UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                                       
                                   FORM 10-Q
                                       
                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


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

For the quarterly period ended September 30, 1996

                                      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 0-24924
----------------------------------------------------------------------------

                          THE ASSOCIATED GROUP, INC.
            (Exact name of registrant as specified in its charter)

           DELAWARE                                       51-0260858
(State of Incorporation)                  (I.R.S. Employer Identification No.)

   200 Gateway Towers, Pittsburgh, Pennsylvania                        15222
   (Address of principal executive offices)                       (Zip Code)

                                 412-281-1907
                        (Registrant's telephone number)


         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
                                                                   ---      ---

         The number of shares outstanding of each of the issuer's classes of
common stock, as of November 13, 1996:

                     Common Stock, Class A              9,382,962
                     Common Stock, Class B              9,397,910





PART I--FINANCIAL INFORMATION

Item 1.  Financial Statements


                  THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS (UNAUDITED)


<TABLE>
<CAPTION>
                                                                       September 30,          December 31,
                                                                           1996                   1995
                                                                  ------------------------------------------
                                                                             (amounts in thousands)
<S>                                                               <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents (approximates fair value)            $             1,800    $            1,018
   Accounts receivable, less allowance for
     doubtful accounts (September 30, 1996--$3,863,000;
     December 31, 1995--$183,000)                                               3,536                   626
   Notes receivable                                                               703                   191
   Inventory held for resale                                                    1,466                 1,311
   Prepaid expenses and other assets                                              802                   860
   Deferred income taxes                                                        1,689                 1,057
                                                                  --------------------   -------------------
                 Total current assets                                           9,996                 5,063

Property and equipment, net of accumulated
   depreciation and amortization (September 30,
   1996--$24,044,000; December 31, 1995--$7,676,000)                           27,045                 3,117

Marketable equity securities, at fair value
   (cost:  September 30, 1996--$6,882,000;
   December 31, 1995--$6,898,000)                                             439,984               540,082
Notes receivable                                                               28,748                11,240
Investments in wireless communications affiliates                              14,812                13,602
Other noncurrent assets                                                         8,417                 1,367
                                                                  --------------------   -------------------

Total assets                                                      $           529,002    $          574,471
                                                                  ====================   ===================
</TABLE>

See notes to consolidated financial statements



                  THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         September 30,          December 31,
                                                                             1996                   1995
                                                                    ------------------------------------------
                                                                               (amounts in thousands)
<S>                                                                 <C>                   <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                 $            8,302     $            4,681
   Other accrued expenses                                                        2,671                  1,297
   Due to cellular equipment vendor                                             14,952                      -
   Short-term obligations                                                       63,148                 33,470
   Current portion of long-term debt                                             2,082                      -
                                                                    --------------------       ---------------
                 Total current liabilities                                      91,155                 39,448

Deferred compensation                                                            1,324                  1,264
Long-term debt, excluding current portion                                        9,197                      -
Deferred income taxes                                                          135,331                175,564
Minority interests                                                               9,404                    797

Commitments and contingencies                                                        -                      -

Stockholders' equity:
   Preferred stock, par value $.01 per share;
     authorized 5,000,000 shares; none issued                                        -                      -
   Class A Common Stock, par value $.10 per share;
     authorized 100,000,000 shares; 9,382,962 issued
     and outstanding in 1996 and 1995                                              938                    938
   Class B Common Stock, par value $.10 per share;
     authorized 50,000,000 shares; 9,397,910 and
     9,382,985 issued and outstanding in 1996 and 1995                             940                    938
   Additional paid-in capital                                                       12                      -
   Unrealized gain on marketable equity securities,
     net of deferred taxes (September 30, 1996--$151,585,000;
     December 31, 1995--$186,614,000)                                          281,517                346,570
   Retained earnings (deficit)                                                    (816)                 8,952
                                                                    --------------------   -------------------
                 Total stockholders' equity                                    282,591                357,398
                                                                    --------------------   -------------------

Total liabilities and stockholders' equity                          $          529,002     $          574,471
                                                                    ====================   ===================
</TABLE>

