UNITED STATES
                       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 year ended December 31, 1998

                                       or

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

              For the transition period from _________ to _________
                          Commission File No. 333-05017

                           UIH Australia/Pacific, Inc.
             (Exact name of registrant as specified in its charter)

       State of Colorado                                         84-1341958
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

  4643 South Ulster Street, #1300
           Denver, Colorado                                        80237
(Address of principal executive offices)                         (Zip code)

       Registrant's telephone number, including area code: (303) 770-4001




Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X    No
                     ---     ---
Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
          ---
The Company has no  publicly-trading  shares of capital  stock.  As of March 29,
1999, the Company had 17,810,249 shares of common stock outstanding.


<PAGE>
<TABLE>
<CAPTION>
                                                UIH AUSTRALIA/PACIFIC, INC.
                                             1998 ANNUAL REPORT ON FORM 10-K

                                                    Table of Contents


                                                                                                                 Page
                                                                                                                Number
                                                                                                                ------

                                                         PART I
<S>           <C>                                                                                                 <C>
Item 1.       Business....................................................................................         2

Item 2.       Properties..................................................................................        18

Item 3.       Legal Proceedings...........................................................................        18

Item 4.       Submission of Matters to a Vote of Security Holders.........................................        19

                                                         PART II

Item 5.       Market for the Registrant's Common Equity and Related Stockholder Matters...................        20

Item 6.       Selected Financial Data.....................................................................        20

Item 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations.......        21

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk..................................        32

Item 8.       Financial Statements and Supplementary Data.................................................        35

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........        35

                                                         PART III

Item 10.      Directors and Executive Officers of the Registrant..........................................        56

Item 11.      Executive Compensation......................................................................        58

Item 12.      Security Ownership of Certain Beneficial Owners and Management..............................        62

Item 13.      Certain Relationships and Related Transactions..............................................        62

                                                         PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................        63
</TABLE>


<PAGE>
                                                              PART I

ITEM 1.  BUSINESS
-----------------

(a)  GENERAL DEVELOPMENT OF BUSINESS
------------------------------------

UIH   Australia/Pacific,   Inc.  (the  "Company")  is  a  leading   provider  of
multi-channel  television services in Australia, New Zealand and Tahiti. Through
its  Australian  operating  companies  CTV  Pty  Limited  and  STV  Pty  Limited
(collectively,  "Austar"),  the Company is the largest provider of multi-channel
television  services in  regional  Australia,  where it  operates  multi-channel
multi-point  distribution  systems  ("MMDS")  and markets a  satellite-delivered
direct-to-home ("DTH") service in franchise areas encompassing approximately 2.1
million  television homes, or 30.0% of the total Australian market. In addition,
the  Company,  through its  65.0%-owned  New Zealand  operating  company  Saturn
Communications  Limited  ("Saturn"),   is  constructing  a  wireline  cable  and
telephony system in and around Wellington,  New Zealand,  a market  representing
approximately  141,000  television  homes.  The Company's other assets include a
25.0%  interest  in XYZ  Entertainment  Pty  Limited  ("XYZ  Entertainment"),  a
programming company that provides five channels to the Australian  multi-channel
television   market;   up  to  a  90.0%  economic  interest  in  Telefenua  S.A.
("Telefenua"), the only provider of multi-channel television services in Tahiti,
with MMDS in a market of 31,000  television homes; and a 100% interest in United
Wireless  Pty Limited  ("United  Wireless"),  an  Australian  company  providing
wireless mobile data services primarily in Sydney and Melbourne.

The  Company,  a  Colorado  corporation  and a  wholly-owned  subsidiary  of UIH
Asia/Pacific  Communications,  Inc.  ("UAP"),  which is an indirect  98.0%-owned
subsidiary of United  International  Holdings,  Inc.  (together  with all of its
subsidiaries other than the Company and the Company's subsidiaries,  "UIH"), was
formed on October 14, 1994.  Immediately  prior to the May 1996  offering of the
Company's 14.0% senior  discount notes due 2006 (the "May 1996 Notes"),  certain
subsidiaries  of UIH that held  interests in  Australia,  New Zealand and Tahiti
were merged with and into the Company.  The information in this annual report on
Form 10-K has been  prepared  as though the Company  had  performed  all foreign
development activities and made all acquisitions of UIH's ownership interests in
multi-channel  television,  programming  and mobile data companies in Australia,
New Zealand and Tahiti  since  inception.  The  Company,  as  presented  in this
manner,   commenced   operations   in   January   1994   when  UIH   began   its
development-related  activities in the Asia/Pacific  region. UIH transferred the
net  assets  of  the  above  mentioned   subsidiaries,   including   capitalized
development costs and investments in affiliated  companies,  to the Company. The
Company,  in turn,  reflected these transfers as capital  contributions from the
parent company.

HISTORY OF ACQUISITIONS

In 1994, the Company  acquired,  through directly and indirectly held interests,
an  effective  50.0%  economic  interest  in  two  newly-formed  companies  that
constitute   Austar.   In  December  1995,  the  Company   acquired  from  other
shareholders of Austar an additional interest in Austar,  thereby increasing its
total  economic  interest  in  Austar  to  90.0%.  In May  1996,  as a result of
additional equity  contributions,  the Company's economic interest in Austar was
increased to 94.0%, which was subsequently  increased to 96.0%. In October 1996,
the Company  acquired the remaining  4.0% economic  interest in Austar.  In July
1998,  Austar acquired  certain  Australian pay television  assets of East Coast
Television Pty Limited  ("ECT"),  an affiliate of Century  Communications  Corp.
("Century"),  for $6.2  million  of  UIH's  newly-created  Series B  Convertible
Preferred  Stock ("Series B Preferred  Stock").  ECT's  subscription  television
business  includes  subscribers  and  certain  MMDS  licenses  and  transmission
equipment  serving the areas in and around Newcastle,  Gossford,  Wollongong and
Tasmania.

In July 1994, the Company acquired a 50.0% interest in Saturn, which at the time
owned only a small cable  television  system  outside of  Wellington.  Since the
Company's initial  investment,  Saturn has begun  construction of a hybrid fiber
coaxial  ("HFC")  cable  network  planned to pass  141,000  homes in the greater
Wellington area. In July 1996, the Company acquired the remaining 50.0% interest
in Saturn in exchange for a 2.6%  interest in the Company,  which was  exchanged
for a 2.0%  interest in UAP in May 1997.  In July 1997,  SaskTel  Holdings  (New
Zealand)  Inc.  ("SaskTel")  purchased  a 35.0%  equity  interest  in  Saturn by
investing approximately New Zealand $("NZ$")29.9 million ($19.6 million) for its
shares (the "Saturn Transaction").

                                       2
<PAGE>


In  October  1994,  the  Company  and  Century  formed XYZ  Entertainment,  each
retaining a 50.0%  interest.  In June 1995,  the Company and Century  formed the
50/50 joint venture Century United Programming  Ventures Pty Limited ("CUPV") to
hold their investments in XYZ Entertainment. In September 1995, a 50.0% interest
in XYZ Entertainment  was sold to a third party,  thereby diluting the Company's
indirect  interest in XYZ  Entertainment  to 25.0%.  In September 1998, UAP (the
Company's parent) acquired the assets in CUPV held by Century.

In September 1995, the Company purchased a 100% interest in United Wireless. The
Company has since  continued  the  development  and funding of United  Wireless'
business.

RELATIONSHIP WITH UIH

The Company is an indirect,  98.0%-owned  subsidiary of UIH, a global  broadband
communications  provider of video,  voice and data services  with  operations in
over 20  countries  throughout  the world.  In  addition to the  Company,  UIH's
operations  include  its  interest  in  United  Pan-Europe  Communications  N.V.
("UPC"),  the  largest  privately-owned  multi-channel  television  operator  in
Europe, as well as its other investments in Europe,  Asia and Latin America.  As
of December 31, 1998,  UIH's  networks  reached 9.4 million homes and served 4.4
million  video  subscribers,  over  138,000  telephony  access  lines and 20,000
broadband data accounts.

ORGANIZATION OF COMPANY

The following chart summarizes the organizational  structure of the Company. The
interests  indicated below are summaries of the approximate  direct and indirect
economic  interests  of the  Company in its  principal  businesses.  Some of the
Company's  interests  in such  operating  companies  are  held  through  various
partnerships and holding  companies and the Company's voting rights with respect
to  certain  of such  operating  companies  differ  from the  economic  interest
indicated in the chart. See Item 1(c) "Corporate Organizational Structure."
<TABLE>
<CAPTION>
                                             UIH Australia/Pacific, Inc.
           Operating                                                                                        Ownership
             System                            Principal Business                                           Percentage
         --------------          ---------------------------------------------------------------------      ----------
         <S>                     <C>                                                                           <C>
         Austar                  Regional Australia, MMDS and DTH multi-channel systems                        100.0%
         United Wireless         Australia, wireless mobile data services                                      100.0%
         Telefenua               Tahiti and Moorea, MMDS                                                        90.0%
         Saturn                  Greater Wellington, New Zealand area, wireline cable/telephony system          65.0%
         XYZ Entertainment       Australian programming                                                         25.0%
</TABLE>

(b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
     ---------------------------------------------

The Company  operates in the  multi-channel  television  and  telecommunications
industry through investing in, acquiring and managing multi-channel  television,
telephony and programming operations.  The Company's reportable segments are the
primary countries in which it operates: Australia, New Zealand and Tahiti. These
reportable  segments  are  managed  separately  because  each  country  presents
different  marketing  strategies  and  technology  issues  as well  as  distinct
economic  climates  and  regulatory  constraints.   For  additional  information
applicable to this Item,  see Item 7  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations" and Note 13 to the  consolidated
financial statements contained in Item 8 "Financial Statements and Supplementary
Data."

(c)  NARRATIVE DESCRIPTION OF BUSINESS
     ---------------------------------

OVERVIEW

The  Company is a leading  provider  of  multi-channel  television  services  in
Australia,  New Zealand and Tahiti.  Through its  Australian  operating  company
Austar, the Company is the largest provider of multi-channel television services
in  regional  Australia,  where it  operates  MMDS and  markets a DTH service in
franchise areas  encompassing  approximately  2.1 million  television  homes, or
30.0% of the total  Australian  market.  In addition,  the Company,  through its
65.0%-owned New Zealand

                                       3
<PAGE>

operating  company Saturn, is constructing a wireline cable and telephony system
in and around  Wellington,  New  Zealand,  a market  representing  approximately
141,000 television homes. The Company's other assets include a 25.0% interest in
XYZ  Entertainment,  a  programming  company that  provides five channels to the
Australian  multi-channel  television market; up to a 90.0% economic interest in
Telefenua,  the only provider of  multi-channel  television  services in Tahiti,
with MMDS in a market  with  31,000  television  homes;  and a 100%  interest in
United Wireless,  an Australian  company providing wireless mobile data services
primarily in Sydney and Melbourne.

The Company  believes  that it is  well-positioned  to capitalize on the rapidly
increasing  demand  for  multi-channel  television  and  telephony  services  in
Australia  and New Zealand.  As of December 31,  1998,  excluding  project-level
financing, the Company had invested $380.8 million in its networks and operating
infrastructure  and had launched service in each of its markets.  As of December
31,  1998,  the  Company's  multi-channel  television  operating  systems had an
aggregate  of  approximately  2.1  million   television  homes  serviceable  and
approximately  301,000  subscribers,   compared  to  approximately  1.6  million
television  homes  serviceable  and  approximately  206,000  subscribers  as  of
December 31, 1997 (with a  substantial  majority of such growth  resulting  from
Austar's  expansion).  During this same period,  programming  subscribers of XYZ
Entertainment  increased  from  approximately  577,000 at  December  31, 1997 to
approximately  700,000 at December  31, 1998.  While the Company  expects that a
substantial  portion  of its  expected  growth  will  come  from  the  continued
development of Austar,  the Company is also anticipating  significant  growth by
its  New  Zealand  multi-channel  television  and  telephony  business  and  its
programming  business,  each of which the Company believes has attractive growth
prospects.


                                       4
<PAGE>


The following table sets forth certain unaudited operating data:
<TABLE>
<CAPTION>
                                                                         As of December 31, 1998
                                               -----------------------------------------------------------------------
                                                                                  Basic                       Economic
                                                 Homes in         Homes        Subscribers/       Basic      Ownership
                                               Service Area    Serviceable        Lines        Penetration    Interest
                                               ------------    -----------     ------------    -----------   ---------
     <S>                                         <C>            <C>               <C>             <C>         <C>
     Multi-channel TV Subscribers:
       Austar.........................           2,085,000      2,083,108         288,721         13.9%       100.0%
       Saturn.........................             141,000         40,950           6,010         14.7%        65.0%
       Telefenua......................              31,000         20,128           6,125         30.4%        90.0%
                                                 ---------      ---------         -------
         Total........................           2,257,000      2,144,186         300,856
                                                 =========      =========         =======
     Telephony Lines:
       Saturn (1).....................             141,000         35,935           7,360         20.5%        65.0%
                                                 =========      =========         =======
     Programming Subscribers:
       XYZ Entertainment..............                N/A(2)          N/A         699,867(3)        N/A        25.0%
                                                 =========      =========         =======

                                                                         As of December 31, 1997
                                               -----------------------------------------------------------------------
                                                                                  Basic                       Economic
                                                 Homes in         Homes        Subscribers/       Basic      Ownership
                                               Service Area    Serviceable        Lines        Penetration    Interest
                                               ------------    -----------     ------------    -----------   ---------
     Multi-channel TV Subscribers:
       Austar.........................           1,635,000      1,589,000         196,205         12.3%       100.0%
       Saturn.........................             141,000         23,518           3,059         13.0%        65.0%
       Telefenua......................              31,000         20,128           6,304         31.3%        90.0%
                                                 ---------      ---------         -------
         Total........................           1,807,000      1,632,646         205,568
                                                 =========      =========         =======
     Programming Subscribers:
       XYZ Entertainment..............                 N/A(2)         N/A         577,205(3)        N/A        25.0%
                                                 =========      =========         =======
</TABLE>

     (1)  In April 1998,  Saturn  launched  business and  residential  telephony
          services in the Wellington, New Zealand area.
     (2)  The Company expects that XYZ Entertainment's  programming package will
          be marketed to virtually  all of  Australia's  6.5 million  television
          households by Australian multi-channel television providers.
     (3)  This  figure  represents  the  total  estimated   subscribers  to  the
          five-channel XYZ Entertainment package.


                                       5
<PAGE>

AUSTAR (AUSTRALIA)

Austar is the largest provider of multi-channel  television services in regional
Australia.  Austar's  market  of  2.1  million  homes  in  Australia  represents
households   outside   Australia's  six  largest  cities.   Austar   experiences
competition for pay television services in only 3.0% of its market.

In 1998, the pay television industry in Australia underwent significant upheaval
brought  about by the  bankruptcy  of  Australis  Media  Limited  ("Australis").
Speculation  surrounding  Australis'  financial  condition  early  in  the  year
culminated  in this company  being placed in the hands of receivers in May 1998.
Austar had  received  the  majority of its basic  programming  channels  through
Australis  ("the  Galaxy  package")  and had also  relied on  Australis  for the
provision of a satellite  signal to its  subscribers.  Following the collapse of
Australis, new program contracts were negotiated directly with program suppliers
and a joint  venture  was  negotiated  with  Cable and  Wireless  Optus  Limited
("Optus") for the provision and operation of a satellite platform.

Another  significant  event was Austar's purchase of ECT in July 1998 consisting
of approximately 9,000 subscribers as well as various transmission equipment and
MMDS licenses.  Furthermore, Austar was able to access an additional 0.5 million
households located in ECT's operating area on the east coast of Australia and in
the state of Tasmania.  Austar began sales and  marketing  initiatives  in these
regions in August 1998.

OPERATING AND GROWTH STRATEGY.  Due to the relatively small size and low housing
densities,  which characterize  Austar's markets,  Austar is primarily utilizing
MMDS and DTH wireless  technologies to deliver its service.  In its metropolitan
markets,  Austar  offers both an MMDS service and a DTH service  (where the MMDS
signal cannot be received).  Austar  constructs  and owns the MMDS  transmission
facilities  and  installs and retains  ownership  of all the in-home  subscriber
equipment.  In its  non-metropolitan  markets,  Austar is marketing only the DTH
service and installs and retains ownership of the in-home subscriber  equipment.
Approximately  70.0% of the  television  homes in Austar's  service  area are in
metropolitan   markets  with   sufficient   size  and  density  to  justify  the
construction of MMDS networks.  Austar owns virtually all of the licenses in the
MMDS  spectrum  currently  available in these  markets for the provision of MMDS
services.  Because  MMDS service is less  expensive to install than DTH,  Austar
services customers in these metropolitan  markets with its MMDS service whenever
possible.  Approximately 30.0% of homes in these metropolitan markets,  however,
are out of the line of sight of Austar's MMDS  networks.  There are less densely
populated  areas  outside its  metropolitan  markets  that are more  effectively
serviced by DTH technology. In addition, Austar has constructed a wireline cable
network in Darwin, a market containing  approximately  27,000 serviceable homes,
where dense vegetation makes an MMDS service impractical.

The  deployment of MMDS networks in  combination  with DTH has allowed Austar to
roll out its  service  quickly  and  achieve  rapid  subscriber  growth.  Austar
believes that the ability to be the first provider of  multi-channel  television
services  in its  markets  has  allowed it to  establish  a  significant  market
presence and strong brand awareness,  factors which management  believes provide
it with a  competitive  advantage.  Austar is  currently  the only  provider  of
multi-channel  television  services in substantially all of its franchise areas.
See "Austar - Competition."

As of December 31, 1998,  Austar had launched service in all of its metropolitan
and  non-metropolitan  markets.  The  following  table  sets  forth the  summary
operating statistics in Austar's markets:
<TABLE>
<CAPTION>
                                                                As of December 31,
                                                     --------------------------------------
                                                       1998           1997          1996
                                                     ---------      ---------     ---------
     <S>                                             <C>            <C>           <C>
     Homes in service area:
       Metropolitan homes....................        1,527,000      1,103,000       997,000
       Non-metropolitan homes................          558,000        532,000       532,000
                                                     ---------      ---------     ---------
         Total...............................        2,085,000      1,635,000     1,529,000
                                                     =========      =========     =========

     Net annual gain in basic subscribers....           92,516         92,758        98,243
     Total basic subscribers.................          288,721        196,205       103,447
</TABLE>

                                       6
<PAGE>

Austar has entered into contracts with a number of service  companies to install
MMDS receivers, DTH satellite dishes and set-top decoders.

Currently,  variable  installation  and  equipment  costs  for each MMDS and DTH
subscriber are approximately $378 and $648 per subscriber,  respectively.  These
subscriber  costs  are  partially  offset  by  the  Company's  metropolitan  and
non-metropolitan  installation  charges  of $10 to $50  and  $75,  respectively.
Austar retains ownership of all MMDS and DTH customer premises equipment.

PRICING.  In September 1998,  Austar began tiering the services  provided to its
customers.  The  ability  to tier the  majority  of  channels  became  available
following  the  collapse  of  Australis  through  which  Austar  had  previously
purchased programming. The Company believes Austar's ability to tier services is
a valuable tool in ensuring its product meets  customer value  expectations,  as
they are able to select programming in accordance with their interests.  Tiering
also provides  customers with a lower basic entry point that both enhances sales
opportunities  and helps  reduce the level of customer  churn.  At December  31,
1998, Austar's pricing was:

                                                     MMDS    DTH
                                                      A$      A$
                                                    -----   -----

          Basic Service........................     31.95   35.95
          Movie Tier...........................     10.95   10.95
          World Movies.........................      6.95    6.95
          Adults Only (Pay per Night)..........      6.95    6.95
          Pay-per-View Events..................     24.95   24.95

MARKETING;  CUSTOMER SUPPORT. Austar has focused its marketing and sales efforts
to  support  its  strategy  of rapid  penetration  of its  markets.  Austar  has
developed a  comprehensive  marketing  and sales  organization  consisting of an
average of over 250 direct sales  representatives and over 250 national customer
service and telemarketing  personnel. The direct sales force, which operates out
of  local  offices  in each  of  Austar's  metropolitan  markets,  is  currently
generating  sales of over  3,000  subscriptions  per week.  The  sales  force at
Austar's  National Customer  Operations Centre ("NCOC") is currently  generating
sales of approximately  3,250  subscriptions  per week from inbound and outbound
calls. This sales  organization is supported by an integrated  marketing program
of television, radio and print advertising.

The NCOC is a  state-of-the-art  fully integrated  subscriber  management system
featuring a sophisticated  digital wide-area  network,  Cable Data's Intelecable
platform, an automated response unit and predictive dialer technology.  The NCOC
currently services all of Austar's MMDS and DTH subscribers and has the capacity
to service all future customers. Incoming calls from all of Austar's markets are
directed to the NCOC where customer  service  representatives  provide sales and
service  information.  The NCOC  currently  handles an average of  approximately
5,000 calls per day but has scalable capacity to handle at least 7,000 calls per
day.  The  NCOC   facility   currently   employs   over  250  customer   service
professionals,  which Austar intends to increase as its subscriber base grows in
its franchise areas.

Austar's  monthly  "churn"  (calculated as total  disconnects as a percentage of
average subscribers) averaged 3.9% during 1998, 4.2% during 1997 and 5.4% during
1996.  Austar  believes  that this ratio is likely to continue to decline in the
future, although there can be no such assurances.  Factors which Austar believes
will  contribute  to the  decline  in  customer  churn  include:  the  continued
enhancement  of the price value  relationship  as more  content is added and the
existing  content  improves,  the tiering of services and tailoring  packages to
customers,  a further  reduction in the level of product  sampling in a maturing
market,  the  introduction in 1998 of customer  contracts and improved  customer
communications combined with loyalty programs.


                                       7
<PAGE>

PROGRAMMING.  Following the Australis  bankruptcy,  Austar was able to negotiate
new program contracts with existing and new program suppliers.  This gave Austar
the ability to enhance the program  line-up and tier  services.  To promote this
initiative,  a re-launch of Austar's  service took place in October 1998.  Since
the re-launch, Austar's basic DTH package consists of the following channels:
<TABLE>
<CAPTION>
         Channel                                     Programming Genre
         -------                                     -----------------
         <S>                                         <C>
         Fox Sports I.......................         sports
         Fox Sports II......................         sports/exclusive Rugby League games
         TV-1...............................         general entertainment
         Discovery..........................         documentary, adventure, history & lifestyle
         Nickelodeon/Nick at Nite...........         children's and family entertainment
         Arena..............................         general entertainment
         Channel [V]........................         music video
         Lifestyle..........................         personal and home improvement
         Thecomedychannel...................         comedy
         Weather 21 (1).....................         weather station
         BBC World (1)......................         world news
         CNBC...............................         business news
         CNN International..................         international
         Sky Racing.........................         horse racing
         National Geographic................         documentaries
         TNT (1)............................         library movies
         Cartoon Network....................         cartoons
         CMT................................         country music videos
         TVSN (1)...........................         shopping
         Main Attraction (1)................         pay-per-view events

         The following programming is available on various tiered bases:

         World Movies.......................         foreign language
         Adults Only (1)....................         adult viewing
         Showtime...........................         premium feature movies
         Encore.............................         library movies (covering 60's, 70's,  80's & classics)
         Movie One (1)......................         premium feature movies
         Movie Extra (1)....................         premium & library movies
         Movie Greats (1)...................         library movies
         Movie Vision.......................         premium and classic movies
</TABLE>

         Austar also  offers an eight-channel "Digital Radio" service to its DTH
         customers.

        (1)  Not available to MMDS subscribers.

                                       8
<PAGE>

FOXTEL  PROGRAMMING  AGREEMENT.  In May 1998,  Austar and Foxtel  Management Pty
Limited  ("Foxtel")  negotiated  a  programming  agreement  with a  term  ending
December 2007. Under the Foxtel  Programming  Agreement,  Foxtel provides Austar
with TV-1,  Showtime and Encore.  Showtime and Encore  broadcast new release and
classic  movies (from the film  libraries of Fox  Studios,  Paramount  Pictures,
Sony/Columbia  and  Universal  Studios)  and are  purchased  as a  package.  The
programming rights are exclusive to Austar throughout its service region (except
for  cable  subscribers).  In a  separate  agreement  with  Foxtel,  two  sports
channels, Fox Sports I and II, are purchased. Fox Sports is a joint venture with
Fox and Liberty Sports,  and provides  coverage of both  international and local
sporting  events.  Fox's  live  sports  programming  includes  rights to certain
international  cricket and live/delayed  telecast rights to Rugby League,  Rugby
Union, English Premier League (and other European/Global soccer), as well as the
National Australian Basketball League, US Major League Baseball, NBA and NFL.

OPTUS  PROGRAMMING  AGREEMENT.  Austar  currently  sources  Movie Vision under a
program supply  agreement with Optus Vision Pty Limited  ("Optus  Vision") which
consists of three 24-hour  channels  comprising  premium and classic movies from
MGM,  Disney,  Warner and  Dreamworks.  The  agreement  expires 2007 and is on a
non-exclusive basis.

SATELLITE  PLATFORM JOINT  VENTURE.  Prior to 1998,  Austar had contracted  with
Australis  by way  of a  franchise  agreement  for  the  majority  of its  basic
programming  channels  and  for  the  provision  of a  satellite  signal  to its
subscribers.  Australis  had in turn  contracted  with Optus Network Pty Limited
("Optus  Network") for the use of  transponders  on the Optus B3 satellite.  The
Optus B3 satellite  has 15  transponders,  7 of which  deliver high  performance
digital  beams with the  capacity  to deliver  up to 14 digital  pay  television
channels.  In anticipation of Australis's  collapse,  UIH held negotiations with
Optus Network for the establishment and operation of a satellite  platform joint
venture.   During  1998,  when  Australis  went  into  receivership,   satellite
transmission  platforms were effected without any loss of signal to Austar's DTH
or MMDS  subscribers.  Futhermore,  in the  later  half of 1998,  the  Satellite
Platform Joint Venture  successfully  negotiated an agreement  which would allow
Foxtel to become a customer of the joint venture. In practice, the management of
the  platform is  conducted  jointly  among UIH,  Optus  Network  and Foxtel.  A
contract  for  the  establishment  and  management  of  the  Satellite  Platform
encompassing all three parties was signed in December 1998.

OTHER AUSTAR PROGRAMMING. Austar purchases five channels from XYZ Entertainment.
The five channels are Discovery, Nickelodeon,  Lifestyle, Channel [V] and Arena.
XYZ   Entertainment's   program   suppliers   include  Fox,  Viacom,   Discovery
Communications and Nickelodeon.  Additional programming is sourced from a number
of   independent   sources,   and  includes   CMT,  CNN,  TNT,  Sky  Racing  and
Thecomedychannel.  This  programming  is  sourced at price  levels  the  Company
believes  are  competitive.  In addition,  UIH has  established  separate  joint
ventures for the production  and supply to Austar of a weather  (Weather 21) and
adults only channel.

The programming  agreements with Foxtel,  Optus Vision,  XYZ  Entertainment  and
other   distributors   provide  Austar   subscribers  access  to  all  available
significant  programming  content in Australia.  The Company  believes that both
Foxtel and Optus Vision derive significant benefits from their relationship with
Austar,  including their ability to receive programming  revenues without build-
out costs and an ability  to meet their own  minimum  subscriber  targets  under
certain programming agreements.

COMPETITION.  The  substantial  majority  of Austar's  metropolitan  markets are
either small (i.e.,  approximately  20,000  homes),  and/or have  relatively low
household  densities  (generally 25 to 75 homes per square kilometer as compared
to 100 to 130 homes per square kilometre in Australia's  largest  cities).  As a
result,  Austar  believes that its  metropolitan  markets  generally do not have
sufficient  density to justify the  construction  of competitive  wireline cable
systems.  While the  Company  believes  household  densities  could  potentially
support wireline cable construction in areas representing approximately 20.0% of
Austar's  total  franchise  homes,  the  relatively  small size of these markets
reduces the  attractiveness  of  constructing a competitive  cable  network.  In
addition,  Austar, as a licensed subscription television provider, is authorized
to build  wireline cable systems in its markets and,  where  appropriate,  could
construct wireline cable systems.

With the exception of the Foxtel cable  television  system  currently  extending
into  Austar's  116,000-home  Gold Coast  metropolitan  market,  Austar does not
currently  have  any  operational  subscription  television  competitors  in its
markets.  At December 31, 1998, Austar had 23,000  subscribers in the Gold Coast
and estimates that Foxtel has 13,000 subscribers in this market.

                                       9
<PAGE>

Approximately   558,000  of  Austar's  2.1  million   franchise   homes  are  in
non-metropolitan  markets  that  generally  have  densities  of  fewer  than  25
households per square  kilometer.  As a result,  the Company believes that these
markets  can only be served  economically  with DTH  technology.  Austar has the
exclusive right from its programming  suppliers to market key movie,  sports and
general  entertainment   programming  in  these  non-metropolitan   markets.  In
addition, Austar believes it has an additional competitive advantage in offering
DTH service in these  markets  because over 50.0% of its  serviceable  homes are
within a 50 kilometer radius of its metropolitan markets, where it has available
sales personnel and installation technicians.  Accordingly,  Austar believes its
cost to market and install  subscribers  in these areas  should be below that of
any potential competitor without similar infrastructure in place.

Management  believes that Austar has established a significant  subscriber base,
strong brand awareness and substantial operational and marketing infrastructure,
factors that provide it with a competitive advantage.

MANAGEMENT  AND  EMPLOYEES.   Austar's  senior  management   includes  five  UIH
employees.  Austar  and  UAP  are  parties  to a  10-year  technical  assistance
agreement,  renewable  for up to an additional  15 one-year  terms,  pursuant to
which Austar pays UAP a monthly fee equal to 5.0% of its gross revenues  through
the term of the agreement, for the provision of various management and technical
services.  In addition,  Austar reimburses UIH for certain direct costs incurred
by UIH,  including the salaries and benefits  relating to the senior  management
team.

As of December 31, 1998,  Austar had over 700  employees.  Substantially  all of
Austar's employees are parties to an "award" governing the minimum conditions of
their  employment  including  probationary  periods of  employment,  rights upon
termination, vacation, overtime and dispute resolution.

SATURN (NEW ZEALAND)

The Company owns 65.0% of Saturn, which launched service on the initial portions
of its HFC  network  that  will  allow it to  provide  multi-channel  television
services as well as business and residential  telecommunications services in the
greater Wellington area, encompassing 141,000 homes. Wellington is New Zealand's
capital and second  largest city.  The Company  launched  service in portions of
this system in September 1996 and expects  construction  to be completed by late
1999.  Saturn  launched  a  full  complement  of  telephone   services  to  both
residential  and  business  markets in April  1998.  As of  December  31,  1998,
Saturn's  activated  networks  passed  approximately  41,000  homes and provided
service to approximately 13,000 subscribers,  including cable and telephone.  In
addition,  Saturn has secured  additional rights to use existing poles to attach
its  network  cable in  markets  representing  500,000  homes,  subject to local
planning  approval,  and is exploring the  possibility of expanding its networks
and services to these markets.

MARKET OVERVIEW.  The Company believes that New Zealand, a market of 1.2 million
homes,  is attractive for a new local operator that can provide  combined video,
voice  and data  services  over a high  bandwidth  network.  New  Zealand  has a
demographic  profile  similar to Australia  including high per capita income and
strong television,  VCR, PC and cellular telephone penetration rates. Wellington
City has over 50.0% PC  penetration  and over 20.0% of homes  subscribing to the
internet.  In addition,  New Zealand imposes virtually no pricing regulation and
only limited program content  regulation and permits operators to offer combined
and bundled multi-channel television, telephony service and internet access over
one network.  There is currently only one significant  multi-channel  television
provider that offers a five-channel  UHF-delivered  subscription service and one
other local phone service provider.

OPERATING  AND GROWTH  STRATEGY.  Saturn is  constructing  a 750MHz HFC  network
designed to service 500 homes per node with each home drop  overlaid with copper
telephony  plant.  This  architecture  allows  the  integrated  delivery  of pay
television,  telephony,  internet access, high speed data and future interactive
services. The majority of Saturn's plant,  approximately 1,600 kilometers,  will
be  constructed on aerial  utility poles which  generally  allow for quicker and
more cost-effective network construction than underground wireline. In addition,
because   Wellington   zoning  generally   permits  only  a  single   additional
communications  cable on its  aerial  utility  poles,  Saturn's  status as first
operator  on such  poles may limit  use of these  poles by other  communications
providers.  Saturn has an interconnect agreement that allows it to provide local
residential  and  business  telephone  services.  Because  the only  significant
multi-channel   television   competitor  in  the  Wellington   market  offers  a
UHF-delivered service that is limited to only five channels, and an expensive 20
channel  satellite  service,  management  believes  it will  be able to  build a
significant customer base by offering an attractive basic programming line-up of

                                       10
<PAGE>

over 25 channels at competitive  prices, as well as pay-per-view  movies,  local
and long distance telephony services and internet services. Saturn also provides
local and long  distance  telephone  service to  business  customers  as well as
enhanced  services  such as  Centrex  and a cable  modem  service.  By  bundling
subscription  television,  telephony  and internet  services,  Saturn is able to
offer  pricing  discounts  across  all  services,  which is  proving to be a key
competitive advantage over competitors that offer only one of these services.

PROGRAMMING.  Saturn's  programming  strategy  is to  offer  a wide  variety  of
high-quality  channels at  competitive  prices.  Saturn is currently  offering a
single tier of service  consisting  of 25  channels  and is  negotiating  with a
number of programming services to expand its channel offering.  The following is
a list of the programming currently offered by Saturn in its basic package:
<TABLE>
<CAPTION>
         Channel                                     Programming Genre
         -------                                     -----------------
         <S>                                         <C>
         TV1, TV2, TV3, TV4.................         general entertainment (retransmitted)
         ONTV...............................         Saturn community channel
         BBC World..........................         world news
         CNBC...............................         world financial news
         CNN International..................         world news
         MCM................................         music video
         Discovery..........................         science and nature
         National Geographic................         culture and nature
         Animal Planet......................         animal entertainment
         TNT................................         classic movies
         Cartoon Network....................         children's cartoon programming
         Trackside..........................         TAB racing
         Kidzone............................         local children's programming
         Weather Channel....................         live weather from NZ MetService
         Program Guide......................         programming line-up
         TVSN...............................         shopping
         CMTV...............................         country music video
         Elijah Television..................         non-denominational religious programming
         Worldnet...........................         U.S. information service news and science
         Saturn SportsNet...................         local/international sports
         The Golf Channel...................         24 hours of golf events/news
         Saturn Showcase....................         Saturn programming channels (split screen)
</TABLE>

Saturn  also offers 19 channels  of new  release  pay-per-view  ("PPV")  movies,
branded Saturn Home Cinema provided by four leading  Hollywood  studios.  Saturn
has been achieving over 100% PPV buy rates per subscriber.


                                       11
<PAGE>


TELEPHONY SERVICES. Saturn offers a full, feature rich telephone service that is
a  competitive  alternative  to Telecom New Zealand  ("Telecom"),  the incumbent
telephony provider.

         Residential Services:
         ---------------------
           Local access
           Long distance
           Full suite of switched based features (e.g., voicemail, call waiting,
             last number dialed, etc.)
           Dial-up internet access

         Business Telephony Services:
         ----------------------------
           Local access
           Long distance service
           Full suite of switch based features
           Centrex services
           High speed cable modem service

PRICING.  With its  unique  bundle  of  services,  Saturn  can offer a number of
attractive  multiple  service  bundles,  ranging from an entry level  package of
cable television service,  plus local telephone access and free local calls, for
NZ$27 per month to a package of two telephone  lines (free local  calls),  cable
television service and unlimited  internet usage for NZ$53 per month.  Saturn is
able to offer a savings of 30.0% based on a customer  buying the  services  from
multiple  providers.  These bundles are proving a very effective  means to drive
penetration  and increase  revenue per home.  Sky TV ("Sky"),  Saturn's  primary
competitor,  charges  subscribers a monthly rate of approximately NZ$31 for five
channels  of UHF  programming  with a  one-time  installation  fee of NZ$29  per
subscriber.  Sky's  digital  satellite  service  is  more  expensive  and has an
installation fee of NZ$350. Saturn's residential and business telephony services
are priced 10.0% to 15.0% below Telecom's  standard rates even though Telecom is
offering range discounts.  The Company believes that Saturn's internet rates are
some of the most price competitive in the country.

MARKETING;   CUSTOMER  SUPPORT.   Saturn's  marketing  strategy  uses  promotion
techniques proven in existing  subscription  television markets such as the U.S.
and Europe, including direct sales campaigns (door-to-door selling), direct mail
and  telemarketing  supported by a mass media brand  awareness  program.  Saturn
already  enjoys very high and positive brand  awareness in the market.  There is
considerable interest in purchasing its products and services. Direct sales have
proven  to  be  the  most  effective  technique  in  other  new  build  markets,
particularly  in areas where  multi-channel  television  is in its  introductory
stage.  Each of these  techniques  aims to communicate the selling points of the
telephone service,  cable television and internet services and in particular the
advantages of purchasing multiple services from one provider. Homes are released
for marketing on a node by node basis as construction is completed, which allows
for a very targeted marketing program tailored to the unique demographic profile
of the  territory  and enables  Saturn to  capitalize  on the product  awareness
resulting from its construction efforts.  Saturn's sales strategy is designed to
include an emphasis  on the bundled  offering  and to  capitalize  on the value,
quality and  customer  service  advantages  associated  with a one-stop  service
provider.  Saturn has  established a national  customer  services  center at its
corporate headquarters in Wellington. The call management technology employed by
Saturn  is  scaleable  and can be  configured  to  support  a  national  network
expansion. In addition, Saturn is currently developing a sophisticated marketing
database  to assist  the sales  force in a  targeted  sales  approach  in future
marketing campaigns.

COMPETITION.  Saturn's  major  telephony  competitor  is Telecom,  New Zealand's
largest  telecommunications  service  provider with nearly a 100% share of local
loop revenues,  75.0% of national and  international  toll revenues and 90.0% of
cellular revenues.  During 1996 and 1997, Telecom  constructed an HFC network to
70,000  homes in  various  parts of New  Zealand  and  began  offering  a pay TV
service.  In 1998, Telecom  discountinued its pay television service and Telecom
now appears to be pursuing an  asymmetrical  digital  subscriber  line  ("ADSL")
strategy for high speed internet access.

There are currently  four  broadcast  networks in New Zealand as well as several
other  free-to-air  regional  channels.  The largest  provider  of  subscription
television  services  in New  Zealand  is Sky,  which  operates  a  five-channel
encrypted  UHF  subscription  television  service  and has  recently  launched a
20-channel  digital  satellite  service.  Although  Sky offers a popular  sports
channel on an exclusive basis, the Company believes Sky does not currently offer
value and  programming  diversity or  television/telephony  bundling that Saturn
offers.

                                       12
<PAGE>

MANAGEMENT  AND  EMPLOYEES.  UIH has appointed  three of its employees to senior
management  positions at Saturn  including  Saturn's  chief  executive  officer.
Saturn  reimburses UIH for certain  direct costs incurred by UIH,  including the
salaries  and  benefits  relating  to  these  senior  management  positions.  In
addition,  Saturn  and UAP are  parties  to a  technical  assistance  agreement,
pursuant  to which  Saturn  pays UAP a  monthly  fee  equal to 2.5% of its gross
revenues for the provision of various technical,  administrative and operational
services.

As of December 3l, 1998, Saturn had  approximately 260 employees.  Substantially
all of  Saturn's  employees  are  parties to a  collective  employment  contract
governing certain conditions of their employment including  probationary periods
of employment,  termination,  redundancy,  overtime, holidays, leave and dispute
resolution.

XYZ ENTERTAINMENT (AUSTRALIAN PROGRAMMING)

In  October  1994,  the  Company  and  Century  formed XYZ  Entertainment,  each
retaining a 50.0%  interest.  In June 1995,  the Company and Century  formed the
50/50 joint venture,  CUPV, to hold their investments in XYZ  Entertainment.  In
September 1995, a 50.0% interest in XYZ Entertainment was sold to a third party,
thereby diluting the Company's  indirect interest in XYZ Entertainment to 25.0%.
In September 1998, UAP (the Company's  parent)  acquired the assets in CUPV held
by Century.

Through its interest in XYZ  Entertainment,  the Company  provides five channels
(the "XYZ Channels") which consist of the following:
<TABLE>
<CAPTION>
     Channel                                                    Programming Genre
     -------                                                    -----------------
     <S>                                                        <C>
     Discovery................................................  documentary, adventure, history and lifestyle
     Nickelodeon/Nick at Nite.................................  children's educational, entertainment and cartoons/family-
                                                                   oriented drama and entertainment
     Channel [V]..............................................  music video with local presenters
     Arena....................................................  drama, comedy, general entertainment, programming and
                                                                   library movies
     Lifestyle................................................  personal and home improvement
</TABLE>

XYZ Entertainment  provides the XYZ Channels to a subsidiary of Austar, which in
turn supplies  them to Austar and Foxtel.  The XYZ Channels are available to the
majority  of  Australia's   approximately  six  million  television  households,
including all households marketed via MMDS and DTH by Austar and Foxtel. The XYZ
Channels are also  distributed  to Foxtel for cable  distribution  pursuant to a
carriage  agreement  between  Foxtel and Austar that has been  warranted  to XYZ
Entertainment as having a term through 2020. XYZ Entertainment's  agreement with
Austar  provides for fixed per subscriber  prices.  The Company  understands the
cable  carriage  agreement  between Austar and Foxtel  provides for  substantial
minimum  subscriber  guarantees.  XYZ Entertainment  currently  receives monthly
revenues  of  $3.15  per MMDS or DTH  subscriber  and  $4.15  per  Foxtel  cable
subscriber.  Austar  also  has an  agreement  for  the  distribution  of the XYZ
channels to Optus  Vision,  although  distribution  has yet to  commence.  As of
December 31, 1998, the XYZ Channels were  distributed to  approximately  700,000
multi-channel television subscribers.

OPERATING AND GROWTH STRATEGY.  XYZ  Entertainment  is an independently  managed
venture which purchases,  edits,  packages and transmits programming for the XYZ
Channels in exchange for a monthly fee per subscriber. The Company manages Arena
and the Lifestyle  channel;  the Company and Foxtel manage  Channel [V]; and the
Company, together with Nickelodeon Australia,  Inc. ("Nickelodeon"),  manage the
Nickelodeon/Nick  at Nite  channel.  Each of these  channels  reports to a board
comprised of the Company and Foxtel executives. The Discovery Channel is managed
by Discovery Asia and distributed by XYZ Entertainment.

XYZ  Entertainment is focusing its marketing  efforts on creating,  building and
supporting channel identification and brand awareness.  XYZ Entertainment's goal
is to  acquire  quality  programming  that  will  engender  viewer  loyalty.  In
addition, XYZ Entertainment offers advertising on each of the XYZ Channels.

                                       13
<PAGE>

ACQUISITION OF PROGRAMMING.  In July 1995, XYZ  Entertainment and Discovery Asia
executed a 12-year exclusive  carriage  agreement whereby a localized version of
the Discovery Channel replaced the existing documentary channel developed by XYZ
Entertainment.  The Company believes that as a result of this  arrangement,  XYZ
Entertainment is able to offer subscribers higher quality programming at a lower
cost to XYZ  Entertainment.  XYZ  Entertainment  and Nickelodeon,  a division of
Viacom,  are  jointly  producing  and  distributing  an  Australian  version  of
Nickelodeon/Nick  at Nite, which XYZ Entertainment began distributing in October
1995. XYZ Entertainment pays a monthly per subscriber  license  distribution fee
that is shared equally by Nickelodeon and XYZ  Entertainment.  XYZ Entertainment
acquires programming and produces interstitials for Arena, Lifestyle and Channel
[V].  XYZ  Entertainment  has  acquired  a supply of  programming  for Arena and
Lifestyle at prices its management considers to be favorable.  XYZ Entertainment
is pursuing supply  agreements and potential joint venture  arrangements  with a
number of other international programming suppliers.

In March 1997,  XYZ  Entertainment  and Channel [V] Music Networks  ("CVMN"),  a
joint venture  between Star TV and several record  companies  including  B.M.G.,
EMI,  Sony  and  Warner  Music,  entered  into  an  agreement  to  re-brand  XYZ
Entertainment's  music  video  channel  under a  license  arrangement  with  the
international  music video channel,  Channel [V]. The  arrangement,  which has a
10-year  term,  allows XYZ  Entertainment  to use the  Channel  [V]  trademarks,
interstitial  materials  and  management  and gives it access to  Channel  [V]'s
favorable record programming arrangements. XYZ Entertainment has agreed to pay a
management fee of approximately $0.7 million over the first two years as well as
a licensing fee based on gross  subscriber  revenues,  ranging from 2.5% for the
first two years to 5.0% for the third  through the tenth years.  After the third
year,  CVMN shall have a one-year  option to acquire a 20.0% interest in Channel
[V] at a price equal to XYZ  Entertainment's  cost plus cost of capital at 11.5%
per annum.  Upon such  acquisition,  CVMN will offset its  licensing fee against
current and future profit shares.

EMPLOYEES.  As of December 31, 1998, XYZ  Entertainment had 79 employees and the
Nickelodeon joint venture had 21 employees. The programming joint venture, CUPV,
had 14 employees who provided management services to XYZ Entertainment.

TELEFENUA (TAHITI)

The Company has an up to 90.0% economic interest in Telefenua,  which operates a
16 channel MMDS in a franchise  area that,  as of December  31,  1998,  included
approximately  20,000  serviceable homes.  Telefenua is currently  expanding its
network by  selectively  adding beam benders and  repeaters  that will allow its
signal  to reach  substantially  all of the  approximately  31,000  homes in its
franchise areas.  Telefenua had  approximately  6,100 subscribers as of December
31, 1998,  representing a 30.4%  penetration  rate. The Company is in litigation
with its partners.  During the fourth quarter of 1998, the Company determined it
had  suffered an  other-than-temporary  loss of control  over  Telefenua,  which
resulted in the  deconsolidation  of Telefenua  at that time.  See Item 3 "Legal
Proceedings".

MARKET OVERVIEW. Tahiti and Moorea are the two largest and most populous islands
of French Polynesia,  a self-governing  territory of the Republic of France. The
French  government   contributes  heavily  to  French  Polynesia's  economy  and
approximately  one-third  of Tahiti's  population  is  employed by the  national
government.   Television  viewing  alternatives  are  limited,  but  demand  for
television is strong as  demonstrated  by the country's high  television and VCR
penetration  rates,  99.0% and  66.0%,  respectively,  and  average  per  capita
television viewing of nearly four hours per day. Prior to late 1994,  television
choice was limited to two government broadcast channels.

COMPETITION.  Telefenua's only subscription television competitor is Canal Plus,
which  offers a single  channel UHF service  offering a  combination  of sports,
movies and general entertainment  programming.  There is no existing competition
in Tahiti from DTH services due to limited satellite  coverage in the region and
lack of available satellite-delivered French language programming.

MANAGEMENT  AND  EMPLOYEES.  UAP  and  Telefenua  are  parties  to  a  technical
assistance   agreement,   whereby   UAP  has   agreed  to   provide   technical,
administrative  and  operational  assistance to Telefenua for  reimbursement  of
expenses and a fee equal to 2.0% of Telefenua's  gross  revenue.  Telefenua also
has a similar  technical  assistance  agreement  with the Societe  Francaise des
Communications et du Cable S.A. ("SFCC"), Telefenua's immediate parent. Although
UAP has assumed all of SFCC's rights and obligations under this agreement,  SFCC
is still entitled to receive from  Telefenua 0.5% of Telefenua's  gross revenues

                                       14
<PAGE>

through the term of the agreement.  The Company and Telefenua are currently in a
dispute  concerning  services  to be  provided  under the  technical  assistance
agreement. See Item 3 "Legal Proceedings".

UNITED WIRELESS (AUSTRALIAN MOBILE DATA)

The Company owns a 100% economic  interest in United  Wireless  which operates a
nationally  linked public  wireless data network in Australia.  United  Wireless
holds a unique  position in the  Australian  market place as the only  dedicated
owner and operator of a packet-switched wireless data network.

BACKGROUND.  The United  Wireless  network  operates on Mobitex  packet-switched
technology,  developed  and licensed by Ericsson.  Mobitex is a  packet-switched
technology designed specifically for data transmission. Today there are 24 other
Mobitex  public  networks  in  operation  throughout  the world in addition to a
number of private networks.

MARKET OVERVIEW.  Australia has a rapidly expanding  telecommunications markets,
though  most  activity is in wireless  voice  communications,  rather than data.
Today there are two carriers operating  wireless data networks,  United Wireless
and Telstra.  There are also three  carriers  operating GSM voice networks which
indirectly compete with United Wireless in the wireless data industry.

OPERATING  AND  GROWTH   STRATEGY.   The  United  Wireless  network  covers  all
metropolitan  areas of Australia's  mainland cities and major regional  centers.
Currently,  United  Wireless  has  deployed 25 base  stations  and is  deploying
additional  stations over the next 12 months to increase its geographic coverage
as well as  addressing  "black-spots"  in existing  coverage.  United  Wireless'
network will cover an estimated 85.0% of the Australian population by the end of
1999.

MARKETING AND CUSTOMERS.  United  Wireless'  targeted  vertical  markets are the
transportation  industry for fleet management requirements and the utility, fire
and  vending  industries  for fixed  telemetry  applications,  including  remote
monitoring  and  reading of meters,  fire  panels,  vending  machines  and other
similar applications.

REVENUE AND PRICING.  The majority of United Wireless' revenues to date has been
on modem sales, connection revenues and monthly access and usage fees charged on
a per terminal basis. The average telemetry  customer pays approximately $17 per
subscriber per month whereas in the transportation  industry the average monthly
revenue is approximately $56 per subscriber per month.

SALES.  United Wireless has sales teams in Sydney,  Melbourne and Brisbane whose
approach has a two-pronged focus. The first are end-users in the transportation,
utilities,  fire  and  vending  industries.  United  Wireless  approaches  these
end-users  with  turn-key  solutions  for  their  wireless  data  communications
requirements  with  system  integrators  brought in  afterwards  as value  added
partners to install,  integrate  and manage the  end-solution.  The second sales
approach is to target and recruit  systems  integrators  as value added partners
who would act as the primary  interface with potential  customers.  These system
integrators   develop  specific  customer   applications  which  utilize  United
Wireless' network for their data transmission requirements.

COMPETITION.  United  Wireless  believes  that the  Mobitex  network  technology
provides  certain  advantages  over  other  operating  platforms  including  the
following:  (i) superior transmission quality and over-air data integrity,  (ii)
broader redundancy and security capabilities, (iii) larger base station coverage
areas,  (iv)  lower  maintenance  and  support   requirements  and  (v)  reduced
communication costs associated with packet wireless technology.

In Australia,  GSM is the major wireless  network  technology that competes with
United Wireless. At present three carriers operate GSM networks - Telstra, Optus
and Vodafone - and a fourth carrier,  One Tel will be entering the market in the
next twelve months.  All, however,  market their wireless data capabilities as a
secondary focus to their voice capabilities.

Telstra  is the  only  other  operator  of a  packet-switched  data  network  in
Australia,  offering the DataTAC  network.  DataTAC focuses on electronic  funds
transfer at point of sale  ("EFTPOS")  as its core business and does not compete
with  United  Wireless  in its core  transportation  market or in its  telemetry
markets.

                                       15
<PAGE>

In the transportation  market, United Wireless also competes against traditional
trunk radio  networks,  although  United  Wireless  has an  inherently  superior
technology  for the  transmission  of data,  especially  where  global  position
systems ("GPS") based requirements are specified.

MANAGEMENT  AND  EMPLOYEES.  UAP and United  Wireless are parties to a technical
assistance  agreement,  pursuant  to which UAP has agreed to provide  technical,
administrative and operational  assistance to United Wireless and UAP receives a
management  fee equal to 5.0% of the gross  revenue of United  Wireless  through
December 2007. UIH has appointed the Chief Executive Officer of United Wireless,
pursuant to the terms of this agreement.  All costs related to the employment of
this individual are reimbursed to UIH by United Wireless.

As of December 31, 1998, United Wireless had 21 employees.

TECHNOLOGIES EMPLOYED BY THE COMPANY

The Company  currently uses three  principal  transmission  technologies  in the
deployment of its multi-channel  television  services in Australia,  New Zealand
and Tahiti.  These technologies are as follows: (i) MMDS or wireless cable, (ii)
DTH  satellite  broadcast  services  and  (iii)  wireline  cable  or  CATV,  the
technology  with which  multi-channel  television  services are most  frequently
delivered  in the  United  States.  The  Company  has  carefully  evaluated  the
characteristics of the markets in which it is currently operating or planning to
operate  multi-channel  television systems and has chosen what it believes to be
the most appropriate  transmission technology for each. While these transmission
technologies are, in general,  similar with respect to picture quality, all such
technologies  offer improved  picture quality  compared to what has historically
been offered by over-the-air broadcasters.

MMDS is a microwave  distribution  system for which frequency bands are utilized
for  transmission of the  programming  services.  MMDS signals  originate from a
head-end facility, which receives  satellite-delivered  programming services and
delivers such  programming  via an encoded  microwave  signal from  transmitters
located on a tower or on top of a building to a small receiving  antenna located
at a  subscriber's  premises,  where the  microwave  signals are  decoded.  MMDS
transmission  requires a clear line-of-sight  because microwave frequencies will
not pass through  obstructions;  however,  many signal blockages can be overcome
through the use of low power  signal  repeaters  which  retransmit  an otherwise
blocked  signal  over a limited  area.  The initial  construction  costs of MMDS
generally  are  significantly  lower than a wireline  cable or DTH  system.  The
Company is using MMDS  transmission  technology in Australia  and Tahiti,  where
housing density and topography make MMDS the most cost effective technology.

DTH  transmits  encoded  signals  directly  from a satellite  to a  subscriber's
premises,  where it is decoded.  Currently in  Australia,  all DTH  subscription
television  services are transmitted via the Optus Network  Satellite using High
Performance  Beams ("HP Beams")  covering  certain  geographic  areas  (commonly
referred to as a satellite  "footprint").  All of Austar's  franchise  areas are
within  the  Optus  Network  Satellite  footprint.  Since  this  signal  will be
transmitted  at a high  power  level and  frequency  utilizing  MPEG II  digital
technology,  its reception can be  accomplished  with a relatively  small (26-35
inch) dish mounted on a rooftop or in the yard for the households located within
the innermost satellite transmission footprint and with a slightly larger (35-47
inch) dish for the households located outside the innermost footprint. Austar is
using DTH  transmission  technology  for homes in its MMDS  markets that are not
reachable by its MMDS signals as well as for homes in its franchise  areas where
household  densities do not support the  construction  of MMDS  systems.  Due to
satellite  coverage  limitations,  DTH service is  currently  not  available  in
Tahiti. In New Zealand,  Sky launched  satellite services to New Zealand via the
Optus Network Satellite in the second half of 1998.

A wireline  cable  television  system is a network  of  coaxial  or  fiber-optic
transmission  cables through which  programming is transmitted to a subscriber's
premises  from the system's  head-end  facility,  which  receives  satellite and
tape-delivered  programming.  Wireline cable television  offers a wide bandwidth
that generally allows the transmission of a larger number of channels than MMDS.
When constructed with an HFC network, as the Company plans to do in New Zealand,
the system's  infrastructure can be used to deliver telephony and data services.
The primary  disadvantages  of a wireline  cable network are the higher costs of
construction, especially in areas of low housing density, and the length of time
required to construct the network.  The Company is  constructing  wireline cable
systems  in New  Zealand  and,  due to  topography  and  housing  densities,  is
constructing a wireline cable system in one market in Australia.

                                       16
<PAGE>

EMPLOYEES

The Company has no employees.  Certain  management,  technical,  administrative,
accounting,  tax, legal,  financial reporting and other services for the Company
are  currently  provided by UIH and UAP  pursuant  to the terms of a  management
agreement.  In addition,  UIH supplies certain  employees to Austar,  Saturn and
United Wireless pursuant to technical assistance  agreements with such operating
companies. See Item 13 "Certain Relationships and Related Transactions."

CORPORATE ORGANIZATIONAL STRUCTURE

The Company is a holding  company  with no  operations  of its own.  The Company
holds majority economic  interests in all of its operating  companies other than
XYZ Entertainment.  Below is a summary of the Company's  ownership  interests in
its operating companies.

AUSTAR

The Company holds a combined 100% economic  interest in Austar,  through  direct
and indirect holdings of convertible debentures and ordinary shares. The Company
holds approximately  15.0% of the ordinary shares of Austar,  which accounts for
an  approximately  0.3%  economic  interest.  The Company  holds all of Austar's
convertible  debentures,  which  accounts for an  approximately  97.8%  economic
interest.  In addition,  through the Company's holdings of certain debentures of
Salstel Media  Holdings Pty Limited  ("SMH") and Salstel Media  Investments  Pty
Limited  ("SMI"),  which in turn  hold  ordinary  shares of  Austar,  UAP has an
additional  effective 1.9% economic interest.  Through contractual  arrangements
and  pursuant to the terms of Austar's  charter  documents,  the Company has the
right to appoint all of the six voting directors of each company.

SATURN

In 1994,  the  Company  acquired  a 50.0%  interest  in  Saturn,  a New  Zealand
corporation.  In July 1996, the Company acquired the remaining 50.0% interest in
Saturn in exchange for a 2.6% common equity  interest in the Company,  which was
exchanged  for a 2.0%  interest  in  UAP in May  1997.  In  July  1997,  SaskTel
purchased a 35.0% equity interest in Saturn,  reducing the Company's interest in
Saturn to 65.0%.

TELEFENUA

UIH-SFCC Holdings, L.P. ("UIH-SFCC"),  a limited partnership wholly-owned by the
Company,  is the general partner of a limited  partnership  (the  "Partnership")
that owns 100% of the preferred stock of SFCC, representing  approximately 40.0%
of the share capital of SFCC.  SFCC is the parent  company of  Telefenua,  which
owns and operates the  multi-channel  television  system in Tahiti. As holder of
100% of the  preferred  stock of SFCC,  the  Partnership  is entitled to certain
preferential  distributions by SFCC.  Through its general partner's  interest in
the Partnership,  UIH-SFCC will receive 90.0% of the distributions  made by SFCC
until UIH-SFCC has received the return of its investment plus a 20.0% cumulative
compounded  annual  return,  75.0% of  distributions  until it has  received the
return of its investment plus a 40.0%  cumulative  compounded  annual return and
64.0% of  distributions  thereafter.  Once  UIH-SFCC's  total equity  investment
exceeds $10.0 million,  further equity  investments would not be entitled to the
90.0% and 75.0% distributions.  Instead, equity investments above $10.0 million,
to the extent not matched pro rata by the Company's partners, would increase the
64.0% that UIH receives  after the  preferential  distributions  are made on the
first $10.0  million.  As of December 31, 1996,  UIH-SFCC had also advanced $7.0
million  as a bridge  loan to SFCC,  approximately  $5.0  million  of which  was
converted  into  convertible  debentures  of SFCC,  which are  convertible  into
preferred stock of SFCC.  During 1997,  UIH-SFCC  converted  approximately  $3.2
million  of such  debentures  into  preferred  stock  with the same terms as the
existing preferred stock of SFCC, to bring UIH-SFCC's total equity investment to
$10.0 million.  UIH-SFCC has also invested $2.3 million in equipment,  which has
been  leased to  Telefenua.  The  Company is  involved  in  litigation  with its
partners  in the  Partnership.  During the fourth  quarter of 1998,  the Company
determined  it  had  suffered  an  other-than-temporary  loss  of  control  over
Telefenua, which resulted in the deconsolidation of Telefenua at that time.
See Item 3 "Legal Proceedings".

                                       17
<PAGE>

UNITED WIRELESS

United Wireless is a wholly-owned subsidiary of the Company.

XYZ ENTERTAINMENT

The Company  has an indirect  25.0%  interest in XYZ  Entertainment  through its
50.0% interest in CUPV, an Australian  corporation  owned equally by the Company
and UAP. CUPV holds a 50.0% interest in XYZ Entertainment.

For a  discussion  of  risks  associated  with  foreign  operations,  see Item 7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
    ----------------------------------------------------------------------------

For  information  applicable  to this  Item,  see the notes to the  consolidated
financial statements contained in Item 8 "Financial Statements and Supplementary
Data."

ITEM 2.  PROPERTIES
-------------------

The Company's executive offices are located in Denver, Colorado, in space leased
by UIH and  provided to the  Company  through the UAP  Management  Agreement  as
described  in Item 13  "Certain  Relationships  and  Related  Transactions."  In
management's  opinion,  these  facilities are sufficient to meet the current and
foreseeable future needs of its operating companies.

Austar  leases  office  space in Sydney for its  administrative  offices and has
established  four regional offices in leased space in certain areas where it has
launched service. Austar also leases locations for smaller local offices in most
of its markets to handle local customer maintenance, marketing and installation.
In  addition,  Austar  leases  facilities  to house the  head-end  facility  and
transmitter  tower  in each  of its  markets.  The  NCOC is  located  in  leased
facilities in the Gold Coast. Generally, these Austar facilities are leased with
terms of three to six years,  with  renewal  options in many  instances.  Austar
believes that its leased facilities are sufficient for its foreseeable needs and
that it has  access to a  sufficient  supply  of  additional  facilities  in its
various markets, should it require more space.

Saturn owns a  head-end/switching  and  operations  facility in Petone,  located
north of Wellington.  Saturn also leases office and warehouse facilities for its
headquarters  in  Petone.  This lease  expires  in 2001 with a six-year  renewal
option.

XYZ Entertainment  currently uses a portion of Foxtel's broadcasting  facilities
located in Sydney.  XYZ Entertainment  pays its proportionate  share of Foxtel's
leasing costs (based on space  utilized).  The Company believes this arrangement
results in operational cost savings.  XYZ Entertainment  believes its facilities
are sufficient for the foreseeable future.

Telefenua owns office space in Punaania, Tahiti. This facility also contains the
customer  service  center and the head-end  equipment for the system,  including
equipment  for  the  receipt  of  satellite  delivered   programming  and  local
broadcasts  as well as play-back of taped  programming.  Telefenua  compiles its
16-channel  service at this facility and then  transmits from its MMDS broadcast
tower located on the island of Moorea.

United  Wireless  leases  corporate  office  space  in  Sydney  and has a leased
regional sales office in Melbourne.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

Other than as described  below, the Company is not a party to any material legal
proceedings,  nor  is it  currently  aware  of  any  threatened  material  legal
proceedings.  From time to time,  the Company may become  involved in litigation
relating to claims  arising out of its  operations  in the normal  course of its
business.

The  territorial   government  of  Tahiti  (in  French  Polynesia)  had  legally
challenged  the decree and authority of the Conseil  Superieur de  l'Audiovisuel

                                       18
<PAGE>

("CSA") to award  Telefenua  the  authorizations  to operate an MMDS  service in
French Polynesia.  The French  Polynesian's  challenge to France's  authority to
award Telefenua an MMDS license in Tahiti was upheld by the Conseil d'Etat,  the
supreme  administrative  court of France.  The territorial  government of Tahiti
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to  Telefenua.  On  November  25,  1998,  the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new  authorization.  The Company  has no reason to believe  that a new
authorization  will  not  be  granted.  If  Telefenua  does  not  obtain  a  new
authorization,   there  is  no  assurance   that   Telefenua  will  receive  any
restitution.  In addition,  any available restitution could be limited and could
take years to obtain.

On July 14, 1998, UIH SFCC filed a complaint in the United States District Court
for the  District of  Colorado,  for damages for breach of  contract,  breach of
fiduciary  duty and to enforce UIH SFCC's rights as General  Partner in UIH SFCC
LP, a Colorado  Limited  Partnership  which owns an interest  in SFCC,  the 100%
parent of Telefenua. The three defendants are Loic Brigato, Winfred Anderson and
Yoshiko Payne, limited partners of UIH SFCC LP. On September 27, 1998, UIH filed
a parallel action in the District Court for the State of Colorado. Specifically,
the complaints  allege that the defendants have refused to abide by the terms of
the  Partnership   Agreement  and  have  taken  actions  highly  detrimental  to
Telefenua.  UIH SFCC seeks monetary  damages,  a decree of specific  performance
requiring  defendants to perform their obligations and a constructive trust over
defendants'  partnership  interest.  Defendants  have filed in the federal court
action  a  motion  to  dismiss  the  complaint   for  lack  of  subject   matter
jurisdiction.  There has been no  decision  issued as of this date.  The Company
intends to vigorously defend its position.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

None.


                                       19
<PAGE>


                                     PART II

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

Upon its  formation,  the  Company  issued 100  shares of common  stock to UAP's
predecessor.  In July 1996, the Company  issued 387 additional  shares of common
stock to UAP as a stock  dividend  and 13 shares of common  stock to Kiwi  Cable
Company BVI, Inc.  ("Kiwi") in exchange for Kiwi's 50.0% interest in Saturn.  In
May 1997,  UAP  acquired  the  remaining  13 shares of the Company  from Kiwi in
exchange  for a 2.0%  interest  in UAP.  At that time,  UAP owned all of the 500
shares of issued and outstanding common stock of the Company.  In November 1997,
the Company  effected a stock split  whereby the 500 shares of common stock then
outstanding  were exchanged for 13,864,941  shares of common stock.  On November
17, 1997,  pursuant to the terms of the indentures  governing the May 1996 Notes
and the September 1997 private  placement of $45.0 million  aggregate  principal
amount of senior discount notes (the "September 1997 Notes") (collectively,  the
"Notes"),  the Company issued  warrants to purchase a total of 488,000 shares of
its common  stock to the holders of the Notes.  Neither the common stock nor the
warrants are listed on any  exchange.  On October 14, 1998,  the Company  issued
3,945,308  shares of its capital  stock to UAP (the  "Equity  Sale")  related to
cumulative  gross equity  contributions  to the Company of $70.0 million through
that date.

The Company has paid no cash dividends since formation. The Company is a holding
company with no  independent  operations of its own and, as such, its ability to
pay cash dividends is dependent upon distributions from its operating companies.
Such  distributions  are limited by  contractual  or other  obligations  of such
operating  companies.  In addition,  the ability of the  operating  companies to
distribute  funds may be limited by the  current  or future  regulations  of the
countries in which they are located.

ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

The following selected consolidated financial data as of and for the years ended
December  31,  1998,  1997,  1996,  1995 and 1994  have  been  derived  from the
Company's audited consolidated financial statements. The data set forth below is
qualified by reference to and should be read in  conjunction  with the Company's
audited  consolidated  financial  statements  including  the  notes  and  Item 7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."
<TABLE>
<CAPTION>
                                                                                For the Years Ended December 31,
                                                              --------------------------------------------------------------------
                                                                  1998          1997           1996          1995         1994
                                                              -----------   -----------    -----------   -----------   -----------
                                                                       (In thousands, except share and per share amounts)
   <S>                                                        <C>           <C>            <C>           <C>           <C>
   Statement of Operations Data:
     Service and other revenue............................    $   89,819    $   68,961     $   24,977    $    1,883    $       --
     System operating expense.............................       (71,149)      (52,703)       (22,865)       (3,230)           --
     System selling, general and administrative expense...       (49,738)      (50,006)       (32,665)       (2,482)           --
     Corporate general and administrative expense.........        (5,696)       (3,306)        (1,376)         (920)         (659)
     Depreciation and amortization........................       (97,140)      (80,802)       (36,269)       (1,003)           --
     Interest expense and other, net......................       (62,088)      (47,792)       (14,374)        4,898            --
     Share in results of affiliated companies, net........       (10,299)       (2,408)        (5,414)      (16,379)       (1,015)
                                                              ----------    ----------     ----------    ----------    ----------
     Net loss.............................................    $ (206,291)   $ (168,056)    $  (87,986)   $  (17,233)   $   (1,674)
                                                              ==========    ==========     ==========    ==========    ==========
     Basic and diluted net loss per common share..........    $   (14.02)   $   (12.12)    $    (6.44)   $    (1.28)   $    (0.12)
                                                              ==========    ==========     ==========    ==========    ==========
     Weighted-average number of shares outstanding........    14,718,857    13,864,941     13,670,832    13,504,453    13,504,453
                                                              ==========    ==========     ==========    ==========    ==========
   Other Data:
     Capital expenditures.................................    $   71,466    $  101,135     $  187,100    $    7,648    $        1


                                                                                          As of December 31,
                                                              --------------------------------------------------------------------
                                                                  1998          1997           1996          1995         1994
                                                              -----------   -----------    -----------   -----------   -----------
                                                                                           (In thousands)
   Balance Sheet Data:
     Cash, cash equivalents, restricted cash and
       short-term liquid investments......................    $      944    $   25,089     $   37,860    $    8,730    $       --
     Property, plant and equipment, net...................    $  122,968    $  183,101     $  193,170    $   27,630    $        1
     Total assets.........................................    $  216,032    $  279,032     $  319,323    $   99,295    $   24,084
     Senior discount notes and other long-term debt.......    $  424,726    $  387,094     $  250,057    $      742    $       --
     Total liabilities....................................    $  510,661    $  431,769     $  315,276    $   21,714    $       11
     Total stockholder's (deficit) equity.................    $ (294,629)   $ (164,153)    $    4,047    $   75,066    $   24,073
</TABLE>
                                       20
<PAGE>

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

The following  discussion and analysis of the Company's  financial condition and
results of operations  covers the years ended  December 31, 1998,  1997 and 1996
and should be read in  conjunction  with the  Company's  condensed  consolidated
financial  statements and related notes thereto included elsewhere herein.  Such
consolidated  financial statements provide additional  information regarding the
Company's financial activities and condition.

Certain  statements in this Report may constitute  "forward-looking  statements"
within  the  meaning  of  the  federal  securities  laws.  Such  forward-looking
statements may include, among other things,  statements concerning the Company's
plans, objectives and future economic prospects,  expectations,  beliefs, future
plans and  strategies,  anticipated  events or trends  and  similar  expressions
concerning   matters  that  are  not  historical  facts.  Such   forward-looking
statements  involve  known and unknown  risks,  uncertainties  and other factors
which may cause the actual  results,  performance or achievements of the Company
(or entities in which the Company has  interests),  or industry  results,  to be
materially  different  from any  future  results,  performance  or  achievements
expressed or implied by such forward-looking  statements.  Such factors include,
among other things,  changes in  television  viewing  preferences  and habits by
subscribers  and potential  subscribers,  their  acceptance  of new  technology,
programming  alternatives and new services offered by the Company, the Company's
ability to secure adequate capital to fund system growth and development,  risks
inherent in the change over to the Year 2000 (including the Company's  projected
state of  readiness  and  expected  contingency  plans for  possible  worst case
scenarios),  risks inherent in investment  and operations in foreign  countries,
changes  in  government  regulation,  changes  in the  nature  of key  strategic
relationships with partners and joint venturers, and other factors referenced in
this Report. These forward-looking  statements speak only as of the date of this
Report,  and the Company  expressly  disclaims any  obligation or undertaking to
disseminate any updates or revisions to any forward-looking  statement contained
herein, to reflect any change in the Company's expectations with regard thereto,
or any other change in events,  conditions  or  circumstances  on which any such
statement is based.  Any  statements  contained in  Management's  Discussion and
Analysis of Financial Condition and Results of Operations in this Report related
to Year 2000 are hereby denominated as "Year 2000 Statements" within the meaning
of the Year 2000 Information and Readiness Disclosure Act.

INTRODUCTION

The Company  currently holds (i) an effective 100% economic  interest in Austar,
(ii) a 65.0% interest in Saturn,  (iii) a 25.0%  interest in XYZ  Entertainment,
(iv) an up to 90.0%  economic  interest in Telefenua  and (v) a 100% interest in
United  Wireless.  Following its July 1996  acquisition  of the remaining  50.0%
interest in Saturn, the Company began consolidating the results of operations of
Saturn,  which had  previously  been  accounted  for using the equity  method of
accounting.  The Company's  interest in Saturn was reduced to 65.0% in July 1997
with  the  Saturn  Transaction.  Due to a  change  in an  accounting  principle,
effective January 1, 1998, the Company discontinued consolidating the results of
operations of Saturn and returned to the equity method of  accounting.  However,
the  Company is  currently  discussing  alternatives  which  would allow for the
consolidation  of  Saturn.   The  Company  accounts  for  its  interest  in  XYZ
Entertainment  using the equity method of accounting.  During the fourth quarter
of 1998, the Company determined it had suffered an other-than-temporary  loss of
control  over  Telefenua,  which  resulted in the  deconsolidation  of Telefenua
effective October 1, 1998. See Item 3 "Legal Proceedings".

In  connection  with the  offering  of the May 1996  Notes,  UIH merged into the
Company UIH's  subsidiaries that held interests in certain operating  properties
and early stage projects in Australia,  New Zealand and Tahiti. The accompanying
financial statements have been prepared on a basis of reorganization  accounting
as though the Company had performed all foreign development  activities and made
all  acquisitions  of UIH's  ownership  interest  in  multi-channel  television,
programming and mobile data companies in Australia, New Zealand and Tahiti since
inception.  The Company,  as presented in this manner,  commenced  operations in
January  1994  when  UIH  began  its   development-related   activities  in  the
Asia/Pacific region. UIH transferred the net assets of the related subsidiaries,
including capitalized development costs and investments in affiliated companies,
to  the  Company.  The  Company  reports  on the  basis  of  generally  accepted
accounting  principles  in the United States ("U.S.  GAAP") and  recognizes  its
proportionate share of affiliated company income (loss) on the basis of U.S.
GAAP results.

UAP,   the   Company's   parent,   provides   various   management,   technical,
administrative,  accounting,  financial reporting, tax, legal and other services
for the Company pursuant to the terms of a management  agreement between UAP and
the  Company.  In  addition,  UAP  provides  similar  services to the  Company's
operating  systems,  pursuant  to the  terms  of  various  technical  assistance
agreements with such operating systems.  See Item 13 "Certain  Relationships and
Related Transactions."


                                       21
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of December  31,  1998,  the Company  had  invested a total of  approximately
$416.8  million in its  projects.  These  fundings do not include  project-level
financing or amounts contributed by shareholders other than the Company.
<TABLE>
<CAPTION>
          SOURCES OF FUNDINGS:                                             As of
                                                                        December 31,
                                                                           1998
                                                                       --------------
                                                                       (In thousands)
          <S>                                                             <C>
          Senior discount notes proceeds, net of offering costs..         $244,652
          Cash contributions and other equity from parent(1).....          167,853
          Interest income........................................            4,316
                                                                          --------
            Total................................................         $416,821
                                                                          ========

          USES OF FUNDINGS:                                                As of
                                                                        December 31,
                                                                           1998
                                                                       --------------
                                                                       (In thousands)
          Austar(1)..............................................         $320,144
          Saturn.................................................           39,435
          Telefenua..............................................           16,738
          XYZ Entertainment......................................           16,481
          United Wireless........................................           10,161
          Other..................................................           13,862
                                                                          --------
            Total................................................         $416,821
                                                                          ========

          (1)  Includes  issuance/use  of  $29.8  million  and $6.2  million  in
               convertible  preferred stock in 1995 and 1998,  respectively,  to
               acquire interests in Australia.
</TABLE>

The  Company  is  responsible  for  its  proportionate   share  of  the  capital
requirements   of  the   operating   companies.   The  Company  has  funded  its
proportionate share to date with capital contributed by UIH and UAP and proceeds
from private debt offerings and has reduced its proportionate share to date with
subsidiary bank debt and strategic  partner  contributions.  Through the private
placement  of the May 1996 Notes,  the Company  raised  total gross  proceeds of
approximately $225.1 million. These notes will accrete to an aggregate principal
amount of $447.4  million at  maturity.  Through  the private  placement  of the
September 1997 Notes,  the Company raised total gross proceeds of  approximately
$29.9  million.  These notes will  accrete to an aggregate  principal  amount of
$45.4 million at maturity.  Effective  May 16, 1997,  the interest rate on these
notes increased by an additional 0.75% per annum to 14.75%. On October 14, 1998,
the Company  consummated the Equity Sale, reducing the interest rate from 14.75%
to 14.0% per annum.

AUSTAR

In July 1997,  Austar  secured the Austar Bank Facility in the amount of A$200.0
million  ($122.5  million as of December 31, 1998) to fund  Austar's  subscriber
acquisition  and working  capital  needs.  The Austar Bank Facility  consists of
three  sub-facilities:  (i) A$50.0 million  revolving  working capital facility,
(ii) A$60.0  million  cash advance  facility and (iii) A$90.0  million term loan
facility.  All of Austar's  assets are pledged as collateral for the Austar Bank
Facility. In addition,  pursuant to the Austar Bank Facility,  Austar cannot pay
any dividends,  interest or fees under its technical assistance agreements prior
to December 31, 2000.  Subsequent to December 31, 2000, Austar will be permitted
to make these types of payments, subject to certain debt to cash flow ratios. As
of December 31, 1998,  Austar had drawn the entire amount of the working capital
facility and the cash advance  facility  totaling A$110.0 million ($67.4 million
converted  using the  December  31, 1998  exchange  rate).  The working  capital
facility is fully repayable on June 30, 2000. The cash advance facility is fully
repayable  pursuant to an amortization  schedule beginning December 31, 2000 and
ending June 30, 2004.

In September 1998,  Austar secured the New Austar Bank Facility  commitment,  of
which the first  A$200.0  million is  intended  to  refinance  the  Austar  Bank
Facility by April 1999 and the remaining  A$200.0  million is available upon the
contribution of additional equity on a 2:1 debt-to-equity  basis. The commitment
has been  extended  to April  30,  1999 and  management  expects  to close  this
financial  transaction by mid-April 1999. In the interim,  Austar has received a
supplemental  amendment to the existing Austar Bank Facility which allows Austar
to draw under the A$90.0  million Term Loan  Facility at an  increased  interest

                                       22
<PAGE>

rate of 2.25% above the professional  market rate in Australia.  All other terms
and conditions of the Austar Bank Facility remain unchanged.  As of December 31,
1998,  Austar  had drawn  A$60.0  million  ($36.7  million  converted  using the
December  31,  1998  exchange  rate)  on the  Term  Loan  Facility  for a  total
outstanding  balance of A$170.0 million.  Subsequent to year-end,  an additional
A$30.0 million was borrowed against the Term Loan Facility which, along with the
A$60.0 million draw, is payable in full in April 1999.

The Company  expects the need for  additional  funding for Austar in the future.
The amount of capital needed is dependent primarily upon three factors:  (i) the
number of new subscribers  added; (ii) the level of churn, that is, the level of
existing  subscribers who disconnect from Austar's service; and (iii) the mix of
DTH  satellite  compared to MMDS  installations.  Substantially  all fixed costs
required to operate  Austar's  service have already been  incurred.  The average
cost to install a subscriber includes variables such as equipment, marketing and
sales  costs,  and  installation  fees.  The average  cost of a  subscriber  who
disconnects  is  reduced  by the  recovery  of  certain  equipment  (principally
converters),  and is  further  reduced if a new  subscriber  is  installed  in a
previously  disconnected  home.  Austar  plans to  continue  to  expand  and add
subscribers;  however,  the timing of such  expansion and the funds required for
such  expansion  are largely  variable.  Based upon  current  plans and budgeted
churn,  Austar  will  require  approximately  $112.4  million to continue on its
current  expansion  path from  January 1, 1999 through  December  31, 1999.  The
required  capital for 1999 will be funded  substantially  by the New Austar Bank
Facility  (assuming  that the Austar Bank Facility will be refinanced by the New
Austar Bank  Facility by April 1999).  The  remaining  sources of funds for such
expansion  may include the raising of private or public equity by the Company or
its  subsidiaries  and/or  continued  investment by UIH and UAP. Even though the
Company  believes that these  financings  will be successful,  if the New Austar
Bank  Facility is not closed,  the Company  believes  that  committed  financial
support from UIH combined  with,  if necessary,  reductions  in planned  capital
expenditures,  are  sufficient  to  sustain  its  operations  through  at  least
mid-2000.

SATURN

In July 1997,  SaskTel  purchased a 35.0% equity interest in Saturn by investing
NZ$29.9  million  (approximately  $19.6  million)  directly  into Saturn for its
newly-issued  shares.  In November 1998, Saturn secured a syndicated senior debt
facility in the amount of NZ$125.0  million  ($66.0  million as of December  31,
1998) (the "Saturn Bank  Facility") to fund the completion of Saturn's  network.
Of  this  amount,   NZ$83.3   million  has  been  subscribed  for  by  financial
institutions. Until Saturn obtains irrevocable commitments in the form of equity
funding  or  additional  underwriting  commitments  for the  balance  of NZ$41.7
million, the maximum that may be drawn down is NZ$73.0 million ($38.5 million as
of December  31,  1998).  If Saturn is  successful  in obtaining  the  necessary
commitments  from other  financing  sources,  Saturn  may  borrow an  additional
NZ$10.3 million from the initial syndicate of banks. If Saturn is not successful
in obtaining the necessary commitments,  the outstanding balance will be due May
31, 1999.  As of December  31, 1998,  Saturn had drawn  NZ$40.0  million  ($21.1
million as of December 31, 1998) on the loan facility at a rate of approximately
8.12% per annum.  The eight-year debt facility has an interest rate of 3.0% over
the current base rate upon drawdown.  Subsequent to year-end, NZ$8.0 million was
borrowed for a total outstanding balance of NZ$48.0 million.

The Company  expects the need for  additional  funding for Saturn in the future.
Saturn's capital needs include approximately $37.2 million for the completion of
the network required by Saturn to offer cable television and telephony  services
and  approximately  $4.8 million until Saturn has sufficient cash flows to cover
its operations and the capital required to install customers, although there can
be no assurance  that  further  additional  capital  will not be  required.  The
sources of funds for such  expansion may include the Saturn Bank  Facility,  the
raising of private or public  equity by the Company or its  subsidiaries  and/or
continued  investment by UIH and SaskTel.  Even though the Company believes that
this financing will be successful, the Company believes that committed financial
support from UIH combined  with,  if necessary,  reductions  in planned  capital
expenditures,  are  sufficient  to  sustain  its  operations  through  at  least
mid-2000.

OTHER

The Company  expects that the  aggregate  future  funding  requirements  for XYZ
Entertainment and United Wireless are less than $2.0 million for 1999.

The indentures  governing UIH's senior secured  discount notes due February 2008
and the Company's Notes  (collectively,  the "Indentures") place restrictions on
the Company and its restricted subsidiaries with respect to incurring additional
debt.  The Company and all of the operating  companies are currently  restricted
under the UIH Indentures. The Company, Austar and Telefenua are restricted under
the Company's Indentures. The restrictions imposed by the UIH Indentures will be
eliminated  upon the  retirement  of UIH's  notes at their  maturity in February
2008,  and  the  restrictions  imposed  by  the  Company's  Indentures  will  be
eliminated  upon the retirement of the Company's  Notes at their maturity in May
2006. In addition,  pursuant to the Austar Bank Facility,  Austar cannot pay any
dividends,  interest on  debentures  and  subordinated  debt,  or fees under its

                                       23
<PAGE>

technical  assistance  agreements  prior to December  31,  2000.  Subsequent  to
December  31,  2000,  Austar will be  permitted to make these types of payments,
subject to certain debt to cash flow ratios.

On November  17, 1997,  pursuant to the terms of the  indentures  governing  the
Notes,  the Company issued warrants to purchase a total of 488,000 shares of its
common  stock,  which  represented  3.4% of its common  stock.  The warrants are
exercisable  at a price of $10.45 per share which would result in gross proceeds
of  approximately  $5.1  million,  if  exercised.  The warrants are  exercisable
through May 15, 2006.

STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1998

The  Company  incurred a net loss  during the year ended  December  31,  1998 of
$206.3  million,   which  included  non-cash  items  such  as  depreciation  and
amortization  expense  totaling  $97.1  million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $49.5 million.

Cash and cash  equivalents  decreased  $12.1  million  from $12.3  million as of
December 31, 1997 to $0.2 million as of December 31, 1998.  Principal sources of
cash during the year ended  December 31, 1998 included cash  contributions  from
parent  of $58.9  million,  borrowings  on the  Austar  Bank  facility  of $39.5
million,  proceeds from the sale of short-term  investments of $12.3 million and
other sources totaling $0.3 million.

During the year ended  December  31,  1998,  cash was used  principally  for the
purchase of property, plant and equipment totaling $71.5 million to continue new
subscriber  connections and the build-out of existing  projects,  the funding of
operating  activities of $23.8 million,  investments in affiliated companies and
acquisition of assets of $11.4 million,  the  deconsolidation  of Saturn of $9.9
million,  the payment of capital leases and other debt of $3.3 million and other
investing and financing uses of $3.2 million.

YEAR ENDED DECEMBER 31, 1997

The  Company  incurred a net loss  during the year ended  December  31,  1997 of
$168.1  million,   which  includes  non-cash  items  such  as  depreciation  and
amortization  expense  totaling  $80.8  million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $38.7 million.

Cash and cash  equivalents  decreased  $6.9  million  from  $19.2  million as of
December 31, 1996 to $12.3 million as of December 31, 1997. Principal sources of
cash during the year ended  December 31, 1997 included  borrowings on the Austar
Bank  Facility  of  $85.2  million,  gross  proceeds  from the  issuance  of the
September  1997 Notes of $29.9  million,  the  purchase  of a 35.0%  interest in
Saturn by SaskTel for $19.6  million,  borrowings  from parent of $10.0 million,
cash  contributions  from parent of $7.9 million and net  proceeds  from the net
decrease in short-term investments of $6.3 million.

During the year ended  December  31,  1997,  cash was used  principally  for the
purchase of  property,  plant and  equipment  of $101.1  million to continue the
build-out of existing projects,  primarily at Austar, a decrease in construction
payables of $29.6 million,  investments in the Company's affiliated companies of
$3.3 million,  deferred financing costs and other uses totaling $6.9 million and
the funding of operating activities of $24.9 million during the year.

YEAR ENDED DECEMBER 31, 1996

The Company incurred a net loss during the year ended December 31, 1996 of $88.0
million,  which includes  non-cash items such as depreciation  and  amortization
expense  totaling  $36.3  million  and  accretion  of  interest on the Notes and
amortization of deferred financing costs totaling $20.3 million.

Cash and cash  equivalents  increased  $10.5  million  from $8.7  million  as of
December 31, 1995 to $19.2 million as of December 31, 1996. Principal sources of
cash during this period  included  gross  proceeds  from the issuance of the May
1996 Notes of $225.1  million,  an  increase in  construction  payables of $38.4
million, borrowings of $17.5 million and cash contributions from parent of $10.7
million.

During the year ended  December  31,  1996,  cash was used  principally  for the
purchase  of  property,  plant and  equipment  of $187.1  million  to  construct

                                       24
<PAGE>

Austar's and  Telefenua's  systems,  repayments  on related  party debt of $25.0
million,   the  purchase  of  net  short-term   investments  of  $18.6  million,
investments in the Company's  affiliated  companies of $16.2  million,  deferred
financing  costs and other uses  totaling  $9.0  million,  the  purchase  of the
approximately  4.0% remaining  economic  interest in Austar for $7.9 million and
the funding of operating activities of $17.4 million during the year.

RESULTS OF OPERATIONS

SELECTED SYSTEM  OPERATING  DATA. The following  table displays  selected system
operating data in Austar's local currency:
<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                        ----------------------------------------
                                                                           1998           1997           1996
                                                                        ----------     ----------     ----------
                                                                                    (In thousands)
          <S>                                                           <C>             <C>            <C>
          Austar (A$):
            Service and other revenue............................        136,072         86,470         26,852
            System operating expense (1).........................       (105,183)       (58,053)       (33,702)
            System selling, general and administrative expense...        (75,169)       (57,900)       (23,330)
            Adjusted EBITDA (2)..................................        (37,981)       (26,027)       (29,770)
            Capital expenditures.................................         96,162        100,149        157,315
</TABLE>


(1)  Includes management fees of A$6.3 million, A$3.5 million and A$0.4 million,
     respectively.
(2)  Adjusted  EBITDA  represents  net loss, as  determined  using United States
     generally accepted accounting principles, plus net interest expense, income
     tax expense, depreciation,  amortization, minority interest, management fee
     expense,  currency exchange gains (losses) and other  non-operating  income
     (expense) items. Industry analysts generally consider adjusted EBITDA to be
     an  appropriate  measure of the  performance  of  multi-channel  television
     operations.  Adjusted  EBITDA should not be considered as an alternative to
     net income, cash flows or any other generally accepted accounting principle
     measure  of  performance  or  liquidity  as an  indicator  of  an  entity's
     operating performance.


SERVICE AND OTHER REVENUE.  The Company's  service and other revenue  (including
installation  revenues)  increased $20.8 million and $44.0 million for the years
ended December 31, 1998 and 1997,  respectively,  compared to the  corresponding
amounts in the prior years as follows:
<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                        ----------------------------------------
                                                                           1998           1997           1996
                                                                        ----------     ----------     ----------
                                                                                    (In thousands)
          <S>                                                           <C>             <C>            <C>
          Austar.................................................       $85,199         $63,848        $21,244
          Saturn.................................................            --             473            110
          Telefenua..............................................         3,411           4,118          3,513
          United Wireless........................................           257             522            110
          Other..................................................           952              --             --
                                                                        -------         -------        -------
               Total service and other revenue...................       $89,819         $68,961        $24,977
                                                                        =======         =======        =======
</TABLE>

          AUSTAR

          Service and other revenue at Austar increased $21.4 million, or 33.5%,
          from $63.8  million  for the year  ended  December  31,  1997 to $85.2
          million for the year ended December 31, 1998. On a functional currency
          basis,  Austar's  service and other revenue  increased A$49.6 million,
          from A$86.5  million for the year ended  December  31, 1997 to A$136.1
          million for the year ended December 31, 1998, a 57.3% increase.  These
          increases were primarily due to subscriber growth (288,721 at December
          31, 1998 compared to 196,205 at December 31, 1997) as Austar continued
          to roll-out its services.  The U.S. dollar increases  occurred despite
          the negative impact of approximately  $15.0 million due to fluctuation
          in exchange rates between the years ended December 31, 1998 and 1997.

          Service  and other  revenue  at Austar  increased  $42.6  million,  or
          200.9%,  from $21.2  million for the year ended  December  31, 1996 to
          $63.8 million for the year ended December 31, 1997.  This increase was
          primarily  due to subscriber  growth from an average of  approximately
          54,000 subscribers during 1996 to an average of approximately  150,000
          subscribers during 1997, as Austar continued to roll-out its services.

                                       25
<PAGE>

          SATURN

          The  Company  discontinued   consolidating  the  results  of  Saturn's
          operations  effective  January  1,  1998.  Accordingly,   the  Company
          reported no service and other  revenue  from Saturn for the year ended
          December 31, 1998.

          The Company  began  consolidating  the results of Saturn's  operations
          effective July 1, 1996.  Accordingly,  the Company reported no service
          and other revenue from Saturn  during the first half of 1996.  Service
          and other revenue at Saturn  increased  $0.4  million,  or 400.0% from
          $0.1 million for the year ended  December 31, 1996 to $0.5 million for
          the year ended  December 31, 1997.  This increase was primarily due to
          growth  in  subscribers  from  an  average  of   approximately   1,300
          subscribers   during  1996  to  an  average  of  approximately   2,400
          subscribers during 1997.


SYSTEM  OPERATING  EXPENSE.  The Company's  operating  expenses  increased $18.4
million  and $29.8  million  for the years  ended  December  31,  1998 and 1997,
respectively,  compared  to the  corresponding  amounts  in the  prior  years as
follows:
<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                        ----------------------------------------
                                                                           1998           1997           1996
                                                                        ----------     ----------     ----------
                                                                                    (In thousands)
          <S>                                                           <C>             <C>            <C>
          Austar.................................................       $65,289         $42,792        $17,990
          Saturn.................................................            --           4,015          1,344
          Telefenua..............................................         1,751           2,040          2,118
          United Wireless........................................         1,301           1,789          1,413
          Other..................................................         2,808           2,067             --
                                                                        -------         -------        -------
               Total system operating expense....................       $71,149         $52,703        $22,865
                                                                        =======         =======        =======
</TABLE>

          AUSTAR

          Operating  expense for Austar increased $22.5 million,  or 52.6%, from
          $42.8  million for the year ended  December 31, 1997 to $65.3  million
          for the year ended December 31, 1998. On a functional  currency basis,
          Austar's  operating  expense  increased  A$47.1  million,  from A$58.1
          million for the year ended  December  31, 1997 to A$105.2  million for
          the year ended December 31, 1998, an 81.1%  increase.  These increases
          were primarily due to a $2.0 million increase in satellite programming
          costs  resulting  from the May 1998  agreements  with Foxtel and Optus
          Vision to obtain additional  programming rights in connection with the
          receivership  of Australis as well as  additional  satellite  platform
          costs  associated  with the May 1998 joint  venture  with Optus Vision
          ($0.7  million).   The  Company  expects  that  the  restructuring  of
          programming  costs for certain channels will result in somewhat higher
          costs in the near  term for  these  channels  which  will be offset by
          lower  costs in the  long-term  when  compared  to  Austar's  previous
          agreements  with  Australis.  The  remainder of the  increase  between
          periods was due to an increase in salaries and benefits related to the
          additional  personnel  necessary to support Austar's  establishment of
          local and state  offices in its  markets  and an  increase in customer
          subscriber   management   expense  related  to  volume   increases  in
          telephone,  billing and collection  costs.  The U.S. dollar  increases
          were  positively  impacted  by  approximately  $12.1  million  due  to
          fluctuation  in exchange  rates  between the years ended  December 31,
          1998 and 1997.

          The Company  reported an increase  in system  operating  expense  from
          Austar of $24.8  million,  or 137.8%,  from $18.0 million for the year
          ended  December 31, 1996 to $42.8 million for the year ended  December
          31, 1997.  This increase was primarily due to an increase in satellite
          programming  fees  and  copyright  costs,  which  corresponds  to  the
          increase in subscribers and additional basic programming  services; an
          increase in salaries and benefits related to the additional  personnel
          necessary to support Austar's launch of local and state offices in its
          markets;  and an increase in customer  subscriber  management expenses
          related to the volume  increases in telephone,  billing and collection
          costs.  The  remainder of the increase  related to increases in system
          travel, maintenance, vehicle costs and management fees.

          Austar expects operating expense as a percentage of service revenue to
          decline in future  periods  because a significant  portion of Austar's
          distribution  facilities  and network  costs,  such as local and state

                                       26
<PAGE>

          office staffing  levels,  operating costs and wireless  license costs,
          have  already  been  incurred  and are fixed in relation to changes in
          subscriber  volumes.  Other system operating expense,  such as certain
          costs related to programming and subscriber  management expense,  will
          vary in direct proportion to the number of subscribers.

          In September 1997, the Company commenced  transponder fee payments for
          a satellite  service fee of  approximately  $0.4  million per month as
          part of its five-year  agreement with Optus  Networks.  In May 1998, a
          subsidiary of Austar began billing the joint  venture  between  Austar
          and Optus Networks for the transponder  rental. The Company eliminates
          all related party accounts in consolidation.

          SATURN

          The  Company  discontinued   consolidating  the  results  of  Saturn's
          operations  effective  January  1,  1998.  Accordingly,   the  Company
          reported no system  operating  expense  from Saturn for the year ended
          December 31, 1998.

          The Company  began  consolidating  the results of Saturn's  operations
          effective July 1, 1996.  Accordingly,  the Company  reported no system
          operating  expense from Saturn  during the first half of 1996.  System
          operating expense at Saturn increased $2.7 million or 207.7% from $1.3
          million for the year ended  December  31, 1996 to $4.0 million for the
          year ended  December 31, 1997.  This  increase was primarily due to an
          increase in personnel  expenses in order to support Saturn's build-out
          of its HFC network in the Wellington area.

SYSTEM  SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSE.  The  Company's  system
selling, general and administrative expense decreased $0.3 million and increased
$17.3  million for the years  ended  December  31, 1998 and 1997,  respectively,
compared to the corresponding amounts in the prior years as follows:
<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                        ----------------------------------------
                                                                           1998           1997           1996
                                                                        ----------     ----------     ----------
                                                                                    (In thousands)
          <S>                                                           <C>             <C>            <C>
          Austar.................................................       $46,986         $42,810        $26,948
          Saturn.................................................            --           3,581          2,008
          Telefenua..............................................         1,710           2,063          2,586
          United Wireless........................................         1,042           1,552          1,123
                                                                        -------         -------        -------
               Total system selling, general and administrative
                 expense.........................................       $49,738         $50,006        $32,665
                                                                        =======         =======        =======
</TABLE>



          AUSTAR

          System  selling,   general  and  administrative   expense  for  Austar
          increased $4.2 million, or 9.8%, from $42.8 million for the year ended
          December  31, 1997 to $47.0  million for the year ended  December  31,
          1998. On a functional  currency basis,  Austar's selling,  general and
          administrative  expense increased A$17.3 million,  from A$57.9 million
          for the year ended  December  31, 1997 to A$75.2  million for the year
          ended December 31, 1998, a 29.9% increase. This increase was primarily
          due to an increase in  salaries  as a result of  additional  personnel
          necessary  to support the increase in  subscribers  and an increase in
          marketing costs. The U.S. dollar increases were positively impacted by
          approximately  $8.4  million  due to  fluctuation  in  exchange  rates
          between the years ended December 31, 1998 and 1997.

          System  selling,   general  and  administrative   expense  for  Austar
          increased  $15.9  million,  or 59.1%,  from $26.9 million for the year
          ended  December 31, 1996 to $42.8 million for the year ended  December
          31, 1997.  This  increase was primarily due to an increase in salaries
          associated  with the NCOC and  Austar's  corporate  headquarters  as a
          result of  additional  personnel  necessary to support the increase in
          subscribers,  an increase in marketing  costs related to print,  radio
          and television  advertisements  associated with subscriber acquisition
          and  retention  and an increase  in direct  sales  commissions  due to
          subscriber growth. In addition,  Austar  experienced  certain one-time
          charges for the  restructuring  and  consolidation of various regional
          offices.

                                       27
<PAGE>

          Austar expects system selling, general and administrative expense as a
          percentage of service  revenue to decline in future periods  because a
          significant  portion of  Austar's  infrastructure  costs,  such as the
          NCOC,  its  corporate  management  staff and  media-related  marketing
          costs, have already been incurred and are fixed in relation to changes
          in   subscriber   volumes.   Other   system   selling,   general   and
          administrative  expense relating to commissions and acquisition  costs
          is expected  to vary in  relation to the number of customer  sales and
          installations.

          SATURN

          The  Company  discontinued   consolidating  the  results  of  Saturn's
          operations  effective  January  1,  1998.  Accordingly,   the  Company
          reported no system selling,  general and  administrative  expense from
          Saturn for the year ended December 31, 1998.

          The Company  began  consolidating  the results of Saturn's  operations
          effective July 1, 1996.  Accordingly,  the Company  reported no system
          selling,  general and  administrative  expense from Saturn  during the
          first   half  of  1996.   Saturn's   system   selling,   general   and
          administrative  expense  increased $1.6 million,  or 80.0%,  from $2.0
          million for the year ended  December  31, 1996 to $3.6 million for the
          year ended  December 31, 1997.  This  increase  was  primarily  due to
          increases in direct sales commissions due to subscriber growth as well
          as marketing and promotion costs for subscriber acquisition.

CORPORATE GENERAL AND ADMINISTRATIVE  EXPENSE.  The Company's  corporate general
and administrative  expense increased $2.4 million,  or 72.7%, from $3.3 million
for the year ended December 31, 1997 to $5.7 million for the year ended December
31, 1998. This increase  related to the allocation of UIH corporate  general and
administrative  expense to the  Company  in the form of  capital  contributions,
based on increased activity at the operating system level.  Management  believes
that this method of allocating costs is reasonable.

The  Company's  corporate  general and  administrative  expense  increased  $1.9
million,  or 135.7%,  from $1.4 million for the year ended  December 31, 1996 to
$3.3 million for the year ended  December 31, 1997.  This increase was primarily
due to an increase in the allocation of UIH corporate general and administrative
expenses to the Company,  based on increased  activity at the  operating  system
level.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  expense increased
$16.3 million and $44.5 million for the years ended  December 31, 1998 and 1997,
respectively, compared to the corresponding amounts in the prior years.
<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                        ----------------------------------------
                                                                           1998           1997           1996
                                                                        ----------     ----------     ----------
                                                                                    (In thousands)
          <S>                                                            <C>            <C>            <C>
          Austar.................................................        $95,403        $76,913        $33,446
          Saturn.................................................             --          2,033            800
          Telefenua..............................................          1,100          1,212          1,382
          United Wireless........................................            637            644            641
                                                                         -------        -------        -------
               Total depreciation and amortization...............        $97,140        $80,802        $36,269
                                                                         =======        =======        =======
</TABLE>


          AUSTAR

          Depreciation  and  amortization  expense  for Austar  increased  $18.5
          million,  or 24.1%, from $76.9 million for the year ended December 31,
          1997 to $95.4  million  for the year ended  December  31,  1998.  On a
          functional  currency basis,  Austar's  depreciation  and  amortization
          expense  increased  A$43.4  million,  from A$99.6 million for the year
          ended December 31, 1997 to A$143.0 million for the year ended December
          31, 1998, a 43.6% increase.  These increases were primarily due to the
          larger fixed asset base due to the significant deployment of operating
          assets  to  meet   subscriber   growth  as  well  as  an  increase  in
          depreciation  expense  related  to  subscriber  disconnects.  The U.S.
          dollar  increases  were  positively  impacted by  approximately  $14.9
          million due to  fluctuation  in exchange rates between the years ended
          December 31, 1998 and 1997.

          Depreciation  and  amortization  expense from Austar  increased  $43.5
          million,  or 130.2% from $33.4 million for the year ended December 31,
          1996 to $76.9  million  for the year ended  December  31,  1997.  This


                                       28
<PAGE>

          increase was  primarily  due to the larger fixed asset base due to the
          significant  deployment of operating assets to meet subscriber  growth
          as well as an increase in expense related to subscriber disconnects.

          SATURN

          The  Company  discontinued   consolidating  the  results  of  Saturn's
          operations  effective  January  1,  1998.  Accordingly,   the  Company
          reported no depreciation and amortization  expense from Saturn for the
          year ended  December 31, 1998.  The Company  began  consolidating  the
          results of Saturn's  operations  effective July 1, 1996.  Accordingly,
          the Company  reported no depreciation  and  amortization  expense from
          Saturn during the first half of 1996.  Depreciation  and  amortization
          expense  for Saturn  increased  $1.2  million,  or  150.0%,  from $0.8
          million for the year ended  December  31, 1996 to $2.0 million for the
          year ended  December 31, 1997.  This increase was primarily due to the
          larger  fixed  asset base as Saturn  continues  to  build-out  its HFC
          network in the Wellington area.

SHARE IN RESULTS OF AFFILIATED COMPANIES.  The Company recognized an increase in
share in results of  affiliated  companies  of $7.9  million  for the year ended
December 31, 1998 and a decrease in share in results of affiliated  companies of
$3.0 million for the year ended December 31, 1997, compared to the corresponding
amounts in the prior years as follows:
<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                        ----------------------------------------
                                                                           1998           1997           1996
                                                                        ----------     ----------     ----------
                                                                                    (In thousands)
          <S>                                                           <C>             <C>            <C>
          XYZ Entertainment......................................       $    55         $(2,408)       $(4,484)
          Saturn.................................................       (10,354)             --           (930)
                                                                        -------         -------        -------
               Total share in earnings (losses) of affiliated
                 companies.......................................      $(10,299)        $(2,408)       $(5,414)
                                                                       ========         =======        =======
</TABLE>
          XYZ ENTERTAINMENT

          Share in losses from XYZ  Entertainment  decreased  $2.5  million,  or
          104.2%,  from $2.4  million  for the year ended  December  31, 1997 to
          earnings of $0.1 million for the year ended  December  31, 1998.  This
          decrease was primarily  attributable to higher revenue  resulting from
          XYZ Entertainment's subscriber increase.

          Share in losses from XYZ  Entertainment  decreased  $2.1  million,  or
          46.7%,  from $4.5 million for the year ended December 31, 1996 to $2.4
          million  for the year ended  December  31,  1997.  This  decrease  was
          primarily   attributable  to  higher   revenue,   resulting  from  XYZ
          Entertainment's   subscriber  increase,   and  overall  reductions  in
          staffing levels during 1997.

          SATURN

          Due to a change in an accounting principle, effective January 1, 1998,
          the Company  discontinued  consolidating  the results of operations of
          Saturn and returned to the equity method of accounting. The results of
          operations  of Saturn  were  consolidated  from  July 1, 1996  through
          December 31, 1997.

PROVISION FOR LOSSES ON MARKETABLE  EQUITY  SECURITIES  AND  INVESTMENT  RELATED
COSTS. In October 1998, as a result of an  other-than-temporary  loss of control
of Telefenua,  the Company  recorded a reserve for the remaining  balance in its
investment of $4,384. In December 1997, based on the financial  difficulties and
potential insolvency of Australis, the Company determined that the loss relating
to its  investment  in  Australis  was other than  temporary.  As a result,  the
Company recorded a provision for this loss of $4,784 for the year ended December
31, 1997.

INTEREST  INCOME.  Interest income  decreased $1.4 million from $1.6 million for
the year ended December 31, 1997 to $0.2 million for the year ended December 31,
1998.  The  decrease was  attributable  to reduced  cash and  short-term  liquid
investment balances.

Interest income decreased $3.9 million, or 70.9%, from $5.5 million for the year
ended  December 31, 1996 to $1.6  million for the year ended  December 31, 1997.
This decrease was primarily due to reduced cash and short-term liquid investment
balances  related to the  funding of the  Company's  investments  in  affiliated
companies.

                                       29
<PAGE>

INTEREST EXPENSE. Interest expense,  including related party expense,  increased
$12.7 million, or 28.9%, from $44.0 million for the year ended December 31, 1997
to $56.7  million  for the year ended  December  31,  1998.  This  increase  was
primarily due to continued  accretion on the Notes at 14.75% during most of 1998
compared to 14.0% for 1997. In addition,  interest expense related to the Austar
Bank Facility, which was secured in July 1997, was $7.5 million in 1998 compared
to $4.0 million in 1997.

Interest expense,  including related party expense,  increased $21.8 million, or
98.2%,  from $22.2 million for the year ended December 31, 1996 to $44.0 million
for the year ended  December 31, 1997.  This  increase was  primarily due to the
accretion of interest on the September  1997 Notes and the accretion of interest
for an entire year on the May 1996 Notes.  The Notes currently  accrete interest
at a rate of 14.0%  compounded  semi-annually.  The interest rate increased from
14.0% to  14.75% on May 16,  1997,  but was  reduced  back to 14.0% per annum on
October 14, 1998, when the Company consummated the Equity Sale.

YEAR 2000 CONVERSION

The Company's multi-channel television, programming and telephony operations are
heavily  dependent upon computer  systems and other  technological  devices with
embedded chips. Such computer systems and other technological devices may not be
capable of  accurately  recognizing  dates  beginning  on January 1, 2000.  This
problem could cause  miscalculations,  resulting in the Company's  multi-channel
television  and telephony  systems or  programming  services  malfunctioning  or
failing to operate.

YEAR 2000  PROGRAM.  In response to possible  Year 2000  problems,  the Board of
Directors of UIH  established  a Task Force to assess the impact that  potential
Year 2000 problems may have on  company-wide  operations,  including the Company
and its operating companies,  and to implement necessary changes to address such
problems.  The Task  Force  reports  directly  to the UIH Board.  In  creating a
program  to  minimize  Year 2000  problems,  the Task Force  identified  certain
critical  operations of the business of the Company.  These critical  operations
are service delivery  systems,  field and headend devices,  customer service and
billing systems and corporate  management and  administrative  operations (e.g.,
cash flow,  accounts  payable and  accounts  receivable,  payroll  and  building
operations).

The Task Force has established a three-phase  program to address  potential Year
2000 problems:

     (a) Identification  Phase: Identify and evaluate computer systems and other
         devices (e.g., headend devices, switches and set top boxes) on a system
         by system basis for Year 2000 compliance.
     (b) Implementation Phase: Establish a database and evaluate the information
         obtained in the Identification Phase,  determine priorities,  implement
         corrective procedures, define costs and ensure adequate funding.
     (c) Testing  Phase:  Test the  corrective  procedures  to  verify  that all
         material compliance problems will operate on and after January 1, 2000,
         and develop, as necessary, contingency plans for material operations.

As of  March 9,  1999,  83.0%  of the  operating  systems  of the  Company  have
completed  the  Identification  Phase  and the  Task  Force  is  working  on the
Implementation  Phase for these systems.  The Task Force has  researched  almost
79.0% of the items identified by the Company during the Identification  Phase as
to Year 2000 compliance. Of the items researched,  74.0% are either compliant or
can be easily remediated without significant cost to the Company. Currently, the
Task Force  expects to complete its research on  substantially  all of the items
identified by mid-1999.  Based on current data to date, the computer systems for
all  corporate  operations  are expected to be in  compliance  with Year 2000 by
mid-1999 and should not require material remediation or replacement.

The Task Force has targeted  mid-1999 for  commencement of the Testing Phase. At
this time, the Company anticipates that all material aspects of the program will
be completed before January 1, 2000. Currently, UIH is managing the program with
its internal Task Force.  During the  Implementation  Phase, the Task Force will
also  evaluate  the need for external  resources to complete the  Implementation
Phase and implement the Testing Phase. In the event the Task Force elects to use
external resources, such resources may not, however, be available.

In addition to its program,  UIH is a member of a Year 2000 working group, which
has 12 cable  television  companies  and meets under the auspices of Cable Labs.
The dialogue with the other cable  operators has assisted UIH in developing  its
Year 2000  program.  Part of the agenda of the working  group is to develop test
procedures and contingency  plans for critical  components of operating  systems
for the benefit of all of its members.

                                       30
<PAGE>

THIRD PARTY DEPENDENCIES. The Company believes its largest Year 2000 risk is its
dependency  upon  third-party  products.  Two  significant  areas on  which  the
Company's systems depend upon third-party products are programming and telephony
interconnects.  The Company does not have the ability to control such parties in
their  assessment and  remediation  procedures for potential Year 2000 problems.
Should these  parties not be prepared for Year 2000,  their systems may fail and
the Company  would not be able to provide its  services  to its  customers.  The
Company is in the process of  communicating  with these parties on the status of
their  Year  2000  compliance  programs  in an effort to  prevent  any  possible
interruptions or failures.  To date,  responses to such communications have been
limited and the responses  received state only that the party is working on Year
2000 issues and does not have a definitive  position at this time.  As a result,
the Company is unable to assess the risk posed by its dependence upon such third
parties'  systems.  The Task Force is considering  certain  limited  contingency
plans,  including  preparing back-up  programming and stand-by power generators.
Such contingency plans may not,  however,  resolve the problem in a satisfactory
manner.  With respect to other  third-party  systems,  each operating  system is
responsible for inquiring of their vendors and other entities with which they do
business (e.g., utility companies,  financial  institutions and facility owners)
as to such entities' Year 2000 compliance programs.

The Task  Force is  working  closely  with the  manufacturers  of the  Company's
headend  devices  to  remedy  any Year 2000  problems  assessed  in the  headend
equipment.  Recent  information  from  the  two  primary  manufacturers  of such
equipment  indicate that most of the equipment  used in the Company's  operating
systems are not date  sensitive.  Where such equipment  needs to be upgraded for
Year 2000 issues, such vendors are upgrading without charge.  These upgrades are
expected to be completed  before year-end 1999, but such a process is not wholly
within the control of the Company or its  systems.  With  respect to billing and
customer  care  systems,  the Company uses  standard  billing and customer  care
programs  from several  vendors.  The Task Force is working with such vendors to
achieve Year 2000  compliance  for all systems.  On an overall  basis,  the Task
Force  continues to analyze the Year 2000 program and will revise the program as
necessary  throughout 1999,  including  procedures it undertakes with respect to
third parties to ensure their Year 2000 compliance.

COSTS OF COMPLIANCE.  The Task Force has not yet determined the full cost of its
Year 2000  program  and its related  impact on the  financial  condition  of the
Company. In the course of its business, the Company has made substantial capital
adjustments  over the past few years in  improving  its systems,  primarily  for
reasons other than Year 2000.  Because these upgrades also resulted in Year 2000
compliance,  replacement and remediation costs have been low. The Task Force has
identified  certain  replacement and remediation costs for the Company which are
currently  estimated at $0.2  million.  Although no assurance  can be made,  the
Company  believes  that the known Year 2000  compliance  issues can be  remedied
without a material  financial impact. No assurance can be made,  however,  as to
the  total  cost  for the  Year  2000  program  until  all of the  data has been
gathered. In addition,  the Company can not predict the financial impact it will
incur if Year 2000  problems are caused by third  parties upon which its systems
are  dependent or  experienced  by entities in which it holds  investments.  The
failure of any one of these parties to implement Year 2000 procedures could have
a material  adverse  impact on the  operations  and  financial  condition of the
Company.

                                       31
<PAGE>


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

INVESTMENT PORTFOLIO

The Company does not use derivative  financial  instruments  in its  non-trading
investment   portfolio.   The  Company  places  its  cash  and  cash  equivalent
investments in highly liquid instruments that meet high credit quality standards
with original  maturities at the date of purchase of less than three months. The
Company also places its short-term  investments in liquid  instruments that meet
high credit quality  standards with original  maturities at the date of purchase
of between three and twelve months. The Company also limits the amount of credit
exposure to any one issue,  issuer or type of instrument.  These investments are
subject to interest  rate risk and will fall in value if market  interest  rates
increase, however, the Company does not expect any material loss with respect to
its investment portfolio.

The table below provides information about the Company's non-trading  investment
portfolio,  including  cash flows and related  weighted-average  fixed  interest
rates by expected maturity dates.
<TABLE>
<CAPTION>
                                                                            As of December 31, 1998
                                                                      ------------------------------------
                                                                      $ Amount       Rate       Fair Value
                                                                      --------       -----      ----------
     Maturity Fiscal Year 1999                                        (In thousands, except interest rates)
     <S>                                                                <C>          <C>           <C>
     Cash and cash equivalents...................................       $181         2.75%         $181
     Short-term liquid investments...............................        763         4.93%          763
                                                                        ----                       ----
          Total portfolio........................................       $944         4.51%         $944
                                                                        ====                       ====
</TABLE>

IMPACT OF FOREIGN CURRENCY RATE CHANGES

The  Company is exposed to foreign  exchange  rate  fluctuations  related to the
operating  subsidiaries'  monetary  assets  and  liabilities  and the  financial
results of foreign  subsidiaries when their respective  financial statements are
translated into U.S.  dollars during  consolidation.  The Company's  exposure to
foreign exchange rate fluctuations also arises from intercompany charges such as
the  cost of  equipment,  management  fees  and  certain  other  charges.  These
intercompany  accounts are predominantly  denominated in the functional currency
of the foreign subsidiary.

The operating  companies' monetary assets and liabilities are subject to foreign
currency exchange risk as certain  equipment  purchases and payments for certain
operating expenses,  such as programming expenses, are denominated in currencies
other than their own functional currency. In addition,  certain of the operating
companies  have notes payable and notes  receivable  which are  denominated in a
currency other than their own functional currency. Foreign currency rate changes
also affect the Company's share in results of its minority-owned affiliates such
as XYZ Entertainment and Saturn.

The spot rates for the countries in the Australia/Pacific region are shown below
for the Australian and New Zealand dollars per one U.S. dollar.

                                                    Australia    New Zealand
                                                    ---------    -----------
          December 31, 1998.....................     1.6332         1.8939
          December 31, 1997.....................     1.5378         1.7161
          December 31, 1996.....................     1.2583         1.4156

In general,  the  Company  and the  operating  companies  do not  execute  hedge
transactions to reduce the Company's  exposure to foreign currency exchange rate
risk.  Accordingly,  the Company  may  experience  economic  loss and a negative
impact on earnings and equity with respect to its holdings solely as a result of
foreign currency exchange rate fluctuations.

The countries in which the operating companies now conduct business generally do
not restrict the removal or  conversion of local or foreign  currency,  however,
there is no assurance this situation will continue. The Company may also acquire
interests in companies that operate in countries where the removal or conversion
of currency is restricted.

                                       32
<PAGE>

INTEREST RATE SENSITIVITY

The table below provides  information about the Company's financial  instruments
that are sensitive to changes in interest rates, primarily debt obligations. The
information  is presented in U.S.  dollar  equivalents,  which is the  Company's
reporting  currency.  The instrument's actual cash flows are denominated in both
U.S. dollars (May 1996 and September 1997 Notes) and Australian  dollars (Austar
Bank Facility).
<TABLE>
<CAPTION>

                                                                    As of December 31, 1998
                                                                 -----------------------------
                                                                 Book Value         Fair Value
                                                                 ----------         ----------
                                                       (U.S. dollars, in thousands, except interest rates)
<S>                                                               <C>                <C>
Long-term and short-term  debt:
     Fixed rate USD Denominated.....................              $356,640           $246,433
       Average interest rate........................                14.00%             20.71%
     Variable rate A$ Denominated...................              $104,090           $104,090
       Average interest rate........................                 6.75%              6.75%
</TABLE>

The table  below  presents  principal  cash flows and  related  weighted-average
interest rates by expected  maturity  dates for the Company's debt  obligations.
The information is presented in U.S. dollar equivalents,  which is the Company's
reporting  currency.  The instrument's actual cash flows are denominated in both
U.S. dollars (May 1996 and September 1997 Notes) and Australian  dollars (Austar
Bank Facility).
<TABLE>
<CAPTION>
                                                                As of December 31, 1998
                                             --------------------------------------------------------
                                              1999     2000   2001   2002   2003  Thereafter   Total
                                             ------   ------ ------ ------ ------ ----------  -------
                                               (U.S. dollars, in thousands, except interest rates)
<S>                                          <C>        <C>    <C>    <C>    <C>   <C>        <C>
Long-term and short-term debt:
     Fixed rate USD Denominated...........        --    --     --     --     --    $356,640   $356,640
       Average interest rate..............        --    --     --     --     --      14.00%     14.00%
     Variable rate A$ Denominated.........   $36,738    --     --     --     --    $ 67,352   $104,090
       Average interest rate..............     6.75%    --     --     --     --       6.75%      6.75%
</TABLE>

Interest  rate swap  agreements  are used by the Company  from time to time,  to
manage  interest rate risk on its floating rate debt  facilities.  Interest rate
swaps are entered into depending on the Company's  assessment of the market, and
generally  are used to  convert  the  floating  rate  debt to fixed  rate  debt.
Interest  differentials  paid  or  received  under  these  swap  agreements  are
recognized  over the life of the contracts as adjustments to the effective yield
of the underlying  debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated  balance sheet.  Currently,  the
Company has two  interest  rate swaps to manage  interest  rate  exposure on the
Austar  Bank  Facility.  These swap  agreements  expire in 2002 and  effectively
convert an aggregate  principal  amount of A$50.0  million  ($30.6 million as of
December 31, 1998) of variable rate,  long-term debt into fixed rate borrowings.
As of December 31, 1998, the weighted-average  fixed rate under these agreements
was 7.94%  compared  to a  weighted-average  variable  rate on the  Austar  Bank
Facility of 6.75%. As a result of these swap  agreements,  interest  expense was
increased by approximately A$0.6 million ($0.4 million) during 1998.

Fair values of the  interest  rate swap  agreements  are based on the  estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting  date,  taking into  account  current  interest  rates and the current
creditworthiness  of the  counterparties.  As of December 31, 1998,  the Company
estimates  it would have paid  approximately  A$1.3  million  ($0.8  million) to
terminate the agreements.

                                       33
<PAGE>

The table below provides  information  about the Company's  interest rate swaps.
The table  presents  notional  amounts and  weighted-average  interest  rates by
expected  (contractual)  maturity dates.  Notional amounts are used to calculate
the contractual payments to be exchanged under the contract.  The information is
presented in U.S.  dollar  equivalents  (in  thousands),  which is the Company's
reporting  currency.  The  instrument's  actual  cash flows are  denominated  in
Australian dollars.
<TABLE>
<CAPTION>
                                                                 As of December 31, 1998
                                             --------------------------------------------------------------
                                              1999     2000     2001     2002     2003  Thereafter   Total
                                             ------   ------   ------   ------   ------ ----------  -------
                                                  (U.S. dollars, in thousands, except interest rates)
<S>                                          <C>        <C>     <C>      <C>       <C>     <C>      <C>
Interest Rate Swaps:
     Variable to fixed.....                    --         --      --     $30,615   --      --       $30,615
     Average pay rate %....                  8.00%      8.00%   8.00%      8.00%   --      --         8.00%
     Average receive rate %                  6.75%      6.75%   6.75%      6.75%   --      --         6.75%
</TABLE>

                                       34

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

The consolidated  financial  statements of the Company are filed under this Item
as follows:
<TABLE>
<CAPTION>
                                                                                                                    Page
                                                                                                                   Number
                                                                                                                   ------
     <S>                                                                                                             <C>
     UIH AUSTRALIA/PACIFIC, INC.
     Report of Independent Public Accountants.................................................................       36
     Consolidated Balance Sheets as of December 31, 1998 and 1997.............................................       37
     Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996...............       38
     Consolidated Statements of Stockholder's (Deficit) Equity for the Years Ended December 31, 1998,
       1997 and 1996..........................................................................................       39
     Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996...............       40
     Notes to Consolidated Financial Statements...............................................................       41
</TABLE>

The financial  statement  schedules  required by Regulation  S-X are filed under
Item 14 "Exhibits, Financial Statement Schedules and Reports on Form 8-K."


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

None.


                                       35
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To UIH Australia/Pacific, Inc.:

We  have  audited  the   accompanying   consolidated   balance   sheets  of  UIH
Australia/Pacific,  Inc. (a Colorado corporation and wholly-owned  subsidiary of
UIH Asia/Pacific Communications,  Inc.) and subsidiaries as of December 31, 1998
and 1997 and the related  consolidated  statements of operations,  stockholder's
(deficit)  equity and cash flows for the years ended December 31, 1998, 1997 and
1996.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our  opinion,  based on our audits,  the  consolidated  financial  statements
referred to above present fairly,  in all material  respects,  the  consolidated
financial  position  of  UIH  Australia/Pacific,  Inc.  and  subsidiaries  as of
December 31, 1998 and 1997,  and the results of their  operations and their cash
flows for the years ended  December 31, 1998,  1997 and 1996 in conformity  with
generally accepted accounting principles.

As  explained  in Note 2 to the  consolidated  financial  statements,  effective
January 1, 1998, the Company changed its method of accounting for its investment
in its 65%-owned subsidiary, Saturn Communications Limited.

                               ARTHUR ANDERSEN LLP

Denver, Colorado
March 29, 1999



                                       36
<PAGE>
<TABLE>
<CAPTION>
                                           UIH AUSTRALIA/PACIFIC, INC.
                                           CONSOLIDATED BALANCE SHEETS
                               (Stated in thousands, except share and per share amounts)
                                                                                                                As of December 31,
                                                                                                               -------------------
                                                                                                                 1998       1997
ASSETS                                                                                                         --------   --------
<S>                                                                                                            <C>        <C>
Current assets
  Cash and cash equivalents.................................................................................   $    181   $ 12,344
  Restricted cash...........................................................................................         --        420
  Short-term liquid investments.............................................................................        763     12,325
  Subscriber receivables....................................................................................      6,322      2,548
  Related party ............................................................................................        746      1,942
  Other receivables.........................................................................................        736      1,220
  Prepaids and other current assets.........................................................................      4,615      2,185
                                                                                                               --------   --------
       Total current assets.................................................................................     13,363     32,984

Investments in and advances to affiliated companies, accounted for under the equity method, net.............     24,597         --
Property, plant and equipment, net of accumulated depreciation of $147,511 and $78,179, respectively........    122,968    183,101
Goodwill and other intangible assets, net of accumulated amortization of $17,512 and $11,817, respectively..     42,559     48,708
Deferred financing costs, net of accumulated amortization of $3,237 and $1,306, respectively................     11,675     13,393
Other non-current assets....................................................................................        870        846
                                                                                                               --------   --------
       Total assets.........................................................................................   $216,032   $279,032
                                                                                                               ========   ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
  Accounts payable..........................................................................................   $  5,426   $  4,055
  Accrued liabilities.......................................................................................     28,522     19,372
  Construction payables.....................................................................................      1,076      6,008
  Related party payables....................................................................................      3,665      1,596
  Related party note payable................................................................................         --      4,999
  Current portion of notes payable..........................................................................     36,738         --
  Current portion of other long-term debt...................................................................      2,189      1,825
                                                                                                               --------   --------
       Total current liabilities............................................................................     77,616     37,855

Due to parent...............................................................................................      6,578      5,394
Senior discount notes.......................................................................................    356,640    309,123
Other long-term debt........................................................................................     68,086     77,971
Other long-term liabilities.................................................................................      1,741      1,426
                                                                                                               --------   --------
       Total liabilities....................................................................................    510,661    431,769
                                                                                                               --------   --------
Commitments and contingencies (Notes 14 and 15)

Minority interest in subsidiary.............................................................................         --     11,416
                                                                                                               --------   --------
Stockholder's deficit
   Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding...............         --         --
   Common stock, $0.01 par value, 30,000,000 shares authorized, 17,810,249 and 13,864,941 shares
     issued and outstanding, respectively...................................................................        178        139
   Additional paid-in capital...............................................................................    215,624    139,621
   Accumulated deficit......................................................................................   (481,240)  (274,949)
   Other cumulative comprehensive loss......................................................................    (29,191)   (28,964)
                                                                                                               --------   --------
Total stockholder's deficit.................................................................................   (294,629)  (164,153)
                                                                                                               --------   --------
Total liabilities and stockholder's deficit.................................................................   $216,032   $279,032
                                                                                                               ========   ========

                     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                           37
<PAGE>
<TABLE>
<CAPTION>
                                           UIH AUSTRALIA/PACIFIC, INC.
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            (Stated in thousands, except share and per share amounts)
                                                                                                          For the Years Ended
                                                                                                             December 31,
                                                                                            ----------------------------------------
                                                                                               1998            1997         1996
                                                                                            ----------     ----------    ----------
<S>                                                                                         <C>            <C>           <C>
Service and other revenue................................................................   $   89,819     $   68,961    $   24,977

System operating expense, including related party expense of
  $4,124, $3,291 and $788, respectively..................................................      (71,149)       (52,703)      (22,865)
System selling, general and administrative expense.......................................      (49,738)       (50,006)      (32,665)
Corporate general and administrative expense, including management fee to
  related party of $853, $790 and $750, respectively.....................................       (5,696)        (3,306)       (1,376)
Depreciation and amortization............................................................      (97,140)       (80,802)      (36,269)
                                                                                            ----------     ----------    ----------
     Net operating loss..................................................................     (133,904)      (117,856)      (68,198)

Interest income, including related party income of $0, $425, and $1,438,
  respectively...........................................................................          207          1,569         5,544
Interest expense, including related party expense of $1,079, $1,730, and $1,896,
  respectively...........................................................................      (56,705)       (43,994)      (22,194)
Provision for losses on marketable equity securities and investment related costs........       (4,462)        (4,784)           --
Other (expense) income, net..............................................................       (1,128)        (1,601)           90
                                                                                            ----------     ----------    ----------
     Net loss before other items.........................................................     (195,992)      (166,666)      (84,758)

Share in results of affiliated companies, net............................................      (10,299)        (2,408)       (5,414)
Minority interest in subsidiary..........................................................           --          1,018         2,186
                                                                                            ----------     ----------    ----------
     Net loss............................................................................   $ (206,291)    $ (168,056)   $  (87,986)
                                                                                            ==========     ==========    ==========
Basic and diluted net loss per common share..............................................   $   (14.02)    $   (12.12)   $    (6.44)
                                                                                            ==========     ==========    ==========
Weighted-average number of common shares outstanding.....................................   14,718,857     13,864,941    13,670,832
                                                                                            ==========     ==========    ==========

                     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                           38

<PAGE>
<TABLE>
<CAPTION>
                                         UIH AUSTRALIA/PACIFIC, INC.
                           CONSOLIDATED STATEMENTS OF STOCKHOLDER'S (DEFICIT) EQUITY
                                  (Stated in thousands, except share amounts)
                                                                                           Other
                                                                                         Cumulative         Total
                                             Common Stock      Additional               Components of       Sum of
                                         --------------------   Paid-In    Accumulated  Comprehensive    Comprehensive
                                           Shares      Amount   Capital      Deficit    Income(Loss)(1)   Income(Loss)    Total
                                         ----------  --------  ----------  -----------  ---------------  -------------  ---------
<S>                                      <C>           <C>      <C>         <C>           <C>              <C>          <C>
Balances, January 1, 1996............... 13,504,453    $135     $ 93,647    $ (18,907)    $    191         $ (18,716)   $  75,066
                                                                                                           =========
Cash contributions from parent..........         --      --       10,903           --           --                --       10,903

Acquisition of remaining 50.0%
  interest in New Zealand subsidiary....    360,488       4        7,796           --           --                --        7,800

Unrealized loss on investment...........         --      --           --           --       (3,412)           (3,412)      (3,412)

Change in cumulative translation
  adjustments...........................         --      --           --           --        1,676             1,676        1,676

Net loss................................         --      --           --      (87,986)          --           (87,986)     (87,986)
                                                                                                           ---------
Total comprehensive loss................         --      --           --           --           --         $ (89,722)          --
                                         ----------    ----     --------    ---------     --------         =========    ---------
Balances, December 31, 1996............. 13,864,941     139      112,346     (106,893)      (1,545)                         4,047

Cash contributions from parent..........         --      --        7,863           --           --                --        7,863

Non-cash contributions from parent......         --      --        9,749           --           --                --        9,749

Gain on sale of stock by New
   Zealand subsidiary...................         --      --        5,985           --           --                --        5,985

Issuance of warrants to purchase
  common stock..........................         --      --        3,678           --           --                --        3,678

Provision for loss on marketable
  equity securities, net................         --      --           --           --        3,412             3,412        3,412

Change in cumulative translation
  adjustments...........................         --      --           --           --      (30,831)          (30,831)     (30,831)

Net loss................................         --      --           --     (168,056)          --          (168,056)    (168,056)
                                                                                                           ---------
Total comprehensive loss................         --      --           --           --           --         $(195,475)          --
                                         ----------    ----     --------    ---------     --------         =========    ---------
Balances, December 31, 1997............. 13,864,941     139      139,621     (274,949)     (28,964)                      (164,153)

Cash contributions from parent..........         --      --       58,947           --           --                --       58,947

Non-cash contributions from parent......         --      --       17,095           --           --                --       17,095

Issuance of capital stock to
  parent related to cumulative
  cash capital contributions............  3,945,308      39          (39)          --           --                --           --

Change in cumulative translation
  adjustments...........................         --      --           --           --         (227)             (227)        (227)

Net loss................................         --      --           --     (206,291)          --          (206,291)    (206,291)
                                                                                                           ---------
Total comprehensive loss................         --      --           --           --           --         $(206,518)          --
                                         ----------    ----     --------    ---------     --------         =========    ---------
Balances, December 31, 1998............. 17,810,249    $178     $215,624    $(481,240)    $(29,191)                     $(294,629)
                                         ==========    ====     ========    =========     ========                      =========

(1)  As of December 31, 1996, the components of Other  Cumulative  Comprehensive
     Income (Loss) include $1,867 and $(3,412) for foreign currency  translation
     adjustments and unrealized loss on investment, respectively. As of December
     31, 1997 and 1998, Other Cumulative  Comprehensive Income (Loss) represents
     foreign currency translation adjustments.

                     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                           39
<PAGE>
<TABLE>
<CAPTION>
                                         UIH AUSTRALIA/PACIFIC, INC.
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (Stated in thousands)
                                                                                                         For the Years Ended
                                                                                                             December 31,
                                                                                                 ----------------------------------
                                                                                                    1998        1997        1996
                                                                                                 ----------  ----------  ----------
<S>                                                                                              <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................................        $(206,291)  $(168,056)  $(87,986)
Adjustments to reconcile net loss to net cash flows from operating activities:
  Depreciation and amortization..........................................................           97,140      80,802     36,269
  Share in results of affiliated companies, net..........................................           10,299       2,408      5,414
  Allocation of expense accounted for as capital contributions by parent.................           4,622       1,949         --
  Provision for losses on marketable equity securities and investment related costs......            4,462       4,784         --
  Minority interest share of losses......................................................               --      (1,018)    (2,186)
  Accretion of interest on senior notes and amortization of deferred financing costs.....           49,508      38,747     20,270
  Increase in subscriber receivables.....................................................           (4,062)     (1,375)    (1,487)
  Decrease (increase) in related party receivables.......................................            1,305        (316)       (51)
  (Increase) decrease in other assets....................................................           (5,719)         68     (1,461)
  Increase in technical assistance agreement payables....................................            8,193       7,375      1,677
  Increase in accounts payable, accrued liabilities and other............................           16,701       9,725     12,122
                                                                                                 ---------   ---------   --------
Net cash flows from operating activities.................................................          (23,842)    (24,907)   (17,419)
                                                                                                 ---------   ---------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments................................................             (763)    (15,988)  (199,242)
Sale of short-term liquid investments....................................................           12,325      22,303    180,602
Restricted cash released (deposited).....................................................               --        (420)        --
Investments in and advances to affiliated companies and acquisition of assets............          (11,389)     (3,272)   (16,204)
Purchase of additional interest in Australian investment.................................               --          --     (7,920)
Deconsolidation of New Zealand subsidiary................................................           (9,881)         --         --
Purchase of property, plant and equipment................................................          (71,466)   (101,135)  (187,100)
Increase (decrease) in construction payables.............................................           (2,007)    (29,621)    38,407
                                                                                                 ---------   ---------   --------
Net cash flows from investing activities.................................................          (83,181)   (128,133)  (191,457)
                                                                                                 ---------   ---------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributed from parent.............................................................           58,947       7,863     10,664
Cash contributed from minority interest partner..........................................               --      19,566         --
Proceeds from offering of senior discount notes..........................................               --      29,925    225,115
Borrowings on related party payable to parent............................................               --       9,998     15,073
Payment on bridge loan payable to parent.................................................               --          --    (25,000)
Deferred financing costs.................................................................             (473)     (5,643)   (10,007)
Borrowings of other debt.................................................................           39,519      85,210      2,465
Payment of capital leases and other debt.................................................           (3,326)       (490)        --
                                                                                                 ---------   ---------   --------
Net cash flows from financing activities.................................................           94,667     146,429    218,310
                                                                                                 ---------   ---------   --------
EFFECT OF EXCHANGE RATES ON CASH.........................................................              193        (265)     1,056
                                                                                                 ---------   ---------   --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.........................................          (12,163)     (6,876)    10,490
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...........................................           12,344      19,220      8,730
                                                                                                 ---------   ---------   --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................................................        $     181   $  12,344   $ 19,220
                                                                                                 =========   =========   ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash capital contributions from parent...............................................        $  12,473   $   7,800   $     --
                                                                                                 =========   =========   ========
Gain on issuance of shares by New Zealand subsidiary.....................................        $      --   $   5,985   $     --
                                                                                                 ==========  =========   ========
Non-cash issuance of warrants to purchase common stock...................................        $      --   $   3,678   $     --
                                                                                                 =========   =========   ========
Non-cash stock issuance for purchase of 50.0% interest in New Zealand subsidiary.........        $      --   $      --   $  7,800
                                                                                                 =========   =========   ========
Increase in unrealized loss on investment................................................        $      --   $    (985)  $ (3,412)
                                                                                                 =========   =========   ========
Assets acquired with capital leases......................................................        $   1,299   $     548   $  3,632
                                                                                                 =========   =========   ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest...................................................................        $  5,323    $   1,239   $     --
                                                                                                 =========   =========   ========
Cash received for interest...............................................................        $    144    $     796   $  3,578
                                                                                                 =========   =========   ========

                     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                           40

<PAGE>

                          UIH AUSTRALIA/PACIFIC, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1998 AND 1997
                     (Monetary amounts stated in thousands)

1.   ORGANIZATION AND BACKGROUND

UIH Australia/Pacific,  Inc. (the "Company"),  a wholly-owned  subsidiary of UIH
Asia/Pacific  Communications,  Inc.  ("UAP"),  which  is  in  turn  an  indirect
98.0%-owned  subsidiary of United  International  Holdings,  Inc.  ("UIH"),  was
formed on October  14,  1994,  for the  purpose  of  developing,  acquiring  and
managing foreign multi-channel television, programming and telephony operations.

The following chart presents a summary of the Company's significant  investments
in multi-channel television, programming and telephony operations as of December
31, 1998.



            ********************************************************
            *                        UIH                           *
            ********************************************************
                                      *
                               100%   *
                                      *
            ********************************************************
            *    United International Properties, Inc. ("UIPI")    *
            ********************************************************
                                      *
                               98%    *
                                      *
            ********************************************************
            *                        UAP                           *
            ********************************************************
                                      *
                               100%   *
                                      *
            ********************************************************
            *                   The Company                        *
            ********************************************************
                                      *
                                      *
                                      *
            ********************************************************
            *  CTV Pty Limited and STV Pty Limited                 *
            *   (collectively, "Austar")(Australia)           100% *
            *  United Wireless Pty Limited                         *
            *   ("United Wireless") ("Australia")             100% *
            *  Telefenua S.A. ("Telefenua")(Tahiti)            90% *
            *  Saturn Communications Limited ("Saturn")            *
            *   (New Zealand)                                  65% *
            *  XYZ Entertainment Pty Limited                       *
            *  ("XYZ Entertainment")(Australia)                25% *
            ********************************************************

LIQUIDITY AND CAPITAL RESOURCES

The Company and its subsidiaries have experienced net losses since formation. As
of December 31, 1998,  the Company's  working  capital and  projected  operating
cashflow  are not  sufficient  to  fund  its  expenditures  and to  service  its
indebtedness over the next 12 months.

A  substantial  portion  of the  Company's  investments  to date  relate  to its
investment in Austar, which is comprised primarily of multi-channel  multi-point
distribution systems ("MMDS") and direct-to-home  ("DTH") satellite  operations.
The Company  has  essentially  completed  the  construction  and  deployment  of
Austar's  entire MMDS  network  infrastructure  and has incurred  certain  other
significant  expenditures,  such as Austar's  National  Customer Service Center,
which contemplates  provision of MMDS and DTH services to a substantially larger
customer base than currently  exists. If additional  capital  financings are not
available to continue to connect new  customers,  revenues  will decline and the
current  net   operating   loss  will   increase   over  time  due  to  customer
disconnections,  which are normally experienced in connection with multi-channel
television  operations.  In order to expand Austar's customer base and build-out
the Company's  other  projects,  the Company will need a  significant  amount of
additional  capital.  As of  December  31,  1998,  the Company had a net working
capital  deficit of $60,588,  excluding  related party  payables of $3,665.  The
working  capital  deficit  includes  $36,738 of bank debt for  Austar  which the
Company  expects will be refinanced  by the end of April 1999 upon  execution of
the new credit facility at Austar.

                                       41
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Due to the nature of the Company's operations,  the Company is generally able to
slow the rate of subscriber  connections at Austar and network  construction  at
the Company's  other projects to adjust to the level of funding sources that are
available.  The Company believes it can, if necessary,  substantially reduce the
capital required at Austar as the majority of future capital  expenditures  will
be for subscriber installation and premises equipment, which are controllable by
the Company based upon the rate of new subscriber connections.

In late 1998,  Austar  received a supplemental  amendment to the existing senior
syndicated  term  debt  facility  in the  amount  of  Australian  $("A$")200,000
($122,459 as of December 31,  1998) (the  "Austar Bank  Facility")  which allows
Austar to draw on the  A$90,000  Term Loan  Facility.  As of December  31, 1998,
Austar  had  drawn  A$60,000  under  the Term Loan  Facility  and the  remaining
A$30,000  was drawn  subsequent  to year end.  Austar  also  received a new bank
underwriting  commitment for an A$400,000 senior secured debt facility (the "New
Austar Bank Facility"),  which is intended to refinance the Austar Bank Facility
by April 30, 1999 (see Note 8). If the New Austar Bank  Facility does not close,
the Term Loan portion of the Austar Bank Facility  (A$90,000)  will be due April
30,  1999.  The  Company  remains  reliant  upon  the  continued  financial  and
management support of its immediate  controlling  entity,  UAP, and its ultimate
controlling  entity,  UIH. The Company believes it will close the New Austar and
Saturn Bank Facilities by April 30, 1999 and also continues to investigate other
potential financial  alternatives.  However, even if such new facilities are not
finalized,  the Company  believes  that  committed  financial  support  from UIH
combined  with,  if  necessary,  reductions  in the  Company's  planned  capital
expenditures,  are  sufficient to sustain its  operations  through at least mid-
2000.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through  the  ownership  of  a  majority  voting   interest.   The  Company  has
consolidated  the  operations of Saturn since July 1, 1996.  Prior to that time,
the Company accounted for its investment in Saturn under the equity method.  The
Company discontinued  consolidating the results of operations from Saturn due to
a change in an accounting  principle  effective  January 1, 1998.  However,  the
Company  is  currently  discussing   alternatives  which  would  allow  for  the
consolidation  of Saturn.  Effective  October 1, 1998, the Company  discontinued
consolidating   the   results   of   operations   of   Telefenua   due   to   an
other-than-temporary  loss of  control  and  began  using the  equity  method of
accounting (See Note 15). All significant intercompany accounts and transactions
have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS

Cash and cash equivalents  include cash and investments with original maturities
of less than three months. Short-term liquid investments include certificates of
deposit,  commercial  paper and  government  securities  which  have  maturities
greater than three  months.  Short-term  liquid  investments  are  classified as
available-for-sale and reported at fair market value.

RESTRICTED CASH

Cash  held as  collateral  for  letters  of credit  is  classified  based on the
expected expiration of such facilities.

INVESTMENTS  IN AND ADVANCES TO  AFFILIATED  COMPANIES,  ACCOUNTED FOR UNDER THE
EQUITY METHOD

For those  investments  in companies in which the Company's  voting  interest is
20.0% to 50.0%,  its investments are held through a combination of voting common
stock, preferred stock, debentures or convertible debt and/or the Company exerts
significant influence through board representation and management authority, the
equity  method  of  accounting  is used.  Under  this  method,  the  investment,
originally   recorded  at  cost,   is  adjusted  to  recognize   the   Company's
proportionate share of net earnings or losses of the affiliates,  limited to the
extent of the Company's investment in and advances to the affiliates,  including

                                       42
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

any debt guarantees or other funding  commitments.  The Company's  proportionate
share of net earnings or losses of affiliates  includes the  amortization of the
excess of its cost  over its  proportionate  interest  in each  affiliate's  net
tangible assets.

PROPERTY, PLANT AND EQUIPMENT

Property,  plant  and  equipment  is stated  at cost.  Additions,  replacements,
installation costs and major improvements are capitalized,  and costs for normal
repair and  maintenance of property,  plant and equipment are charged to expense
as incurred.  All MMDS/DTH  subscriber  equipment and  capitalized  installation
labor is  depreciated  over three  years.  Upon  disconnection  of a MMDS or DTH
subscriber,  the remaining  book value of the  subscriber  equipment,  excluding
converters which are recovered upon  disconnection,  and the unamortized portion
of   capitalized   labor  are  written  off  and  accounted  for  as  additional
depreciation  expense.  MMDS  distribution  facilities  and  cable  distribution
networks are depreciated  using the  straight-line  method over estimated useful
lives of five to ten years.

With respect to the Company's cable  distribution  networks,  initial subscriber
installation  costs are capitalized and depreciated over a period no longer than
the  depreciation  period  used for  cable  television  plant or the term of the
license  agreement.  All  installation  fees and related  costs with  respect to
reconnect  are  recognized in the statement of operations in the period in which
the reconnection occurs.

Office equipment,  furniture and fixtures,  building and leasehold  improvements
are depreciated  using the  straight-line  method over estimated useful lives of
three to ten years.

Assets  acquired  under  capital  leases are  included  in  property,  plant and
equipment.  The  initial  amount of the  leased  asset and  corresponding  lease
liability  are recorded at the present value of future  minimum lease  payments.
Leased assets are amortized over the life of the relevant lease.

GOODWILL AND OTHER INTANGIBLE ASSETS

The excess of investments  in  consolidated  subsidiaries  over the net tangible
asset value at acquisition is amortized using the  straight-line  method over 15
years.  The  acquisition  of MMDS  licenses  has  been  recorded  at  cost,  and
amortization expense is computed using the straight-line method over the term of
the license.  In Australia,  the cost to acquire these  licenses for a five-year
period is being amortized over the remaining  license  period.  The licenses are
renewable every five years.

RECOVERABLE AMOUNTS OF TANGIBLE AND INTANGIBLE ASSETS

The Company  evaluates the carrying value of all tangible and intangible  assets
whenever  events or  circumstances  indicate  the  carrying  value of assets may
exceed their  recoverable  amounts.  An impairment  loss is recognized  when the
estimated  future cash flows  (undiscounted  and without  interest)  expected to
result from the use of an asset are less than the carrying  amount of the asset.
Measurement  of an  impairment  loss is based on fair  value of the asset if the
asset is expected to be held and used,  which would  generally be computed using
discounted  cash flows.  Measurement of an impairment loss for an asset held for
sale would be based on fair market value less estimated costs to sell.

DEFERRED FINANCING COSTS

Costs to obtain debt  financing are  capitalized  and amortized over the life of
the debt facility using the effective interest method.

REVENUE RECOGNITION

Revenue is  primarily  derived  from the sale of cable  television  services  to
subscribers  and is recognized in the period the related  services are provided.
Initial  installation  fees are recognized as revenue in the period in which the
installation  occurs, to the extent  installation fees are equal to or less than
direct selling costs, which are expensed. To the extent installation fees exceed
direct  selling  costs,  the excess fees are  deferred  and  amortized  over the
average contract period. All installation fees and related costs with respect to
reconnections and  disconnections  are recognized in the statement of operations
in the  period  in  which  the  reconnection  or  disconnection  occurs  because
reconnection  fees  are  charged  at a  level  equal  to or  less  than  related
reconnection costs.

                                       43
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

CONCENTRATION OF CREDIT RISK

Financial  instruments that potentially subject the Company to concentrations of
credit risk  consist  primarily of  subscriber  receivables.  Concentrations  of
credit risk with respect to subscriber  receivables are limited due to the large
number of customers comprising the Company's customer base.

INCOME TAXES

The Company accounts for income taxes under the asset and liability method which
requires  recognition  of deferred tax assets and  liabilities  for the expected
future income tax  consequences of transactions  which have been included in the
financial statements or tax returns. Under this method,  deferred tax assets and
liabilities  are  determined  based  on the  difference  between  the  financial
statement  and tax bases of assets,  liabilities  and loss  carryforwards  using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. Net deferred tax assets are then reduced by a valuation allowance if
management believes it more likely than not that they will not be realized.

STOCKHOLDER'S DEFICIT

Gains  realized as a result of stock  sales by the  Company's  subsidiaries  are
recorded in the statement of operations,  except for any transactions which must
be  credited  directly  to equity in  accordance  with the  provisions  of Staff
Accounting Bulletin No. 51 ("SAB 51").

On October 14, 1998, the Company issued 3,945,308 shares of its capital stock to
UAP (the "Equity Sale") related to cumulative gross equity  contributions to the
Company of $70,000 through that date.

BASIC AND DILUTED LOSS PER SHARE

"Basic loss per share" is  determined  by dividing net loss  available to common
shareholders by the weighted-average  number of common shares outstanding during
each period.  "Diluted  earnings per share"  includes the effects of potentially
issuable common stock,  but only if dilutive.  The treasury stock method,  using
the average  price of the Company's  common stock for the period,  is applied to
determine  dilution from options and warrants.  The if-converted  method is used
for convertible securities. Because of reported losses, there are no differences
between  basic and diluted loss per share amounts for the Company for any of the
years  presented.   The  only  potentially   dilutive   securities  excluded  as
antidilutive were the warrants issued in November 1997 (see Note 9).

COMPREHENSIVE LOSS

The Company has adopted  Statement of Financial  Accounting  Standards  No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify  items of other  comprehensive  income  (loss) by their nature in a
financial   statement  and  (ii)  display  the  accumulated   balance  of  other
comprehensive  income (loss)  separately  from retained  earnings and additional
paid-in capital in the equity section of a statement of financial position.  The
Company adopted SFAS 130 effective January 1, 1998.

FOREIGN OPERATIONS

The functional  currency for the Company's foreign  operations is the applicable
local currency for each  affiliate  company.  Assets and  liabilities of foreign
subsidiaries  are translated at the exchange rates in effect at period-end,  and
the statements of operations are translated at the average exchange rates during
the period. Exchange rate fluctuations on translating foreign currency financial
statements  into U.S.  dollars  that  result in  unrealized  gains or losses are
referred to as translation  adjustments.  Cumulative translation adjustments are
recorded within other cumulative comprehensive income (loss) in the consolidated
statements of stockholder's deficit.

Transactions  denominated  in  currencies  other  than the  local  currency  are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in  exchange  rates  result in  transaction  gains and losses  which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.

                                       44
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash flows from the  Company's  operations in foreign  countries are  calculated
based on their reporting currencies.  As a result, amounts related to assets and
liabilities reported on the consolidated statements of cash flows will not agree
to changes in the corresponding balances on the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line item below cash flows from financing activities.

NEW ACCOUNTING PRINCIPLES

The American Institute of Certified Public Accountants recently issued Statement
of Position 98-5,  "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"),
which is required to be adopted by affected companies for fiscal years beginning
after December 15, 1998. SOP 98-5 defines start-up and organization costs, which
must be expensed as  incurred.  The Company  does not expect the adoption of SOP
98-5  to  have a  material  effect  on its  financial  position  or  results  of
operations.

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"   ("SFAS  133"),   which  requires  that  companies   recognize  all
derivatives  as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133,  accounting  for  changes in fair market  value of a  derivative
depends on its intended use and  designation.  SFAS 133 is effective  for fiscal
years  beginning  after June 15, 1999.  The Company is currently  assessing  the
effect of this new standard.

RECLASSIFICATIONS

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

3.   ACQUISITIONS AND DISPOSITIONS

In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a 35.0%
equity interest in Saturn by investing  approximately New Zealand $("NZ$")29,900
($19,566)  directly  into  Saturn  for  its  newly-issued  shares  (the  "Saturn
Transaction").  The Saturn Transaction resulted in a SAB51 gain of $5,985, which
was credited directly to paid-in capital.

In July 1998,  Austar acquired certain  Australian pay television assets of East
Coast  Television Pty Limited  ("ECT"),  an affiliate of Century  Communications
Corp.  ("Century"),  for $6,155 of  UIH's  newly-created  Series  B  Convertible
Preferred  Stock ("Series B Preferred  Stock").  ECT's  subscription  television
business  includes  subscribers  and  certain  MMDS  licenses  and  transmission
equipment  serving the areas in and around Newcastle,  Gossford,  Wollongong and
Tasmania.


                                       45
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.   CASH  AND  CASH   EQUIVALENTS,   RESTRICTED  CASH  AND  SHORT-TERM   LIQUID
     INVESTMENTS
<TABLE>
<CAPTION>
                                                                 As of December 31, 1998
                                                 --------------------------------------------------
                                                                              Short-term
                                                 Cash and Cash   Restricted     Liquid
                                                  Equivalents       Cash      Investments    Total
                                                 -------------   -----------  ------------  -------
           <S>                                        <C>           <C>         <C>           <C>
          Cash.................................       $181          $ --        $ --          $181
          Certificates of deposit..............         --            --          --            --
          Commercial paper.....................         --            --         406           406
          Government securities................         --            --         357           357
                                                      ----          ----        ----          ----
             Total.............................       $181          $ --        $763          $944
                                                      ====          ====        ====          ====

                                                           As of December 31, 1997
                                                 --------------------------------------------------
                                                                              Short-term
                                                 Cash and Cash   Restricted     Liquid
                                                  Equivalents       Cash      Investments    Total
                                                 -------------   -----------  ------------  -------
           <S>                                      <C>            <C>         <C>          <C>
           Cash................................     $12,344         $420       $    --      $12,764
           Certificates of deposit.............          --           --         8,399        8,399
           Commercial paper....................          --           --         3,926        3,926
                                                    -------         ----       -------      -------
              Total............................     $12,344         $420       $12,325      $25,089
                                                    =======         ====       =======      =======
</TABLE>

5.   INVESTMENTS  IN AND ADVANCES TO AFFILIATED  COMPANIES,  ACCOUNTED FOR UNDER
     THE EQUITY METHOD
<TABLE>
<CAPTION>

                                                                          As of December 31, 1998
                                           ---------------------------------------------------------------------------------------
                                             Investments in        Cumulative Equity        Cumulative
                                             and Advances to           in Losses of         Translation       Valuation
                                           Affiliated Companies    Affiliated Companies     Adjustments       Allowance     Total
                                           --------------------    --------------------     -----------      -----------   -------
     <S>                                        <C>                      <C>                 <C>              <C>          <C>
     Saturn............................         $49,808                  $(23,138)           $(2,881)         $   --       $23,789
     XYZ Entertainment.................          19,363                   (18,666)               111              --           808
     Telefenua.........................          18,599                   (14,215)                --          (4,384)(1)        --
                                                -------                  --------            -------          -------      -------
        Total..........................         $87,770                  $(56,019)           $(2,770)         $(4,384)     $24,597
                                                =======                  ========            =======          =======      =======
</TABLE>
<TABLE>
<CAPTION>
                                                                          As of December 31, 1997
                                           --------------------------------------------------------------------------------------
                                             Investments in        Cumulative Equity        Cumulative
                                             and Advances to           in Losses of         Translation       Valuation
                                           Affiliated Companies    Affiliated Companies     Adjustments       Allowance     Total
                                           --------------------    --------------------     -----------      -----------    -----
     <S>                                        <C>                      <C>                   <C>              <C>         <C>

     XYZ Entertainment.................         $18,610                  $(18,720)             $110             $--         $--
                                                =======                  ========              ====             ===         ===
</TABLE>

      (1) The  Company  has  reserved  the  remaining  balance of the  Telefenua
          investment of $4,384 due to the  uncertainty of realization  (See Note
          15).

                                       46
<PAGE>
                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Condensed  financial  information  for  Saturn,  stated in U.S.  dollars,  is as
follows:
<TABLE>
<CAPTION>
                                                                                    As of
                                                                              December 31, 1998
                                                                              -----------------
     <S>                                                                           <C>
     Current assets.............................................                   $ 4,071
     Non-current assets.........................................                    59,242
                                                                                   -------
        Total assets............................................                   $63,313
                                                                                   =======

     Current liabilities........................................                   $33,608
     Non-current liabilities....................................                        19
     Shareholders' equity.......................................                    29,686 
                                                                                   -------
        Total liabilities and shareholders' equity..............                   $63,313
                                                                                   =======

                                                                      For the Year Ended December 31, 1998
                                                                      ------------------------------------

     Revenue....................................................                   $  1,693
     Expenses...................................................                    (16,934)
                                                                                   --------
        Net loss................................................                   $(15,241)
                                                                                   ========
</TABLE>
6.   PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                           As of December 31,
                                                                       --------------------------
                                                                         1998              1997
                                                                       --------          --------
     <S>                                                               <C>               <C>
     Subscriber premises equipment and converters...............       $187,247          $160,413
     MMDS distribution facilities...............................         54,725            55,093
     Cable distribution networks................................          2,009            16,770
     Office equipment, furniture and fixtures...................          9,810            10,813
     Buildings and leasehold improvements.......................          2,841             5,647
     Other......................................................         13,847            12,544
                                                                       --------          --------
                                                                        270,479           261,280
        Accumulated depreciation................................       (147,511)          (78,179)
                                                                       --------          --------
        Net property, plant and equipment.......................       $122,968          $183,101
                                                                       ========          ========
</TABLE>
7.    GOODWILL AND OTHER INTANGIBLE ASSETS
<TABLE>
<CAPTION>
                                                                           As of December 31,
                                                                       --------------------------
                                                                         1998              1997
                                                                       --------          --------
     <S>                                                               <C>               <C>
     Austar.....................................................       $55,805           $51,552
     Saturn.....................................................            --             6,100
     Other......................................................         4,266             2,873
                                                                       -------           -------
                                                                        60,071            60,525
        Accumulated amortization................................       (17,512)          (11,817)
                                                                       -------           -------
        Net goodwill and other intangible assets................       $42,559           $48,708
                                                                       =======           =======
</TABLE>
8.    CURRENT PORTION OF NOTES PAYABLE
<TABLE>
<CAPTION>
                                                                           As of December 31,
                                                                       --------------------------
                                                                         1998              1997
                                                                       --------          --------
     <S>                                                               <C>                 <C>
     Austar Bank Facility (See Note 10).........................       $36,738             $ --
                                                                       -------             ----
        Total notes payable.....................................       $36,738             $ --
                                                                       =======             ====
</TABLE>
                                       47
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.    SENIOR DISCOUNT NOTES
<TABLE>
<CAPTION>
                                                                           As of December 31,
                                                                       --------------------------
                                                                         1998              1997
                                                                       --------          --------
     <S>                                                               <C>               <C>
     May 1996 Notes (as defined below), net of
      unamortized discount......................................       $321,687          $278,662
     September 1997 Notes (as defined below), net of
      unamortized discount......................................         34,953            30,461
                                                                       --------          --------
        Total senior discount notes.............................       $356,640          $309,123
                                                                       ========          ========
</TABLE>

MAY 1996 NOTES

The 14.0% senior notes,  which the Company issued in May 1996 at a discount from
their principal amount of $443,000 (the "May 1996 Notes"), had an accreted value
of $321,687 as of December 31, 1998.  On and after May 15, 2001,  cash  interest
will accrue and will be payable  semi-annually  on each May 15 and  November 15,
commencing November 15, 2001. The May 1996 Notes are due May 15, 2006. Effective
May 16, 1997, the interest rate on these notes increased by an additional  0.75%
per annum to 14.75%.  On October 14, 1998,  the Company  consummated  the Equity
Sale  resulting in gross  proceeds to the Company of $70,000  which  reduced the
interest  rate from  14.75%  to 14.0%  per  annum.  Due to the  increase  in the
interest rate effective May 16, 1997 until  consummation of the Equity Sale, the
May 1996 Notes will  accrete to a principal  amount of $447,418 on May 15, 2001,
the date cash interest  begins to accrue.  The quoted fair market value of these
notes was approximately  $223,700 and $292,380 as of December 31, 1998 and 1997,
respectively.

SEPTEMBER 1997 NOTES

The 14.0% senior notes, which the Company issued in September 1997 at a discount
from their  principal  amount of $45,000 (the  "September  1997 Notes"),  had an
accreted  value of $34,953 as of December 31,  1998.  On and after May 15, 2001,
cash interest will accrue and will be payable  semi-annually  on each May 15 and
November 15, commencing  November 15, 2001. The September 1997 Notes are due May
15,  2006.  Effective  September  23,  1997,  the  interest  rate on these notes
increased by an additional  0.75% per annum to 14.75%.  On October 14, 1998, the
Company  consummated the Equity Sale,  reducing the interest rate from 14.75% to
14.0% per annum.  Due to the increase in the interest rate  effective  September
23, 1997 until  consummation  of the Equity Sale,  the September 1997 Notes will
accrete to a principal amount of $45,448 on May 15, 2001, the date cash interest
begins to accrue.  The quoted fair market value of these notes was approximately
$22,700 and $29,700 as of December 31, 1998 and 1997, respectively.

On November 17, 1997, pursuant to the terms of the indentures  governing the May
1996 Notes and the September 1997 Notes (collectively, the "Notes"), the Company
issued  warrants  to  purchase  488,000  shares  of  its  common  stock,   which
represented 3.4% of its common stock. The warrants are exercisable at a price of
$10.45 per share which would result in gross  proceeds of  approximately  $5,100
upon exercise.  The warrants are exercisable  through May 15, 2006. The warrants
were valued at $3,678 and have been  reflected as an additional  discount to the
Notes on a pro-rata basis and as an increase in additional paid-in capital.

10.  OTHER LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                           As of December 31,
                                                                       --------------------------
                                                                         1998              1997
                                                                       --------          --------
     <S>                                                               <C>               <C>
     Austar Bank Facility (as defined below)....................       $67,352           $71,531
     Vendor financed equipment at Saturn........................            --             3,730
     Capital leases and other...................................         2,923             4,535
                                                                       -------           -------
                                                                        70,275            79,796
        Less current portion....................................        (2,189)           (1,825)
                                                                       -------           -------
        Total other long-term debt..............................       $68,086           $77,971
                                                                       =======           =======
</TABLE>
                                       48
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


AUSTAR BANK FACILITY

In July 1997,  Austar  secured a senior  syndicated  term debt  facility  in the
amount  of  A$200,000  ($122,459  as of  December  31,  1998)  to fund  Austar's
subscriber  acquisition  and working  capital  needs.  The Austar Bank  Facility
consists  of  three  sub-facilities:  (i)  A$50,000  revolving  working  capital
facility,  (ii)  A$60,000  cash advance  facility and (iii)  A$90,000  Term Loan
Facility.  All of Austar's  assets are pledged as collateral for the Austar Bank
Facility. In addition,  pursuant to the Austar Bank Facility, Austar can not (a)
pay any dividends,  (b) make any payments of interest on the Company's  Notes or
(c) pay any fees under its technical assistance agreements prior to December 31,
2000.  Subsequent  to December 31, 2000,  the payments in (a), (b) and (c) above
may be made,  subject to certain  debt to cash flow  ratios.  As of December 31,
1998, Austar had drawn the entire amount of the working capital facility and the
cash advance facility totaling  A$110,000  ($67,352 converted using the December
31, 1998 exchange rate). The working capital facility is fully repayable on June
30,  2000.  The  cash  advance  facility  is  fully  repayable  pursuant  to  an
amortization schedule beginning December 31, 2000 and ending June 30, 2004.

In September 1998,  Austar secured the New Austar Bank Facility  commitment,  of
which the first  A$200,000 is intended to refinance  the Austar Bank Facility in
April 1999 and the remaining  A$200,000 is available  upon the  contribution  of
additional  equity  on a 2:1  debt-to-equity  basis.  The  commitment  has  been
extended  to April 30,  1999 and  management  expects  to close  this  financial
transaction  by  mid-April   1999.  In  the  interim,   Austar  has  received  a
supplemental  amendment to the existing Austar Bank Facility which allows Austar
to draw under the A$90,000 Term Loan  Facility at an increased  interest rate of
2.25%  above the  professional  market  rate in  Australia.  All other terms and
conditions  of the Austar Bank  Facility  remain  unchanged.  As of December 31,
1998, Austar had drawn A$60,000  ($36,738  converted using the December 31, 1998
exchange  rate) on the Term Loan  Facility  for a total  outstanding  balance of
A$170,000.  Subsequent to year-end an additional  A$30,000 was borrowed  against
the Term Loan Facility  which,  along with the A$60,000 draw, is payable in full
in April 1999.

DEBT MATURITIES

The Company's maturities of its other long-term debt are as follows:

     1999.......................................................    $ 2,189
     2000.......................................................        734
     2001.......................................................         --
     2002.......................................................         --
     2003 and thereafter........................................     67,352
                                                                    -------
                                                                    $70,275
                                                                    =======
OTHER FINANCIAL INSTRUMENTS

Interest  rate swap  agreements  are used by the Company  from time to time,  to
manage  interest rate risk on its floating rate debt  facilities.  Interest rate
swaps are entered into depending on the Company's  assessment of the market, and
generally  are used to  convert  the  floating  rate  debt to fixed  rate  debt.
Interest  differentials  paid  or  received  under  these  swap  agreements  are
recognized  over the life of the contracts as adjustments to the effective yield
of the underlying  debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated  balance sheet.  Currently,  the
Company has two  interest  rate swaps to manage  interest  rate  exposure on the
Austar  Bank  Facility.  These swap  agreements  expire in 2002 and  effectively
convert an aggregate  principal  amount of A$50.0  million  ($30.6 million as of
December 31, 1998) of variable rate,  long-term debt into fixed rate borrowings.
As of December 31, 1998, the weighted-average  fixed rate under these agreements
was 7.94%  compared  to a  weighted-average  variable  rate on the  Austar  Bank
Facility of 6.75%. As a result of these swap  agreements,  interest  expense was
increased by approximately A$0.6 million ($0.4 million) during 1998.

Fair values of the  interest  rate swap  agreements  are based on the  estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting  date,  taking into  account  current  interest  rates and the current
creditworthiness  of the  counterparties.  As of December 31, 1998,  the Company
estimates  it would have paid  approximately  A$1.3  million  ($0.8  million) to
terminate the agreements.

11.  RELATED PARTY

Effective May 1, 1996, the Company and UIH Management,  Inc. ("UIH Management"),
an  indirect  wholly-owned  subsidiary  of UIH,  executed  a 10-year  management
services  agreement  (the  "Management   Agreement"),   pursuant  to  which  UIH
Management performs certain administrative,  accounting, financial reporting and
other services for the Company,  which has no separate employees of its own. For
the first four months of 1996, UIH Management  allocated  approximately $250 for

                                       49
<PAGE>


                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

such services. Pursuant to the Management Agreement, the management fee was $750
for the first year (beginning May 1, 1996), and it increases on each anniversary
date of the Management Agreement by 8.0% per year. Effective March 31, 1997, UIH
Management assigned its rights and obligations under the Management Agreement to
UAP, the  Company's  immediate  parent,  and extended the agreement for 20 years
from that date (the "UAP  Management  Agreement").  For the years ended December
31, 1998, 1997 and 1996, the Company recorded $853, $790 and $750, respectively,
in related party  management  fees.  The Company is also  allocated a portion of
UIH's indirect  overhead  costs such as  administrative,  accounting,  financial
reporting  and other  services.  These costs are  recorded  as a deemed  capital
contribution in the Company's financial statements. For the years ended December
31,  1998,  1997  and  1996,  the  Company  recorded  $4,622,   $1,949  and  $0,
respectively,  in corporate  general and  administrative  expense allocated from
UIH.

UIH Management  executed a 10-year  technical  assistance  agreement with Austar
pursuant to which it provided various  management and technical  services.  This
agreement is renewable  for up to an  additional  15 one-year  terms.  Under the
agreement dated October 12, 1994, UIH Management was to receive a management fee
equal to 5.0% of Austar's total revenue, less certain deductions,  for the first
two years,  4.0% for the next six years,  3.0% for the  following  two years and
2.0%  thereafter.  Effective March 31, 1997, UIH Management  assigned its rights
and obligations under this agreement to UAP. In addition, the management fee was
revised to remain at 5.0% of Austar's  gross  revenue  throughout  the remaining
term of the agreement.  Austar's chief operating  officer and director of sales,
marketing  and  programming  are  employees  of UIH that have been  seconded  to
Austar. In addition,  UIH has appointed three other management personnel and all
six directors.  Austar  reimburses UIH for certain direct costs incurred by UIH,
including salaries and benefits relating to these senior management positions.

Telefenua  and  SFCC,  the  parent  company  of  Telefenua,  executed  a 10-year
technical  services  agreement on January 11, 1995,  whereby SFCC would  provide
technical,  administrative and operational  assistance to Telefenua encompassing
the  following  areas:  (i)  engineering,  design,  construction  and  equipment
purchasing; (ii) marketing, selling and advertising;  (iii) accounting,  billing
and subscriber management systems and (iv) personnel management and training for
a fee equal to 5.5% of  Telefenua's  gross revenue  through 1996,  3.5% of gross
revenue during 1997 and 2.5%  thereafter.  SFCC would also be reimbursed for all
direct and indirect costs  associated  with the services it provided.  Effective
January  11,  1995,  SFCC  assigned  all of its  rights and  obligations  to UIH
Management,  except that SFCC retained the right to receive 0.5% of  Telefenua's
gross revenues through the term of the agreement.  Accordingly,  Telefenua would
pay UIH Management  fees of 5.0%,  3.0% and 2.0% of  Telefenua's  gross revenues
over the same periods.  Effective  March 31, 1997, UIH  Management  assigned its
rights and obligations under this agreement to UAP. Telefenua reimburses UIH for
certain direct costs incurred by UIH. The Company and Telefenua are currently in
a dispute  concerning  services to be provided  under the  technical  assistance
agreement.

Saturn and UIH  executed a technical  services  agreement  pursuant to which UIH
provided  technical,   administrative  and  operational   assistance  to  Saturn
encompassing  the following areas:  (i)  engineering,  design,  construction and
equipment purchasing;  (ii) marketing,  pricing and packaging of services; (iii)
selection of programming and  negotiations  with suppliers and (iv)  accounting,
billing and subscriber  management systems.  UIH receives a management fee equal
to 5.0% of Saturn's gross revenue  through July 1999.  Effective March 31, 1997,
UIH  assigned  all its rights and  obligations  under this  agreement to UAP. In
connection with SaskTel's  investment in Saturn on July 23, 1997, the management
fee  payable  to UAP was  reduced  to 2.5% of  Saturn's  gross  revenue  and the
management  fee payable to SaskTel became 2.5% of Saturn's gross revenue under a
similar  agreement.  The chief executive  officer is an employee of UIH that has
been seconded to Saturn. Saturn reimburses UIH for certain direct costs incurred
by UIH,  including  salaries  and  benefits  relating to this senior  management
position.

United  Wireless and UAP  executed a technical  services  agreement,  commencing
January  1,  1997,  pursuant  to which  UAP has  agreed  to  provide  technical,
administrative  and operational  assistance to United Wireless  encompassing the
following areas: (i) design,  engineering and construction of the network;  (ii)
marketing  and  sales  of  the  service;  (iii)  network  management,   customer
management and information systems and (iv) personnel and training. UAP receives
a management fee equal to 5.0% of the gross revenue of United  Wireless  through
December 2007. The chief  executive  officer is an employee of UIH that has been
seconded to United Wireless.  United Wireless  reimburses UIH for certain direct
costs incurred by UIH,  including  salaries and benefits relating to this senior
management position.

                                       50

<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Included in the due to parent payable is the following:

<TABLE>
<CAPTION>
                                                                                         As of December 31,
                                                                                     --------------------------
                                                                                       1998              1997
                                                                                     --------          --------
     <S>                                                                              <C>               <C>
     Austar technical assistance agreement obligations, including deferred......
      management fees of $5,973 and $2,248, respectively (1) (2)................      $8,347            $2,629
     Telefenua technical assistance agreement obligations.......................          --             2,659
     Saturn technical assistance agreement obligations..........................          --               406
     United Wireless technical assistance agreement obligations.................         605               487
     Payable to parent for management fees and interest on note payable(2)......       1,056               723
     Other......................................................................         235                86
                                                                                      ------            ------
                                                                                      10,243             6,990
        Less current porton.....................................................      (3,665)           (1,596)
                                                                                      ------            ------
                                                                                      $6,578            $5,394
                                                                                      ======            ======
</TABLE>
     (1)  The management  fees have been deferred until December 31, 2000 due to
          restrictions under the Austar Bank Facility.  Subsequent to that date,
          Austar will be permitted  to make these types of payments,  subject to
          certain debt to cash flow ratios.
     (2)  UAP has the option of converting these management fees into equity.

As of  December  31,  1997,  UIPI had  loaned  $4,999  to UIH  Australia/Pacific
Finance,  Inc., a  wholly-owned  subsidiary  of the  Company.  This loan accrued
interest at 15.0% and was due on demand.  In December 1998, UIPI contributed the
amount of the loan, plus interest, totaling $6,242 into equity in the Company.

12.   INCOME TAXES

In  general,  a U.S.  corporation  may claim a foreign  tax credit  against  its
federal income tax expense for foreign income taxes paid or accrued. Because the
Company must calculate its foreign tax credit separately for dividends  received
from each  foreign  corporation  in which the Company owns 10.0% to 50.0% of the
voting stock, and because of certain other limitations, the Company's ability to
claim a  foreign  tax  credit  may be  limited,  particularly  with  respect  to
dividends  paid out of  earnings  subject to a high rate of foreign  income tax.
Generally, the Company's ability to claim a foreign tax credit is limited to the
amount of U.S. taxes the Company pays with respect to its foreign source income.
In calculating  its foreign  source income,  the Company is required to allocate
interest  expense and  overhead  incurred in the U.S.  between its  domestic and
foreign  activities.  Accordingly,  to the extent  U.S.  borrowings  are used to
finance equity contributions to its foreign subsidiaries,  the Company's ability
to claim a foreign tax credit may be significantly  reduced.  These  limitations
and the  inability of the Company to offset  losses in one foreign  jurisdiction
against  income earned in another  foreign  jurisdiction  could result in a high
effective  tax rate on the  Company's  earnings.  The Company  has an  ownership
interest in Telefenua, which is located in Tahiti, a self-governing territory of
France,  with which the United  States does not have an income tax treaty.  As a
result,  the Company may be subject to increased  withholding  taxes on dividend
distributions  and other  payments  from  Telefenua  and also may be  subject to
double taxation with respect to income generated by Telefenua.

