markets. We believe that the ability to
market over larger areas increases the efficiency and effectiveness of our
marketing and advertising programs.

    In the business market, we focus on a direct sales approach, targeting small
and medium-sized businesses. We believe that small to medium-sized businesses
represent a large and growing market which is currently undeserved by the ILECs
and competitive providers. We seek to attract these target customers with
customer-convenient bundles, providing simplicity, flexibility and ease of
decision-making. We use our sales force to sell directly to customers, to
establish a relationship with telecoms managers, and to better understand and
service their communications needs. We generally employ sales people with
significant experience in the telecommunications industry. In order to
effectively incentivize our sales force, a large portion of their compensation
is performance-based and focused on sales and customer retention. We try to
attract and retain qualified sales people by offering them the opportunity to
work with a successful management team in an entrepreneurial environment, with
equity participation through stock options.

CUSTOMER INTERFACE AND PROPRIETARY SYSTEMS

    We believe that the customer experience must be easy, enjoyable, and
exceptional. We have developed integrated systems and procedures that will
substantially support all aspects of our business, including provisioning,
billing, customer care and collections. Our information services and customer
care operations are closely linked to ensure that all related operations are
effectively integrated. We believe this focus on the customer experience will
provide us with a competitive advantage in attracting and retaining customers.


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<PAGE>   18





"Internet Centric" Approach

    We are in the process of actively developing and incorporating systems to
deliver "Internet Centric" operational support systems. These customer-facing
systems are expected to add functionality in the areas of electronic billing,
web-based customer care and e-commerce. We are preparing to support a
substantial portion of our customer interactions over the World Wide Web. Our
customers are able to order new services and interact with our customer care
department without using the telephone. They will also be able to view and pay
their bill online. We believe that this method of communicating with the
customer will not only be convenient for the customer, but will also increase
our operating efficiency.

    We employ a variety of techniques to effectively and efficiently serve the
customer, including:

    Efficient Fulfillment of Services -- Our systems support electronic tracking
    of orders from provisioning through installation. Service orders will flow
    directly from the consumer to our back office, and then on to the ILEC.
    Administrative controls in our support systems are designed to provide
    timely identification and resolution of customer concerns and issues.

    Low-cost Billing -- We have developed a customer friendly, fully integrated
    billing statement covering all of the communications services supplied. The
    statement currently can be delivered electronically via e-mail. Customers
    may elect to pay their bill automatically via credit card or direct debit.
    We are further developing web-based electronic bill presentment and payment
    capabilities. These services will reduce billing costs while providing
    value-added services to customers such as the ability to sort billing data
    and create customized reports.

    Smart Customer Care -- We intend to continue to develop sophisticated
    customer care systems that will increase our use of the Internet as a means
    of communicating with our customers. We are currently making customer care
    available via e-mail, which allows for simple requests and changes to be
    processed without use of the phone and for customer care associates to work
    from outside of our facilities. We are currently expanding our web-based
    care services to include significant additional functionality. These and
    other initiatives are expected to improve the efficiency of our customer
    care resources by developing on-line tools which will enable customers to
    communicate more efficiently with us and even service themselves when
    appropriate.

Electronic Bonding & Proprietary Systems

    We view the efficiency and the accuracy of our communications and interface
with ILECs as an important strategic priority. We are currently bonded
electronically with Ameritech and Bell Atlantic. This electronic interface
allows for more timely and accurate service ordering and provisioning of our
customers. We have real-time access to customer information as well as real-time
order entry and confirmation. We provision service to customers through our
proprietary systems, which are designed to interface with the ILECs' systems
through a variety of delivery mechanisms. Our systems and processes have been
developed to decrease the risk of human error associated with provisioning
customers by manual keying or fax.

    Our customer interface systems have been developed and continue to be
enhanced in a client/server environment that allows for flexibility to
accommodate an expanding customer base, efficient entry into new markets,
switch-based services, and rapid development of additional functionality. Our
proprietary systems handle all pre-ordering activities, including obtaining
customer service records (CSR), finding and reserving telephone numbers,
verifying customer addresses, validating due dates, searching the ILEC's
switches for feature availability (COFA), and yellow page listings.

    In addition, we have developed proprietary methods of ordering and
provisioning services through ILECs by formatting and sending electronic data
interchange (EDI) messages. These systems use common software for the actual
sending and receiving of purchase orders and acknowledgements, but use custom
code for the content of these messages. We typically use off-the-shelf software
for standard processes that is readily available, and develop proprietary
systems when such processes need to be modified to meet our needs.


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System Enhancements

    Given the importance that we place on the efficiency, quality and scale of
our back office capabilities, we continuously upgrade our proprietary systems in
order to enhance their functionality and performance. Our recent and ongoing
enhancements to our information systems include the following:

     o     Our Rating and Billing engines are being re-engineered for
           performance and scalability using a multi-tiered architecture.

     o     Our provisioning systems for the Ameritech region have been enhanced
           to support Ameritech's five state region. Our service order
           management system has been enhanced to validate in real time the ILEC
           feature availability, integrate the electronic generation of service
           order data, and integrate automated switch activation software for
           our Class 5 switches, all within a single system. The provisioning
           information is entered once, and it flows through our internal
           systems, our switch, and the ILEC systems without any manual
           processes.

     o     We have evaluated best of breed Interconnection Gateway packages that
           will allow us to develop further electronic bonding with all future
           ILECs in our business plan going forward, and are planning for the
           integration with our current back office systems later this year.

     o     We have automated the migration processes to move customers from
           resale to "on-net" via our service order management system, which has
           been designed to eliminate any manual processes with the ILEC.

     o     We have purchased and installed a platform for our call centers which
           has introduced skills-based routing of our inbound calls with our
           automated attendant. This allows us to service our customers better
           by ensuring that a call is delivered to a customer service
           representative with the skills necessary to handle the customer.

     o     We have integrated a new auto-dialer with our collections system,
           which has significantly increased collection agent productivity and
           effectiveness.

COMMUNICATIONS INDUSTRY

    We are participating in the large and rapidly changing U.S. wireline
telecommunications industry. We believe that the wireline telecommunications
industry benefits from positive price elasticity, as well as growing,
non-cyclical demand for services. According to the U.S. Census Bureau, the total
market size of the telecommunications services industry (which excludes cable
television and Internet access) has increased from approximately $160 billion in
1990 to approximately $285 billion in 1998. This represents growth of 78% over
this period. The wireline segment of this market accounts for approximately $208
billion, or 73% of the total telecommunications services market in 1998.
Approximately 50% of wireline segment revenues are derived from local service
and network access.

    According to FCC data, the total local revenue generated by the CLECs and
competitive access providers was less than 2.5% of the total U.S. local revenues
in 1998. As of June 30, 1999, CLEC lines (resold and switched) constituted
approximately 2.6% of the total switched lines in the U.S.

    The emergence of the Internet and demand for data services has had a
significant effect on the U.S. communications industry. The use of the Internet
in both businesses and residences has been increasing rapidly, and is expected
to continue its growth. Forrester Research projects that revenues from Internet
access services will grow from $10.3 billion in 1998 to $61.8 billion in 2003 in
the U.S. They also project that web hosting revenues will increase from $900
million in 1998 to $14.7 billion in 2003 in the U.S. Frost and Sullivan project
that the total U.S. market for high-speed and switched data services will grow
at an annual rate of approximately 17%, from $18.0 billion in 1997 to
approximately $40 billion by 2002. The Gartner Group forecasts data traffic to
grow more than five times faster than voice traffic through 2002, and that DSL
revenue will grow at an annual rate of over 200% from 1998 to 2003, to reach
$18.0 billion.

    We believe the overall size and growth of the U.S. communications market
presents a significant opportunity for competitive communications providers.
There are several factors which we believe will enhance the ability for
competitive providers to compete with the incumbent operators, including general
market receptivity to alternative providers, the desire in the business market
to diversify services to multiple suppliers, and the ability of competitive
providers to attractively bundle services and to offer improved customer
service.

OUR OTHER BUSINESSES

    We are exploring other telecommunications opportunities both domestically
and internationally, including other facilities-based telecommunications
businesses and prepaid cellular telephone service opportunities.


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<PAGE>   20




COMPETITION

    The telecommunications industry and all of its segments are highly
competitive and many of our existing and potential competitors have greater
financial, marketing, technical and other resources than we do. Please refer to
the section entitled "Risk Factors--We face heavy competition in the
telecommunications industry for all of the services we currently provide and
those we intend to provide in the future." Competition for our products and
services is based on price, quality, network reliability, service features and
responsiveness to customers' needs.

CLEC

    In each of our markets, we face competition from ILECs, including Ameritech
and Bell Atlantic, as well as other providers of telecommunications services,
such as GTE, other CLECs and cable television companies. In the local exchange
markets, our principal competitor will be the ILECs. We also face competition or
prospective competition from one or more CLECs. For example the following
companies have each begun to offer local telecommunications services in major
U.S. markets using their own facilities or by resale of the incumbent local
exchange carrier's services or other providers' services: AT&T, MCI WorldCom,
ICG, NEXTLINK and Sprint.

    Some of our competitors, including AT&T, MCI WorldCom and Sprint, have
entered into interconnection agreements with Ameritech in states in which we
operate. These competitors either have begun or in the near future likely will
begin offering local exchange service in those states. In addition to these long
distance service providers and existing CLECs, entities that currently offer or
are potentially capable of offering switched telecommunications services
include:

    o    wireless telephone system operators;

    o    large customers who build private networks;

    o    cable television companies; and

    o    other utilities.

    Competition in our CLEC business will continue to intensify in the future
due to the increase in the size, resources and number of market participants.
Many facilities-based CLECs have committed substantial resources to building
their networks or to purchasing CLECs or IXCs with complementary facilities. By
building or purchasing a network or entering into interconnection agreements or
resale agreements with ILECs, including Regional Bell Operating Companies
(RBOCs) and IXCs, a provider can offer single source local and long distance
services similar to those offered by us. Such additional alternatives may
provide such competitors with greater flexibility and a lower cost structure
than us. Some of these CLECs and other facilities-based providers of local
exchange service are acquiring or being acquired by IXCs. These combined
entities may provide a bundled package of telecommunications products, including
local and long distance telephony, that is in direct competition with the
products offered or planned to be offered by us.

    Under the Telecommunications Act and related federal and state regulatory
initiatives, barriers to local exchange competition are being removed. The
availability of broad-based local resale and introduction of facilities-based
local competition are required before the RBOCs may provide in-region long
distance services originating in their traditional service area. The RBOCs are
currently allowed to offer certain in-region "incidental" long distance services
(such as cellular, audio and visual programming and certain interactive storage
and retrieval functions) and to offer out-of-region landline long distance
services.

    Section 271 of the Telecommunications Act prohibits an RBOC from providing
long distance service that originates (or in certain cases terminates) in one of
its in-region states until the RBOC has satisfied certain statutory conditions
in that state and has received the approval of the FCC. The FCC to date has
granted only one RBOC 271 application, which was filed by Bell Atlantic in New
York. It is currently reviewing an application filed by SBC for Texas. We
anticipate that RBOCs, including Bell Atlantic and SBC/Ameritech, will file
additional applications for in-region long distance authority in other states.
The FCC will have 90 days from the date an application for in-region long
distance authority is filed to decide whether to grant or deny the application.
Once the RBOCs are allowed to offer widespread in-region long distance services,
they will be in position to offer single-source local and long distance services
similar to those offered by CoreComm and the largest IXCs.


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<PAGE>   21




    While new business opportunities have been made available to us through the
Telecommunications Act and other federal and state regulatory initiatives,
regulators are likely to provide the ILECs with an increased degree of
flexibility with regard to pricing of their services as competition increases.
If the ILECs elect to lower their rates and sustain lower rates over time, this
may adversely affect our revenues and place downward pressure on the rates we
can charge. We believe the effect of lower rates may be offset by the increased
revenues available by offering new products and services to our target customers
as well as increased usage, but we cannot be sure that this will occur. In
addition, future regulatory decisions may afford the ILECs excessive pricing
flexibility or other regulatory relief which could have a material adverse
effect on us.

INTERNET

    The Internet services market is also extremely competitive. We compete
directly or indirectly with the following categories of companies:

    o    established online services, such as America Online, the Microsoft
         Network and Prodigy;

    o    local, regional and national ISPs, such as Earthlink/MindSpring and
         Internet America;

    o    national telecommunications companies, such as AT&T and MCI;

    o    RBOCs, such as Ameritech and Bell Atlantic; and

    o    online cable services, such as Excite@Home and Roadrunner.

    This competition will increase as large diversified telecommunications and
media companies acquire ISPs and as ISPs consolidate into larger, more
competitive companies. Diversified competitors may bundle other services and
products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. As a result, our businesses may suffer.

    Our DSL service offering will also face competition from the traditional
telephone companies, cable modem service providers, competitive
telecommunications companies, traditional and new national long distance
carriers, other Internet service providers, on-line service providers and
wireless and satellite service providers.

LMDS

    Depending on the services ultimately offered, our LMDS business could face
the same competition as outlined above. In addition, the extent it is used to
deliver pay television, our LMDS business will compete with franchised cable
television systems and also may face competition from several other types of
Multichannel Video Programming Distributors (MVPDs) including:

    o    Multichannel Multipoint Distribution Systems;

    o    Satellite Master Antenna Television Systems;

    o    DBS and other television receive-only satellite dishes;

    o    video service from telephone companies; and

    o    open video system operators.

    MVPDs face competition from other sources of entertainment, such as movie
theaters and computer on-line services. Further, premium movie services offered
by MVPDs have encountered significant competition from the home video industry.
In areas where off-air television broadcasts can be received without the benefit
of terrestrial distribution systems, MVPDs have experienced competition from
such broadcasters. Online services and ISPs also serve as a source of
competition to MVPDs.

    The Telecommunications Act relaxed the regulatory barriers to entry by ILECs
into the provision of video programming in their local telephone service areas,
and it substantially reduces current and future regulatory burdens on franchised
cable television systems, thus potentially resulting in significant additional
competition to LMDS operators from local telephone companies and franchised
cable television systems.


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<PAGE>   22




OTHER BUSINESSES

    In addition to our CLEC, Internet and LMDS businesses, our other businesses
face strong competition as well. These competitive businesses include long
distance service, cellular service and paging service. Our long distance service
faces competition from long distance carriers, including facilities-based
carriers such as AT&T, MCI WorldCom and Sprint and resellers of long distance
service. Our cellular service faces competition from other cellular carriers,
such as Vodafone AirTouch and AT&T, and from PCS carriers, such as Sprint PCS.
Our paging services are similarly exposed to competition from other providers of
paging services operating in the same local markets, regionally or nationally.

CUSTOMER DEPENDENCE AND SEASONALITY

    We do not depend upon any single customer for any significant portion of our
business. Neither our business nor the telecommunications industry are generally
characterized as having a material seasonal element, and we do not expect our
business or the industry to become seasonal in the foreseeable future.

RECENT DEVELOPMENTS

AGREEMENT TO ACQUIRE ATX TELECOMMUNICATIONS SERVICES, INC.

    On March 10, 2000, we announced that we had entered into a definitive
agreement to acquire ATX Telecommunications Services, Inc. ("ATX"), which is a
facilities based CLEC and integrated communications provider serving the
Mid-Atlantic states. We will pay total consideration consisting of (a)
approximately 12.4 million shares of the Company's common stock, (b) $250
million of 3% convertible preferred stock and (c) $150 million in cash, of which
up to $70 million, at our option, may be paid in senior notes with a two-year
maturity. The convertible preferred stock will be convertible into common stock
at $44.36 per share. Under the agreement's cap provisions, the shares of common
stock to be issued will be reduced if our stock price at closing exceeds $46.38
per share, and the number of common shares underlying the convertible preferred
stock will be reduced if our stock price at closing exceeds $44.36 per share.
The transaction is subject to regulatory and shareholder approval and other
customary closing conditions.

AGREEMENT TO ACQUIRE VOYAGER.NET, INC.

    On March 13, 2000, we and Voyager.net, Inc. ("Voyager.net") announced that
we had entered into a definitive agreement through which we would acquire
Voyager.net for shares of our common stock and cash. Voyager.net is the largest
independent full-service Internet communications company in the Midwest, and is
rapidly expanding into DSL delivery of its services. Under the agreement,
Voyager.net shareholders will receive 0.292 shares of our common stock and $3 in
cash for each share of Voyager.net common stock (an aggregate of approximately
9.2 million shares and approximately $95 million in cash). Under the agreement's
collar provisions, the shares of common stock issued will be reduced if our
common stock price at closing exceeds $57 per share, and increased if our common
stock price at closing is below $41 per share. If our stock price at closing is
below $33 per share, there would be no further adjustment to the number of
shares of our common stock issued and Voyager.net will have the right to
terminate the transaction, subject to our right to adjust further the shares
issued. The transaction is subject to regulatory and shareholder approval and
other customary closing conditions. Holders of over a majority of the voting
shares of Voyager.net have entered into an agreement with us to vote in favor of
the transaction.

OFFERING OF CORECOMM CONVERTIBLE NOTES

    On October 6, 1999, we closed our sale of $175 million of 6% Convertible
Subordinated Notes, due 2006 (the "Convertible Notes"). The Convertible Notes
were sold only in transactions exempt from or not subject to the registration
requirements of the Securities Act of 1933, as amended. The Convertible Notes
are convertible into shares of our common stock at a conversion price of $27.39
per share. Pursuant to a registration rights agreement, we have registered with
the Securities Exchange Commission the Convertible Notes and shares of common
stock issuable upon conversion of the Convertible Notes.