See notes to consolidated financial statements



                  THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                     Three Months Ended September 30,       Nine Months Ended September 30,
                                                          1996                1995                1996               1995
                                                   -------------------------------------  -------------------------------------
                                                           (amounts in thousands, except share and per share amounts)
<S>                                                <C>                 <C>                 <C>                <C>
Revenues:
   Wireless communication services                 $         4,163     $           465     $        12,448    $         1,426
   Radio broadcasting                                          843                 481               1,773              1,417
   Art gallery sales                                           116                  53                 426                440
                                                   -----------------  ------------------  ------------------  ----------------
                                                             5,122                 999              14,647              3,283
Costs and expenses:
   Cost of sales:
     Wireless communication services                         2,189                 197               6,627                578
     Radio broadcasting                                        188                 164                 517                431
     Art gallery sales                                          93                  42                 322                388
   Direct research and development expenses                  2,392               1,974               6,075              4,210
   Sales, general and administrative expenses                7,818               2,481              16,355              7,556
   Depreciation and amortization expense                     1,369                 315               3,882                984
                                                   -----------------  ------------------  ------------------  -----------------
                                                            14,049               5,173              33,778             14,147
                                                   -----------------  ------------------  ------------------  -----------------
Operating loss                                              (8,927)             (4,174)            (19,131)           (10,864)

Equity in loss of affiliates                                  (618)               (702)             (1,412)            (1,859)

Other income (expense):
   Gain on sale of marketable equity securities                  1                  -                3,398                  1
   Interest and dividend income                                523                 250               1,651                968
   Interest expense                                         (1,108)               (455)             (3,115)            (1,179)
   Minority interests                                        2,477                  (1)              3,828                 (2)
                                                   -----------------  ------------------  ------------------  -----------------
                                                             1,893                (206)              5,762               (212)
                                                   -----------------  ------------------  ------------------  -----------------
Loss before income taxes                                    (7,652)             (5,082)            (14,781)           (12,935)

Income tax benefit                                           2,686               1,743               5,013              4,435
                                                   -----------------  ------------------  ------------------  -----------------

Net loss                                           $        (4,966)    $        (3,339)    $        (9,768)   $        (8,500)
                                                   =================  ==================  ==================  =================

Net loss per common share                          $          (.26)    $          (.18)    $          (.52)   $          (.45)
                                                   =================  ==================  ==================  =================

Weighted average common shares outstanding              18,780,122          18,765,947          18,771,617         18,765,947
</TABLE>

See notes to consolidated financial statements


                                       
                  THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              Nine Months Ended September 30,
                                                                              1996                     1995
                                                                    -----------------------------------------------
                                                                                  (amounts in thousands)
<S>                                                                 <C>                            <C>
Cash Flows From Operating Activities
   Net loss                                                           $       (9,768)              $       (8,500)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
     Depreciation and amortization                                             3,882                          984
     Loss on disposal of property and equipment                                   32                          160
     Provision for losses on accounts receivable                                 971                           91
     Gain on sale of marketable equity securities                             (3,398)                          (1)
     Equity in loss of affiliates                                              1,412                        1,859
     Minority interests                                                       (3,828)                           2
     Provision for deferred income taxes                                      (5,204)                      (4,435)
     Change in assets and liabilities:
       Accounts receivable                                                    (1,350)                          39
       Note receivable                                                        (8,291)                           -
       Inventory held for resale                                                  80                          201
       Prepaid expenses and other assets                                         420                        1,304
       Accounts payable                                                          775                          812
       Accrued transaction expenses                                                -                       (5,433)
       Other accrued expenses                                                    247                         (366)
       Deferred compensation                                                      60                           67
                                                                    ------------------            -----------------
Net Cash Used In Operating Activities                                        (23,960)                     (13,216)

Cash Flows From Investing Activities
   Cash and cash equivalents from consolidation of affiliate                     751                            -
   Cash paid for acquisition                                                  (2,639)                           -
   Purchases of property and equipment                                        (3,056)                        (541)
   Proceeds from sale of marketable equity securities                          3,414                            2
   Increase in notes receivable                                               (2,617)                        (931)
   Investments in wireless communications affiliates                          (3,530)                        (320)
   Other investing activities, net                                              (410)                         (37)
                                                                    ------------------            -----------------
Net Cash Used In Investing Activities                                         (8,087)                      (1,827)

Cash Flows From Financing Activities
   Proceeds from short-term obligations, net                                  29,678                       13,642
   Long-term debt assumed by cellular equipment vendor                        (2,845)                           -
   Increase in due to cellular equipment vendor                                3,450                            -
   Repayment of long-term debt                                                (1,211)                           -
   Investment by minority interests                                            3,743                            1
   Proceeds from stock option exercises                                           14                            -
                                                                    ------------------          -------------------

Net Cash Provided By Financing Activities                                     32,829                       13,643
                                                                    ------------------          -------------------

Net Increase (Decrease) In Cash And Cash Equivalents                             782                       (1,400)

Cash And Cash Equivalents At Beginning Of Period                               1,018                        1,919
                                                                    ------------------          -------------------
Cash And Cash Equivalents At End Of Period                            $        1,800              $           519
                                                                    ==================          ===================
</TABLE>

See notes to consolidated financial statements



THE ASSOCIATED GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.   BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1996, are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in The Associated Group,
Inc. (the "Company," as used herein, includes all consolidated subsidiaries,
unless the context otherwise indicates) Annual Report on Form 10-K for the year
ended December 31, 1995. The audited financial statements of Grupo Portatel,
S.A. de C.V. and Subsidiaries for the years ended December 31, 1995, 1994 and
1993 are included as Exhibit 99.1 to The Associated Group, Inc. Annual Report
on Form 10-K for the year ended December 31, 1995.

Certain amounts in the financial statements for the 1995 periods have been
reclassified to conform to the financial statement presentation for the current
period. These reclassifications have no effect on net loss.


2.   CONSOLIDATION OF GRUPO PORTATEL, S.A. de C.V.

At September 30, 1996, the Company, through a wholly owned subsidiary,
Associated Communications of Mexico, Inc. ("ACM"), has a 30.2% interest in
Grupo Portatel, S.A. de C.V. ("Grupo"), of which Portatel del Sureste, S.A. de
C.V. ("Portatel"), a Mexican cellular telephone company, is a wholly owned
subsidiary. Effective January 1, 1996, the Company and the other United States
shareholder of Grupo agreed to contribute their respective stock interests in
Grupo, as well as their rights under an Association in Participation Agreement
("AP Agreement") and a related Joint Venture Agreement, to Grupo Holdings,
L.L.C. ("Grupo Holdings"), a new joint venture limited liability company, in
which the Company has a 61.6% controlling equity interest. Through December 31,
1995, the Company recorded its investment in Grupo using the equity method. As
a result of the formation of Grupo Holdings and the effects of the AP
Agreement, the Company has consolidated the financial statements of Grupo with
the Company's financial statements as of January 1, 1996.

At September 30, 1996, excluding the effects of the AP Agreement and any
dilution that may result from the debt to equity conversion discussed in Note
10, the Company has a 30.2% economic ownership interest and through Grupo
Holdings controls a 49.0% voting interest in Grupo. Upon closing of the
agreement discussed in Note 10, excluding the effects of the AP Agreement, the
Company's ownership interest in Grupo will be reduced to approximately 23.6%.

Subsequent to this transaction, through the AP Agreement and control of Grupo
Holdings, the Company will continue to exert sufficient control over Grupo to
warrant consolidation of Grupo's financial statements.

As a result of the consolidation of Grupo's financial statements and the
formation of Grupo Holdings, equity in loss of affiliates in the 1996 period no
longer includes Grupo, and at September 30, 1996, the Company's minority
interests include third-party ownership interests of 69.8% and 38.4% for Grupo
and Grupo Holdings, respectively. The consolidation of Grupo has no effect on
the Company's consolidated net equity, consolidated net loss or per share data
since its economic ownership percentage is the same regardless of consolidation
of Grupo. The pro forma consolidated revenues of the Company for the three and
nine months ended September 30, 1995 would have been $4,377,000 and
$13,796,000, respectively, assuming consolidation of Grupo as of January 1,
1995.







3.   ACQUISITION

In the second quarter of 1996, the Company purchased the assets and was awarded
an assignment of the Federal Communications Commission ("FCC") license of radio
broadcasting station WCEZ-FM located in Delaware, Ohio, serving the
Delaware/Columbus, Ohio market, for consideration of approximately $3,250,000,
including amounts for noncompete and consulting agreements. The Company has
consolidated the results of operations of WCEZ since the date of acquisition.
The operations of WCEZ-FM are not material to the Company's revenues or net
loss.


4.   FOREIGN CURRENCY TRANSLATION

The financial statements of Grupo are translated from Mexican new pesos to U.S.
dollars in accordance with Financial Accounting Standards No. 52, "Foreign
Currency Translation." Based upon the inflationary and political environment in
Mexico, along with the economic dependency Grupo has had on its shareholders
(including the Company) and the source of its cash outflows, the U.S. dollar
has been utilized as the functional currency. Nonmonetary assets and
liabilities have been translated at historical exchange rates and monetary
assets and liabilities have been translated based on the current exchange rate.
Revenues and expenses have been translated at the weighted average exchange
rate in effect during the period. Foreign currency translation gains and losses
are included in the statement of operations.


5.   INVENTORY HELD FOR RESALE

Inventory, which consists of art prints of $1,210,000 and $1,311,000 at
September 30, 1996 and December 31, 1995, respectively, and cellular telephones
and related equipment of $256,000 and $0 at September 30, 1996 and December 31,

1995, respectively, is recorded at the lower of cost or market value. Cost of
art prints is determined under the first-in, first-out method and cost of
cellular telephones and related equipment is determined under the last-in,
first-out method. