1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 10-Q



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

                  For the Quarterly Period Ended June 30, 1998


                                       OR

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

                For the transition period from _______ to _______

                          Commission File Number 1-3040

                          U S WEST Communications, Inc.

               A Colorado Corporation IRS Employer No. 84-0273800

                 1801 California Street, Denver, Colorado 80202

                         Telephone Number (303) 896-3099

THE  REGISTRANT,  A  WHOLLY  OWNED  SUBSIDIARY  OF U S  WEST,  INC.,  MEETS  THE
CONDITIONS SET FORTH IN GENERAL  INSTRUCTION H(1)(a) and (b) OF FORM 10-Q AND IS
THEREFORE  FILING THIS FORM WITH REDUCED  DISCLOSURE  FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).

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



<PAGE>




Form 10-Q - Part I                                 U S WEST Communications, Inc.

                                    FORM 10-Q
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>       <C>                                                                      <C>   

Item                                                                               Page
                         PART I - FINANCIAL INFORMATION



1.        Financial Statements

               Consolidated Statements of Income -
                    Three and Six Months Ended June 30, 1998 and 1997                 3

               Consolidated Balance Sheets -
                    June 30, 1998 and December 31, 1997                               4

               Consolidated Statements of Cash Flows -
                    Six Months Ended June 30, 1998 and 1997                           6

               Notes to Consolidated Financial Statements                             7

2.        Management's Analysis of the Results of Operations - (Reduced
               disclosure format pursuant to General Instruction H(2))               10


                           PART II - OTHER INFORMATION



1.        Legal Proceedings                                                          17

6.        Exhibits and Reports on Form 8-K                                           17

</TABLE>












<PAGE>



Form 10-Q - Part I

CONSOLIDATED STATEMENTS OF                        U S WEST COMMUNICATIONS, INC.
INCOME (Unaudited)
<TABLE>
<CAPTION>
<S>                                                        <C>              <C>           <C>          <C>    

------------------------------------------------------ ---------------------------- ---------------------------
                                                           Three Months Ended               Six Months Ended
                                                                  June 30,                       June 30,
Dollars in millions                                             1998          1997          1998          1997
------------------------------------------------------ -------------- ------------- ------------- -------------

Operating revenues:
  Local service                                               $1,369        $1,194        $2,719        $2,425
  Interstate access service                                      711           678         1,409         1,365
  Intrastate access service                                      202           200           408           400
  Long-distance network services                                 195           240           396           490
  Other services                                                 218           176           432           355
                                                       -------------- ------------- ------------- -------------
     Total operating revenues                                  2,695         2,488         5,364         5,035

Operating expenses:
  Employee-related expenses                                      860           842         1,682         1,648
  Other operating expenses                                       654           374         1,165           824
  Taxes other than income taxes                                   86            95           179           200
  Depreciation and amortization                                  518           524         1,036         1,046
                                                       -------------- ------------- ------------- -------------
     Total operating expenses                                  2,118         1,835         4,062         3,718
                                                       -------------- ------------- ------------- -------------

Operating income                                                 577           653         1,302         1,317

Interest expense                                                  94            93           185           189
Gains on sales of rural telephone exchanges                        -            29             -            47
Other expense - net                                               29            18            56            40
                                                       -------------- ------------- ------------- -------------

Income before income taxes                                       454           571         1,061         1,135

Provision for income taxes                                       178           218           411           433
                                                       -------------- ------------- ------------- -------------

NET INCOME                                                    $  276        $  353        $  650        $  702
                                                       ============== ============= ============= =============

</TABLE>








See Notes to Consolidated Financial Statements.


<PAGE>



Form 10-Q - Part I

CONSOLIDATED BALANCE SHEETS                       U S WEST COMMUNICATIONS, INC.
(Unaudited)
<TABLE>
<CAPTION>
<S>                                                         <C>               <C>    

----------------------------------------------------- ---------------- --------------------
                                                             June 30,         December 31,
Dollars in millions                                              1998                 1997
----------------------------------------------------- ---------------- --------------------

ASSETS

Current assets:
     Cash and cash equivalents                              $      45            $      26
     Accounts and notes receivable  - net                       1,629                1,608
     Inventories and supplies                                     172                  124
     Deferred tax asset                                           173                  226
     Prepaid and other                                             69                   68
                                                      ---------------- --------------------

Total current assets                                            2,088                2,052
                                                      

Gross property, plant and equipment                            34,004               33,182
Accumulated depreciation                                       19,711               19,041
                                                      ---------------- --------------------

Property, plant and equipment - net                            14,293               14,141

Other assets                                                      794                  815
                                                      ---------------- --------------------

Total assets                                                  $17,175              $17,008
                                                      ================ ====================

</TABLE>









See Notes to Consolidated Financial Statements.


<PAGE>



Form 10-Q - Part I

CONSOLIDATED BALANCE SHEETS                       U S WEST COMMUNICATIONS, INC.
(Unaudited), continued
<TABLE>
<CAPTION>
<S>                                                    <C>               <C>    

---------------------------------------------------------------- ---------------------
                                                       June 30,          December 31,
Dollars in millions                                        1998                  1997
---------------------------------------------------------------- ---------------------

LIABILITIES AND SHAREOWNER'S EQUITY

Current liabilities:
     Short-term debt                                   $    920             $     497
     Accounts payable                                     1,284                 1,439
     Employee compensation                                  269                   321
     Dividends payable                                      276                   192
     Advanced billing and customer deposits                 314                   292
     Other                                                  848                   982
                                                     ----------- ---------------------

Total current liabilities                                 3,911                 3,723


Long-term debt                                            4,856                 5,019
Postretirement and other postemployment
     benefit obligations                                  2,358                 2,365
Deferred income taxes                                       922                   891
Deferred credits and other                                  665                   610

Contingencies

Shareowner's equity:
     Common shares - one share without par value,
        owned by parent                                   8,080                 8,017
     Cumulative deficit                                 (3,617)               (3,617)
                                                     ----------- ---------------------
Total shareowner's equity                                 4,463                 4,400
                                                     ----------- ---------------------
Total liabilities and shareowner's equity               $17,175               $17,008
                                                     =========== =====================
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>


Form 10-Q - Part I

CONSOLIDATED STATEMENTS OF                      U S WEST COMMUNICATIONS, INC.
CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                 <C>             <C>    

--------------------------------------------------------------------------- ----------------
Six Months Ended June 30,                                             1998             1997
--------------------------------------------------------------------------- ----------------
                                                                      Dollars in millions
OPERATING ACTIVITIES
   Net income                                                       $  650           $  702
   Adjustments to net income:
      Depreciation and amortization                                  1,036            1,046
      Gains on sales of rural telephone exchanges                        -             (47)
      Deferred income taxes and amortization
         of investment tax credits                                      79             (14)
   Changes in operating assets and liabilities:
      Accounts receivable                                              (20)              12
      Inventories, supplies and other current assets                   (63)             (40)
      Accounts payable and accrued liabilities                        (159)             268
   Other - net                                                          86               79
                                                                ----------- ----------------
   Cash provided by operating activities                             1,609            2,006
                                                                ----------- ----------------

INVESTING ACTIVITIES
   Expenditures for property, plant and equipment                   (1,242)            (831)
   Proceeds from disposals of property, plant and equipment             34                4
   Purchase of PCS licenses                                            (18)                -
   Proceeds from sales of rural telephone exchanges                      -               28
   Other                                                                (6)                -
                                                                ----------- ----------------
      Cash (used for) investing activities                          (1,232)            (799)
                                                                ----------- ----------------

FINANCING ACTIVITIES
   Net proceeds from (repayments of ) short-term debt                  228            (669)
   Repayments of long-term debt                                        (83)             (85)
   Dividends paid on common stock                                     (566)            (656)
   Equity infusions from U S WEST                                       63              209
                                                                ----------- ----------------
   Cash used for financing activities                                 (358)          (1,201)
                                                                ----------- ----------------

CASH AND CASH EQUIVALENTS
   Increase                                                             19                6
   Beginning balance                                                    26               92
                                                                =========== ================
   Ending balance                                                   $   45           $   98
                                                                =========== ================
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>


Form 10-Q - Part I

                          U S WEST COMMUNICATIONS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 For the Six Months Ended June 30, 1998 and 1997
                              (Dollars in millions)
                                   (Unaudited)

A.   Summary of Significant Accounting Policies

Basis  of  Presentation.  U S  WEST  Communications,  Inc.  (the  "Company")  is
incorporated under the laws of the State of Colorado and is an indirect,  wholly
owned subsidiary of U S WEST, Inc. ("U S WEST").

Certain reclassifications within the Consolidated Financial Statements have been
made to conform to the current year presentation.

The  Consolidated  Financial  Statements  have  been  prepared  by the  Company,
pursuant to the interim  reporting  rules and  regulations of the Securities and
Exchange  Commission  ("SEC").  Certain  information  and  footnote  disclosures
normally accompanying financial statements prepared in accordance with generally
accepted  accounting  principles have been condensed or omitted pursuant to such
SEC rules and  regulations.  In the  opinion of the  Company's  management,  the
Consolidated  Financial  Statements include all adjustments,  consisting of only
normal  recurring  adjustments,   necessary  to  present  fairly  the  financial
information set forth therein. It is suggested that these Consolidated Financial
Statements  be read in  conjunction  with the  financial  statements  and  notes
thereto  included in the Company's  Form 10-K/A for the year ended  December 31,
1997.

B.  U S WEST Separation

On October 25, 1997,  the Board of  Directors of the former  parent of U S WEST,
herein  referred to as "Old U S WEST,"  adopted a proposal  to separate  Old U S
WEST into two independent  companies (the "Separation").  Old U S WEST conducted
its  businesses  through  two  groups:  the U S WEST  Communications  Group (the
"Communications Group"), which included the communications businesses of Old U S
WEST,  and the U S WEST Media  Group (the "Media  Group"),  which  included  the
multimedia businesses of Old U S WEST. On June 4, 1998,  shareholders of Old U S
WEST voted in favor of the Separation, which became effective June 12, 1998 (the
"Separation Date"). At that time, the Communications Group became an independent
public company  renamed "U S WEST,  Inc." and Media Group's  directory  business
known  as U S WEST  Dex,  Inc.  ("Dex")  was  aligned  with U S WEST  (the  "Dex
Alignment").  Old U S  WEST  has  continued  as an  independent  public  company
comprised of the current  businesses  of Media Group other than Dex and has been
renamed "MediaOne Group, Inc." ("MediaOne Group").


<PAGE>


Form 10-Q - Part I

                          U S WEST COMMUNICATIONS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (Dollars in millions)
                                   (Unaudited)

The Separation was implemented  pursuant to the terms of a separation  agreement
(the "Separation  Agreement") between U S WEST and MediaOne Group. In connection
with the Dex Alignment,  (i) U S WEST  distributed,  as a dividend to holders of
MediaOne  Group common  stock,  an aggregate of $850 in value of U S WEST common
stock and (ii) $3.9  billion of Old U S WEST debt,  formerly  allocated to Media
Group, was refinanced by U S WEST (the "Dex Indebtedness").

Further  information  about the  Separation is contained in Old U S WEST's proxy
statement mailed to all Old U S WEST shareowners on April 20, 1998.

C.  Asset Impairment

During  second quarter  1998, the Company recorded a non-cash charge of $21 (net
of a $14 tax benefit)  related to the  impairment of certain  long-lived  assets
associated with the Company's video operations in Omaha,  Nebraska. The impaired
assets primarily consist of underground cable and hardware. Recent technological
advances  have  permitted  the Company to pursue and use more  economical  Video
Digital  Subscriber  Line  ("VDSL")  technology in cable  overbuild  situations.
Because the projected future cash flows were less than the carrying  values,  an
impairment  loss was  recognized  in  accordance  with  Statement  of  Financial
Accounting  Standards  ("SFAS")  No.  121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of." The amount of
impairment  was  determined  based on the net  present  value of the future cash
flows of the business,  discounted at the Company's cost of capital.  The pretax
charge is  recorded  in  "other  operating  expenses"  within  the  Consolidated
Statements of Income.

D.  Contingencies

There are pending regulatory actions in local regulatory jurisdictions that call
for price decreases, refunds or both.

Oregon. On May 1, 1996, the Oregon Public Utilities Commission ("OPUC") approved
a  stipulation   terminating  prematurely  the  Company's  alternative  form  of
regulation  ("AFOR")  plan,  and it then  undertook  a review  of the  Company's
earnings.  In May 1997,  the OPUC  ordered  the  Company  to reduce  its  annual
revenues  by  $97,  effective  May 1,  1997,  and to  issue a  one-time  refund,
including  interest,  of approximately $102 to reflect the revenue reduction for
the  period May 1, 1996  through  April 30,  1997.  The  one-time  refund is for
interim rates which became  subject to refund when the  Company's  AFOR plan was
terminated on May 1, 1996.


<PAGE>


Form 10-Q - Part I

                          U S WEST COMMUNICATIONS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              (Dollars in millions)
                                   (Unaudited)

The Company filed an appeal of the order and asked for an immediate  stay of the
refund with the Oregon  Circuit Court which granted the Company's  request for a
stay,  pending a full review of the OPUC's  order.  On February  19,  1998,  the
Oregon  Circuit Court  entered a judgment in the Company's  favor on most of the
appealed  issues.  The OPUC appealed to the Oregon Court of Appeals on March 19,
1998, and the appeal is pending.  The Company continues to charge interim rates,
subject to refund,  during the pendency of that  appeal.  The  potential  refund
exposure, including interest, at June 30, 1998, is not expected to exceed $245.

Utah. In another  proceeding,  the Utah Supreme Court has remanded a Utah Public
Service Commission ("UPSC") order to the UPSC for hearing,  thereby establishing
two  exceptions to the rule against  retroactive  ratemaking:  1) unforeseen and
extraordinary  events,  and 2)  misconduct.  The UPSC's  initial  order denied a
refund request from interexchange carriers ("IXCs") and other parties related to
the Tax Reform Act of 1986. The potential exposure,  including interest, at June
30, 1998, is not expected to exceed $165.

State Regulatory Accruals.  The Company has accrued $173 at June 30, 1998, which
represents  its  estimated  liabilities  for all state  regulatory  proceedings,
predominately  the items  discussed  above.  It is  possible  that the  ultimate
liabilities  could exceed the amounts accrued by up to  approximately  $250. The
Company  will  continue to monitor and evaluate  the risks  associated  with its
local  regulatory  jurisdictions,  and will adjust  estimates as new information
becomes available.

In addition to its estimated liabilities for state regulatory  proceedings,  the
Company has an accrued liability of approximately  $170 at June 30, 1998 related
to refunds in the state of  Washington.  Approximately  $70 was refunded to IXCs
and independent local exchange carriers during the second quarter. The remaining
liability will be refunded to ratepayers beginning in the third quarter.

E.  New Accounting Standards

On June 15, 1998, the Financial  Accounting Standards Board issued SFAS No. 133,
"Accounting  for  Derivative  Instruments  and  for  Hedging  Activities."  This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments  and for  hedging  activities.  SFAS No. 133  requires,  among other
things,  that all  derivative  instruments be recognized at fair value as either
assets or  liabilities  on the balance  sheet and that  changes in fair value be
recognized  currently in earnings unless specific hedge accounting  criteria are
met. The Standard is effective for fiscal years  beginning  after June 15, 1999,
though earlier adoption is permitted.  The Company has not determined the future
effects of its adoption of the new standard.



<PAGE>


Form 10-Q - Part I

Item 2. Management's Analysis of the Results of Operations (Dollars in millions)

Some  of  the  information  presented  in  or in  connection  with  this  report
constitutes  "forward-looking  statements"  within the  meaning  of the  Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations  are  based on  reasonable  assumptions  within  the  bounds of its
knowledge of its business and operations,  there can be no assurance that actual
results will not differ  materially  from its  expectations.  Factors that could
cause  actual  results to differ from  expectations  include:  (i) greater  than
anticipated  competition  from new entrants into the local  exchange,  intraLATA
toll,  data and  wireless  markets,  (ii)  changes in demand  for the  Company's
products and services,  including optional custom calling features, (iii) higher
than anticipated employee levels,  capital expenditures,  and operating expenses
(such  as  costs  associated  with  year  2000  remediation),  (iv)  the loss of
significant  customers,  (v) pending regulatory actions in state  jurisdictions,
(vi) regulatory  changes affecting the  telecommunications  industry,  including
changes that could have an impact on the  competitive  environment  in the local
exchange  market,  (vii) a change in economic  conditions in the various markets
served by the  Company's  operations  that could  adversely  affect the level of
demand for telephone, wireless, or other services offered by the Company, (viii)
greater  than  anticipated   competitive  activity  requiring  new  pricing  for
services,  (ix) higher  than  anticipated  start-up  costs  associated  with new
business  opportunities,  (x) increases in  fraudulent  activity with respect to
wireless services,  (xi) consumer  acceptance of broadband  services,  including
telephony,  data and wireless  services,  or (xii) delays in the  development of
anticipated  technologies,  or the  failure  of  such  technologies  to  perform
according to expectations.

Results of Operations - Six Months Ended June 30, 1998 Compared with 1997

Following  are  details of the  Company's  reported  net income,  normalized  to
exclude the effects of certain and nonrecurring and nonoperating items.
<TABLE>
<CAPTION>
<S>                                                  <C>           <C>          <C>         <C>    


------------------------------------------------------------------------ --------------------------
                                                     Six Months Ended                Increase
                                                          June 30,                  (Decrease)
                                                     1998          1997            $           %
----------------------------------------------------------- ------------- ------------ ------------
Reported net income                                   $650          $702        $(52)        (7.4)
Adjustments to reported net income:
      Separation costs                                  68             -           68            -
      Asset impairment                                  21             -           21            -
      Gains on sales of rural telephone exchanges        -          (29)           29            -
                                                   -------- ------------- ------------ ------------
Normalized income                                     $739          $673          $66          9.8
=========================================================== ============= ============ ============
</TABLE>

During 1998, the Company's  normalized income increased $66, or 9.8 percent,  to
$739.  The increase is  primarily  due to higher  demand for services  partially
offset  by  interstate  access  rate  reductions,  higher  expenses  related  to
interconnection and start-up costs associated with growth initiatives.

<PAGE>


Form 10-Q - Part I

Item 2.  Management's Analysis of the Results of Operations (Dollars in
millions), continued

Operating Revenues
<TABLE>
<CAPTION>
<S>                                         <C>          <C>         <C>      <C>   

------------------------------------------------------------------------------------
                                              Six Months Ended          Increase
                                                   June 30,            (Decrease)
                                               1998         1997       $         %
------------------------------------------------------------------------------------
  Local service                             $2,719       $2,425      $294       12.1
  Interstate access service                  1,409        1,365        44        3.2
  Intrastate access service                    408          400         8        2.0
  Long-distance network services               396          490       (94)     (19.2)
  Other services                               432          355        77       21.7
                                         --------------------------------------------
  Total                                     $5,364       $5,035      $329        6.5
  ===================================================================================
</TABLE>

Local Service Revenues.  Local service revenues increased $294, or 12.1 percent,
to $2,719,  primarily as a result of access line growth and increased demand for
new products and services,  and existing central office features.  Excluding the
non-recurring impact of a regulatory charge in last year's second quarter, local
service  revenues  increased 9.1 percent.  Total reported access lines increased
622,000,  or 4.0  percent,  during  the past 12  months,  of which  289,000  was
attributable to second lines. Second line installations  increased 24.5 percent.
Access  lines  grew  656,000,  or  4.2  percent,  when  adjusted  for  sales  of
approximately 34,000 rural telephone access lines during the past twelve months.
Also contributing to the increase in revenues were the effects of rate increases
of $31 in various jurisdictions and interim compensation revenues from IXCs as a
result of Federal Communications  Commission ("FCC") payphone orders, which took
effect in April 1997.

Interstate Access Service Revenues. Interstate access service revenues increased
$44, or 3.2 percent, to $1,409,  primarily due to the effects of a change in the
classification of universal service fundings,  which increased  revenues by $38.
In 1997 these fundings were offset against  interstate  access service revenues.
Beginning in 1998 these  fundings are  recorded as access  expense  within other
operating expenses.  Excluding the effects of the  reclassification,  interstate
access  revenues  increased  $6,  or 0.4  percent,  due to the  effects  of 1997
true-ups to  sharing-related  accruals.  Increased demand for interstate  access
services,  as evidenced by a 6.7 percent  increase in billed  interstate  access
minutes of use, was essentially offset by price reductions.

Intrastate Access Service Revenues. Intrastate access service revenues increased
by $8, or 2.0 percent, to $408,  primarily due to higher demand for private line
services and the effects of a 6.2 percent  increase in intrastate  billed access
minutes of use.  Largely  offsetting  the effects of  increased  demand were the
effects of net rate  reductions  aggregating  $14, the majority of which were in
the  state of  Washington.  Competitive  effects  are also  adversely  impacting
intrastate access revenue growth.


<PAGE>


Form 10-Q - Part I

Item 2.  Management's Analysis of the Results of Operations (Dollars in
millions), continued

Long Distance Network Services Revenues. Long-distance network services revenues
decreased  by $94, or 19.2  percent,  to $396,  primarily  due to the effects of
competition  and  rate  reductions  of  $27  in  several   jurisdictions,   most
significantly in the state of Washington.  Also contributing to the decline were
the   implementation  of  multiple  toll  carrier  plans  ("MTCPs")  in  various
jurisdictions  in  1997.  The  MTCPs  essentially  allow  independent  telephone
companies  to act as toll  carriers  and are net income  neutral to the Company,
with the  reduction in toll  revenues  largely  offset by  increased  intrastate
access service revenues and lower access expense.

Other Services Revenues.  Revenues from other services increased by $77, or 21.7
percent,  primarily as a result of greater sales of inside wire  maintenance and
wireless  communications  services and  continued  market  penetration  in voice
messaging services.

Costs and Expenses
<TABLE>
<CAPTION>
<S>                                                <C>          <C>        <C>      <C>    

-------------------------------------------------------------------------------------------
                                                        Six Months Ended         Increase
                                                             June 30,           (Decrease)
                                                      1998         1997      $         %
-------------------------------------------------------------------------------------------
  Employee-related expenses                        $1,682       $1,648        34        2.1
  Other operating expenses (1)                      1,165          824       341       41.4
  Taxes other than income taxes                       179          200       (21)     (10.5)
  Depreciation and amortization                     1,036        1,046       (10)      (1.0)
  Interest expense                                    185          189        (4)      (2.1)
  Gains on sales of rural telephone exchanges           -           47       (47)         -
  Other expense - net                                  56           40        16       40.0
  ------------------------------------------------------------------------------------------
<FN>
(1)  Includes separation expenses of $94 and an asset impairment charge of $35 
during second quarter 1998.
</FN>
</TABLE>

Employee-Related Expenses. Total employee-related expenses increased $34, or 2.1
percent,  to $1,682,  primarily  due to increased  salaries and wages and higher
contract  labor  costs.  The  increase  in  salaries  and  wages was a result of
workforce  and wage  increases  which were  largely  offset by the  transfer  of
approximately  1,200  employees  during  third quarter  1997  to an  unregulated
affiliate.

Other Operating Expenses.  Excluding nonrecurring charges as described in Note 1
to the above table, other operating expenses increased by $212, or 25.7 percent,
during 1998. The increase is primarily due to increased  affiliate  expense as a
result  of  the  above  referenced  transfer  of  employees  to  an  unregulated
affiliate, interconnection expenses and costs associated with growth initiatives
(primarily  PCS),  including  marketing and advertising  costs.  Other operating
expenses also increased $38 as compared to 1997 due to the aforementioned change
in classification of universal  service funding expenses.  Partially  offsetting
the  increases  were reduced  access  expense  (primarily  due to the effects of
competitive by-pass and the MTCPs) and a 1997 reserve adjustment associated with
billing and collection activities performed for IXCs.



<PAGE>


Form 10-Q - Part I

Item 2.  Management's Analysis of the Results of Operations (Dollars in
millions), continued

Other operating expenses include $94 in costs that are directly  attributable to
the Separation.  These Separation costs include executive  severance,  legal and
financial  advisory fees,  securities  registration  fees,  printing and mailing
costs, and internal systems and rearrangement costs.

The Company also  recorded in other  operating  expenses a pretax  charge of $35
related to the  impairment  of certain  long-lived  assets  associated  with the
Company's video operations in Omaha,  Nebraska.  Recent  technological  advances
have permitted the Company to pursue and use more  economical VDSL technology in
cable overbuild  situations.  Because the projected  future cash flows were less
than the carrying  values,  an impairment loss was recognized in accordance with
SFAS No. 121. (See "Note C - Asset  Impairment" - to the Consolidated  Financial
Statements.)

Taxes Other Than Income Taxes. Taxes other than income taxes decreased primarily
as a result of adjustments related to the 1997 property tax accrual.

Interest  Expense.  The  decline in interest  expense was  primarily a result of
lower average debt levels.

Gains On Sales of Rural Telephone  Exchanges.  During the six-month period ended
June 30, 1997,  the Company sold  selected  rural  telephone  exchanges in Iowa,
Nebraska, and South Dakota for pretax gains of $47.

Other  Expense  - Net.  Other  expense  increased  primarily  due to  additional
interest expense associated with the Company's state regulatory liabilities.

Provision for Income Taxes

The  effective  tax rate for the first six  months  of 1998 is 38.7  percent  as
compared to 38.1  percent  during the first six months of 1997.  The increase in
the  effective  tax rate is  primarily  due to the  impact of  certain  expenses
related to the  Separation,  which are not deductible for tax purposes,  and the
effects of lower amortization of investment tax credits.




<PAGE>


Form 10-Q - Part I

Item 2.  Management's Analysis of the Results of Operations (Dollars in
millions), continued

Other Items

Credit Ratings

On May 15, 1998,  Standard & Poor's upgraded the Company's senior unsecured debt
from A to A+ and reaffirmed its commercial paper rating of A1.

During the first  quarter  of 1998,  Moody's  downgraded  the  Company's  senior
unsecured debt from Aa3 to A2 due to regulatory rulings and financial challenges
associated  with  the  Separation.  (See  "Note  D -  Contingencies"  -  to  the
Consolidated Financial Statements.) The Company's debt ratings, including the P1
commercial  paper rating,  remained under review until May 15, 1998 when Moody's
reaffirmed both ratings.

On May 7, 1998, Duff & Phelps reaffirmed the Company's senior unsecured debt and
commercial paper ratings of AA-and D-1+.

Collective Bargaining Agreements

The Company's principle collective  bargaining agreements expire in August 1998.
As of August 12, 1998, settlement of these agreements has not been reached.

Year 2000 Costs

During  1997 the  Company  conducted a  comprehensive  high level  review of its
computer systems and related software to ensure that systems properly  recognize
the year 2000 and continue to process data.  The systems  evaluated  include (i)
the  Public  Switched  Telephone  Network  (the  "Network"),   (ii)  Information
Technologies  ("IT") and (iii) individual Business Units (the "Business Units").
The Network,  which  processes voice and data  information  relating to the core
communications  business,   relies  on  remote  switches,   central  office  and
interoffice  equipment,  and  loop  transport  equipment  that is  predominately
provided  by  telecommunications  network  vendors.  IT is an  affiliate  of the
Company that manages internal business systems that employ hardware and software
with  an   enterprise-wide   scope,   including   operational,   financial   and
administrative   functions.   The  Business   Units,   which  include   internal
organizations such as finance,  procurement,  operator services,  wireless, data
networks,   real  estate,   etc.,   employ  systems  that  support  desktop  and
departmental applications that relate specifically to their business and are not
generally part of the Network or IT.

The Company's  approach to year 2000 remediation  activities is broken down into
five general phases: (i) inventory/assessment,  (ii) planning, (iii) conversion,
(iv) testing/certification and (v) implementation.


<PAGE>



Form 10-Q - Part I

Item 2.  Management's Analysis of the Results of Operations (Dollars in
millions), continued

With  regard to the  Network,  the  Company is working  with  telecommunications
network  vendors to obtain  compliant  releases of hardware  and  software.  The
Company is also working on a focused testing approach given the requirement that
Network testing must be done over multiple equipment  configurations involving a
broad spectrum of services. The inventory/assessment and planning phases for the
Network are complete and management expects that the testing/certification phase
will be completed by December 1998, with implementation  completed by July 1999.
To facilitate Network testing, the Company participates,  along with other major
providers  of  telecommunications  services,  as a member of the Telco Year 2000
Forum (the "Forum"),  an organization  that addresses the year 2000 readiness of
network  elements and network  interoperability.  The Forum has contracted  with
Bellcore,  a former affiliate engaged in  telecommunications  industry research,
development   and   maintenance   activities,    to   engage   in   inter-region
interoperability testing.

Within IT,  applications  that support its critical  business  processes such as
billing  and  collection,  network  monitoring,  repair and  ordering  have been
identified. The inventory/assessment and planning phases for IT are complete and
management  expects  that  conversion  will be  completed  by the end of 1998 or
shortly thereafter, with testing and implementation continuing through 1999.

Within the Business Units, the Company is generally in the  inventory/assessment
phase,  though some Business  Units have  completed  this phase and are into the
conversion and the testing/certification  phase. Accordingly,  a majority of the
Business Units are in the process of  establishing  project plans and associated
schedules to accomplish the remaining phases.

The Company has spent  approximately  $40 through the second  quarter of 1998 on
year 2000 projects and  activities.  The estimated total  incremental  costs for
year 2000 related projects and activities have increased from approximately $150
to approximately $200 through 1999, excluding capital  expenditures.  Additional
incremental  capital  expenditures over the same period will approximate $50-80.
Year 2000 project costs are being funded  through  operations.  Though year 2000
costs will directly impact the reported level of future net income,  the Company
intends to manage its total cost structure,  including  deferral of non-critical
projects,  in an  effort  to  mitigate  the  impact  of year  2000  costs on its
historical rate of earnings growth.

Management  cannot provide assurance that the result of its year 2000 compliance
efforts or the cost of such efforts will not differ  materially  from estimates.
Accordingly,  business  continuity  and  contingency  plans are currently  being
developed to address high risk areas as they are identified. These plans will be
in place by third-quarter 1999. Within Network,  the Company is highly dependent
on the  telecommunications  network  vendors to provide  compliant  hardware and
software in a timely  manner,  and on third parties that will assist the Company
in the focused

<PAGE>


Form 10-Q - Part I

Item 2.  Management's Analysis of the Results of Operations (Dollars in 
millions), continued

testing of the Network.  Within IT, the Company is dependent on the  development
of software by experts,  both internal and  external,  and the  availability  of
critical  resources with the requisite skill sets.  Failure by the Company or by
certain of its vendors to remediate year 2000 compliance  issues could result in
disruption of the Company's  operations,  possibly impacting the Network and the
Company's ability to bill or collect revenues. However, management believes that
its efforts at remediation will be successful and that the aforementioned "worst
case" scenario is unlikely to develop.

The above discussion contains statements that are  "forward-looking"  within the
meaning of the Private  Securities  Litigation Reform Act of 1995.  Although the
Company believes that its estimates are based on reasonable  assumptions,  there
can be no assurance  that actual results will not differ  materially  from these
estimates.

Contingencies

The Company has pending  regulatory  actions in local  regulatory  jurisdictions
that call for price decreases,  refunds or both. (See "Note D - Contingencies" -
to the Consolidated Financial Statements.)



<PAGE>



Form 10-Q - Part II                               U S WEST Communications, Inc.

                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

The Company and its subsidiaries  are subject to claims and proceedings  arising
in the ordinary  course of business.  At the Company,  there are pending certain
regulatory  actions  in local  regulatory  jurisdictions  that  call  for  price
decreases,  refunds or both.  For a discussion of these  actions,  See "Note D -
Contingencies" to the Consolidated Financial Statements.


Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

Exhibit No.

12        Statement  regarding computation of earnings to fixed charges
          ratio of U S WEST  Communications, Inc.

27        Financial Data Schedule

(b)  Reports on Form 8-K Filed During the Second Quarter of 1998

(i)      Form 8-K dated June 2, 1998  concerning a press  release  regarding the
         New Mexico State Commission's order to reduce U S WEST  Communications'
         rates.



<PAGE>



Form 10-Q - Part II                               U S WEST Communications, Inc.


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                  U S WEST Communications, Inc.

                                     /s/ ALLAN R. SPIES
                                  By:___________________________________
                                  Allan R. Spies
                                  Vice President and Chief Financial Officer

August 13, 1998