CORECOMM STOCK SPLITS

    In August of 1999, our board of directors approved a 3-for-2 stock split,
payable as a stock dividend. The record date and the payment date for the stock
split were August 30, 1999 and September 2, 1999, respectively. In January 2000,
our board of directors approved another 3-for-2 stock split, also payable as a
stock dividend. The record date and the payment date of the second stock split
were January 28, 2000 and February 2, 2000, respectively. For both stock splits,
one new share of our common stock was distributed for each two shares of our
common stock owned on the record date for the stock split, with fractional
shares rounded up or down. All common stock and per share data have been
adjusted to reflect the stock splits.


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<PAGE>   23




EMPLOYEES

    As of December 31, 1999, we had an aggregate of approximately 850 employees.
None of our employees are represented by any labor organization. We believe that
our relationship with our employees is excellent.

OPTION PLANS

    In 1998, our Board of Directors adopted the CoreComm Limited 1998 Stock
Option Plan and in 1999, our Board of Directors adopted the CoreComm Limited
1999 Stock Option Plan, reserving under these plans shares for issuances to
employees and directors.

    The purpose of our stock option plans is to encourage stock ownership by our
employees and non-employee directors, and the employees and non-employee
directors of our divisions, subsidiary corporations and other affiliates, so as
to encourage our employees to continue being employed by us and to put forth
maximum efforts for the success of our business. Under our stock option plans,
grants may be made of options to acquire shares of our common stock. The options
may be "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code. The terms of options granted under our stock option
plans, including provisions regarding vesting, exercisability, exercise price
and duration, are generally set by the Compensation Committee of our Board of
Directors. In general, options under our plans are 20% vested at grant and vest
20% each January 1 after they are granted, until they are fully vested.

    In January 1999, CoreComm, Inc., one of our wholly-owned subsidiaries,
adopted a stock option plan. Options granted under that plan were not to become
excercisable unless and until there was either a registered public offering of
CoreComm, Inc.'s common stock or a spin-off of CoreComm, Inc. However, pursuant
to the terms of the options granted under that plan, we reserved the right to
cancel the plan and issue new options in the parent company, CoreComm Limited.
In March 2000, the Compensation and Option Committee of our Board of Directors
approved the cancellation of the CoreComm, Inc. plan and the issuance of options
in CoreComm Limited to eligible employees of CoreComm, which will result in the
issuance of options to purchase approximately 2.7 million shares of CoreComm
Limited common stock. The strike prices of the new grants are approximately 30%
of the fair market value of our common stock on the date of the new grant.
Eligibility for receiving the new grants is determined by, among other things,
continued employment with CoreComm.


                                   REGULATION

OVERVIEW

    The telecommunications services we provide are subject to regulation by
federal, state and local government agencies. The following summary does not
purport to describe all current and proposed regulations and laws affecting the
telecommunications industry. Other existing federal and state regulations and
legislation are the subject of judicial proceedings, legislative hearings and
administrative proposals, which could change in varying degrees the manner in
which this industry operates. Neither the outcome of these proceedings nor their
impact on the telecommunications industry or our business can be determined at
this time. Future federal or state regulations and legislation may be less
favorable to us than current regulation and legislation and therefore may have a
material and adverse impact on our business and financial prospects. In
addition, we may expend significant financial and managerial resources to
participate in proceedings setting rules at either the federal or state level,
without achieving a favorable result.

    At the federal level, the FCC has jurisdiction over interstate and
international services and interstate services are communications that originate
in one state and terminate in another. Intrastate services are communications
that originate and terminate in a single state and state public service
commissions exercise jurisdiction over intrastate services. Municipalities and
other local government agencies may also regulate limited aspects of our
business, such as use of government-owned rights-of-way and construction
permits. Our networks are also subject to numerous local regulations such as
building codes, franchise and right-of-way licensing requirements.


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<PAGE>   24




TELECOMMUNICATIONS ACT OF 1996

    The federal Telecommunications Act, enacted in 1996, has resulted and will
continue to result in substantial changes in the marketplace for
telecommunications services. These changes include, at present, opening local
exchange services to competition and, in the future, a substantial increase in
the addressable services for us. Among its more significant provisions, the
Telecommunications Act:

       o   removes legal barriers to entry into all telecommunications services,
           such as long distance and local exchange services;

       o   requires ILECs (e.g., Ameritech or Bell Atlantic) to "interconnect"
           with and provide  services for resale by
           competitors;

       o   establishes procedures for LECs and BOCs to enter into new services,
           such as long distance and cable television;

       o   relaxes regulation of telecommunications services provided by ILECs
           and all other telecommunications service providers; and

       o   directs the FCC to establish an explicit subsidy mechanism for the
           preservation of universal service.

    The FCC was also directed by Congress to revise and make explicit subsidies
inherent in the access charge paid by IXCs for use of local exchange carriers'
services.

REMOVAL OF ENTRY BARRIERS

    The provisions of the Telecommunications Act should enable us to provide a
full range of local telecommunications services in any state. Although we will
be required to obtain certification from state public service commissions in
almost all cases, the Telecommunications Act should limit substantially the
ability of a state public service commission to deny a request for
certification. The provisions of the Telecommunications Act also reduce the
barriers to entry by other potential competitors and therefore increase the
level of competition we will likely face in all markets affected by the Act.
Please refer to the section entitled "Business--Competition."

INTERCONNECTION WITH LOCAL EXCHANGE CARRIER FACILITIES

    A company cannot compete effectively with the ILECs in the switched local
telephone services market unless it is able to connect its facilities with the
ILEC's facilities and obtain access to certain essential services and resources
under reasonable rates, terms and conditions. The Telecommunications Act imposes
a number of access and interconnection requirements on all local exchange
providers, including CLECs, with additional requirements imposed on non-rural
ILECs. These requirements are intended to provide access to certain networks
under reasonable rates, terms and conditions. Specifically, ILECs must provide
the following:

    UNBUNDLING OF NETWORK ELEMENTS. ILECs must offer access to various unbundled
elements of their network. This requirement allows new entrants to purchase at
cost-based rates elements of an ILEC's network that may be necessary to provide
service to a new entrant's customers.

    DIALING PARITY. All local exchange carriers must provide dialing parity,
which means that a customer calling to or from a CLEC network cannot be required
to dial more digits than is required for a comparable call originating and
terminating on the ILEC's network.

    TELEPHONE NUMBER PORTABILITY. Telephone number portability enables a
customer to keep the same telephone number when the customer switches local
exchange carriers.

    RECIPROCAL COMPENSATION. The duty to provide reciprocal compensation means
that local exchange carriers must terminate calls that originate on competing
networks in exchange for a given level of compensation and that they are
entitled to termination of calls that originate on their network, for which they
must pay a given level of compensation.

    RESALE. All local exchange carriers generally may not prohibit or place
unreasonable restrictions on the resale of their services. In addition, ILECs
must offer local exchange services to resellers at a wholesale rate that is less
than the retail rate charged to end users.


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<PAGE>   25






    COLLOCATION. ILECs must permit CLECs to install and maintain their own
network equipment in ILEC central offices and remote terminals subject to
certain rates, terms and conditions.

    ACCESS TO RIGHTS-OF-WAY. All ILECs, CLECs and certain other utilities must
provide access to their poles, ducts, conduits and rights-of-way on a
reasonable, nondiscriminatory basis.

    ILECs are required to negotiate in good faith with other carriers that
request any or all of the arrangements discussed above. If a requesting carrier
is unable to reach agreement with the ILEC within a prescribed time, either
carrier may request arbitration by the applicable state commission.

    The rates charged by ILECs for interconnection and unbundled network
elements vary greatly from state to state. These rates must be approved by state
regulatory commissions, which often follows a lengthy and expensive negotiation,
arbitration, and review process. Recurring and non-recurring charges for
telephone lines and other unbundled network elements may change based on the
rates proposed by ILECs and approved by state regulatory commissions from time
to time, which could have an adverse effect on our operations. In addition, the
FCC's cost- based methodology for determining these rates is still subject to
judicial review, which creates uncertainty about how interconnection and
unbundled element rates will be determined in the future.

    While the Telecommunications Act generally requires ILECs to offer
interconnection, unbundled network elements and resold services to CLECs,
ILEC-to-CLEC interconnection agreements may have short terms, requiring the CLEC
to renegotiate the agreements. ILECs may not provide timely provisioning or
adequate service quality, thereby impairing a CLEC's reputation with customers
who can easily switch back to the ILEC. In addition, the prices set in the
agreements may be subject to significant rate increases if state regulatory
commissions establish prices designed to pass on to the CLECs part of the
intrastate cost of providing universal service.

    In January 1999, the United States Supreme Court upheld the FCC's authority
to adopt pricing rules for interconnection services, unbundled network elements,
and resale by CLECs. However, the Supreme Court instructed the FCC to reconsider
aspects of its 1996 order regarding the extent to which ILECs are required to
unbundle elements of their networks. The FCC's pricing rules are still subject
to further judicial review. On remand from the Supreme Court, the FCC adopted an
order on September 15, 1999, which specified the unbundled elements that ILECs
must make available to competitors. The FCC reaffirmed that incumbents must
provide unbundled access to six of the seven network elements that were listed
in the FCC's 1996 order. According to the FCC, the seventh item, operator and
directory assistance services, are no longer necessary to permit competition.
The FCC's order also added additional unbundled elements to the list --
subloops, portions of loops, dark fiber optic loops and transport -- but
declined, except in limited circumstances, to require ILEC's to unbundle the
facilities used to provide high-speed Internet access and other data services.
In addition, the FCC initiated a further rulemaking proceeding to consider
whether carriers should be able to combine certain unbundled elements to provide
special access services in competition with those provided by the ILECs.
Portions of the FCC's 1999 ruling have been appealed by several parties.

     In February 1999, the FCC determined that calls to ISPs are interstate in
nature, thus falling under the FCC's jurisdiction and outside the scope of the
Communications Act's reciprocal compensation requirements. The FCC initiated a
review of compensation arrangements for calls to ISPs but stated that, in the
meantime, parties may voluntarily include reciprocal compensation provisions in
their interconnection agreements and that state commissions may order
compensation for termination of ISP calls. Many states decided to leave intact
existing decisions in favor of reciprocal compensation for ISP-bound calls. On
March 24, 2000, the U.S. Court of Appeals for the D.C. Circuit overturned the
FCC's decision that calls to ISPs are not local. The court found that the FCC
had failed to explain adequately its determination that a call does not
"terminate" at an ISP merely because the ISP then originates further
telecommunications that extend beyond state boundaries. In response to this
court ruling, the FCC could try to bolster its original jurisdictional
conclusion or it could determine that calls to ISPs are local. If it takes the
latter course, CLECs will be entitled to reciprocal compensation under the
Communications Act for terminating ISP-bound traffic, which could have a
favorable impact on our revenues. Such a decision, however, could also
potentially lead to more state control over Internet-related services, which
could have a negative effect on our roll out of such services.


                                       23

<PAGE>   26
    Several ILECs have filed petitions at the FCC and have initiated legislative
efforts to effect a waiver of the obligation to unbundle and offer services for
resale with regard to high-speed data or "advanced" services. In addition, the
ILECs are seeking to provide such services on an interLATA (long distance) basis
before they have been granted approval by the FCC pursuant to Section 271 of the
Communications Act to enter the long distance market. Although the FCC has held
that advanced services continue to be subject to the resale and unbundling
obligations of the Act, it has commenced a proceeding to determine whether ILECs
can create separate affiliates for advanced services that would be free of these
obligations. In November 1999, the FCC ruled that DSL services that traditional
telephone companies sell to Internet service providers need not be resold to
competitive telecommunications providers at wholesale rates. In addition, an FCC
decision on voluntary remand from the U.S. Court of Appeals for the D.C. Circuit
affirmed and clarified the FCC's position that advanced services are subject to
the interconnection, resale, and unbundling requirements of the Act. Permitting
ILECs to provision data services through separate affiliates with fewer
regulatory requirements could have a material adverse impact on our ability to
compete in the data services sector. The FCC also imposed conditions on the
merger of SBC with Ameritech in October 1999 that permit the provisioning of
advanced data services via separate subsidiaries pursuant to various
requirements, some of which expire in the near term. We cannot predict whether
these requirements are enforceable, nor whether they will deter anticompetitive
behavior if they are enforceable. Bell Atlantic's application for long distance
service in New York has been approved subject to similar separate subsidiary
provisions. These areas of regulation are subject to change through additional
proceedings at the FCC or judicial challenge.

    On March 17, 2000, the U.S. Court of Appeals for the D.C. Circuit issued a
decision in which it vacated significant portions of an FCC order that granted
collocation rights to CLECs for advanced services equipment. In particular, the
court found that that FCC's order impermissibly appears to permit competitors to
collocate equipment that may do more than what is required to achieve
interconnection or access to unbundled network elements. It faulted the FCC for
requiring ILECs to permit collocation of any equipment that is "used or useful"
for either interconnection or access to unbundled elements "regardless of other
functionalities inherent in such equipment." It told the FCC to explain better
which types of equipment are actually "necessary" for interconnection or access.
On remand, the FCC could determine that much of the multi-function equipment
that CLECs generally wish to collocate today satisfies the court's "necessary"
standard. In fact, the court's only example of equipment that likely would not
meet the standard is equipment that facilitates payroll or data collection.
Nevertheless, it probably will be years before the FCC and the courts decide
this issue finally and, in the meantime, many ILECs may seek to interpret the
court's decision to mean that they do not have to permit the collocation of
multi-function equipment. This could significantly delay or hamper our network
deployment plans, which call for collocation of various types of equipment in
ILEC central offices.

    In this March 17, 2000 order, the court also overturned the FCC's
determination that ILECs must permit collocating CLECs to cross-connect their
facilities. The court stated that the FCC failed to explain how cross-connects
between CLECs are necessary for interconnection with or access to the unbundled
elements of the ILEC. In addition, the court rejected some of the FCC's
provisions regarding the implementation of physical collocation, such as the
requirement that ILECs give competitors the option of collocating equipment "in
any unused space." The immediate impact of these rulings is that ILECs may seek
to hinder physical collocation, driving up collocation costs. The FCC will have
the opportunity to offer explanations for its decisions, but such explanations
may not be issued in the near future. The March 17 order did uphold certain FCC
rules, including the requirement that ILECs provide cageless and adjacent
collocation, and rules regarding cost allocation.

    On December 9, 1999, the FCC released its line sharing order that requires
ILECs to offer line sharing as an unbundled network element by June 6, 2000.
Line sharing permits CLECs to use a customer's existing line to provide DSL
services while the ILEC continues to use the same line to provide voice service.
Prices for line sharing will be set by the states. The decision has been
appealed.

    There are also numerous bills being considered by Congress that would
deregulate the provision of advanced services by ILECs. These regulatory or
legislative outcomes could have an adverse effect on our ability to obtain
access to the network elements necessary for the provision of advanced services
to our customers or to compete with ILECs in the provision of such services.

LOCAL EXCHANGE CARRIER ENTRY INTO NEW MARKETS

    Our principal competitor in each market we enter is the ILEC. Prior to the
enactment of the Telecommunications Act, the RBOCs generally were prohibited by
the consent decree that broke up the Bell System from providing long distance
services. The Telecommunications Act established procedures under which a RBOC
can provide landline long distance services originating from (and in certain
cases, terminating in) its traditional telephone service area after receiving
approval from the FCC. The interconnection offered or provided by the RBOC must
comply with a competitive checklist that incorporates the interconnection
requirements discussed above. Please refer to the section entitled
"--Interconnection with Local Exchange Carrier Facilities." RBOCs are currently
permitted to provide landline long distance services to customers outside of
their local service areas and in conjunction with their mobile telephone service
offerings.

                                       24
<PAGE>   27




    Approval from the FCC will enable a RBOC to provide customers with a full
range of local and long distance telecommunications services. The provision of
landline long distance services by RBOCs is expected to reduce the market share
of the major long distance carriers, which may be significant customers of our
services. Consequently, the entry of the RBOCs into the long distance market may
have adverse consequences on the ability of CLECs both to generate access
revenues from the IXCs and to compete in offering a package of local and long
distance services. On December 22, 1999, the FCC approved an application filed
by Bell Atlantic seeking authority to begin providing long distance services to
customers located in the State of New York, where it also provides local
telephone service. This action represents the first approval by the FCC of an
RBOC request to provide long distance services to customers located in its local
operating region. The FCC's approval of Bell Atlantic's application is likely to
strengthen Bell Atlantic's competitive position in New York substantially. In
addition, we anticipate that Bell Atlantic will soon initiate similar
proceedings to obtain long distance service authority in other states in its
fourteen state operating region. For example, Bell Atlantic already has begun
the necessary regulatory review process in the Commonwealth of Massachusetts. In
addition, on January 10, 2000, Southwestern Bell filed an application with the
FCC seeking permission to provide long distance services to customers in Texas.
More RBOC requests to provide in-region long distance service are expected to be
filed with the FCC in the near future.

RELAXATION OF REGULATION

    A goal of the Telecommunications Act is to increase competition for
telecommunications services, thereby reducing the need for regulation of these
services. To this end, the Telecommunications Act requires the FCC to streamline
its regulation of ILECs and permits the FCC to forbear from regulating
particular classes of telecommunications services or providers. Since we are a
non-dominant carrier and, therefore, are not heavily regulated by the FCC, the
potential for regulatory forbearance likely will be more beneficial to the ILECs
than to us in the long run.

    The Communications Act requires all common carriers to charge just and
reasonable rates for their services and to file schedules of these rates with
the FCC. These schedules are known as "tariffs" and they represent a contract
between a carrier and its customers. The Telecommunications Act permits the FCC
to "forbear" from enforcing certain provisions of the Communications Act and the
FCC has used this authority to determine that it is in the public interest to
prohibit carriers from filing tariffs for their interstate services. This
decision of the FCC and its "mandatory detariffing" has been stayed by the U.S.
Court of Appeals for the D.C. Circuit. If the FCC is successful in its attempt
to preclude telecommunications providers from filing tariffs, it may increase
our exposure to litigation. Currently, tariffs contain provisions limiting the
liability of providers on a variety of issues. In the absence of filed tariffs,
carriers would have to rely on negotiated contracts with each customer to
provide such liability limitations.

    Another FCC decision permits, but does not require, CLECs to file tariffs
for the charges that they levy on interstate long distance carriers for
completing calls to CLEC customers (refer to the discussion of "access charges"
below). In the absence of a tariff, a carrier depends on a contract with its
customers to determine the rates and conditions of service.

UNIVERSAL SERVICE AND ACCESS CHARGE REFORM

    On May 8, 1997, the FCC issued an order implementing the provisions of the
Telecommunications Act relating to the preservation and advancement of universal
telephone service. This order requires all telecommunications carriers providing
interstate telecommunications services, including us, to contribute to universal
service support. Our share of the contributions used to support schools,
libraries and rural health care programs is based on our share of the total
industry end user telecommunications revenues. Our share of the federal
high-cost fund is based on our share of total interstate telecommunications
revenue. Although we have already begun contributing to the federal universal
service fund, the amount of our required contribution changes each quarter.
Various states are also in the process of implementing their own universal
service programs. We are currently unable to quantify the amount of subsidy
payments that we will be required to make and the effect that these required
payments will have on our financial condition.

    On July 30, 1999, the United States Court of Appeals for the Fifth Circuit
overturned certain of the FCC's rules governing the basis on which the FCC
collects subsidy payments from telecommunications carriers and recovery of those
payments by ILECs. In October 1999, the FCC released two orders in response to
the Fifth Circuit decision. One order permits ILECs to continue to recover their
universal service contributions from access charges or to establish end-user
charges. The second order changed the contribution basis for school/library
funding to eliminate calculations based upon intrastate revenues. A number of
parties have petitioned the Supreme Court to review the Fifth Circuit's
decision.


                                       25

<PAGE>   28




    In May 1999, the FCC adopted a framework for a new, forward-looking,
high-cost support mechanism that will provide support for non-rural
telecommunications carriers. The FCC stated that the support mechanism will be
used only to determine federal support and will not impose any obligation on a
state to impose intrastate surcharges. It is not possible to determine at this
time what effect this ruling will have on the level of contributions we are
required to make to either the federal or various state universal service
programs, or if it will become easier for us to become qualified as recipients
of universal service funds when we serve high-cost areas.

    In a related proceeding, on May 16, 1997, the FCC issued an order
implementing certain reforms to its access charge rules. Access charges are
charges imposed by local exchange carriers on long distance providers for access
to the local exchange network, and are designed to compensate the local exchange
carrier for its investment in the local network. The FCC regulates interstate
access and the states regulate intrastate access. This order required ILECs to
substantially decrease over time the prices they charge for switched and special
access and changed how access charges are calculated. These changes are intended
to reduce access charges paid by IXCs to local exchange carriers and shift
certain usage-based charges to flat-rated, monthly per-line charges. To the
extent that these rules are effective in reducing access charges, our ability to
offer customers lower-cost access services might be impaired. Additionally, the
FCC ruled that ILECs may no longer impose certain interconnection charges on
competitive providers that interconnect with the ILEC at the end offices but do
not use the transport facilities.

    On August 27, 1999, the FCC issued an order implementing further reforms to
its access charge rules. The FCC's order granted price cap LECs greater pricing
flexibility, and instituted other access charge reforms designed to increase
competition and reduce access charges. These changes could impair our ability to
offer customers lower-cost access services. The FCC also issued a notice of
proposed rulemaking, proposing additional pricing flexibility. In addition, the
FCC stated that it is considering whether to adopt rules constraining CLEC
access charges. To the extent CLEC access charges are reduced, our revenue could
decrease.

    Some state public service commissions have adopted rules or are currently
considering actions to preserve universal services and promote the public
interest.

FEDERAL REGULATION GENERALLY

    Through a series of proceedings, the FCC has established different levels of
regulation for "dominant carriers" and "non-dominant carriers." Only ILECs are
classified as dominant; all other providers of domestic interstate services are
classified as non-dominant carriers. As a non-dominant carrier, we are subject
to relatively limited regulation by the FCC. However, at a minimum, we must
offer interstate services at just and reasonable rates in a manner that is not
unreasonably discriminatory.

    The FCC has adopted rules requiring ILECs to provide collocation to CLECs
for the purpose of interconnecting their competing networks. Under the rules
adopted by the Local Competition Orders, ILECs are required to provide either
physical collocation or virtual collocation at their switching offices.
Recently, the FCC established new rules designed to make it easier and less
expensive for CLECs to obtain collocation at ILEC central offices by, among
other things, restricting the ILECs' ability to prevent certain types of
equipment from being collocated and requiring ILECs to offer alternative
collocation arrangements to CLECs. On March 17, 2000, however, the U.S. Court
of Appeals for the D.C. Circuit overturned several of these collocation rules,
finding that the FCC had failed to make a determination about whether all the
types of equipment ILECs are required to collocate is "necessary" for
interconnection or access to unbundled elements. According to the court, such a
determination is required under the Communications Act. The court also rejected
other FCC rules that permit CLECs to cross-connect their equipment with the
equipment of other CLECs and give CLECs the option of collocating equipment in
any unused space in an ILEC central office. While, ultimately, the FCC could
provide reasoned explanations for its current collocation requirements, the
uncertainty created by this court decision could provide ILECs with a basis for
refusing to collocate multi-function equipment or provide collocation in a
timely and efficient manner. This could have a negative impact on our network
deployment plans.

    All local exchange carriers, including CLECs, must:

    o    make their services available for resale by other carriers;

    o    provide nondiscriminatory access to rights-of-way;

    o    offer reciprocal compensation for termination of traffic; and

    o    provide dialing parity and telephone number portability.


                                       26

<PAGE>   29






    In addition, the Telecommunications Act requires all telecommunications
carriers to contribute to the universal service mechanism established by the FCC
and to ensure that their services are accessible to and usable by persons with
disabilities. Moreover, the FCC is considering the regulatory implications of
various aspects of local exchange competition. Any or all of these proceedings
may negatively affect CLECs, including us.

    The May 21, 1997 order reforming the FCC's price cap formula and the August
27, 1999 order granting ILECs substantial pricing flexibility with regard to
interstate access services afford ILECs greater flexibility in establishing
rates and provide additional incentives to foster efficiency. Because these
regulatory initiatives enable ILECs to offer selectively reduced rates for
access services, the rates we may charge for access services could be
constrained. Our rates also will be constrained by our competitors which,
excluding the ILECs, are subject to the same streamlined regulatory regime as us
and can price their services to meet competition.


STATE REGULATION GENERALLY

    Most state public service commissions require companies to be certified to
provide common carrier services. These certifications generally require a
showing that the carrier has adequate financial, managerial and technical
resources to offer the proposed services in a manner consistent with the public
interest.

    In addition to obtaining certification, in each state, we must negotiate
terms of interconnection with the incumbent local exchange carrier before we can
begin providing switched services. Under the Telecommunications Act, the FCC has
adopted interconnection requirements, certain portions of which have been upheld
by the United States Supreme Court and other portions of which are subject to
reconsideration by the FCC or further judicial review. Please refer to the
section entitled "--Interconnection with Local Exchange Carrier Facilities."
State public utility commissions are required to approve interconnection
agreements before they become effective and must arbitrate disputes among the
parties upon request. We have already entered into interconnection agreements
with Ameritech, Cincinnati Bell Telephone and Bell Atlantic. We have also
initiated the process of negotiations with Ameritech and Bell Atlantic for
additional interconnection agreements. Regulatory changes could require
renegotiation of relevant portions of existing interconnection agreements, or
subject them to additional court and regulatory proceedings.

    Some recent state regulatory commission decisions regarding the
applicability of the Telecommunications Act's reciprocal compensation provisions
to the termination of calls placed to ISPs could result in lower revenues for
CLECs in those states. The issue remains undecided in various other states.

    We are not presently subject to price regulation based on costs or earnings.
Most states require CLECs to file tariffs setting forth the terms, conditions
and prices for intrastate services. Some states permit tariffs to list a rate
range or set prices on an individual case basis.

    Several states provide ILECs with flexibility for their rates, special
contracts (selective discounting) and tariffs, particularly for services deemed
subject to competition. This pricing flexibility increases the ability of the
incumbent local exchange carrier to compete with us and constrains the rates we
may charge for its services. In light of the additional competition that is
expected to result from the Telecommunications Act, states may grant ILECs
additional pricing flexibility. At the same time, some ILECs may request
increases in certain local exchange rates to offset revenue losses due to
competition.

    The rates that may be charged by ILECs for access to loops and other network
elements are set by state public service commissions based on pricing
established by the FCC. Proposed changes to existing rates are currently being
considered by public service commissions in several states, including states in
which we are presently operating. If approved, these changes could increase our
costs of doing business, thus having an adverse effect on our operations.


                                       27


<PAGE>   30
REGULATION OF RESELLERS

    The FCC has defined resale as any activity in which a party (the reseller)
subscribes to the services or facilities of a facilities-based provider (or
another reseller) and then reoffers communications services to the public for
profit, with or without adding value. Resellers are common carriers generally
subject to all rules and regulations placed on providers of the underlying
services by either the FCC or the states in which they operate. The FCC has held
that prohibitions on the resale of common carrier services are unjust,
unreasonable, and unlawfully discriminatory in violation of the Communications
Act. Accordingly, all common carriers must make their services available for
resale at rates, terms, and conditions that do not unreasonably discriminate
against resellers. The Telecommunications Act imposes the additional duty upon
incumbent local exchange carriers to make their services available for resale at
wholesale rates. The FCC adopted specific requirements for determining such
wholesale rates for local telecommunications services. While the United States
Supreme Court upheld the FCC's authority to adopt these rules, the FCC's
specific pricing rules are subject to further judicial review. As to other
telecommunications services, however, there is no regulation that requires
discounts to resellers below those offered to end users of the same quantities
of like services. The FCC has determined that because of the competitive
development of broadband commercial mobile radio service, it will eliminate the
explicit requirement that those services be offered for resale after November
24, 2002.

LOCAL GOVERNMENT AUTHORIZATIONS

    Many jurisdictions where we may provide service require license or franchise
fees based on a percentage of certain revenues. Because the Telecommunications
Act specifically allows municipalities to charge fees for use of the public
rights-of-way, it is likely that jurisdictions that do not currently impose fees
will seek to impose fees in the future. However, the amount and basis of these
fees have been successfully challenged by several telecommunications service
providers. Federal courts have struck down municipal ordinances that (1) do not
relate the fees imposed under the ordinance to the extent of a provider's use of
the rights-of-way; (2) do not relate the fees imposed under the ordinance to the
costs incurred by the local government in maintaining the rights-of-way; or (3)
seek to impose fees based on a concept of the "value" of the use to the provider
by relating the fees to provider revenues. Additionally, because the
Telecommunications Act requires jurisdictions to charge non-discriminatory fees
to all telecommunications providers, telecommunications providers are
challenging municipal fee structures that excuse other companies, particularly
the ILECs, from paying license or franchise fees, or allow them to pay fees that
are materially lower than those that are required from new competitors such as
CoreComm. A number of these decisions have been appealed and, in any event, it
is uncertain how quickly particular jurisdictions will respond to the court
decisions without a specific legal challenge initiated by us or another CLEC to
the fee structure at issue.

LOCAL MULTIPOINT DISTRIBUTION SERVICE

    The FCC has established a new wireless service referred to as "Local
Multipoint Distribution Service" or LMDS. The FCC allocated two frequency blocks
in each of 493 Basic Trading Areas in the U.S. to LMDS: Block A with 1,150 MHz
of spectrum in the 28 GHz and 31 GHz bands, and Block B with 150 MHz in the 31
GHz band. LMDS licenses are awarded for ten-year terms with renewal expectancies
provided to licensees that make a showing of substantial service in their
licensed areas.

    LMDS may be used to provide any kind of communications service on a common
carrier or non common-carrier basis. Radio frequencies in the 28 and 31 GHz
bands are generally capable of only "line-of-sight" transmission and reception,
are subject to interference from certain weather conditions, and do not lend
themselves to mobile applications. LMDS is expected to be used for the delivery
of various broadband services to homes and offices, including
telecommunications, Internet access, and two-way video. At least seven other
countries, including Canada and Mexico, have licensed LMDS on either a permanent
or experimental basis. LMDS licensees are expected to be able to provide a wide
array of services, two-way capabilities, and high capacity through the use of
newer digital equipment and transmission mechanisms. The FCC expects that
Block-A LMDS licensees especially, by applying cellular-style frequency re-use
technology to an already large frequency bandwidth, have the potential to become
competitors to ILECs and cable operators. Accordingly, the LMDS rules prohibit
ownership of Block-A licenses by ILECs and incumbent cable operators prior to
July 2000, but permit an applicant that would otherwise be prohibited from
holding a Block-A license to apply for a waiver of the ownership restriction by
showing that it does not have market power in its telephone or cable service
area.

    The FCC held a simultaneous, multiple-round auction for the 986 LMDS
licenses which closed on March 25, 1998. 104 winning participants bid a total of
$578,663,029 for 864 licenses. No auction participant placed the minimum opening
bid on any of the remaining 122 licenses, which were reauctioned in April and
May, 1999. In the initial auction, we won 15 Block-A licenses for Basic Trading
Areas encompassing substantially all population centers in the state of Ohio,
for a total bid of $25,241,133. Auction participants that had average gross
revenues for the previous three years of $75 million or less, when aggregated
with all commonly controlled affiliates, were entitled to bidding credits of
25%, 35%, or 45%. We did not qualify for any bidding credit. The FCC has since
granted our 15 LMDS licenses with an effective date of June 8, 1998.

                                       28
<PAGE>   31




FUTURE INTERNATIONAL OPERATIONS

    We may ultimately expand our operations to other countries and already
provide international resale services. The FCC requires every carrier that
intends to originate international telecommunications from within the U.S.,
either through the use of its own facilities or on a resale basis, to secure in
advance an authorization from the FCC under Section 214 of the Communications
Act. Additionally, these carriers must file with the FCC a tariff containing the
rates, terms, and conditions of their international service offerings. In
applying for a 214 Authorization, a carrier must disclose any affiliations with
or special concessions from foreign carriers or nations. The FCC has streamlined
its procedures for granting 214 Authorizations, providing a routine grant of
such authorizations in 35 days unless an application is formally opposed or the
applicant is affiliated with a carrier that controls bottleneck
telecommunications facilities in a foreign country, in which case the applicant
may be subject to more stringent regulation as a "dominant" carrier.
Additionally, applicants affiliated with foreign carriers in countries that are
signatories to the Telecommunications Annex to the World Trade Organization
General Agreement of Trade in Services, including Canada, have a reduced burden
of demonstrating their "non-dominance." Carriers that have received 214
Authorizations are subject to certain reporting requirements, must file
contracts with foreign correspondents, and are restricted in the provision of
certain services to certain nations, such as the use of resold private lines for
switched services and the provision of any services to countries on the FCC's
"exclusion list." We hold a 214 Authorization for both facilities-based and
resale international services and have filed a tariff for our international
resale services.

INTERNET REGULATION

    The FCC currently does not regulate the provision of Internet service,
although it does regulate common carriers that provide elements of the
"backbone" networks on which the Internet is based. Similarly, state public
utility commissions generally do not regulate Internet service, except in some
limited circumstances where incumbent local exchange carriers provide Internet
services. The FCC and some states, however, are reviewing the development of the
Internet and the types of services that are provided through it. For example, if
the FCC should determine that an Internet service provider offers a service that
is an exact substitute for long distance telephone service with the sole
distinction that it is based on a packet-switched network rather than a
circuit-switched network, the FCC may determine that it should provide
regulatory parity for the services.

ITEM 2.  PROPERTY

    Certain of our subsidiaries lease switch buildings, ILEC collocations and
office space which we believe are adequate to serve our present business
operations and our needs for the foreseeable future. See the Notes to the
Consolidated Financial Statements included elsewhere in this Form 10-K for
information concerning lease commitments.

ITEM 3.  LEGAL PROCEEDINGS

    We are not involved in any legal disputes that we expect to have a material
adverse effect on our results of operations or financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

    No matter was submitted to a vote of security holders of the Company during
the quarter ended December 31, 1999.


                                       29

<PAGE>   32




                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS.

CoreComm formerly was a wholly owned subsidiary of Cellular Communications of
Puerto Rico, Inc. ("CCPR") (formerly CoreComm Incorporated). On September 2,
1998, CCPR distributed to its stockholders, on a one for one basis, all of the
capital stock of CoreComm. CoreComm's Common Stock began trading on the Nasdaq
Stock Market's National Market on September 2, 1998, under the Nasdaq symbol
"COMFV". Subsequently, on September 3, 1998, the symbol was changed to "COMMF,"
and on September 17, 1999, the symbol was changed to "COMM", under which it
presently trades. The following table sets forth for the periods indicated, the
high and low last sale prices on the Nasdaq Stock Market's National Market.

<TABLE>
<CAPTION>
                                                                                          LAST SALE PRICE
                                                                                       ------------------------
                                                                                        HIGH              LOW
                                                                                       ------           -------
<S>                                                                                  <C>               <C>
1998
Third Quarter (beginning September 2, 1998)                                            $10.14           $  4.44
Fourth Quarter                                                                         $ 7.67           $  3.33
1999
First Quarter                                                                          $17.39           $  7.28
Second Quarter                                                                         $22.00            $16.11
Third Quarter                                                                          $25.50            $20.53
Fourth Quarter                                                                         $39.58            $23.83
2000
First Quarter (through March 23, 2000)                                                 $49.31            $32.17
</TABLE>

On March 23, 2000, the last sales price for the Common Stock on the Nasdaq Stock
Market National Market was $48.00. As of March 23, 2000, there were
approximately 376 record holders of the Common Stock. This figure does not
reflect beneficial ownership of shares held in nominee names.

We have never declared or paid any cash dividends on the Common Stock. We
anticipate that we will retain earnings, if any, for use in the operation and
expansion of its business and we do not anticipate paying any cash dividends in
the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA.

The following selected financial data of CoreComm and its predecessor, OCOM
Corporation Telecoms Division ("OCOM") should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in this
Form 10-K. The selected historical financial data relates to OCOM as it was
operated prior to its acquisition by CoreComm.


<TABLE>
<CAPTION>
                                                                                       THE PREDECESSOR (OCOM)
                                                                                       ----------------------
                                                    FOR THE PERIOD
                                                     FROM APRIL 1,
                                                      1998 (DATE
                                                      OPERATIONS        FOR THE PERIOD
                                    YEAR ENDED       COMMENCED) TO      FROM JANUARY 1,
                                   DECEMBER 31,       DECEMBER 31,          1998 TO             YEAR ENDED DECEMBER 31,
                                     1999 (1)           1998 (2)          MAY 31, 1998       1997        1996     1995 (3)
                                   ------------     ---------------     ---------------    --------    --------   --------
                                            (in thousands, except per share data)
<S>                                   <C>               <C>                 <C>            <C>          <C>        <C>
INCOME STATEMENT DATA:
Revenues                              $58,151           $  6,713            $  1,452       $  3,579    $ 5,103    $  4,001
Operating expenses                    161,376             25,139               4,234          7,954      6,333       8,413
Net (loss)                           (103,524)           (16,255)             (2,782)        (4,379)    (1,097)     (4,154)
Basic and diluted net
  (loss) per common
  share (4)                             (3.03)              (.55)               (.09)          (.15)      (.04)       (.17)
Basic and diluted
 weighted average number
 of common shares(4)                  34,189             29,678              29,664         29,419     29,691      24,908
</TABLE>


                                       30

<PAGE>   33



<TABLE>
<CAPTION>

                                                                   THE PREDECESSOR (OCOM)
                                              DECEMBER 31,     -------------------------------
                                 1999(1)       1998(2)          1997         1996        1995
                                 --------      --------        ------       ------      ------
                                                     (in thousands)
<S>                              <C>           <C>              <C>        <C>          <C>
BALANCE SHEET DATA:
Working capital                  $121,292      $133,899        $ (950)      $ (490)     $  (42)
Fixed assets--net                  90,619         3,582         1,269          270         226
Total assets                      392,103       176,526         1,731          917       1,020
Long-term debt                    179,318           283            --           --          --
Other noncurrent liabilities       14,564           218            --           --          --
Shareholders' equity              126,926       169,297            --           --          --
Parent's investment                    --            --           321         (208)       (207)
</TABLE>

(1)      In 1999, we acquired 100% of the stock of MegsINet Inc. and the CLEC
         assets of USN Communications, Inc. In addition, we issued $175 million
         principal amount of 6% Convertible Subordinated Notes due 2006.

(2)      During the period from April 1, 1998 (date operations commenced) to
         December 31, 1998, CCPR made the following contributions to CoreComm
         prior to the spin-off: (a) a cash contribution of $150 million, (b)
         businesses acquired by CCPR in April and June 1998 and (c) the
         subsidiary that owns various LMDS licenses in Ohio that were acquired
         for an aggregate of $25,241,000.

(3)      OCOM incurred one-time costs of $2,294,000 in 1995 in connection with
         the expansion of its cellular long distance resale business into
         certain AT&T Wireless markets.

(4)      After giving retroactive effect to the 3-for-2 stock split by way of
         stock dividend paid in September 1999 and the 3-for-2 stock split by
         way of stock dividend paid in February 2000. The weighted average
         number of common shares prior to September 1998 are equivalent to
         CCPR's historical weighted average shares (since CCPR shareholders
         received one share of the Company for each CCPR share owned).

         We have never declared or paid any cash dividends.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION.


                              RESULTS OF OPERATIONS


YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM APRIL 1, 1998 (DATE
OPERATIONS COMMENCED) TO DECEMBER 31, 1998

     As a result of the completion of the acquisitions of 100% of the stock of
MegsINet Inc. and the CLEC assets of USN Communications, Inc. in May 1999, we
consolidated the results of operations of these businesses from the dates of
acquisition. The results of these businesses are not included in the 1998
results.

     A significant component of the 1999 results is associated with the
acquisition of certain assets of USN. Although USN quickly developed a large
customer list and revenue base in 1997 and 1998, it had difficulties under its
previous management providing services, including billing, customer care and
other operational areas, and filed for bankruptcy in February 1999. Since the
acquisition, we have been focusing on improving these operations, and have been
successful in many areas. However, we did not actively sell additional lines in
these markets in 1999 because we were not fully satisfied with the quality of
the operations. Consequently, and consistent with our due diligence, transaction
structure and purchase price, revenues associated with the USN assets have
declined significantly since our acquisition, and additional declines may
continue as customers leave or "churn" off the service.


                                       31

<PAGE>   34






     The increase in revenues to $58,151,000 from $6,713,000 is primarily due to
acquisitions in 1999, which accounted for $40,909,000 of the increase. The
remainder of the increase is primarily due to an increase in CLEC and ISP
revenues from an increase in customers, offset by the decline in cellular long
distance revenue as a result of customers switching to other long distance
providers. In the third quarter of 1999, we sold most of our prepaid cellular
debit card business and we terminated our cellular long distance business in
certain markets. We had revenues in 1999 of $2,223,000 from the prepaid cellular
debit card business and $519,000 from the cellular long distance business in
these markets.

     Operating costs increased to $58,561,000 from $5,584,000 primarily due to
acquisitions in 1999, which accounted for $43,315,000 of the increase. The
remainder of the increase is primarily due to the increase in revenues.
Operating costs as a percentage of revenues increased to 101% from 83%. The
increase in percentage terms is the result of an increase in the fixed component
of operating expenses due to the migration toward a facilities-based
infrastructure. Operating costs as a percentage of revenues is expected to
remain higher than 1998 levels until customer and revenue growth exceeds the
increases in facilities-based infrastructure costs. In 1999, operating costs
were $2,543,000 from the prepaid cellular debit card business and $458,000 from
the cellular long distance business in the terminated markets.

     Selling, general and administrative expenses increased to $74,185,000 from
$11,940,000 primarily due to acquisitions in 1999, which accounted for
$33,184,000 of the increase. The remainder of the increase is a result of
increased selling and marketing costs and increased customer service costs.
These costs are expected to increase in the foreseeable future as we grow our
operations and customer base.

     Corporate expenses include the costs of our officers and headquarters
staff, the costs of operating the headquarters and costs incurred for strategic
planning and evaluation of business opportunities. Corporate expenses increased
to $7,996,000 from $2,049,000 because the 1998 expenses did not represent a full
period of results due to the fact that the spin-off from CCPR occurred on
September 2, 1998, at which time corporate expenses commenced. In addition,
allocated charges from NTL Incorporated (a company that has some of the same
officers and directors as CoreComm) have increased due to the sales in 1999 of
other affiliated companies.

     The non-cash compensation charge of $1,056,000 in 1999 is recorded in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
related to a change in employee stock option agreements. The non-cash
compensation charge of $4,586,000 in 1998 is recorded in accordance with APB
Opinion No. 25, as a one time charge related to the issuance of the Company's
warrants and stock options to holders of CCPR's stock options in connection with
the Company's distribution to CCPR's shareholders.

     Depreciation expense increased to $10,945,000 from $749,000 as a result of
acquisitions in 1999, which accounted for $7,176,000 of the increase and an
increase in fixed assets.

     Amortization expense increased to $8,633,000 from $231,000 due to the
amortization of goodwill and other intangibles from the acquisitions in 1999.

     Interest income and other, net, increased to $5,773,000 from $2,632,000
primarily due to interest income on the Company's cash, cash equivalents and
marketable securities.

     Interest expense increased to $5,341,000 from $21,000 primarily due to
interest on the 6% Convertible Subordinated Notes issued in October 1999 and
interest on notes payable and capital leases of acquired businesses.


                                       32

<PAGE>   35





FOR THE PERIOD FROM APRIL 1, 1998 (DATE OPERATIONS COMMENCED) TO DECEMBER 31,
1998 AND FOR THE YEAR ENDED DECEMBER 31, 1997

     As a result of the completion of the acquisitions of Digicom, Inc. in April
1998, certain assets of JeffRand Corp. (known as Wireless Outlet) in April 1998,
certain assets of OCOM Corporation in June 1998, and certain assets of Stratos
Internet Group, Inc. in November 1998, we consolidated the results of operations
of these businesses from the dates of acquisition. The following discussion
includes a comparison to the results of operations of OCOM, our predecessor
business. OCOM's primary historical business was its cellular long distance
resale business that has been and currently is a highly competitive segment of
the long distance telephone market.

     The increase in revenues to $6,713,000 from $3,579,000 is primarily due to
acquisitions in 1998, which accounted for $4,535,000 of the increase. OCOM's
revenues decreased to $2,178,000 from $3,579,000 because OCOM's revenues prior
to its acquisition in June 1998 of $1,452,000 are not included in the 1998
amount. OCOM's cellular long distance revenues continued to decline in 1998 as a
result of customers switching to other long distance providers. This reduction
in revenues was offset by increases in CLEC and cellular revenues.

     Operating costs increased to $5,584,000 from $1,581,000 primarily due to
acquisitions in 1998, which accounted for $3,895,000 of the increase. Operating
costs as a percentage of revenues increased to 83% from 44%. This increase is
the result of the reduction in cellular long distance revenues which to date has
the highest gross margin of our telecommunications businesses.

     Selling, general and administrative expenses increased to $11,940,000 from
$5,934,000 as a result of increased selling and marketing costs and increased
customer service costs. These increases were offset by a reduction in billing
costs due to the implementation of in-house billing in the fourth quarter of
1997.

     The non-cash compensation charge of $4,586,000 in 1998 is a one time charge
related to the issuance of the Company's warrants and stock options to holders
of CCPR's stock options in connection with the Company's distribution to CCPR's
shareholders.

     Depreciation expense increased to $749,000 from $428,000 as a result of an
increase in fixed assets, primarily computer hardware and software.

     Amortization expense increased to $231,000 from $11,000 due to the
amortization of goodwill from the acquisitions in 1998.

     Interest income and other, net, increased to income of $2,632,000 from
expense of $4,000 primarily due to $2,585,000 of interest income on the
Company's cash, cash equivalents and marketable securities.

     Interest expense increased to $21,000 from zero due to interest on the note
payable and capital leases.

     March 2000 non-cash compensation expense. In March 2000, the Compensation
and Option Committee of the Board of Directors approved the issuance of options
in the Company to various employees to acquire approximately 2.7 million shares
of the Company's common stock at an exercise price of 30% of the fair market
value of our common stock on the date of the grant. In accordance with APB
Opinion No.25, "Accounting for Stock Issued to Employees," we will record a
non-cash compensation expense of approximately $44.8 million in March 2000 and a
non-cash deferred expense of approximately $48.5 million. We will charge the
deferred expense to non-cash compensation expense on a straight-line basis over
the vesting period of the stock options as follows: $15 million in 2000, $20
million in 2001, $11.6 million in 2002, $1.8 million in 2003 and $0.1 million
in 2004.


                                       33


<PAGE>   36




                         LIQUIDITY AND CAPITAL RESOURCES

     We will require significant resources to fund the construction of our
facilities-based network, develop and expand our existing businesses and fund
near term operating losses and debt service. We estimate that these requirements
will aggregate approximately $275 million in 2000, which excludes the effect of
the proposed acquisitions of ATX and Voyager.net. We intend to use cash and
securities on hand of $178.7 million at December 31, 1999 to meet a portion of
our operating and capital requirements. We are currently negotiating with
equipment manufacturers to provide us with additional vendor financing, and we
currently anticipate obtaining additional financing in the future. However,
there can be no assurance that the proposed financings will occur.

     Acquisitions. In May 1999, we acquired MegsINet and the CLEC assets of USN
Communications. The USN acquisition includes a contingent payment in July 2000
which is payable only if the USN assets meet or exceed operating performance
thresholds. The total additional cash consideration that we may pay for the USN
assets is capped at $58.6 million. We do not expect the actual contingent
payment to be significant.

     In the future, we plan to make further appropriate acquisitions which may
require significant acquisition related and capital expenditures. On March 10,
2000, we announced that the Company had entered into a definitive agreement to
acquire ATX Telecommunications Services, Inc. and on March 13, 2000, the Company
and Voyager.net, Inc. announced a definitive agreement to merge in a stock and
cash transaction. We will require between $80 million and $150 million in cash
for the ATX acquisition and approximately $95 million in cash for the
Voyager.net merger. In addition, we will issue new shares of convertible
preferred stock and common stock to the shareholders of ATX, and new shares of
common stock to the shareholders of Voyager.net. We are evaluating our financing
options and anticipate issuing additional debt and/or equity to fund the cash
portion of these acquisitions.

     Historical Uses of Cash. For the year ended December 31, 1999, cash used in
operating activities increased to $72,417,000 from $12,322,000 in the period
from April 1, 1998 (date operations commenced) to December 31, 1998, primarily
due to the increase in the net loss to $103,524,000 from $16,255,000. The net
loss increased as a result of acquisitions and an increase in selling and
marketing costs and customer service expenses as we have grown the business.

     For the year ended December 31, 1999, cash used to purchase fixed assets
increased to $20,575,000 from $2,341,000 in the period from April 1, 1998 (date
operations commenced) to December 31, 1998. The increase was due to acquisitions
and as a result of an increase in fixed asset purchases. The cash used for
acquisitions of $47,056,000 in the year ended December 31, 1999 is primarily for
payments in connection with the MegsINet and USN acquisitions.

     Proceeds from borrowings, net of financing costs, of $168,545,000 in 1999
is primarily from the issuance of the 6% Convertible Subordinated Notes.

     Network Construction. We intend to significantly expand our
telecommunications infrastructure in the United States over the next several
years. We have installed switches and other facilities, and we are in the
process of installing additional switches, Internet points-of-presence, and
other telecommunications facilities in many states. The amount of such
expenditures in 2000 will be related to the number of new markets entered, the
speed and location of equipment deployment, the timing and integration of
acquisitions, as well as the mix of resold vs. facilities-based services.

     We have deployed our Smart LEC facilities in Columbus, Ohio, Cleveland,
Ohio and Chicago, Illinois and are currently developing three additional
markets: Detroit, Michigan, New York, New York and Boston, Massachusetts. These
six markets comprise approximately 18 million total access lines. In connection
with these markets, we are in the process of establishing collocation facilities
in approximately 133 ILEC central offices. We have also identified approximately
30 additional markets where we intend to deploy our Smart LEC network in
2000-2002.


                                       34

<PAGE>   37




     We believe that our Smart LEC strategy enables us to enter and construct
our networks into new cities with relatively low up-front expenditures and a
significant proportion of success-based capital expenditures. Depending on the
size of the market, we expect our up-front capital expenditures to be
approximately $7 to $10 million, which includes the costs of installing our
switch facility and our collocation facilities and other related initial set-up
and installation expenses.

     The significant majority of the additional capital costs will be based on
subscriber levels. These costs will include equipment to increase network
capacity, such as ports and modems in our switch and access devices. These costs
will vary based on the type, volume and services of each customer, but are
estimated to be approximately $400-$500 per line. For example, a sample target
market may have 1 million business lines and 2 million residential lines, for a
total of 3 million lines. Our total level of capital expenditures for that
market will depend on our level of penetration. If we are able to gain 3%
overall penetration of the market, we would serve approximately 90,000 lines,
and based on approximately $400-$500 per line, we would spend approximately
$35-$45 million on additional capital costs developing and expanding our
networks in the market. A lower or higher penetration would decrease or
increase, respectively, our additional capital costs.

     The foregoing summary of the cost structure of our entry into a typical
market does not purport to be indicative of our performance, but is provided
solely as a basis for understanding our basic cost structure for individual
communications services in a typical target market. You should be aware that our
actual performance could differ materially from our current expectations.

     Operations. Our businesses will also consume capital to acquire new
customers and to finance the working capital required to support these new
customers. These businesses will also require additional billing, customer
service and other back-office infrastructure. These capabilities can be expanded
in-house or can be outsourced to reduce up-front capital requirements. To date,
our strategy has been to utilize the expertise developed by our management to
develop in-house billing and back-office capabilities.

     LMDS. LMDS is a fixed broadband wireless service that may be used to
provide high-speed data transfer, telephone service, telecommunications network
transmission, Internet access, video broadcasting, video conferencing, and other
services. The spectrum is useable for communications services from a fixed
antenna, but is not suitable for mobile or portable communications. LMDS can be
used to provide a wireless high-capacity broadband service for the "last mile"
to a home or office.

     The amount of capital required to construct our LMDS systems is not easily
quantifiable at this time, but is likely to be several times the $25 million
cost of the licenses. In addition to up-front network construction costs, a
significant ongoing capital requirement will be the cost to acquire customer
premise equipment to receive and transmit LMDS signals. We will deploy this LMDS
network only if we determine that we can achieve sufficient returns on our
capital invested, from reduced costs associated with providing our services or
from new services which we can offer through LMDS technology.

     Sources of Liquidity. Our operations were initially funded by the $150
million cash capital contribution from CCPR in connection with the spin-off. In
October 1999, we issued $175 million principal amount of 6% Convertible
Subordinated Notes due 2006, and received net proceeds of $168.5 million.
Interest on the Convertible Subordinated Notes is payable semiannually on April
1 and October 1 of each year, commencing April 1, 2000. We expect to experience
substantial negative cash flow for the next several years due to the continued
development of our Smart LEC network and our other businesses. Our cash flow
requirements will depend upon:

     o   our network development schedules;

     o   acquisition opportunities;

     o   operating results; and

     o   technological developments.


                                       35

<PAGE>   38




     We are currently negotiating with equipment manufacturers, including Cisco
Systems, Inc., Lucent Technologies, Inc. and others to provide us with
additional vendor financing. In the aggregate, such financings are anticipated
to be significant. We are presently in the process of negotiating terms for
these transactions. However, until definitive agreements are reached with each
vendor, we cannot be certain that the proposed financings will occur, that the
terms will not change or that any alternative financing on terms satisfactory to
us will be available.

     Our ability to raise additional capital will be dependent on a number of
factors, such as general economic and market conditions, which are beyond our
control. If we are unable to obtain additional financing or to obtain it on
favorable terms, we may be required to delay the construction of our Smart LEC
network, forego attractive business opportunities, or take other actions which
could adversely affect our business, results of operations and financial
condition.

     We are a holding company with no significant assets other than cash and
securities and investments in and advances to our subsidiaries. We are therefore
likely to be dependent upon receipt of funds from our subsidiaries to meet our
own obligations. However, our subsidiaries' proposed debt agreements may prevent
the payment of dividends, loans or other distributions to us (except in certain
limited circumstances).

YEAR 2000

     We had a comprehensive Year 2000 project designed to identify and assess
the risks associated with our information systems, products, operations,
infrastructure, suppliers and customers, and to develop, implement and test
remediation and contingency plans to mitigate these risks. To date, we have not
experienced any significant problems related to the Year 2000.

     Because we use a variety of information systems and have additional systems
embedded in our operations and infrastructure, we cannot be sure that all of our
systems will continue to work together in a Year 2000-ready fashion.
Furthermore, we cannot be sure that we will not suffer business interruptions,
either because of our own Year 2000 problems or those of third-parties upon whom
we are reliant for services. Therefore, a problem that has not yet been
identified may arise and could have adverse consequences to us.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     The Securities and Exchange Commission's rule related to market risk
disclosure requires that we describe and quantify our potential losses from
market risk sensitive instruments attributable to reasonably possible market
changes. Market risk sensitive instruments include all financial or commodity
instruments and other financial instruments (such as investments and debt) that
are sensitive to future changes in interest rates, currency exchange rates,
commodity prices or other market factors. We are not exposed to market risks
from changes in foreign currency exchange rates or commodity prices. We do not
hold derivative financial instruments nor do we hold securities for trading or
speculative purposes. Under our current policies, we do not use interest rate
derivative instruments to manage our exposure to interest rate changes.

     The fair-market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
fair value of our Convertible Subordinated Notes was determined from the quoted
market price. The fair value of our other notes payable are estimated using
discounted cash flow analyses, based on our current incremental borrowing rates
for similar types of borrowing arrangements.


                                       36

<PAGE>   39




                            Interest Rate Sensitivity
                      Principal Amount by Expected Maturity
                              Average Interest Rate





<TABLE>
<CAPTION>
                                                                                                           Fair
                                                                                                           Value
                                2000       2001      2002      2003      2004    Thereafter    Total      12/31/99
                                ----       ----      ----      ----      ----    ----------    -----      --------
                                                       (in thousands)
                                                        ------------


<S>                             <C>        <C>        <C>    <C>      <C>        <C>           <C>         <C>
Long-term Debt, including Current Portion

Fixed Rate                      $5,280     $4,229      $89   $   -     $   -      $175,000     $184,598    $281,530
Average Interest Rate             11.3%      11.1%    8.0%                             6.0%
</TABLE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Financial Statements are included herein commencing on page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

Not applicable.




                                    PART III

ITEMS 10, 11, 12 AND 13.

    The information required by Part III is incorporated by reference from
CoreComm's definitive proxy statement involving the election of directors which
CoreComm expects to file, pursuant to Regulation 14A, within 120 days following
the end of its fiscal year.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

      (a)   (1)      Financial Statements--See list of Financial Statements on
                     page F-1.

            (2)      Financial Statement Schedules--See list of Financial
                     Statement Schedules on page F-1.

            (3)      Exhibits--See Exhibit Index on page 38.

      (b)            Reports on Form 8-K: During the fourth quarter of 1999, the
                     Company filed the following Current Reports on Form 8-K:
                     Form 8-K dated October 1, 1999 (filed October 4, 1999)
                     under item 5, reporting the pricing of $150 million 6%
                     Convertible Subordinated Notes due 2006; Form 8-K dated
                     October 6, 1999 (filed October 12, 1999) under item 2,
                     reporting the closing of the sale of $175 million of 6%
                     Convertible Subordinated Notes due 2006, including exercise
                     of $25 million over-allotment option.

      (c)            Exhibits--The response to this portion of Item 14 is
                     submitted as a separate section of this report.

      (d)            Financial Statement Schedules--See list of Financial
                     Statement Schedules on page F-1.


                                       37

<PAGE>   40


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO.            DESCRIPTION OF EXHIBIT
-------        ----------------------

<S>      <C>
2.1      Distribution Agreement, dated as of August 18, 1998, between CoreComm
         Incorporated and the Company(1)

2.2      Agreement and Plan of Merger, dated as of March 10, 2000, by and among
         CoreComm Limited and ATX Telecommunications Services Inc.

2.3      Agreement and Plan of Merger, dated as of March 12, 2000, by and among
         CoreComm Limited and Voyager.net Inc.

2.4      Agreement and Plan of Merger, dated as of February 17, 1999, by and
         among CoreComm Limited, CoreComm Acquisition Sub, Inc., and MegsINet
         Inc.(3)

2.5      First Amendment to Agreement and Plan of Merger, dated as of May 3,
         1999, by and among CoreComm Limited, CoreComm Acquisition Sub, Inc.,
         and MegsINet Inc.(2)

2.6      Asset Purchase Agreement, dated as of February 19, 1999, by and between
         CoreComm Limited, USN Communications, Inc. ("USN") and several
         subsidiaries of USN (3)

3.1      Company's Memorandum of Association and Certificate of Name Change(1)

3.2      Company's By-laws(1)

4.2      Rights Agreement, dated as of August 18, 1998, between CoreComm Limited
         and Continental Stock Transfer & Trust Company, as Rights Agent(1)

4.3      First Amendment to Rights Agreement, dated as of January 20, 1999,
         between CoreComm Limited and Continental Stock Transfer & Trust Company

4.4      Second Amendment to Rights Agreement, dated as of November 11, 1999,
         between CoreComm Limited and Continental Stock Transfer & Trust Company

4.5      Form of Common Stock Certificate(1)

4.6      Indenture, dated as of October 6, 1999, by and between the Company and
         The Chase Manhattan Bank as Trustee, with respect to the 6% Convertible
         Notes due 2006 (4)

4.7      Registration Rights Agreement, dated October 6, 1999, by and among the
         Company and the Initial Purchasers of the 6% Convertible Notes due
         2006(4)

10.1     Form of Tax Disaffiliation Agreement between CoreComm Incorporated and
         the Registrant(1)

10.2     CoreComm Limited 1998 Stock Option Plan(1)

10.3     CoreComm Limited Non-Employee Director Stock Option Plan (1)

10.4     CoreComm Ohio Limited 1999 Stock Option Plan(5)

10.5     CoreComm Limited 1999 Stock Option Plan

11       Statement re computation of per share earnings

21       Subsidiaries of the registrant

23.1     Consent of Ernst & Young, LLP

27.1     Financial Data Schedules
</TABLE>

(1)      Incorporated by reference from the Company's Registration Statement on
         Form 10-12G/A, Filed on August 19, 1998

(2)      Incorporated by reference from the Company's Registration Statement on
         Form S-4/A, File No. 333-74801

(3)      Incorporated by reference from the Company's Registration Statement on
         Form 8-K, Filed on February 24, 1999

(4)      Incorporated by reference from the Company's Registration Statement on
         Form S-3, File No. 333-90113

(5)      Incorporated by reference from the Company's 1998 Annual Report on Form
         10-K, Filed on March 22, 1999


                                       38


<PAGE>   41



                                   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 under signed thereunto duly authorized. Dated: March 29, 2000

                                                    CORECOMM LIMITED

                                                    By: /s/ RICHARD J. LUBASCH
                                                    Senior Vice President,
                                                    General Counsel
                                                    and Secretary

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE                                             TITLE                                         DATE
---------                                             -----                                         ----

<S>                                <C>                                                           <C>
/s/ GEORGE S. BLUMENTHAL           Chairman of the Board and Director                            March 29, 2000
George S. Blumenthal

/s/ J. BARCLAY KNAPP               Principal Executive and Financial                             March 29, 2000
J. Barclay Knapp                   Officer and Director

/s/ PATTY J. FLYNT                 Principal Operating Officer                                   March 29, 2000
Patty J. Flynt

/s/ GREGG GORELICK                 Principal Accounting Officer                                  March 29, 2000
Gregg Gorelick

/s/ SIDNEY R. KNAFEL               Director                                                      March 29, 2000
Sidney R. Knafel

/s/ TED H. MCCOURTNEY              Director                                                      March 29, 2000
Ted H. McCourtney

/s/ DEL MINTZ                      Director                                                      March 29, 2000
Del Mintz

/s/ ALAN J. PATRICOF               Director                                                      March 29, 2000
Alan J. Patricof

/s/ WARREN POTASH                  Director                                                      March 29, 2000
Warren Potash
</TABLE>


                                       39

<PAGE>   42

                       Form 10-K -- Item 14(a)(1) and (2)

                        CoreComm Limited and Subsidiaries

                   Index to Consolidated Financial Statements
                        and Financial Statement Schedule

The following consolidated financial statements and schedule of CoreComm Limited
and Subsidiaries and its predecessor OCOM Corporation Telecoms Division are
included in Item 8:

<TABLE>
<S>                                                                                           <C>
Reports of Independent Auditors .............................................................  F-2
Consolidated Balance Sheets - December 31, 1999 and 1998 ....................................  F-4
Consolidated Statements of Operations - Year Ended December 31, 1999,
     for the Period from April 1, 1998 (date operations commenced) to
     December 31, 1998, for the Period from January 1, 1998 to May 31, 1998
     and for the Year Ended December 31, 1997 ...............................................  F-5
Consolidated Statement of Shareholders' Equity - Year Ended
     December 31, 1999 and for the Period from April 1, 1998
     (date operations commenced) to December 31, 1998 .......................................  F-6
Statement of Parent's Investment (Deficiency) - For the Period from
     January 1, 1998 to May 31, 1998 and for the Year Ended
     December 31, 1997 ......................................................................  F-7
Consolidated Statements of Cash Flows - Year Ended December 31, 1999,
     for the Period from April 1, 1998 (date operations commenced)
     to December 31, 1998, for the Period from January 1, 1998 to
     May 31, 1998 and for the Year Ended December 31, 1997 ..................................  F-8
Notes to Consolidated Financial Statements .................................................. F-10

The following consolidated financial statement schedule of CoreComm Limited and
Subsidiaries and OCOM Corporation Telecoms Division is included in Item 14(d):

Schedule II - Valuation and Qualifying Accounts ............................................. F-28
</TABLE>

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.


                                      F-1
<PAGE>   43


                         Report of Independent Auditors



Shareholders and Board of Directors
CoreComm Limited

We have audited the consolidated balance sheet of CoreComm Limited and
Subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year ended
December 31, 1999 and for the period from April 1, 1998 (date operations
commenced) to December 31, 1998. Our audits also included the financial
statement schedule listed in the Index at Item 14(a) for the year ended December
31, 1999 and for the period from April 1, 1998 (date operations commenced) to
December 31, 1998. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CoreComm Limited and Subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1999 and for the period from April 1, 1998 (date operations
commenced) to December 31, 1998 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

                                                    ERNST & YOUNG LLP

New York, New York
March 3, 2000


                                      F-2
<PAGE>   44


                         Report of Independent Auditors




Shareholder
OCOM Corporation Telecoms Division

We have audited the statements of operations, parent's investment (deficiency)
and cash flows of OCOM Corporation Telecoms Division ("OCOM") for the period
from January 1, 1998 to May 31, 1998 and for the year ended December 31, 1997.
Our audit also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects the results of operations and the cash flows of OCOM
Corporation Telecoms Division for the period from January 1, 1998 to May 31,
1998 and for the year ended December 31, 1997 in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                                    ERNST & YOUNG LLP

New York, New York
February 26, 1999


                                      F-3
<PAGE>   45


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                 1999                1998
                                                                          ------------------------------------
<S>                                                                       <C>                  <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                $ 86,685,000         $ 26,161,000
   Marketable securities                                                      92,041,000          110,718,000
   Accounts receivable-trade, less allowance for doubtful
     accounts of $3,949,000 (1999) and $742,000 (1998)                         7,875,000            1,125,000
   Due from affiliates                                                           195,000            1,954,000
   Other                                                                       5,791,000              669,000
                                                                          ------------------------------------
Total current assets                                                         192,587,000          140,627,000

Fixed assets, net                                                             90,619,000            3,582,000
Goodwill, net of accumulated amortization of $7,262,000 (1999)
  and $230,000 (1998)                                                         57,888,000            4,028,000
LMDS license costs                                                            25,366,000           25,366,000
Other, net of accumulated amortization of $2,202,000 (1999) and
  $1,000 (1998)                                                               25,643,000            2,923,000
                                                                          ------------------------------------
                                                                            $392,103,000         $176,526,000
                                                                          ====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                          $ 13,851,000         $  1,937,000
  Accrued expenses                                                            32,215,000            4,247,000
  Equipment payable                                                            4,702,000                    -
  Current portion of notes payable and capital lease obligations              19,127,000              133,000
  Deferred revenue                                                             1,400,000              411,000
                                                                          ------------------------------------
Total current liabilities                                                     71,295,000            6,728,000

Notes payable                                                                179,318,000              283,000
Capital lease obligations                                                     14,564,000              218,000

Commitments and contingent liabilities

Shareholders' equity:
  Series preferred stock - $.01 par value, authorized 1,000,000
    shares; issued and outstanding none                                                -                    -
  Common stock - $.01 par value; authorized 75,000,000 shares;
    issued and outstanding 38,556,000 (1999) and  29,697,000
    (1998) shares                                                                386,000              297,000
  Additional paid-in capital                                                 246,319,000          185,255,000
  (Deficit)                                                                 (119,779,000)         (16,255,000)
                                                                          ------------------------------------
                                                                             126,926,000          169,297,000
                                                                          ------------------------------------
                                                                            $392,103,000         $176,526,000
                                                                          ====================================
</TABLE>

See accompanying notes.


                                      F-4
<PAGE>   46


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                          THE PREDECESSOR
                                                                                               (OCOM)
                                                                                   ------------------------------

                                                                 FOR THE PERIOD
                                                                  FROM APRIL 1,
                                                                   1998 (DATE      FOR THE PERIOD
                                                                   OPERATIONS      FROM JANUARY 1,
                                               YEAR ENDED         COMMENCED) TO        1998 TO        YEAR ENDED
                                              DECEMBER 31,        DECEMBER 31,         MAY 31,       DECEMBER 31,
                                                 1999                 1998              1998             1997
                                            ---------------------------------------------------------------------
<S>                                           <C>                 <C>               <C>              <C>
REVENUES                                      $  58,151,000       $  6,713,000      $ 1,452,000      $ 3,579,000

COSTS AND EXPENSES
Operating                                        58,561,000          5,584,000          772,000        1,581,000
Selling, general and administrative              74,185,000         11,940,000        3,205,000        5,934,000
Corporate                                         7,996,000          2,049,000                -                -
Non-cash compensation                             1,056,000          4,586,000                -                -
Depreciation                                     10,945,000            749,000          255,000          428,000
Amortization                                      8,633,000            231,000            2,000           11,000
                                            ---------------------------------------------------------------------
                                                161,376,000         25,139,000        4,234,000        7,954,000
                                            ---------------------------------------------------------------------
Operating (loss)                               (103,225,000)       (18,426,000)      (2,782,000)      (4,375,000)

OTHER INCOME (EXPENSE)
Interest income and other, net                    5,773,000          2,632,000                -           (4,000)
Interest expense                                 (5,341,000)           (21,000)               -                -
                                            ---------------------------------------------------------------------
(Loss) before income tax provision             (102,793,000)       (15,815,000)      (2,782,000)      (4,379,000)
Income tax provision                               (731,000)          (440,000)               -                -
                                            ---------------------------------------------------------------------
Net (loss)                                    $(103,524,000)      $(16,255,000)     $(2,782,000)     $(4,379,000)
                                            =====================================================================

Basic and diluted net (loss) per
 share                                               $(3.03)             $(.55)           $(.09)           $(.15)
                                            =====================================================================

Weighted average shares                          34,189,000         29,678,000       29,664,000       29,419,000
                                            =====================================================================
</TABLE>


See accompanying notes.


                                      F-5
<PAGE>   47

                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                 Consolidated Statement of Shareholders' Equity

          For the Period from April 1, 1998 (date operations commenced)
         to December 31, 1998 and for the Year Ended December 31, 1999

<TABLE>
<CAPTION>
                                                                  COMMON STOCK             ADDITIONAL
                                                           --------------------------        PAID-IN
                                                              SHARES          PAR            CAPITAL          (DEFICIT)
                                                           ---------------------------------------------------------------
    <S>                                                    <C>              <C>           <C>                <C>
    Initial contribution                                     2,700,000      $ 27,000      $ 22,158,000
    Capital contributions                                   26,994,000       270,000       158,508,000
    Issuance of stock options                                                                4,586,000
    Exercise of warrants                                         3,000                           3,000
    Net (loss) for the period from April 1,
      1998 (date operations commenced) to
      December 31, 1998                                                                                      $(16,255,000)
                                                           ---------------------------------------------------------------
    Balance, December 31, 1998                              29,697,000       297,000       185,255,000        (16,255,000)
                                                           ---------------------------------------------------------------

    Exercise of stock options                                  804,000         8,000         5,232,000
    Exercise of warrants                                     4,810,000        48,000        10,857,000
    Common stock issued for acquisition                      3,245,000        33,000        30,792,000
    Stock options issued for acquisition                                                     4,027,000
    Warrants issued for acquisition                                                          9,100,000
    Stock option based compensation                                                          1,056,000
    Net (loss) for the year ended
       December  31, 1999                                                                                    (103,524,000)
                                                           ---------------------------------------------------------------
    Balance, December 31, 1999                              38,556,000      $386,000      $246,319,000      $(119,779,000)
                                                           ===============================================================
</TABLE>


The Consolidated Statement of Shareholders' Equity reflects on a retroactive
basis the 3-for-2 stock split by way of a stock dividend paid on September 2,
1999 and the 3-for-2 stock split by way of a stock dividend paid on February 2,
2000.


See accompanying notes.


                                      F-6
<PAGE>   48


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                  Statement of Parent's Investment (Deficiency)
             of OCOM Corporation Telecoms Division (the Predecessor)

                    For the Year Ended December 31, 1997 and
              for the Period from January 1, 1998 to May 31, 1998

<TABLE>
<S>                                                              <C>
Balance, December 31, 1996                                        $ (208,000)
Capital contributions                                              4,908,000
Net (loss) for the year ended December 31, 1997                   (4,379,000)
                                                                 ------------
Balance, December 31, 1997                                           321,000
Capital contributions                                              4,261,000
Net (loss) for the period ended May 31, 1998                      (2,782,000)
                                                                 ------------
Balance, May 31, 1998                                             $1,800,000
                                                                 ============
</TABLE>


See accompanying notes.


                                      F-7
<PAGE>   49

                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                     THE PREDECESSOR
                                                                                                          (OCOM)
                                                                                             -------------------------------

                                                                          FOR THE PERIOD
                                                                          FROM APRIL 1,         FOR THE
                                                                            1998 (DATE        PERIOD FROM
                                                                            OPERATIONS         JANUARY 1,
                                                        YEAR ENDED        COMMENCED) TO         1998 TO          YEAR ENDED
                                                       DECEMBER 31,        DECEMBER 31,         MAY 31,         DECEMBER 31,
                                                           1999                1998               1998              1997
                                                     -----------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>               <C>
OPERATING ACTIVITIES
  Net (loss)                                          $(103,524,000)      $(16,255,000)       $(2,782,000)      $(4,379,000)
  Adjustments to reconcile net (loss) to
    net cash (used in) operating
    activities:
     Depreciation and amortization                       19,578,000            980,000            257,000           439,000
     Stock option based compensation                      1,056,000          4,586,000                  -                 -
     Provision for losses on accounts
       receivable                                         3,241,000            501,000             92,000            46,000
     Accretion of interest on marketable
       securities                                        (3,053,000)          (639,000)                 -                 -
     Other                                                  239,000           (119,000)                 -            82,000
     Changes in operating assets and
       liabilities, net of effect from
       business acquisitions:
      Accounts receivable                                 3,115,000           (480,000)          (262,000)          129,000
      Due from affiliates                                 1,759,000         (1,954,000)                 -                 -
      Other current assets                               (3,488,000)          (287,000)          (179,000)          (79,000)
      Other assets                                       (2,783,000)        (2,824,000)                 -                 -
      Accounts payable                                    5,390,000          1,261,000           (311,000)          169,000
      Accrued expenses                                    6,114,000          2,814,000           (453,000)          116,000
      Deferred revenue                                      (61,000)            94,000                  -                 -
                                                     -----------------------------------------------------------------------
  Net cash (used in) operating activities               (72,417,000)       (12,322,000)        (3,638,000)       (3,477,000)

  INVESTING ACTIVITIES
  Purchase of fixed assets                              (20,575,000)        (2,341,000)          (623,000)       (1,431,000)
  Acquisitions, net of cash acquired                    (47,056,000)                 -                  -                 -
  Purchase of marketable securities                    (142,922,000)      (110,079,000)                 -                 -
  Proceeds from sale of marketable
    securities                                          164,652,000                  -                  -                 -
                                                     -----------------------------------------------------------------------
  Net cash (used in) investing activities               (45,901,000)      (112,420,000)          (623,000)       (1,431,000)
</TABLE>


                                      F-8
<PAGE>   50


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                                                     THE PREDECESSOR
                                                                                                          (OCOM)
                                                                                             -------------------------------

                                                                          FOR THE PERIOD
                                                                          FROM APRIL 1,         FOR THE
                                                                            1998 (DATE        PERIOD FROM
                                                                            OPERATIONS         JANUARY 1,
                                                        YEAR ENDED        COMMENCED) TO         1998 TO          YEAR ENDED
                                                       DECEMBER 31,        DECEMBER 31,         MAY 31,         DECEMBER 31,
                                                           1999                1998               1998              1997
                                                     -----------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>               <C>
FINANCING ACTIVITIES
Capital contributions                                             -        150,904,000          4,261,000         4,908,000
Proceeds from borrowing, net of
   financing costs                                      168,545,000                  -                  -                 -
Proceeds from exercise of stock
  options and warrants                                   16,145,000              3,000                  -                 -
Principal payments                                       (3,469,000)                 -                  -                 -
Principal payments of capital lease
  obligations                                            (2,379,000)            (4,000)                 -                 -
                                                     -----------------------------------------------------------------------
Net cash provided by financing
  activities                                            178,842,000        150,903,000          4,261,000         4,908,000
                                                     -----------------------------------------------------------------------
Increase in cash and cash
  equivalents                                            60,524,000         26,161,000                  -                 -
Cash and cash equivalents at
  beginning of period                                    26,161,000                  -                  -                 -
                                                     -----------------------------------------------------------------------
Cash and cash equivalents at end of
  period                                                $86,685,000        $26,161,000        $         -       $         -
                                                     =======================================================================

SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION
Cash paid for interest                                  $ 2,032,000        $     4,000        $         -       $         -
Income taxes paid                                         1,421,000                  -                  -                 -

SUPPLEMENTAL SCHEDULE OF
  NONCASH  INVESTING ACTIVITIES
Capital contributions of noncash net
  assets                                                $         -        $30,059,000        $         -       $         -
Liabilities incurred to acquire fixed
  assets                                                 19,621,000            175,000                  -                 -
Common stock, stock options and
   warrants issued for acquisitions                      43,952,000                  -                  -                 -
</TABLE>


See accompanying notes.


                                      F-9
<PAGE>   51


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

                   Notes to Consolidated Financial Statements

1.   ORGANIZATION AND BUSINESS

     CoreComm Limited (the "Company"), formerly a wholly-owned subsidiary of
     Cellular Communications of Puerto Rico, Inc. ("CCPR"), was formed in March
     1998 (operations commenced in April 1998) in order to succeed to the
     businesses and assets that were operated by OCOM Corporation and as an
     appropriate vehicle to pursue new telecommunications opportunities outside
     of Puerto Rico and the U.S. Virgin Islands. In September 1998, CCPR made a
     cash contribution to the Company of $150,000,000 and distributed 100% of
     the outstanding shares of the Company on a one-for-one basis to CCPR's
     shareholders.

     The Company's competitive local exchange carrier ("CLEC"), cellular long
     distance, landline long distance and cellular resale businesses were
     formerly owned and operated by OCOM Corporation Telecoms Division ("OCOM").
     CCPR acquired the operating assets and related liabilities of these
     businesses from OCOM on June 1, 1998. OCOM is the predecessor business to
     the Company.

     The Company seeks to become a leading provider of integrated telephone,
     Internet and data services to business and residential customers in
     targeted markets throughout the United States. As of December 31, 1999, the
     Company's customers are located throughout the United States, although much
     of the Company's business is conducted in Ohio and Illinois.

     The Company's performance will be affected by, among other things, its
     ability to implement expanded interconnection and collocation with the
     facilities of incumbent local exchange carriers ("ILECs") and develop
     efficient and effective working relationships with the ILECs and other
     carriers. The Company has installed, and is currently in the process of
     installing, its own switches and related equipment in certain of its
     markets. The Company will continue to lease the unbundled local loop needed
     to connect its customers to its switches. The Company purchases capacity
     from the ILECs on a wholesale basis pursuant to contracts and sells it at
     retail rates to its customers. The Company depends upon the ILECs to
     maintain the quality of their service to the Company's customers. Also,
     except for CLEC customers who are connected to one of the Company's
     switches and Internet services customers, the Company depends upon the
     ILECs for accurate and prompt billing information in order for the Company
     to bill its customers.

     The Company's business is highly competitive which results in pricing
     pressure and increasing customer acquisition costs. Expenses are expected
     to exceed revenues in each location in which the Company offers service
     until a sufficient customer base is established. It is anticipated that
     obtaining a sufficient customer base will take a number of years, and
     positive cash flows from operations are not expected in the near future.


                                      F-10
<PAGE>   52


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

1.   ORGANIZATION AND BUSINESS (CONTINUED)

     The following is the revenues from external customers for each of the
     Company's communication services:

<TABLE>
<CAPTION>
                                                                                                     THE PREDECESSOR
                                                                                                          (OCOM)
                                                                                             -------------------------------

                                                                          FOR THE PERIOD
                                                                          FROM APRIL 1,         FOR THE
                                                                            1998 (DATE        PERIOD FROM
                                                                            OPERATIONS         JANUARY 1,
                                                        YEAR ENDED        COMMENCED) TO         1998 TO          YEAR ENDED
                                                       DECEMBER 31,        DECEMBER 31,         MAY 31,         DECEMBER 31,
                                                           1999                1998               1998              1997
                                                     -----------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>               <C>
     Telecommunications                                 $47,456,000         $2,993,000         $  217,000        $  167,000
     Internet and Data                                    6,996,000            155,000                  -                 -
     Other                                        (a)     3,699,000          3,565,000          1,235,000         3,412,000
                                                     -----------------------------------------------------------------------
                                                        $58,151,000         $6,713,000         $1,452,000        $3,579,000
                                                     =======================================================================
</TABLE>

     (a)  Other includes cellular long distance, wireless and paging revenue.

2.   SIGNIFICANT ACCOUNTING POLICIES

     USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the amounts reported in the financial statements
     and accompanying notes. Actual results could differ from those estimates.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company,
     its wholly-owned subsidiaries and those entities where the Company's
     interest is greater than 50%. Significant intercompany accounts and
     transactions have been eliminated in consolidation.

     CASH EQUIVALENTS

     Cash equivalents are short-term highly liquid investments purchased with a
     maturity of three months or less. Cash equivalents were $71,564,000 and
     $20,995,000 at December 31, 1999 and December 31, 1998, respectively, and
     consisted of corporate commercial paper.


                                      F-11
<PAGE>   53


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     MARKETABLE SECURITIES

     Marketable securities are classified as available-for-sale, which are
     carried at fair value. Unrealized holding gains and losses on securities,
     net of tax, are carried as a separate component of shareholders' equity.
     The amortized cost of debt securities is adjusted for amortization of
     premiums and accretion of discounts to maturity. Such amortization is
     included in interest income. Realized gains and losses and declines in
     value judged to be other than temporary will be included in interest
     income. The cost of securities sold or matured is based on the specific
     identification method. Interest on securities is included in interest
     income.

     Marketable securities at December 31, 1999 consisted of corporate
     commercial paper. Marketable securities at December 31, 1998 consisted of a
     certificate of deposit and corporate commercial paper. During the year
     ended December 31, 1999 and the period from April 1, 1998 (date operations
     commenced) to December 31, 1998, there were no realized gains or losses on
     sales of securities. All of the marketable securities as of December 31,
     1999 and 1998 had a contractual maturity of less than one year.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The Company records an estimate of uncollectible accounts receivable based
     on the current aging of its receivables and its prior collection
     experience.

     FIXED ASSETS

     Fixed assets are stated at cost. Depreciation is computed by the
     straight-line method over the estimated useful lives of the assets.
     Estimated useful lives are as follows: operating equipment - 3 to 15 years,
     computer hardware and software - 3 or 5 years and other equipment - 2 to 7
     years, except for leasehold improvements for which the estimated useful
     lives are the term of the lease.

     Long-lived assets are reviewed for impairment whenever events or changes in
     circumstances indicate that the carrying amount may not be recoverable. If
     the sum of the expected future undiscounted cash flows is less than the
     carrying amount of the asset, a loss is recognized for the difference
     between the fair value and carrying value of the asset.


                                      F-12
<PAGE>   54


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     GOODWILL

     Goodwill is the excess of the purchase price over the fair value of net
     assets acquired in business combinations accounted for as purchases.
     Goodwill is amortized on a straight-line basis over the period benefited,
     which is estimated to be 5 to 10 years. The Company continually reviews the
     recoverability of the carrying value of goodwill using the same methodology
     that it uses for the evaluation of its other long-lived assets.

     LMDS LICENSE COSTS

     The costs incurred to acquire the Local Multipoint Distribution Service
     ("LMDS") licenses from the Federal Communications Commission (the "FCC")
     were deferred and will be amortized on a straight-line basis over the term
     of the licenses upon the commencement of operations. The Company
     continually reviews the recoverability of the carrying value of LMDS
     licenses using the same methodology that it uses for the evaluation of its
     other long-lived assets.

     OTHER ASSETS

     Other assets include customer lists, deferred financing costs and
     noncompetition agreements. Customer lists represent a portion of the excess
     of the purchase price over the fair value of net assets acquired in
     business combinations accounted for as purchases and are amortized on a
     straight-line basis over 2 to 7 years. Deferred financing costs were
     incurred in connection with the issuance of debt and are charged to
     interest expense over the term of the related debt. Noncompetition
     agreements obtained in connection with an acquisition were valued at
     $100,000 and are being charged to expense on a straight-line basis over the
     noncompetition period of 5 years. The Company continually reviews the
     recoverability of the carrying value of these assets using the same
     methodology that it uses for the evaluation of its other long-lived assets.

     NET (LOSS) PER SHARE

     The Company reports its net (loss) per share in accordance with Financial
     Accounting Standards Board ("FASB") Statement of Financial Accounting
     Standards ("SFAS") No. 128, "Earnings Per Share". The weighted average
     shares used for the computation of net (loss) per share prior to September
     1998 are equivalent to CCPR's historical weighted average shares (since
     CCPR shareholders received one share of the Company for each CCPR share
     owned). The shares issuable upon the exercise of stock options, warrants
     and convertible securities are excluded from the calculation of net (loss)
     per share as their effect would be antidilutive.


                                      F-13
<PAGE>   55


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     NET (LOSS) PER SHARE (CONTINUED)

     In 1999 and 1998, the Company had 18.0 million and 9.8 million shares,
     respectively, issuable upon the exercise of stock options, warrants and
     convertible securities that have been excluded from the calculation of net
     (loss) per share as their effect would be antidilutive. In 1997, CCPR had
     5.3 million shares issuable upon the exercise of stock options that have
     been excluded from the calculation of net loss per share as their effect
     would be antidilutive.

     REVENUE RECOGNITION

     Revenue is recognized at the time service is provided to the customer.
     Charges for services that are billed in advance are deferred and recognized
     when earned.

     ADVERTISING EXPENSE

     The Company charges the cost of advertising to expense as incurred.
     Advertising expense for the year ended December 31, 1999, for the period
     from April 1, 1998 (date operations commenced) to December 31, 1998, for
     the period from January 1, 1998 to May 31, 1998 and for the year ended
     December 31, 1997 was $4,407,000, $812,000, $79,000 and $127,000,
     respectively.

     STOCK-BASED COMPENSATION

     The Company has adopted the disclosure-only provisions of SFAS No. 123,
     "Accounting for Stock-Based Compensation." The Company applies APB Opinion
     No. 25, "Accounting for Stock Issued to Employees" and related
     interpretations in accounting for its stock option plans.

     RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform to the 1999
     presentation.

3.   RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities," which is required to be adopted by the
     Company effective January 1, 2001. Management does not anticipate that the
     adoption of this new standard will have a significant effect on the results
     of operations, financial condition or cash flows of the Company.

     In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income"
     and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
     Information", both of which had no effect on the consolidated financial
     statements. The Company operates in a single business segment.


                                      F-14
<PAGE>   56


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

4.   ACQUISITIONS

     In May 1999, the Company acquired 100% of the stock of MegsINet Inc., a
     national Internet Service Provider ("ISP") with a national Asynchronous
     Transfer Mode network and local telecommunications facilities in Chicago
     for a total consideration of $16.8 million in cash and 3.2 million shares
     of the Company's common stock. In addition, the Company exchanged MegsINet
     stock options for options to purchase 444,000 shares of the Company's
     common stock, repaid $2.0 million of MegsINet debt and incurred acquisition
     related costs of $1.2 million. The common stock portion of the
     consideration was valued at $30.8 million, the fair value on the date prior
     to the announcement. The stock options were valued at $4.0 million using
     the Black-Scholes option pricing model.

     Also in May 1999, the Company acquired the wireline assets of USN
     Communications, Inc., which was a CLEC that operated on a resale basis, for
     a cash payment of $26.4 million, warrants to purchase 563,000 shares of the
     Company's common stock at a price of $13.33 per share and 225,000 shares at
     a price of $22.22 per share, and a potential contingent cash payment to be
     paid in July 2000 which is capped at $58.6 million. The contingent payment
     is payable only if the USN assets meet or exceed operating performance
     thresholds. The Company does not expect the actual payment in July 2000 to
     be significant. The warrants were valued at $9.1 million, the fair value on
     the date of issuance. In addition, the Company incurred acquisition related
     costs of $1.0 million.

     These acquisitions have been accounted for as purchases, and, accordingly,
     the net assets and results of operations of the acquired businesses have
     been included in the consolidated financial statements from the dates of
     acquisition. The aggregate purchase price of $91.3 million exceeded the
     fair value of the net tangible assets acquired by $75.6 million, which was
     allocated as follows: $13.3 million to customer lists, $1.5 million to
     other intangibles and $60.8 million to goodwill.

     In April and June 1998, CCPR acquired the stock of Digicom, Inc. and
     certain operating assets and related liabilities of Jeff Rand Corp. (known
     as the Wireless Outlet) and OCOM Corporation. CCPR contributed these
     businesses to the Company. These acquisitions were accounted for as
     purchases by CCPR, and, accordingly, the net assets and results of
     operations of the acquired businesses have been included in the
     consolidated financial statements from the dates of acquisition. The
     contribution of the assets from CCPR to the Company was accounted for at
     historical cost in a manner consistent with a transfer of entities under
     common control which is similar to that used in a "pooling of interests".
     The Company's financial statements include the results of the contributed
     companies for all periods owned by CCPR. In November 1998, a wholly-owned
     subsidiary of the Company acquired substantially all of the assets and
     certain liabilities of Stratos Internet Group, Inc. ("Stratos"), an ISP in
     the Cleveland-Akron, Ohio area. This acquisition has been accounted for as
     a purchase, and, accordingly, the net assets and results of operations of
     Stratos have been included in the consolidated financial statements from
     the date of acquisition. The aggregate purchase price of $5.2 million
     exceeded the fair value of net tangible assets acquired by $4.4 million,
     which was allocated as follows: $100,000 to noncompetition agreements and
     $4.3 million to goodwill.


                                      F-15
<PAGE>   57


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

4.   ACQUISITIONS (CONTINUED)

     The pro forma unaudited consolidated results of operations for the years
     ended December 31, 1999 and 1998 assuming consummation of the acquisitions
     and receipt of the capital contributions from CCPR as of January 1, 1998
     are as follows. The pro forma net (loss) and basic and diluted net (loss)
     per share do not give effect to interest income that may have been earned
     had the $150,000,000 cash capital contribution from CCPR been made on
     January 1, 1998.

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                           1999               1998
                                                      ---------------------------------
       <S>                                            <C>                 <C>
       Total revenue                                   $ 97,855,000       $148,174,000
       Net (loss)                                      (138,458,000)      (233,267,000)
       Basic and diluted net (loss) per share                 (3.74)             (6.23)
</TABLE>

     A significant component of the pro forma results is associated with the
     acquisition of certain assets of USN. Although USN quickly developed a
     large customer list and revenue base in 1997 and 1998, it had difficulties
     under its previous management providing services, including billing,
     customer care and other operational areas, and filed for bankruptcy in
     February 1999. Since the acquisition, we have been focusing on improving
     these operations, and have been successful in many areas. However, we did
     not actively sell additional lines in these markets in 1999 because we were
     not fully satisfied with the quality of the operations. Consequently, and
     consistent with our due diligence, transaction structure and purchase
     price, revenues associated with the USN assets have declined significantly
     since our acquisition, and additional declines may continue as customers
     leave or "churn" off the service.

5.   LMDS LICENSE COSTS

     Cortelyou Communications Corp. ("Cortelyou"), a wholly-owned subsidiary of
     the Company, was the successful bidder for 15 Block A LMDS licenses in
     Ohio. The LMDS licenses were acquired for an aggregate of $25,366,000,
     which includes costs incurred of $125,000. LMDS frequencies are expected to
     be used for the provision of voice, data, video and Internet services to
     businesses and homes in competition with ILECs and/or cable television
     operators. The FCC has allocated two blocks of frequencies to be licensed
     in each of the 493 Basic Trading Areas in the United States and its
     territories based on an auction that ended in March 1998.


                                      F-16
<PAGE>   58


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

6.   FIXED ASSETS

     Fixed assets consist of:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              1999               1998
                                                         ---------------------------------
       <S>                                               <C>                 <C>
       Operating equipment                                 $50,290,000        $   720,000
       Computer hardware and software                       17,455,000          2,450,000
       Other equipment                                       9,300,000            987,000
       Construction-in-progress                             24,681,000              5,000
                                                         ---------------------------------
                                                           101,726,000          4,162,000
       Accumulated depreciation                            (11,107,000)          (580,000)
                                                         ---------------------------------
                                                           $90,619,000         $3,582,000
                                                         =================================
</TABLE>

7.   ACCRUED EXPENSES

     Accrued expenses consist of:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              1999               1998
                                                         ---------------------------------
       <S>                                               <C>                 <C>
       Payroll and related                                  $2,903,000         $1,263,000
       Professional fees                                     2,161,000            527,000
       Taxes, including income taxes                         6,089,000          1,246,000
       Accrued equipment purchases                          13,455,000                  -
       Other                                                 7,607,000          1,211,000
                                                         ---------------------------------
                                                           $32,215,000         $4,247,000
                                                         =================================
</TABLE>

8.   NOTES PAYABLE

     Notes payable consist of the following:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              1999               1998
                                                         ---------------------------------
       <S>                                               <C>                 <C>
       6% Convertible Subordinated Notes                  $175,000,000          $       -
       Working capital promissory note, interest at 8.5%     3,077,000                  -
       Note payable for equipment, interest at 12.75%        6,238,000                  -
       Other                                                   283,000            363,000
                                                         ---------------------------------
                                                           184,598,000            363,000
       Less current portion                                  5,280,000             80,000
                                                         ---------------------------------
                                                          $179,318,000          $ 283,000
                                                         =================================
</TABLE>


                                      F-17
<PAGE>   59


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

8.   NOTES PAYABLE (CONTINUED)

     In October 1999, the Company issued $175,000,000 principal amount of 6%
     Convertible Subordinated Notes due 2006 (the "Convertible Notes"). Interest
     on the Convertible Notes is payable semiannually on April 1 and October 1
     of each year, commencing April 1, 2000. The Convertible Notes are unsecured
     obligations convertible into common stock prior to maturity at a conversion
     price of $27.39 per share, subject to adjustment. There are approximately
     6.4 million shares of common stock reserved for issuance upon conversion of
     the Convertible Notes. The Convertible Notes are redeemable, in whole or in
     part, at the option of the Company, at any time on or after October 1,
     2002, at a redemption price of 103.429% that declines annually to 100% in
     2006, in each case together with accrued and unpaid interest to the
     redemption date. The Company incurred $6,935,000 in fees and expenses in
     connection with the issuance of the Convertible Notes, which is included in
     deferred financing costs.

     MegsINet originally borrowed $4,000,000 from Ascend Communications, Inc.
     ("Ascend") under a working capital promissory note dated August 1998.
     MegsINet is required to make monthly principal and interest payments of
     $148,000 through January 2002. The Company issued a warrant to Ascend to
     purchase approximately 29,000 shares of the Company's common stock at
     $13.75 per share in connection with the promissory note.

     In 1998, MegsINet entered into an agreement with Cisco Systems Capital
     Corporation ("Cisco"), whereby MegsINet can purchase operating equipment
     under a promissory note. Monthly payments of principal and interest
     commenced in 1999, MegsINet paid an aggregate of $3,164,000. MegsINet is
     required to make monthly principal and interest payments that decline each
     month from $366,000 beginning in January 2000 through September 2001. The
     Company has guaranteed the obligations of MegsINet under the promissory
     note.

     The Company issued a note payable in the amount of $362,000 in connection
     with the Stratos acquisition. Interest on the note accrues at 5.542% per
     annum. The note is payable in twelve consecutive quarterly payments of
     principal and interest of $33,000 which commenced in May 1999 and is
     collateralized by the assets acquired from Stratos.

     The aggregate principal amounts of notes payable scheduled for repayment
     are as follows:

<TABLE>
               <S>                              <C>
               Year ended December 31,
                        2000                       $5,280,000
                        2001                        4,229,000
                        2002                           89,000
                        2003                           -
                        2004                           -
                     Thereafter                   175,000,000
                                                --------------
                                                 $184,598,000
                                                ==============
</TABLE>


                                      F-18
<PAGE>   60


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

9.   FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used by the Company in
     estimating its fair value disclosures for financial instruments:

     Cash and cash equivalents: The carrying amounts reported in the
     consolidated balance sheets approximate fair value.

     Notes payable: The fair value of the Company's convertible notes is based
     on the quoted market price. The fair value of the Company's other notes
     payable are estimated using discounted cash flow analyses, based on the
     Company's current incremental borrowing rates for similar types of
     borrowing arrangements.

     The carrying amounts and fair values of the Company's financial instruments
     are as follows:

<TABLE>
<CAPTION>
                                               DECEMBER 31, 1999           DECEMBER 31, 1998
                                               -----------------           -----------------
                                             CARRYING        FAIR        CARRYING        FAIR
                                              AMOUNT        VALUE         AMOUNT        VALUE
                                           ---------------------------------------------------
                                                               (in thousands)
       <S>                                   <C>           <C>            <C>          <C>
       Cash and cash equivalents             $ 86,685      $ 86,685       $26,161      $26,161
       Notes payable
          Convertible notes                   175,000       273,000             -            -
          Ascend note                           3,077         2,721             -            -
          Cisco note                            6,238         5,561             -            -
          Other                                   283           248           363          301
</TABLE>

10.  LEASES

     The Company has capital leases for certain of its operating equipment.
     Leased property included in operating equipment consists of:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              1999            1998
                                                          ----------------------------
                       <S>                                <C>              <C>
                       Operating equipment                 $33,941,000      $258,000
                       Accumulated depreciation              5,901,000         7,000
                                                          ----------------------------
                                                           $28,040,000      $251,000
                                                          ============================
</TABLE>


                                      F-19
<PAGE>   61


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

10.  LEASES (CONTINUED)

     Future minimum annual payments under these leases at December 31, 1999 are
     as follows:

<TABLE>
            <C>                                                                      <C>
            Year Ended December 31,
                   2000                                                                $16,092,000
                   2001                                                                 13,053,000
                   2002                                                                  2,477,000
                   2003                                                                     19,000
                                                                                     --------------
                   Total minimum lease payments                                         31,641,000
                   Less amount representing interest (at rates ranging
                       from 8.5% to 26.44%)                                              3,230,000
                                                                                     --------------
                   Present value of net minimum obligations                             28,411,000
                   Current portion                                                      13,847,000
                                                                                     --------------
                                                                                       $14,564,000
                                                                                     ==============
</TABLE>

     As of December 31, 1999, the Company had leases for office space and
     equipment which extend through 2013. Total rent expense for the year ended
     December 31, 1999, for the period from April 1, 1998 (date operations
     commenced) to December 31, 1998, for the period from January 1, 1998 to May
     31, 1998 and for the year ended December 31, 1997 under operating leases
     was $5,151,000, $354,000, $98,000 and $131,000, respectively.

     Future minimum annual lease payments under noncancellable operating leases
     at December 31, 1999 are as follows: $7,967,000 (2000); $6,682,000 (2001);
     $5,832,000 (2002); $5,384,000 (2003); $5,005,000 (2004) and $19,481,000
     thereafter.

11.  NON-CASH COMPENSATION

     The non-cash compensation charge of $1,056,000 in 1999 is recorded in
     accordance with APB Opinion No. 25, "Accounting for Stock Issued to
     Employees," related to a change in employee stock option agreements.

     The non-cash compensation charge of $4,586,000 in 1998 is a recorded in
     accordance with APB Opinion No. 25, as a one time charge related to the
     issuance of the Company's warrants and stock options to holders of CCPR's
     stock options in connection with the Company's distribution to CCPR's
     shareholders.


                                      F-20
<PAGE>   62


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

12.  RELATED PARTY TRANSACTIONS

     Some of the officers and directors of the Company are also officers or
     directors of NTL Incorporated ("NTL"). NTL provides the Company with
     management, financial, legal and technical services, access to office space
     and equipment and use of supplies. Amounts charged to the Company by NTL
     consist of salaries and direct costs allocated to the Company where
     identifiable, and a percentage of the portion of NTL's corporate overhead
     which cannot be specifically allocated to NTL (which is agreed upon by the
     Board of Directors of NTL and the Company). NTL's charges to the Company
     commenced in October 1998. It is not practicable to determine the amounts
     of these expenses that would have been incurred had the Company operated as
     an unaffiliated entity. In the opinion of management, this allocation
     method is reasonable. In 1999 and 1998, NTL charged the Company $2,330,000
     and $313,000, respectively, which is included in corporate expenses.

     The Company provides NTL with access to office space and equipment and the
     use of supplies. In the fourth quarter of 1999, the Company began charging
     NTL a percentage of the Company's office rent and supplies expense. It is
     not practicable to determine the amounts of these expenses that would have
     been incurred had the Company operated as an unaffiliated entity. In the
     opinion of management, this allocation method is reasonable. In 1999, the
     Company charged NTL $62,000, which reduced corporate expenses.

     A subsidiary of the Company provides billing and software development
     services to subsidiaries of NTL. The Company charges an amount in excess of
     its costs to provide these services. General and administrative expenses
     were reduced by $800,000, $275,000, $138,000, and $217,000 for the year
     ended December 31, 1999, the period from April 1, 1998 (date operations
     commenced) to December 31, 1998, the period from January 1, 1998 to May 31,
     1998 and the year ended December 31, 1997, respectively, as a result of
     these charges.

     At December 31, 1999, due from affiliates was comprised of $195,000 due
     from NTL. At December 31, 1998, due from affiliates included $128,000 due
     from CCPR and $1,826,000 due from NTL.

13.  401(k) PLAN

     The Company sponsors a 401(k) Plan in which all full-time employees who
     have completed 90 days of employment and are 21 years of age may
     participate. The Company's matching contribution is determined annually by
     the Board of Directors. Participants may make salary deferral contributions
     of 1% to 15% of their compensation not to exceed the maximum allowed by
     law. The expense for the year ended December 31, 1999, the period from
     April 1, 1998 (date operations commenced) to December 31, 1998, the period
     from January 1, 1998 to May 31, 1998 and the year ended December 31, 1997
     was $350,000, $103,000, $29,000 and $126,000, respectively.


                                      F-21
<PAGE>   63

                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

14.  SHAREHOLDERS' EQUITY

     STOCK SPLITS

     In August 1999, the Company declared a 3-for-2 stock split by way of a
     stock dividend, which was paid on September 2, 1999. In January 2000, the
     Company declared a 3-for-2 stock split by way of a stock dividend, which
     was paid on February 2, 2000. The consolidated financial statements and the
     notes thereto give retroactive effect to the stock splits.