The Company is included as a member of UIH's  consolidated tax return and, after
the  offering of the May 1996 Notes,  remained a member of the UIH  consolidated
group.  UIH and the Company are parties to a tax sharing  agreement that defines
the parties' rights and obligations with respect to tax liabilities and benefits
relating to the Company and its operations as part of the consolidated  group of
UIH. In general,  UIH is  responsible  for filing  consolidated  tax returns and
paying the associated  taxes, and the Company will reimburse UIH for the portion
of the tax cost  relating  to the  Company  and its  operations.  For  financial
reporting  purposes,  the  Company  accounts  for  income  taxes  as if it filed
separate income tax returns in accordance with the fundamental provisions of the
tax sharing agreement. Any differences in income tax expense (benefit) allocated
to the  Company by UIH in  accordance  with the tax  sharing  agreement  and the
income  tax  expense  (benefit)  will  be  accounted  for  as a  deemed  capital
distribution or  contribution.  Because the Company holds certain of its foreign
investments  through  affiliates which hold investments  accounted for under the
equity method in foreign corporations,  taxable income (loss) generated does not
flow through to the Company for U.S.  federal and state tax purposes even though
the  Company  records its  allocable  share of  affiliate  income  (losses)  for

                                       51
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

financial  reporting  purposes.  Accordingly,  due to the indefinite reversal of
such amounts in future periods, no deferred tax assets have been established for
tax basis in excess of the  Company's  book  basis  (approximately  $13,000  and
$10,000 as of  December  31,  1998 and 1997,  respectively)  in  investments  in
affiliated   companies  who,  in  turn,  have  equity   investments  in  foreign
corporations.

The Company's  United States tax net operating  losses,  totaling  approximately
$12,100 at December  31,  1998,  expire  beginning  in 2004  through  2014.  The
significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
                                                                                         As of December 31,
                                                                                     --------------------------
                                                                                        1998             1997
                                                                                     ---------         --------
     <S>                                                                             <C>               <C>
     Basis differences in property, plant and equipment............................  $   1,367         $  1,074
     Accrued interest expense on the Notes.........................................     32,885           17,435
     U.S. tax net operating loss carryforward......................................      4,615            1,338
     Basis difference in marketable equity securities..............................      1,696            1,818
     Tax net operating loss carryforward of consolidated foreign subsidiaries(1)...    107,856           67,412
                                                                                     ---------         --------
     Deferred tax asset............................................................    148,419           89,077
     Valuation reserve.............................................................   (148,419)         (89,077)
                                                                                     ---------         --------
     Deferred tax asset, net.......................................................  $      --         $     --
                                                                                     =========         ========
</TABLE>
     (1)  For   Australian   income  tax  purposes,   the  net  operating   loss
          carryforward  may be  limited  in the event of a change in  control of
          Austar or a change in the business.

The difference  between income tax expense provided in the financial  statements
and the expected  income tax expense  (benefit) at statutory rates is reconciled
as follows:
<TABLE>
<CAPTION>
                                                                                        For the Years Ended December 31,
                                                                                     --------------------------------------
                                                                                        1998          1997          1996
                                                                                     ---------     ----------    ----------
     <S>                                                                             <C>           <C>           <C>
     Expected income tax benefit at the U.S. statutory rate of 35.0%..............   $(72,202)     $(58,820)     $(30,795)
     Tax effect of permanent and other differences:
        Change in valuation reserve...............................................     64,624        56,060        27,663
        State tax, net of federal benefit.........................................     (6,189)       (5,042)       (3,520)
        International rate differences............................................     (1,251)         (615)         (181)
        Non-deductible interest accretion on the Notes............................      2,605         2,145           973
        Amortization of outside basis differences.................................      1,412         1,570         1,324
        Amortization of licenses..................................................      1,819         1,312           625
        Book/tax basis differences associated with foreign equity investments.....      3,914           915         2,111
        Non-deductible expenses and other.........................................      5,268         2,475         1,800
                                                                                     --------      --------      --------
     Total income tax expense (benefit)...........................................   $     --      $     --      $     --
                                                                                     ========      ========      ========
</TABLE>

13.   SEGMENT INFORMATION

Operating  segments are components of an enterprise for which separate financial
information  is  available  and is evaluated  regularly  by the chief  operating
decision  maker  in  deciding  how  to  allocate   resources  and  in  assessing
performance.  The  Company's  reportable  segments are the various  countries in
which  it  operates  multi-channel  television,   programming  and/or  telephony
operations.  These  reportable  segments  are managed  separately  because  each
country presents different marketing strategies and technology issues as well as
distinct economic climates and regulatory constraints.  The Company has selected
the  following  reportable  segments:  (i)  Australia,  including  the Company's
investments  in Austar and United  Wireless,  (ii) New  Zealand,  including  the
Company's investment in Saturn, (iii) Tahiti, including the Company's investment
in Telefenua,  and (iv) Corporate and Other, including various holding companies
and eliminations.

                                       52
<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Company's segment information is as follows:
<TABLE>
<CAPTION>
                                                                     As of and for the Year Ended December 31, 1998
                                                                ----------------------------------------------------------
                                                                                                     Corporate
                                                                Australia   New Zealand   Tahiti     and Other     Total
                                                                ---------   -----------  --------    ---------   ---------
<S>                                                             <C>          <C>         <C>         <C>         <C>
Service and other revenue...................................    $  86,864    $     --    $ 3,411     $   (456)   $  89,819
Systems operating expense, including management fees of
  $3,953, $0, $171, $0 and $4,693, respectively.............    $ (69,854)   $     --    $(1,751)    $    456    $ (71,149)
Selling, general and administrative expense.................    $ (48,028)   $     --    $(1,710)    $ (5,696)   $ (55,434)
Adjusted EBITDA (1).........................................    $ (27,065)   $     --    $   121          N/A          N/A
Depreciation and amortization...............................    $ (96,040)   $     --    $(1,100)    $     --    $ (97,140)
Interest income, including related party income.............    $      74    $     --    $    52     $     81    $     207
Interest expense, including related party expense...........    $  (7,461)   $     --    $  (888)    $(48,356)   $ (56,705)
Provision for loss on marketable equity securities
  and investment related costs..............................    $      --    $     --    $    --     $ (4,462)   $  (4,462)
Equity in earnings of affiliated companies, net.............    $      55    $(10,354)   $    --     $     --    $ (10,299)
Net loss....................................................    $(142,408)   $(10,354)   $(1,997)    $(51,532)   $(206,291)
Cash and cash equivalents...................................    $     181    $     --    $    --     $     --    $     181
Property, plant and equipment, net..........................    $ 122,968    $     --    $    --     $     --    $ 122,968
Total assets................................................    $ 181,169    $ 23,789    $    --     $ 11,074    $ 216,032
</TABLE>
<TABLE>
<CAPTION>
                                                                     As of and for the Year Ended December 31, 1997
                                                                ----------------------------------------------------------
                                                                                                     Corporate
                                                                Australia   New Zealand   Tahiti     and Other     Total
                                                                ---------   -----------  --------    ---------   ---------
<S>                                                             <C>          <C>         <C>         <C>         <C>
Service and other revenue...................................    $  64,370    $   473     $ 4,118     $     --    $  68,961
Systems operating expense, including management fees of
  $2,558, $435, $298, $0 and $3,291, respectively...........    $ (46,648)   $(4,015)    $(2,040)    $     --    $ (52,703)
Selling, general and administrative expense.................    $ (44,362)   $(3,581)    $(2,063)    $ (3,306)   $ (53,312)
Adjusted EBITDA (1).........................................    $ (24,082)   $(6,688)    $   313          N/A          N/A
Depreciation and amortization...............................    $ (77,557)   $(2,033)    $(1,212)    $     --    $ (80,802)
Interest income, including related party income.............    $      80    $   380     $    41     $  1,068    $   1,569
Interest expense, including related party expense...........    $  (4,031)   $   (23)    $(1,343)    $(38,597)   $ (43,994)
Provision for loss on marketable equity securities
  and investment related costs..............................    $      --    $    --     $    --     $ (4,784)   $  (4,784)
Equity in losses of affiliated companies, net...............    $      --    $    --     $    --     $ (2,408)   $  (2,408)
Net loss....................................................    $(108,133)   $(6,930)    $(4,304)    $(48,689)   $(168,056)
Cash and cash equivalents...................................    $   1,262    $ 9,881     $   246     $    955    $  12,344
Property, plant and equipment, net..........................    $ 147,871    $26,484     $ 8,746     $     --    $ 183,101
Total assets................................................    $ 202,325    $43,349     $11,359     $ 21,999    $ 279,032
</TABLE>
                                       53
<PAGE>

                          UIH AUSTRALIA PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                     As of and for the Year Ended December 31, 1996
                                                                ----------------------------------------------------------
                                                                                                     Corporate
                                                                Australia   New Zealand   Tahiti     and Other     Total
                                                                ---------   -----------  --------    ---------   ---------
<S>                                                             <C>          <C>         <C>         <C>         <C>
Service and other revenue...................................    $ 21,354     $   110     $ 3,513     $     --    $ 24,977
Systems operating expense, including management fees of
  $649, $89, $375, $0 and $1,113, respectively..............    $(19,403)    $(1,344)    $(2,118)    $     --    $(22,865)
Selling, general and administrative expense.................    $(28,071)    $(2,008)    $(2,586)    $ (1,376)   $(34,041)
Adjusted EBITDA (1).........................................    $(25,471)    $(3,153)    $  (816)         N/A         N/A
Depreciation and amortization...............................    $(34,087)    $  (800)    $(1,382)    $     --    $(36,269)
Interest income, including related party income.............    $    287     $    32     $    --     $  5,225    $  5,544
Interest expense, including related party expense...........    $   (915)    $    --     $(1,011)    $(20,268)   $(22,194)
Equity in losses of affiliated companies, net...............    $     --     $    --     $    --     $ (5,414)   $ (5,414)
Net loss....................................................    $(58,274)    $(4,126)    $(4,230)    $(21,356)   $(87,986)
Cash and cash equivalents...................................    $  7,787     $   410     $   213     $ 10,810    $ 19,220
Property, plant and equipment, net..........................    $166,012     $16,309     $10,849     $     --    $193,170
Total assets................................................    $236,259     $25,655     $14,386     $ 43,023    $319,323
</TABLE>

(1)  Adjusted  EBITDA  represents  net loss, as  determined  using United States
     generally accepted accounting principles, plus net interest expense, income
     tax expense, depreciation,  amortization, minority interest, management fee
     expense,  currency exchange gains (losses) and other  non-operating  income
     (expense) items. Industry analysts generally consider adjusted EBITDA to be
     an  appropriate  measure of the  performance  of  multi-channel  television
     operations.  Adjusted  EBITDA should not be considered as an alternative to
     net income or to cash flows or to any other generally  accepted  accounting
     principle  measure  of  performance  or  liquidity  as an  indicator  of an
     entity's operating performance.

14.   COMMITMENTS

The Company has MMDS and programming  license fees and  programming  commitments
due annually as follows:

          1999.........................................   $ 38,310
          2000.........................................     45,658
          2001.........................................     51,541
          2002.........................................     54,583
          2003 and thereafter..........................     57,152
                                                          --------
                                                          $247,244
                                                          ========

The Company has operating lease obligations as follows:

          1999.........................................    $2,464
          2000.........................................       606
          2001.........................................       495
          2002.........................................       149
          2003 and thereafter..........................        22
                                                           ------
                                                           $3,736
                                                           ======


                                       54
<PAGE>

                          UIH AUSTRALIA PACIFIC, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A subsidiary of Austar has a five-year  agreement with Optus Networks to lease a
54MHz transponder. Pursuant to the agreement, which commenced September 1, 1997,
Austar will pay approximately  $370 per month in satellite service fees to Optus
Networks. Satellite fees payable annually are approximately as follows:

          1999.........................................    $ 4,440
          2000.........................................      4,440
          2001.........................................      4,440
          2002.........................................      2,960
                                                           -------
                                                           $16,280
                                                           =======

UIH and many of its  employees  serving as senior  management  in the  Company's
operating companies are parties to employment  agreements,  typically with terms
of three to five years.  The agreements  generally  provide for a specified base
salary as well as a bonus set at a specified  percentage of the base salary. The
bonus is based on the  performance of the  respective  company and the employee.
The agreements  often provide for the grant of an incentive  interest equal to a
percentage  of the residual  equity value of the  respective  company,  which is
typically  defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders' investment.  The Company has recorded a
liability  for the estimated  amount of the bonus earned  during 1998,  1997 and
1996.  The  employment  agreements  generally  also  provide  for cost of living
differentials,  relocation and moving expenses, automobile allowances and income
tax equalization  payments,  if necessary,  to keep the employee's tax liability
the same as it would be in the United States.

15.  CONTINGENCIES

Other than as described  below, the Company is not a party to any other material
legal  proceedings,  nor is it currently aware of any other threatened  material
legal  proceedings.  From time to time,  the  Company  may  become  involved  in
litigation relating to claims arising out of its operations in the normal course
of its business.

The  territorial   government  of  Tahiti  (in  French  Polynesia)  had  legally
challenged  the decree and authority of the Conseil  Superieur de  l'Audiovisuel
("CSA") to award  Telefenua  the  authorizations  to operate an MMDS  service in
French Polynesia.  The French  Polynesian's  challenge to France's  authority to
award Telefenua an MMDS license in Tahiti was upheld by the Conseil d'Etat,  the
supreme  administrative  court of France.  The territorial  government of Tahiti
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to  Telefenua.  On  November  25,  1998,  the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new  authorization.  The Company  has no reason to believe  that a new
authorization  will  not  be  granted.  If  Telefenua  does  not  obtain  a  new
authorization,   there  is  no  assurance   that   Telefenua  will  receive  any
restitution.  In addition,  any available restitution could be limited and could
take years to obtain.

On July 14, 1998, UIH SFCC filed a complaint in the United States District Court
for the  District of  Colorado,  for damages for breach of  contract,  breach of
fiduciary  duty and to enforce UIH SFCC's rights as General  Partner in UIH-SFCC
LP, a Colorado  Limited  Partnership  which owns an interest  in SFCC,  the 100%
parent of Telefenua. The three defendants are Loic Brigato, Winfred Anderson and
Yoshiko Payne, limited partners of UIH-SFCC LP. On September 27, 1998, UIH filed
a parallel action in the District Court for the State of Colorado. Specifically,
the complaints  allege that the defendants have refused to abide by the terms of
the  Partnership   Agreement  and  have  taken  actions  highly  detrimental  to
Telefenua.  UIH-SFCC seeks monetary  damages,  a decree of specific  performance
requiring  defendants to perform their obligations and a constructive trust over
defendants'  partnership interest.  Defendants have filed in the federal court a
motion to dismiss the complaint for lack of subject matter  jurisdiction.  There
has been no decision  issued as of this date. The Company  intends to vigorously
defend its position.


                                       55

<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

MANAGEMENT

The directors and officers of the Company and the key employees of the operating
companies  and other  management of the Company and their ages and positions are
set forth below.
<TABLE>
<CAPTION>

     Name                            Age        Position
     ----                            ---        --------
     <S>                              <C>       <C>
     The Company:
       Gene W. Schneider              72        Chairman of the Board and Chief Executive Officer
       Michael T. Fries               36        President and Director
       John C. Porter                 41        Chief Operating Officer

     Operating Companies:
       Bruce Mann                     43        Sales, Marketing and Programming Director, Austar
       Robert J. Birrell              36        Finance Director, Austar
       Jack B. Matthews               47        Chief Executive Officer, Saturn
       Joseph P. Gatto, Jr.           52        Chief Executive Officer, United Wireless

     Other Management:
       Kevin Ong                      43        Vice President--Finance
       Ellen P. Spangler              50        Vice President and Secretary
       Valerie L. Cover               42        Controller
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS

GENE W.  SCHNEIDER  has  served as  Chairman  of the Board of  Directors  of the
Company and UAP since their  respective  formations and Chief Executive  Officer
since  October  1998. He has served as Chairman of the Board of Directors of UIH
since May 1989 and as its Chief  Executive  Officer since October 1995. From May
1989 until  November 1991,  Mr.  Schneider  served as Chairman of United Artists
Entertainment  Company ("United  Artists"),  then the  third-largest  U.S. cable
television  company.  He was a founder of United  Cable  Television  Corporation
("United  Cable") in the early 1950's and, as its  Chairman and Chief  Executive
Officer,  built United Cable into the  eighth-largest  multiple  system operator
prior to  merging  with  United  Artists  in 1989.  He has been  active in cable
television  affairs  and  has  served  on  numerous  National  Cable  Television
Association  ("NCTA")  committees and special projects since NCTA's inception in
the early 1950's. Mr. Schneider is also Chairman of the Board of Advance Display
Technologies, Inc..

MICHAEL T. FRIES has served as  President  of the  Company  and UAP since  their
respective  formations,  and as a Director of the Company and UAP since November
1996.  He served as Chief  Executive  Officer of the Company from  November 1996
until  September  1998.  Prior to becoming  President of the Company,  Mr. Fries
served as Senior Vice President,  Development,  of UIH, in which capacity he was
responsible  for  managing  UIH's  acquisitions  and  new  business  development
activities  since March 1990,  including UIH's expansion into the  Asia/Pacific,
Latin  America  and  European  markets.  Mr.  Fries  is  also  a  member  of the
Supervisory Board of UPC.

JOHN C. PORTER has served as Chief Operating  Officer of UAP since January 1997,
and has served as the  Managing  Director of Austar  Entertainment  Pty Limited,
which  became an indirect  subsidiary  of the Company in 1997,  since July 1997.
From March 1995 until January 1997, Mr. Porter served as Chief Operating Officer
for Austar Entrtainment Pty Limited, where he was responsible for the design and
deployment   of   such   company's   multi-channel    multi-point   distribution
system/satellite/cable television network. Prior to joining Austar Entertainment
Pty Limited,  Mr.  Porter  served as the  President of the Ohio Division of Time
Warner, Inc., which had over 250,000 cable customers.


                                       56
<PAGE>

OPERATING COMPANIES

BRUCE MANN has served as Sales,  Marketing  and  Programming  Director of Austar
since  joining  that  company in April  1995.  Mr. Mann is  responsible  for the
development  of Austar's  marketing,  sales and  programming  techniques and has
played  a  critical  role  in  the  successful  implementation  of  these  plans
throughout  Austar's  franchise  area.  Mr.  Mann has been  involved  in various
marketing capacities of communications and entertainment  companies for the past
15  years,   including   eight  years  at  Time  Warner  Cable  as  Director  of
Marketing-Brooklyn,  Queens.  From 1994 until joining Austar, Mr. Mann served as
President,  National Division, of Cross Country Wireless,  Inc., a U.S. provider
of  wireless  multi-channel  television  services.  From 1991 to 1994,  Mr. Mann
served  as Vice  President-Marketing  of  Washington  Redskins/Jack  Kent  Cooke
Stadium,  Inc.,  specializing  in sports and  entertainment  related  promotion,
advertising and marketing.

ROBERT J. BIRRELL has served as Finance  Director of Austar  since  January 1996
and has been involved with the development  aspects of the Austar business since
April 1994. Mr. Birrell is responsible  for the accounting,  finance,  inventory
control,  investor  relations and legal aspects of Austar's  business.  Prior to
joining Austar,  Mr. Birrell has been involved with various  activities in large
scale  retailing in the Australian  marketplace.  From 1985 to 1993, Mr. Birrell
served as Treasurer of Industrial Equity Limited, an Australian based investment
company.  Mr.  Birrell has over 14 years  experience in the banking and business
environment in Australia.

JACK B. MATTHEWS has served as Chief  Executive  Officer of Saturn since joining
that company in January 1995.  Mr.  Matthews is  responsible  for the technical,
operating and  marketing  aspects of the  business.  Mr.  Matthews has served in
various  general  management   capacities  with  several  U.S.  multiple  system
operators,  including Cox Cable Communications and Continental Cablevision. From
August 1993 until joining Saturn,  Mr. Matthews was the Vice  President-Sales  &
Marketing of Arrowsmith Technologies, a cable technology company, which develops
and installs advanced field operations management and operations support systems
for the cable  television  industry.  From 1990 to 1993,  Mr.  Matthews  was the
President of COMM/ONE, an entrepreneurial business marketing sophisticated video
and  voice  processing  systems.   Mr.  Matthews  has  over  14  years  of  U.S.
multi-channel television industry experience.

JOSEPH P. GATTO,  JR. has been the Chief  Executive  Officer of United  Wireless
since  May  1996.  From May  1995 to May  1996,  Mr.  Gatto  served  as the Vice
President-Development   of  UAP,   focusing   on   telecommunications   business
development within the Asia/Pacific  region. Prior to joining UAP, Mr. Gatto was
the Director of Sales of Plexsys  International Corp., a cellular system network
manufacturer, where he was responsible for worldwide sales. Mr. Gatto has served
in various sales and marketing capacities for U.S. and Asian  telecommunications
and technology companies for the past 26 years.

OTHER MANAGEMENT

KEVIN ONG has served as Vice  President--Finance  of the Company since May 1996.
Prior to joining UIH, Mr. Ong served in various  financial and senior management
positions with U.S. and international cable television  operators.  From 1988 to
1994, Mr. Ong served as a Director with Jones Intercable, Inc. and the Treasurer
of  Jones  International,  Limited,  where  he  was  responsible  for  financial
operations and various accounting functions.

ELLEN P.  SPANGLER  has served as Vice  President  and  Secretary of the Company
since July 1997.  Ms.  Spangler is responsible  for the legal  operations of the
Company. Ms. Spangler also serves as Senior Vice President of Business and Legal
Affairs and Secretary of UIH, a position she has held since December 1996.  From
February 1991 to December  1996,  Ms.  Spangler was Vice President and Assistant
Secretary of UIH.  Prior to joining UIH in January 1991,  she served as Director
of Business Affairs, Programming, at Tele-Communications, Inc. ("TCI") from 1987
to 1991, and as Acquisitions Counsel at TCI from 1984 to 1987.

VALERIE L. COVEr has served as Controller for the Company since its formation in
October  1994.  Ms.  Cover  is  responsible  for the  accounting  and  financial
reporting  functions of the Company.  She has served as  Controller of UIH since
joining UIH in October 1990 and became a Vice President of UIH in December 1996.
Prior to joining UIH, she was Director of Corporate Accounting at United Artists
from May 1989 until  October 1990 and Manager of  Financial  Reporting at United
Cable from June 1986 until May 1989.


                                       57
<PAGE>

ITEM 11.   EXECUTIVE COMPENSATION
---------------------------------

All of the  officers of the Company are  employed  by UIH,  the  indirect  98.0%
stockholder of the Company.  The Company pays no separate  compensation to these
officers;  however, the Company and UIH Management are parties to the Management
Agreement,  pursuant to which the Company pays UIH  Management a management  fee
for certain  services  provided to the Company.  Effective  March 31, 1997,  UIH
Management assigned its rights and obligations under the Management Agreement to
UAP in the UAP Management Agreement.  UIH Management and UAP also became parties
to a similar  management  agreement (the "UIH Management  Agreement")  effective
March 31, 1997.

Certain members of senior  management of Austar,  Saturn and United Wireless are
U.S.  expatriates  who  are  employed  by UIH  and  have  been  seconded  to the
respective operating companies. The respective operating companies reimburse UIH
for  compensation  paid to these  employees.  Gene W.  Schneider,  the Company's
Chairman and Chief Executive  Officer,  is also the Chairman and Chief Executive
Officer of UIH and spends  only a portion of his time on matters  pertaining  to
the Company and its operations.  Michael T. Fries, the Company's  President,  is
also an officer  and  employee  of UIH and spends  only a portion of his time on
matters  pertaining to the Company and its  operations.  The services of Messrs.
Schneider and Fries are provided to the Company  pursuant to the UIH  Management
Agreement.  While the Company and its  operating  companies do not reimburse UIH
directly  for a  specified  portion  of the  compensation  UIH  pays to  Messrs.
Schneider and Fries,  UAP pays a management  fee to UIH under the UIH Management
Agreement for certain services,  including those of Messrs. Schneider and Fries,
performed on behalf of the Company.

SUMMARY COMPENSATION TABLE
--------------------------

The  following  table sets forth the  compensation  paid  during the years ended
December 31, 1998, 1997 and 1996 to the Company's  Chief  Executive  Officer and
the four most  highly  compensated  executive  officers  of the  Company and the
operating  companies,  whose annual salary and bonus  exceeded  $100,000 for the
year ended  December 31,  1998.  In addition,  the  information  in this section
reflects  compensation received by the named executive officers for all services
performed for the Company, UAP, UIH and their respective affiliates:
<TABLE>
<CAPTION>
                                               Summary Compensation Table
                                                                                            Long-Term
                                                                                           Compensation
                                                      Annual Compensation                     Awards
                                             ---------------------------------------      --------------
                                                                           Other          Securities
                                                                           Annual          Underlying         All Other
Name and Principal Position         Year      Salary         Bonus      Compensation(1)   Options (#)(2)    Compensation
---------------------------        ------    --------     ------------  ------------      --------------    ------------
<S>                                 <C>      <C>            <C>            <C>              <C>               <C>
Gene W. Schneider                   1998     $450,000(3)    $     --       $    --          287,500(4)        $5,512(5)
Chief Executive Officer             1997     $369,904(3)    $     --       $    --          250,000(6)        $5,398(5)
                                    1996     $346,827(3)    $     --       $    --          100,000(7)        $5,398(5)

Michael T. Fries                    1998     $300,000(3)    $250,000       $25,000          625,000(8)        $5,632(5)
President                           1997     $245,346(3)    $     --       $    --          350,000(9)        $5,398(5)
                                    1996     $230,577(3)    $     --       $    --           10,000(10)       $5,398(5)

John C. Porter                      1998     $245,913(3)    $ 30,000       $60,081          250,000(11)       $5,632(5)
Chief Operating Officer             1997     $218,972(3)    $ 60,000       $47,142          200,000(12)       $5,398(5)
                                    1996     $195,986(3)    $ 42,402       $35,509               --           $5,398(5)

Bruce Mann                          1998     $181,457       $ 41,470       $21,839          245,000(13)       $5,296(14)
Sales, Marketing and                1997     $160,770       $ 45,900       $24,476           50,000(15)       $4,884(14)
Programming Director (Austar)       1996     $148,481       $ 29,106       $22,539               --           $4,885(14)

Jack B. Matthews                    1998     $155,000       $     --       $19,725               --           $5,170(16)
Chief Executive Officer (Saturn)    1997     $154,731       $ 29,000       $19,753            4,000(17)       $4,854(16)
                                    1996     $144,808       $ 15,000       $16,206               --           $4,841(16)
</TABLE>
                                       58
<PAGE>

(1)  Amounts  represent  additional  cash  compensation   relating  to  overseas
     assignment.
(2)  Amounts  represent  the number of options with respect to shares of Class A
     Common Stock of UIH, UAP, United Pan-Europe  Communications ("UPC") and UIH
     Latin America  ("ULA") granted to such executives as officers and employees
     of UIH.
(3)  Amounts represent total  compensation paid by UIH for duties performed with
     respect to the Company and other operations of UIH.
(4)  Includes  phantom  stock  options  for  125,000  shares  granted  by UPC on
     September  24, 1998,  and valued at $18.00 per share.  Such  phantom  stock
     options vest evenly over 48 months with vesting having  commenced  April 1,
     1997 and expire October 8, 2008.  Includes phantom stock options for 62,500
     shares  granted by UAP on October 8, 1998,  and valued at $10.00 per share.
     Such phantom  stock  options vest evenly over 48 months  commencing  on the
     date of grant and expire October 8, 2008. Also includes UIH options granted
     on October 8, 1998 to acquire  100,000  shares of Class A Common Stock at a
     purchase  price of $8.3125  per share.  Such  options  vest  evenly over 48
     months  commencing  on the date of grant and expire  October  8, 2008.  For
     information  concerning the award of stock options by UIH included  herein,
     see "Option Grants Table" below.
(5)  Amounts consist of matching employer  contributions made by UIH under UIH's
     employee  401(k)  plan of $4,800,  $4,750  and  $4,750 for the years  ended
     December  31,  1998,  1997  and  1996,  respectively,  with  the  remainder
     consisting of term life  insurance  premiums paid by UIH for such officer's
     benefit.
(6)  Includes phantom stock options for 125,000 shares granted by UAP on June 6,
     1997, and valued at $10.00 per share. Such phantom options vest evenly over
     48 months commencing on the date of grant and expire June 6, 2007. Includes
     phantom  stock options for 125,000  shares  granted by ULA on June 6, 1997,
     and valued at $4.26 per share.  Such  phantom  options  vest evenly over 48
     months commencing on the date of grant and expire June 6, 2007.
(7)  Includes UIH options granted on December 20, 1996 to acquire 100,000 shares
     of Class A Common  Stock at a  purchase  price of $12.75  per  share.  Such
     options  vest  evenly  over 48 months  commencing  on the date of grant and
     expire December 20, 2006.
(8)  Includes phantom stock options for 175,000 shares granted by UAP on October
     8, 1998,  and valued at $10.00 per share.  Such phantom  stock options vest
     evenly over 48 months commencing on the date of grant and expire October 8,
     2008.  Includes  phantom stock options for 300,000 shares granted by ULA on
     September  18,  1998,  and valued at $8.98 per share.  Such  phantom  stock
     options  vest  evenly  over 48 months  commencing  on the date of grant and
     expire September 18, 2008. Includes phantom stock options for 50,000 shares
     granted by UPC on September 18, 1998, and valued at $20.35 per share.  Such
     phantom stock options vest evenly over 48 months  commencing on the date of
     grant and expire  September 18, 2008.  Also includes UIH options granted on
     September 18, 1998 to acquire  100,000  shares of Class A Common Stock at a
     purchase  price of $10.375  per share.  Such  options  vest  evenly over 48
     months  commencing on the date of grant and expire  September 18, 2008. For
     information concerning  the award of stock options by UIH included  herein,
     see "Option Grants Table" below.
(9)  Includes phantom stock options for 350,000 shares granted by UAP on June 6,
     1997,  and valued at $10.00 per share.  Such  phantom  stock  options  vest
     evenly  over 48 months  commencing  on the date of grant and expire June 6,
     2007.
(10) Includes UIH options  granted on December 20, 1996 to acquire 10,000 shares
     of Class A Common  Stock at a  purchase  price of $12.75  per  share.  Such
     options  vest  evenly  over 48 months  commencing  on the date of grant and
     expire December 20, 2006.
(11) Includes phantom stock options for 225,000 shares granted by UAP on October
     8, 1998,  and valued at $10.00 per share.  Such phantom  stock options vest
     evenly over 48 months with  vesting  having  commenced  on June 8, 1996 for
     125,000  shares and the  balance  commencing  on date of grant,  and expire
     October 8, 2008.  Also  includes UIH options  granted  December 18, 1998 to
     acquire  25,000  shares  of Class A Common  Stock  at a  purchase  price of
     $10.375 per share.  Such options vest evenly over 48 months  commencing  on
     the date of grant and expire December 18, 2008. For information  concerning
     the award of stock  options by UIH  included  herein,  see  "Option  Grants
     Table" below.
(12) Includes phantom stock options for 200,000 shares granted by UAP on June 6,
     1997,  and valued at $10.00 per share.  Such  phantom  stock  options  vest
     evenly  over 48 months  commencing  on the date of grant and expire June 6,
     2007.
(13) Includes phantom stock options for 225,000 shares granted by UAP on October
     8, 1998,  and valued at $10.00 per share.  Such phantom  stock options vest
     evenly over 48 months with  vesting  having  commenced  on June 8, 1996 for
     125,000  shares  and the  balance  commencing  on date of grant and  expire
     October 8, 2008.  Also includes UIH options granted on December 18, 1998 to
     acquire  20,000  shares  of Class A Common  Stock  at a  purchase  price of
     $10.375 per share.  Such options vest evenly over 48 months  commencing  on
     the date of grant and expire December 18, 2008. For information  concerning
     the award of stock  options by UIH  included  herein,  see  "Option  Grants
     Table" below.

                                       59
<PAGE>

(14) Amounts consist of matching employer  contributions made by UIH under UIH's
     employee  401(k)  plan of $4,464,  $4,236  and  $4,237 for the years  ended
     December  31,  1998,  1997  and  1996,  respectively,  with  the  remainder
     consisting  of term  life  insurance  premiums  paid by UIH for Mr.  Mann's
     benefit.
(15) Includes  phantom stock options for 50,000 shares granted by UAP on June 6,
     1997,  and valued at $10.00 per share.  Such  phantom  stock  options  vest
     evenly  over 48 months  commencing  on the date of grant and expire June 6,
     2007.
(16) Amounts consist of matching employer  contributions made by UIH under UIH's
     employee  401(k)  plan of $4,428,  $4,206  and  $4,193 for the years  ended
     December  31,  1998,  1997  and  1996,  respectively,  with  the  remainder
     consisting of term life  insurance  premiums paid by UIH for Mr.  Matthew's
     benefit.
(17) Includes UIH options  granted on December 20, 1997 to acquire  4,000 shares
     of Class A Common  Stock at a  purchase  price of $10.875  per share.  Such
     options  vest  evenly  over 24 months  commencing  on the date of grant and
     expire December 20, 2007.


OPTION GRANTS TABLE
-------------------

Messrs.  Schneider,  Fries, Porter, Mann and Matthews, as employees of UIH, have
been granted options to acquire stock of UIH and its subsidiaries. The following
tables set forth information  concerning options to purchase shares of UIH Class
A Common Stock granted to these  executives  during 1998 as well as the value of
unexercised  options held by such  executives  as of December 31, 1998.  No such
executive has exercised any options during the year ended December 31, 1998. The
Company has not granted any options to acquire its stock.

<TABLE>
<CAPTION>
                                             Option Grants in Last Year(1)

                                                    Individual Grants
                             ------------------------------------------------------------------     Potential Realizable Value
                              Number of     Percentage of                                            at Assumed Annual Rates
                              Securities    Total Options                                          of Stock Price Appreciation
                              Underlying     Granted to     Exercise  Market Price                       for Option Term (2)
                               Options      Employees in     Price      on grant    Expiration     ----------------------------
Name                          Granted (#)   Last Year(3)     ($/Sh)    Date ($/Sh)      Date         5% ($)            10% ($)
----                          -----------   -------------   --------- -----------   -----------    ---------         ----------
<S>                             <C>            <C>          <C>       <C>             <C>          <C>               <C>
Gene W. Schneider              100,000         27.8%        $ 8.3125   $ 8.3125(4)    10/08/08     $522,769          $1,324,798
Michael T. Fries               100,000         27.8%        $10.3750   $10.3750(5)    09/18/08     $652,478          $1,653,508
John C. Porter                  25,000          7.0%        $10.3750   $18.2500(6)    12/18/08     $163,120          $  413,377
Bruce Mann                      20,000          5.6%        $10.3750   $18.2500(6)    12/18/08     $130,496          $  330,702
Jack B. Matthews                    --           --               --         --             --           --                  --
</TABLE>

(1)  The stock options granted during 1998 vest in equal monthly increments over
     the four-year  period  following the date of grant.  Vesting of the options
     granted would be accelerated  upon a change of control of UIH as defined in
     UIH's 1993 Stock Option Plan.
(2)  The potential  gains shown are net of the option  exercise price and do not
     include the effect of any taxes associated with exercise. The amounts shown
     are  for  the  assumed  rates  of  appreciation  only,  do  not  constitute
     projections of future stock price  performance,  and may not necessarily be
     realized.  Actual gains,  if any, on stock option  exercises  depend on the
     future performance of the Class A Common Stock, continued employment of the
     optionee through the term of the options, and other factors.
(3)  Based on all options to purchase  Class A Common Stock granted to employees
     of the Company and UIH during the year ended December 31, 1998.
(4)  Represents  the closing  market price per share of the Class A Common Stock
     on Nasdaq on October 8, 1998.
(5)  Represents  the closing  market price per share of the Class A Common Stock
     on Nasdaq on September 18, 1998.
(6)  Represents  the closing  market price per share of the Class A Common Stock
     on Nasdaq on December 18, 1998.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION TABLE
------------------------------------------------------------

The following table sets forth information  concerning  unexercised  options for
UIH Class A Common  Stock held by  officers  named in the  Summary  Compensation
Table above as of December 31, 1998.

                                       60
<PAGE>

<TABLE>
<CAPTION>
                        Aggregate Option Exercises in Last Year and Year-End Option Values

                                                              Number of Securities               Value of Unexercised
                                                             Underlying Unexercised                  In-the-Money
                                                             Options at Year-End (#)            Options at Year-End ($)
Name                                                       Exercisable/Unexercisable           Exercisable/Unexercisable
----                                                       -------------------------           -------------------------
<S>                                                            <C>                             <C>
Gene W. Schneider..................................            239,167 / 150,833               $1,955,577 /  $1,390,673
Michael T. Fries...................................            161,875 / 103,125               $1,465,157 /  $  879,844
John C. Porter.....................................                  0 /  25,000               $        0 /  $  221,875
Bruce Mann.........................................                  0 /  20,000               $        0 /  $  177,500
Jack B. Matthews...................................              2,000 /   2,000               $   16,750 /  $   16,750
</TABLE>


AGREEMENTS WITH EMPLOYEES

Many of the employees  serving as senior  management in the Company's  operating
companies are parties to employment  agreements typically with terms of three to
five years. The agreements generally provide for a specified base salary as well
as a bonus set at a  specified  percentage  of the base  salary,  which bonus is
based on the performance of the respective company and employee.  The agreements
often  provide for the grant of an incentive  interest  equal to a percentage of
the residual equity value of the respective company,  which is typically defined
as the fair market value of the business less net  liabilities  and a reasonable
return on shareholders'  investment.  The employment  agreements  generally also
provide  for cost of  living  differentials,  relocation  and  moving  expenses,
automobile  allowances and income tax equalization  payments,  if necessary,  to
keep the employee's tax liability the same as it would be in the United States.

Of the persons identified in the Summary  Compensation  Table,  Messrs.  Porter,
Mann and Matthews  continue to have such an employment  agreement  with UIH. The
agreements  with  Porter  and Mann  terminate  on  October  8,  2002.  Matthews'
agreement  terminated  January 1, 1999,  however,  a current  contract  is under
negotiation.  These employment  agreements  provide for an annual base salary of
$252,500  for  Porter,   $200,000  for  Mann  and  $165,000  for  Matthews,  and
eligibility for an annual bonus of up to a fixed  percentage of the base salary,
based  on  the  performance  of  their  respective   entities  as  well  as  the
individual's  performance.  All are  entitled  to  participate  in UIH  employee
benefits. In addition, Mr. Matthews is eligible to receive a project award based
on company defined targets over the term of his compensation agreement. His base
salary is reviewed annually.

COMPENSATION OF DIRECTORS

All of the  directors of the Company are also  directors or officers of UIH, UAP
and/or officers of the Company.  They receive no separate cash  compensation for
serving as directors of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Board of Directors has no separate  Compensation  Committee as the
Company  currently does not have any employees.  UIH's  Compensation  Committee,
none of the members of which are employees or executive officers of the Company,
determine the compensation of the Company's executive officers in their capacity
as employees of UIH. Directors or executive officers of the Company may serve on
the Boards of Directors of Austar,  Saturn,  Telefenua,  United Wireless and XYZ
Entertainment  and, as part of their duties,  may determine the  compensation of
those operating  companies'  employees.  However,  none of the employees of such
operating companies are directors of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Articles of Incorporation  eliminate the personal liability of its
directors to the Company and its stockholders for monetary damages for breach of
the directors' fiduciary duties in certain circumstances. The Company's Articles
of  Incorporation  and Bylaws  provide  that the  Company  shall  indemnify  its
officers  and  directors  to the fullest  extent  permitted  by law. The Company
believes  that  such  indemnification  covers  at  least  negligence  and  gross
negligence on the part of indemnified parties.

The Company has entered into agreements to indemnify its directors and officers,
in addition to the  indemnification  provided for in the  Company's  Articles of
Incorporation  and Bylaws.  These  agreements  require the Company,  among other
things,  to indemnify the Company's  directors and officers for certain expenses
(including attorney's fees), judgments,  fines, penalties and settlement amounts
incurred by any such person in certain actions or proceedings, including actions

                                       61


<PAGE>

by or in the right of the Company,  arising out of such  person's  services as a
director or officer of the Company,  any  subsidiary of the Company or any other
company or  enterprise to which the person  provides  services at the request of
the Company. The Company believes that these agreements are necessary to attract
and retain qualified persons as directors and officers.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------------------------------------------------------------------------

UAP owns 100% of the 17,810,249 shares of issued and outstanding common stock of
the Company.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------------------

RELATIONSHIP WITH UAP AND UIH

The Company is currently a direct,  wholly-owned  subsidiary of UAP, which is an
indirect,  98.0%-owned  subsidiary of UIH. The Company's operations to date have
been funded by capital  contributions  from UIH and UAP as well as proceeds from
the Notes, minority shareholder contributions and subsidiary bank debt.

The  Company  and UAP are parties to the UAP  Management  Agreement  pursuant to
which UAP agreed to  continue  to perform  certain  administrative,  accounting,
financial  reporting and other  services for the Company,  which has no separate
employees of its own. Pursuant to the UAP Management  Agreement,  the management
fee was $750,000 for the first year of such  agreement  (beginning May 1, 1996),
and it increases on each anniversary date of the UAP Management  Agreement by 8%
per year. The management fee for the first year of the UAP Management  Agreement
was  calculated  based on an estimate of staff hours to  accomplish  the various
administrative,  accounting,  financial  reporting  and  other  services  to  be
provided to the Company under the UAP Management Agreement. The percentage those
hours  constituted  of the  respective  employees'  annual  work  hours was then
multiplied by the employment cost to UIH for such employees.

Each of Austar,  Saturn,  Telefenua and United Wireless are parties to technical
assistance  agreements  with  UAP,  pursuant  to which the  operating  companies
receive  certain   technical   assistance  in  connection  with  such  operating
companies' design, development,  construction,  marketing and operation of their
respective  multi-channel  television  systems.  Fees paid under these technical
assistance  agreements  are a  percentage  (currently  between 2.5% and 5.0%) of
gross  revenues  generated by the operating  companies plus  reimbursements  for
costs associated with the seconded  employees.  As of December 31, 1998, Austar,
Saturn, Telefenua and United Wireless had accrued fees due to parent under their
technical assistance  agreements of $8.3 million, $1.1 million, $3.1 million and
$0.6 million, respectively.

TAX SHARING AGREEMENT

The Company is included as a member of UIH's  consolidated  tax return and, is a
member  of the UIH  consolidated  group  (as long as  non-UIH  ownership  of the
Company does not exceed 20.0%). UIH and the Company are parties to a tax sharing
agreement that defines the parties' rights and  obligations  with respect to tax
liabilities  and benefits  relating to the Company and its operations as part of
the  consolidated  group of UIH.  In  general,  UIH is  responsible  for  filing
consolidated  tax returns and paying the  associated  taxes and the Company will
reimburse  UIH for the  portion of the tax cost  relating to the Company and its
operations.


                                       62
<PAGE>


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
   (a)(1)  Financial Statements
<TABLE>
<CAPTION>
   INCLUDED IN PART II OF THE REPORT:                                                                               Page
                                                                                                                   Number
                                                                                                                   ------
     <S>                                                                                                             <C>
     UIH AUSTRALIA/PACIFIC, INC.
     Report of Independent Public Accountants.................................................................       36
     Consolidated Balance Sheets as of December 31, 1998 and 1997.............................................       37
     Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996...............       38
     Consolidated Statements of Stockholder's Deficit for the Years Ended December 31, 1998,
       1997 and 1996..........................................................................................       39
     Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996...............       40
     Notes to Consolidated Financial Statements...............................................................       41

   (a)(2)  Financial Statement Schedules

   INCLUDED IN PART IV OF THE REPORT:

     (i)  Financial Statement Schedules required to be filed

     UIH AUSTRALIA/PACIFIC, INC.
     Report of Independent Public Accountants.................................................................      S-1
     Schedule I - Condensed Financial Information of the Registrant (Parent only).............................      S-2
</TABLE>

     (ii) Separate Financial Statements and Related Schedules

     None.


(a) (3)  Exhibits

     3.1       Articles of Incorporation of the Registrant, as amended. (1)

     3.2       By-Laws of the Registrant. (1)

     4.1       The  Indenture  dated as of May 14, 1996,  between the Issuer and
               American Bank National Association. (1)

     4.2       The Indenture dated as of September 23, 1997,  between the Issuer
               and Firstar Bank of Minnesota, N.A. (2)

     4.3       Warrant  Agreement  dated as of November  15,  1997,  between the
               Issuer and Firstar Bank of Minnesota, N.A. (1)

     4.4       The  Articles of  Incorporation,  as amended,  and By-Laws of the
               Registrant are included as Exhibits 3.1 and 3.2. (1)

     10.1      Memorandum   of  Variation   dated   December  21,  1995  to  the
               Subscription   and   Securityholders   Agreement,   among  United
               International  Holdings,  Inc.,  ("UIH"),  UIH  Australia,   Inc.
               ("UIHA"),  Salstel Media Holdings Pty Limited ("SMH"),  Australis
               Media Limited ("Australis") and CTV Pty Limited ("CTV"). (1)

     10.2      Memorandum   of  Variation   dated   December  21,  1995  to  the
               Subscription  and  Securityholders  Agreement  dated  October 12,
               1994,  among UIH, UIH  Australia  II, Inc.  ("UIHA II"),  Salstel
               Media  Investment  Pty  Limited  ("SMI"),  Australis  and STV Pty
               Limited ("STV"). (1)

                                       63
<PAGE>

     10.3      Memorandum   of  Variation   dated  April  4,  1996  to  the  CTV
               Securityholders  Agreement,  among UIH ,UIHA, Australis,  SMH and
               CTV. (1)

     10.4      Memorandum   of  Variation   dated  April  4,  1996  to  the  STV
               Securityholders Agreement, among UIH, UIHA II, Australis, SMI and
               STV. (1)

     10.5      Agreement dated December 21, 1995, among UIH, UIHA and SMH. (1)

     10.6      Amending  Agreement  dated  April 4, 1996 to CTV  Securityholders
               Agreement, among UIH, UIHA and SMH. (1)

     10.7      Agreement  dated  December 21, 1995,  among UIH, UIHA II and SMI.
               (1)

     10.8      Amending Agreement dated April 4, 1996 to the STV Securityholders
               Agreement, among UIH, UIHA II and SMI. (1)

     10.9      Subscription and Investment  Agreement dated July 21, 1997, among
               SaskTel Holdings (New Zealand),  Inc.  ("SaskTel"),  Saskatchewan
               Telecommunications Holding Corporation, UIH New Zealand Holdings,
               Inc. ("UIHNZ"), UIH Asia/Pacific Communications, Inc. ("UAP") and
               Saturn Communications Limited ("Saturn"), as amended. (2)

     10.10     Shareholders  Agreement dated July 23, 1997, among SaskTel, UIHNZ
               and Saturn. (2)

     10.11     XYZ Shareholders Agreement dated September 6, 1995, among Century
               United   Programming   Ventures  Pty  Limited  ("CUPV"),   Foxtel
               Management Pty Limited ("Foxtel"),  XYZ Entertainment Pty Limited
               ("XYZ"),  Century United  Programming  Ventures  ("CPVC") and the
               Issuer. (1)

     10.12     Shareholders   Deed   dated   June  30,   1995,   among   Century
               Communications Corporation, CPVC, UIH, the Issuer and CUPV. (1)

     10.13     UIH-SFCC   L.P.   Amended  and  Restated   Agreement  of  Limited
               Partnership  dated January 6, 1995,  among  UIH-SFCC Inc. and the
               limited partners named therein. (1)

     10.14     Master  Agreement dated January 11, 1995,  between  UIH-SFCC L.P.
               and the Societe  Francaise  des  Communications  et du Cable S.A.
               ("Societe"). (1)

     10.15     Shareholder's  Agreement  dated January 11, 1995,  among UIH-SFCC
               L.P. and the shareholders named therein. (1)

     10.16     A$200,000,000  Syndicated Senior Secured Debt Facility  Agreement
               dated July 31,  1997,  among  Austar  Entertainment  Pty  Limited
               ("Austar"),  Chase Securities  Australia Limited,  the Guarantors
               named herein and the financial institutions named herein. (3)

     10.17     Syndicated Senior Secured Debt Facility Agreement, dated November
               5,  1998  by and  among  Saturn  Communications  Limited,  as the
               Borrower,   Kiwi  Cable  Company  Limited,  as  Guarantor,   each
               financial  institution specified as a bank in Schedule 1 attached
               thereto, and Toronto Dominion Australia Limited, as the Agent.

     10.18     Channel Supply Agreement dated June 30, 1995, among XYZ, CUPV and
               East Coast Pay Television Pty Limited ("ECT"). (1)

     10.19     Technical  Assistance  Agreement dated October 12, 1994,  between
               CTV and United International Management, Inc. ("UIMI"). (1)

                                       64
<PAGE>

     10.20     Technical  Assistance  Agreement dated October 12, 1994,  between
               STV and UIMI. (1)

     10.21     Technical Assistance Agreement dated July 8, 1994, between Saturn
               and UIH. (1)

     10.22     Amendment No. 1 to Technical  Assistance Agreement dated July 23,
               1997, between Saturn and UAP. (2)

     10.23     Technical  Assistance  Agreement  dated  July 23,  1997,  between
               SaskTel and Saturn. (2)

     10.24     Technical  Assistance  Agreement dated January 11, 1995,  between
               Telefenua S.A. and Societe. (1)

     10.25     Assignment  of Rights and  Delegation  of Duties under  Technical
               Assistance  Agreement dated January 11, 1995, between Societe and
               UIMI. (1)

     10.26     Management  Agreement dated May 1, 1996,  between UIH Management,
               Inc. and the Registrant. (1)

     10.27     Tax Allocation  Agreement  dated May 8, 1996,  among UIH, UAP and
               the Issuer. (1)

     12.1      Statement re:  Ratio of Earnings to Fixed Charges.

     21.1      List of Subsidiaries.

     23.1      Consent of Independent  Public  Accountants--Arthur  Andersen LLP
               (UIH Australia/Pacific, Inc.).

     24.1      Power of Attorney.

     27.1      Financial Data Schedule.


----------------------
(1)  Incorporated by reference from the Company's Registration Statement on Form
     S-4 (SEC File No. 333-05017) filed on May 31, 1996.
(2)  Incorporated by reference from the Company's Registration Statement on Form
     S-4 (SEC File No. 333-39707) filed on November 6, 1997.
(3)  Incorporated   by  reference   from   Amendment  No.  1  to  the  Company's
     Registration  Statement  on Form S-4  (SEC  File  No.  333-39707)  filed on
     December 5, 1997.


   (b)   Reports on Form 8-K filed during the quarter:

         None.


                                       65
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To UIH Australia/Pacific, Inc.:

We have audited, in accordance with generally accepted auditing  standards,  the
consolidated  financial  statements of UIH  Australia/Pacific,  Inc. included in
this Form 10-K and have  issued our report  thereon  dated March 29,  1999.  Our
audit was made for the  purpose of forming an opinion on the basic  consolidated
financial   statements  taken  as  a  whole.  The  following   schedule  is  the
responsibility  of the  Company's  management  and is presented  for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements as indicated in our report with respect  thereto and, in our opinion,
based on our audits,  fairly states in all material  respects the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.



                                           ARTHUR ANDERSEN LLP




Denver, Colorado
March 29, 1999



                                      S-1
<PAGE>
<TABLE>
<CAPTION>
                                        UIH AUSTRALIA/PACIFIC, INC.
                                                PARENT ONLY
                                                 SCHEDULE 1
                              Condensed Financial Information of the Registrant
                          (Stated in thousands, except share and per share amounts)
                                                                                                              As of December 31,
                                                                                                         -------------------------
                                                                                                           1998             1997
                                                                                                         --------         --------
<S>                                                                                                      <C>              <C>
ASSETS
Current Assets
  Cash and cash equivalents......................................................................        $     --          $    955
  Short-term liquid investments..................................................................             763            12,325
  Related party receivables and costs to be reimbursed...........................................             327               738
  Other current assets...........................................................................               3               195
                                                                                                         --------          --------
     Total current assets........................................................................           1,093            14,213

Investments in and advances to affiliated companies, accounted for under the equity method.......          52,801           122,247
Deferred financing costs, net of accumulated amortization of $1,215 and $624, respectively.......           9,173             9,757
Other non-current assets.........................................................................              --                77
                                                                                                         --------          --------
     Total assets................................................................................        $ 63,067          $146,294
                                                                                                         ========          ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
  Related party payables.........................................................................        $  1,056          $    723
  Accounts payable...............................................................................              --               195
  Accrued liabilities............................................................................              --               406
                                                                                                         --------          --------
     Total current liabilities...................................................................           1,056             1,324

Senior discount notes............................................................................         356,640           309,123
                                                                                                         --------          --------
     Total liabilities...........................................................................         357,696           310,447

Stockholder's deficit
  Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding                   --                --
  Common stock, $0.01 par value, 30,000,000 shares authorized, 17,810,249 and 13,864,941
     shares issued and outstanding, respectively.................................................             178               139
  Additional paid-in capital.....................................................................         215,624           139,621
  Accumulated deficit............................................................................        (481,240)         (274,949)
  Other cumulative comprehensive loss............................................................         (29,191)          (28,964)
                                                                                                         --------          --------
     Total stockholder's deficit.................................................................        (294,629)         (164,153)
                                                                                                         --------          --------
Total liabilities and stockholder's deficit......................................................        $ 63,067          $146,294
                                                                                                         ========          ========
</TABLE>

                                      S-2
<PAGE>
<TABLE>
<CAPTION>
                                        UIH AUSTRALIA/PACIFIC, INC.
                                                PARENT ONLY
                                                 SCHEDULE 1
                        Condensed Information as to the Operations of the Registrant
                                           (Stated in thousands)

                                                                                   For the Years Ended December 31,
                                                                              ------------------------------------------
                                                                                 1998            1997            1996
                                                                              ----------      ----------      ----------
<S>                                                                           <C>             <C>              <C>
Corporate general and administrative expense, including management
  fees to related party of $853, $790 and $750, respectively..............    $  (5,689)      $  (3,189)       $ (1,173)
                                                                              ---------       ---------        --------
     Net operating loss...................................................       (5,689)         (3,189)         (1,173)

Interest income...........................................................           81             643           3,505
Interest expense..........................................................      (48,108)        (38,115)        (20,270)
Other expense, net........................................................         (836)           (559)            (59)
                                                                              ---------       ---------        --------
     Net loss before other item...........................................      (54,552)        (41,220)        (17,997)

Share in losses of affiliated companies, net..............................     (151,739)       (126,836)        (69,989)
                                                                              ---------       ---------        --------
     Net loss.............................................................    $(206,291)      $(168,056)       $(87,986)
                                                                              =========       =========        ========
</TABLE>







                                      S-3
<PAGE>

<TABLE>
<CAPTION>
                                        UIH AUSTRALIA/PACIFIC, INC.
                                                PARENT ONLY
                                                 SCHEDULE 1
                        Condensed Information as to the Cash Flows of the Registrant
                                           (Stated in thousands)

                                                                                                       For the Years Ended
                                                                                                           December 31,
                                                                                             --------------------------------------
                                                                                                1998          1997          1996
                                                                                             ----------    ----------    ----------
<S>                                                                                          <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................             $(206,291)    $(168,056)    $(87,986)
Adjustments to reconcile net loss to net cash flows from operating activities:
  Share in results of affiliated companies, net.................................               151,739       126,836       69,989
  Allocation of expense accounted for as capital contributions by parent........                 4,622         1,949           --
  Accretion of interest on senior notes and amortization of deferred
    financing costs.............................................................                48,108        38,115       20,270
  (Increase) decrease in related party receivables and other assets.............                   603         1,768       (2,112)
  Increase in accounts payable, accrued liabilities and other...................                 2,332         2,210           70
                                                                                             ---------     ---------     --------
Net cash flows from operating activities........................................                 1,113         2,822          231
                                                                                             ---------     ---------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments.......................................                  (763)      (15,988)    (199,242)
Sale of short-term liquid investments...........................................                12,325        22,303      180,602
Investments in and advances to affiliated companies and other investments.......               (72,570)      (61,024)    (171,553)
                                                                                             ---------     ---------     --------
Net cash flows from investing activities........................................               (61,008)      (54,709)    (190,193)
                                                                                             ---------     ---------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributed from parent....................................................                58,947         7,863       10,664
Proceeds from offering of senior discount notes.................................                    --        29,925      225,115
Borrowings on related party payable to parent...................................                    --         4,999           --
Payment on bridge loan payable to parent........................................                    --            --      (25,000)
Deferred financing costs........................................................                    (7)         (755)     (10,007)
                                                                                             ---------     ---------     --------
Net cash flows from financing activities........................................                58,940        42,032      200,772
                                                                                             ---------     ---------     --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................                  (955)       (9,855)      10,810
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................                   955        10,810           --
                                                                                             ---------     ---------     --------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................             $      --     $     955     $ 10,810
                                                                                             =========     =========     ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash capital contributions from parent......................................             $  12,473     $   7,800     $ 25,000
                                                                                             =========     =========     ========
Gain on issuance of shares by New Zealand subsidiary............................             $      --     $   5,985     $     --
                                                                                             =========     =========     ========
Non-cash issuance of warrants to purchase common stock..........................             $      --     $   3,678     $     --
                                                                                             =========     =========     ========
Non-cash stock issuance for purchase of 50.0% interest in New Zealand subsidiary             $      --     $      --     $  7,800
                                                                                             =========     =========     ========
Increase in unrealized loss on investment.......................................             $      --     $    (985)    $ (3,412)
                                                                                             =========     =========     ========
</TABLE>

                                      S-4
<PAGE>


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized,  in the City of Denver,
State of Colorado, on this 31 day of March 1999.


                                               UIH Australia/Pacific, Inc.
                                               a Colorado corporation

                                               By:  /S/ Valerie L. Cover
                                               ---------------------------------
                                               Valerie L. Cover
                                               Controller


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has caused this Report to be signed by the following  persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
                                                 Title of Position
Signature                                        Held With the Registrant
---------                                        ------------------------
<S>                                              <C>                               <C>

     *
---------------------------------
Gene W. Schneider                                Chairman of the Board and          March 31, 1999
                                                 Chief Executive Officer
     *
---------------------------------
Michael T. Fries                                 Director and President             March 31, 1999



/S/ Valerie L. Cover
---------------------------------
Valerie L. Cover                                 Controller (Principal
                                                 Accounting Officer)                March 31, 1999



*  By:   /S/ Valerie L. Cover
      ---------------------------
      Valerie L. Cover
      Attorney-in-fact
</TABLE>


                                       66