     SHAREHOLDER RIGHTS PLAN

     The Rights Agreement provides that .44 of a Right will be issued with each
     share of common stock issued on or after the date of distribution. The
     Rights become exercisable upon the occurrence of certain potential takeover
     events and will expire in December 2010 unless previously redeemed by the
     Company. When exercisable, each Right entitles the owner to purchase from
     the Company 1/100 of a share of Series A Junior Participating Preferred
     Stock ("Series A Preferred Stock") at a purchase price of $100.

     The Series A Preferred Stock will be entitled to a minimum preferential
     quarterly dividend payment of $.01 per share and will be entitled to an
     aggregate dividend of 225 times the dividend, if any, declared per share of
     common stock. In the event of liquidation, the holders of Series A
     Preferred Stock will be entitled to a minimum preferential liquidation
     payment of $100 per share and will be entitled to an aggregate payment of
     225 times the payment made per share of the common stock. Each share of
     Series A Preferred Stock will have 225 votes and will vote together with
     the common stock. In the event of any merger, consolidation or other
     transaction in which shares of common stock are changed or exchanged, each
     share of Series A Preferred Stock will be entitled to receive 225 times the
     amount received per share of common stock. The rights are protected by
     customary antidilution provisions.

     The 1,000,000 authorized shares of Series Preferred Stock are designated
     Series A Preferred Stock. No shares of Series A Preferred Stock are issued
     or outstanding.

     WARRANTS

     The Company had the following warrants outstanding as of December 31, 1999:
     (1) warrants to purchase an aggregate of 29,000 shares of common stock at
     $13.75 per share issued in 1999 that expire in August 2008, (2) warrants to
     purchase an aggregate of 225,000 shares of common stock at $22.22 per share
     issued in 1999 that expire in May 2004 and (3) warrants to purchase an
     aggregate of 563,000 shares of common stock at $13.33 per share issued in
     1999 that expire in May 2002. None of these warrants were exercised in
     1999.


                                      F-22
<PAGE>   64

                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

14.  SHAREHOLDERS' EQUITY (CONTINUED)

     DISTRIBUTION WARRANTS AND STOCK OPTIONS

     In connection with the distribution of the Company to CCPR's shareholders,
     the Company issued warrants to purchase shares of common stock to holders
     of CCPR stock options who elected to receive warrants as follows: (1)
     warrants to purchase an aggregate of 4,303,000 shares of common stock at an
     exercise price of $5.86 per share which expire in 2005, (2) warrants to
     purchase an aggregate of 8,000 shares of common stock at an exercise price
     of $5.86 per share which expire in 2003 and (3) warrants to purchase an
     aggregate of 1,842,000 shares of common stock at an exercise price of $7.03
     which expire in 2005. As of December 31, 1999, warrants to purchase an
     aggregate of 47,000 shares of common stock at an exercise price of $5.86
     per share which expire in 2005 remain outstanding.

     There are 13,500,000 shares of common stock authorized for issuance under
     the 1998 CoreCom Limited Stock Option Plan and 5,625,000 shares of common
     stock authorized for issuance under the 1999 CoreCom Limited Stock Option
     Plan (together the "Plans"). The Plans provide that incentive stock
     options be granted at the fair market value of the Company's common stock
     on the date of grant, and nonqualified stock options be granted at a price
     determined by the Compensation and Option Committee. Options are generally
     exercisable as to 20% of the shares subject thereto on the date of grant
     and become exercisable as to an additional 20% of the shares subject
     thereto on each January 1 thereafter, while the optionee remains an
     employee of the Company. Options generally expire ten years after the date
     of the grant.

     In connection with the distribution of the Company to CCPR's shareholders,
     the Company issued approximately 1,877,000 options to purchase shares of
     the Company's common stock to holders of CCPR stock options who elected to
     receive options.

     Pro forma information regarding net loss and net loss per share is required
     by SFAS No. 123, and has been determined as if the Company had accounted
     for its employee warrants and stock options under the fair value method of
     that Statement. The fair value for these warrants and options was estimated
     at the date of grant using the Black-Scholes option pricing model with the
     following weighted-average assumptions for 1999 and 1998: risk-free
     interest rate of 6.81% and 5.02%, respectively, dividend yield of 0%,
     volatility factor of the expected market price of the Company's common
     stock of .465 and .810, respectively, and a weighted-average expected life
     of the warrants and options of 10 years.

     The Black-Scholes option valuation model was developed for use in
     estimating the fair value of traded options which have no vesting
     restrictions and are fully transferable. In addition, option valuation
     models require the input of highly subjective assumptions including the
     expected stock price volatility. Because the Company's distribution
     warrants and stock options have characteristics significantly different
     from those of traded options and because changes in the subjective input
     assumptions can materially affect the fair value estimate, in management's
     opinion, the existing models do not necessarily provide a reliable single
     measure of the fair value of its distribution warrants and stock options.


                                      F-23
<PAGE>   65

                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

14.  SHAREHOLDERS' EQUITY (CONTINUED)

     For purposes of pro forma disclosures, the estimated fair value of the
     distribution warrants and options is amortized to expense over the options'
     vesting periods. Following is the Company's pro forma information:

<TABLE>
<CAPTION>
                                                                                            FOR THE PERIOD
                                                                                          FROM APRIL 1, 1998
                                                                                           (DATE OPERATIONS
                                                                         YEAR ENDED         COMMENCED) TO
                                                                      DECEMBER 31, 1999   DECEMBER 31, 1998
                                                                      ---------------------------------------
       <S>                                                            <C>                 <C>
       Pro forma net (loss)                                             $(128,795,000)      $(48,015,000)
       Pro forma net (loss) per share - basic and diluted                      $(3.77)            $(1.62)
</TABLE>

     A summary of the Company's distribution warrants and stock option activity
     and related information for the year ended December 31, 1999 and for the
     period from April 1, 1998 (date operations commenced) to December 31, 1998
     follows:

<TABLE>
<CAPTION>
                                                          1999                            1998
                                             ----------------------------------------------------------------
                                                NUMBER OF        WEIGHTED-       NUMBER OF       WEIGHTED-
                                              WARRANTS AND        AVERAGE         WARRANTS        AVERAGE
                                                 OPTIONS      EXERCISE PRICE    AND OPTIONS   EXERCISE PRICE
                                             ----------------------------------------------------------------
     <S>                                      <C>                <C>            <C>               <C>
     Outstanding - beginning of period          9,765,000         $ 5.51                 -         $   -
     Granted                                    7,925,000          19.56         9,767,000          5.51
     Exercised                                  5,606,000           6.27             2,000          5.86
     Forfeited                                  1,330,000           6.27                 -             -
                                              -----------                        ---------
     Outstanding - end of period               10,754,000         $15.37         9,765,000         $5.51
                                              ===========                        =========
     Exercisable at end of period               3,438,000         $10.11         7,747,000         $5.42
                                              ===========                        =========
</TABLE>

     Weighted-average fair value of distribution warrants and options,
     calculated using the Black-Scholes option pricing model, granted during
     1999 and 1998 is $14.28 and $4.33, respectively.

     The following table summarizes the status of the distribution warrants and
     stock options outstanding and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                         STOCK OPTIONS OUTSTANDING                                    STOCK OPTIONS EXERCISABLE
---------------------------------------------------------------------------------------------------------------------
                                         WEIGHTED-
                                         REMAINING             WEIGHTED-                                 WEIGHTED-
      RANGE OF           NUMBER OF      CONTRACTUAL             AVERAGE            NUMBER OF              AVERAGE
  EXERCISE PRICES         OPTIONS          LIFE             EXERCISE PRICE          OPTIONS           EXERCISE PRICE
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>             <C>                  <C>                  <C>                  <C>
   $0.02 to $3.03        1,235,000       7.6 Years              $0.635             1,136,000              $0.505
   $5.28 to $7.33        2,310,000       8.3 Years              $5.858               922,000              $5.853
  $14.78 to $18.45         193,000       9.4 Years             $18.442                39,000             $18.442
  $18.67 to $22.45       6,768,000       9.4 Years             $20.714             1,291,000             $20.627
  $24.92 to $26.25         169,000       9.7 Years             $24.921                34,000             $24.921
       $38.75               79,000       10.0 Years            $38.750                16,000             $38.750
---------------------------------------------------------------------------------------------------------------------
                        10,754,000                                                 3,438,000
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-24
<PAGE>   66


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

15.  INCOME TAXES

     The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                              FOR THE PERIOD
                                                                            FROM APRIL 1, 1998
                                                                             (DATE OPERATIONS
                                                            YEAR ENDED         COMMENCED) TO
                                                           DECEMBER 31,         DECEMBER 31,
                                                               1999                1998
                                                          -------------------------------------
          <S>                                               <C>                 <C>
          Current:
               Federal                                       $106,000            $      -
               State and local                                625,000             440,000
                                                          -------------------------------------
          Total current                                       731,000             440,000
                                                          -------------------------------------
          Deferred:
               Federal                                              -                   -
               State and local                                      -                   -
                                                          -------------------------------------
            Total deferred                                          -                   -
                                                          -------------------------------------
                                                             $731,000            $440,000
                                                          =====================================
</TABLE>

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts used for income tax purposes.
     Significant components of the Company's deferred tax liabilities and assets
     are as follows:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                  1999              1998
                                                             -------------------------------
       <S>                                                   <C>                <C>
       Deferred tax assets:
             Depreciation                                     $   887,000        $  (58,000)
             Net operating losses                              35,444,000         5,419,000
             Allowance for doubtful accounts                    1,599,000           301,000
             Amortization of goodwill                             653,000            24,000
             Accrued expenses                                  10,359,000                 -
             Other                                                200,000                 -
                                                             -------------------------------
                                                               49,142,000         5,686,000
       Valuation allowance for deferred tax assets            (49,142,000)       (5,686,000)
                                                             -------------------------------
       Net deferred tax assets                                $         -        $        -
                                                             ===============================
       </TABLE>

     At December 31, 1999, the Company had net operating loss carryforwards of
     approximately $88,000,000 for federal income tax purposes that begin to
     expire in 2018. The Company became eligible to file a consolidated federal
     income tax return in July 1999. Losses incurred prior to July 1999 may only
     be utilized by the subsidiary that generated the loss. The deferred tax
     assets have been fully offset by a valuation allowance due to the
     uncertainty of realizing such tax benefit.


                                      F-25
<PAGE>   67


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

15.  INCOME TAXES (CONTINUED)

     The reconciliation of income taxes computed at U.S. federal statutory rates
     to income tax expense is as follows:

<TABLE>
<CAPTION>
                                                                                  FOR THE PERIOD
                                                                                   FROM APRIL 1,
                                                                                    1998 (DATE
                                                                                    OPERATIONS
                                                                YEAR ENDED         COMMENCED) TO
                                                               DECEMBER 31,        DECEMBER 31,
                                                                   1999                1998
                                                              -----------------------------------
          <S>                                                 <C>                  <C>
          Benefit at federal statutory rate (35%)              $(35,978,000)        $(5,535,000)
          State and local income taxes                              625,000             440,000
          Expenses not deductible for tax purposes                2,160,000           1,623,000
          Foreign income not subject to U.S. tax                   (399,000)           (846,000)
          U.S. losses with no benefit                            34,323,000           4,758,000
                                                              -----------------------------------
                                                               $    731,000         $   440,000
                                                              ===================================
</TABLE>

16.  COMMITMENTS AND CONTINGENT LIABILITIES

     As of December 31, 1999, the Company had purchase commitments of
     approximately $41,000,000 outstanding.

     The Company is involved in various disputes, arising in the ordinary course
     of its business, which may result in pending or threatened litigation. None
     of these matters are expected to have a material adverse effect on the
     Company's financial position, results of operations or cash flows.

17.  SUBSEQUENT EVENTS (UNAUDITED)

     On March 10, 2000, the Company announced that it had entered into a
     definitive agreement to acquire ATX Telecommunications Services, Inc.
     ("ATX"), which is a facilities based CLEC and integrated communications
     provider serving the Mid-Atlantic states. The Company will pay  total
     consideration consisting of (a) approximately 12.4 million shares of the
     Company's common stock, (b) $250 million of 3% convertible preferred stock
     and (c) $150 million in cash, of which up to $70 million, at the Company's
     option, may be paid in senior notes with a two-year maturity. The
     convertible preferred stock will be convertible into common stock at $44.36
     per share. Under the agreement's cap provisions, the shares of common stock
     to be issued will be reduced if the Company's stock price at closing
     exceeds $46.38 per share, and the number of common shares underlying the
     convertible preferred stock will be reduced if the Company's stock price at
     closing exceeds $44.36 per share. The transaction is subject to regulatory
     and shareholder approval and other customary closing conditions.


                                      F-26
<PAGE>   68


                        CoreComm Limited and Subsidiaries
             and its Predecessor OCOM Corporation Telecoms Division

             Notes to Consolidated Financial Statements (continued)

17.  SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)

     On March 13, 2000, the Company and Voyager.net, Inc. ("Voyager.net")
     announced a definitive agreement to merge in a stock and cash transaction.
     Voyager.net is the largest full-service Internet communications company in
     the Midwest, and is rapidly expanding into DSL delivery of its services.
     Under the agreement, Voyager.net shareholders will receive 0.292 shares of
     the Company's common stock and $3 in cash for each share of Voyager.net
     common stock (an aggregate of approximately 9.2 million shares and
     approximately $95 million in cash). Under the agreement's collar
     provisions, the shares of common stock issued will be reduced if the
     Company's stock price at closing exceeds $57 per share, and increased if
     the Company's common stock price at closing is below $41 per share. If the
     Company's stock price at closing is below $33 per share, there would be no
     further adjustment to the number of shares of the Company's common stock
     issued and Voyager.net would have the right to terminate the transaction,
     subject to the Company's right to adjust further the shares issued. The
     transaction is subject to shareholder approval and other customary closing
     conditions. Holders of over a majority of the voting shares of Voyager.net
     have entered into an agreement with the Company to vote in favor of the
     transaction.

     In March 2000, the Compensation and Option Committee of the Board of
     Directors approved the issuance of options in the Company to various
     employees to acquire 2.7 million shares of the Company's common stock at an
     exercise price of 30% of the fair market value of the Company's common
     stock on the date of the grant. In accordance with APB Opinion No. 25,
     "Accounting for Stock Issued to Employees," the Company will record a
     non-cash compensation expense of approximately $44.8 million in March 2000
     and a non-cash deferred expense of approximately $48.5 million. The
     Company will charge the deferred expense to non-cash compensation expense
     on a straight-line basis over the vesting period of the stock options as
     follows: $15 million in 2000, $20 million in 2001, $11.6 million in 2002,
     $1.8 million in 2003 and $0.1 million in 2004.








                                      F-27
<PAGE>   69


                        CoreComm Limited and Subsidiaries

                 Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
             COL. A                             COL. B                   COL. C                   COL. D           COL. E
-----------------------------------------------------------------------------------------------------------------------------
                                                                        ADDITIONS
                                                               ---------------------------
                                                                  (1)              (2)
                                                               ---------------------------
                                                                                CHARGED TO
                                              BALANCE AT       CHARGED TO         OTHER
                                              BEGINNING        COSTS AND         ACCOUNTS-     DEDUCTIONS -      BALANCE AT
           DESCRIPTION                        OF PERIOD         EXPENSES         DESCRIBE        DESCRIBE       END OF PERIOD
-----------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                <C>          <C>               <C>
For the year ended December 31, 1999:
  Allowance for doubtful accounts              $742,000        $3,241,000          $  -         $(34,000) (a)    $3,949,000
For the period from April 1, 1998
   (date operations commenced) to
   December 31, 1998:
   Allowance for doubtful accounts             $   -             $501,000             -         $241,000  (b)      $742,000
</TABLE>

(a)  Uncollectible accounts written off, net of recoveries, of $24,688,000
     offset by $24,654,000 allowance for doubtful accounts as of acquisition
     date from business combinations.

(b)  Uncollectible accounts written off, net of recoveries, of $117,000 offset
     by $358,000 allowance for doubtful accounts as of acquisition date from
     business combinations.


                                      F-28
<PAGE>   70


                       OCOM Corporation Telecoms Division

                 Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
             COL. A                             COL. B                   COL. C                   COL. D           COL. E
-----------------------------------------------------------------------------------------------------------------------------
                                                                        ADDITIONS
                                                               ---------------------------
                                                                  (1)              (2)
                                                               ---------------------------
                                                                                CHARGED TO
                                              BALANCE AT       CHARGED TO         OTHER
                                              BEGINNING        COSTS AND         ACCOUNTS-     DEDUCTIONS -      BALANCE AT
           DESCRIPTION                        OF PERIOD         EXPENSES         DESCRIBE        DESCRIBE       END OF PERIOD
-----------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                <C>          <C>               <C>
For the period from January 1, 1998
  to May 31, 1998:
  Allowance for doubtful accounts              $46,000          $92,000           $  -           $60,000  (a)      $78,000
For the year ended December 31, 1997:
  Allowance for doubtful accounts              $  -             $46,000           $  -           $  -              $46,000
</TABLE>

(a)  Uncollectible accounts written-off, net of recoveries.









                                      F-29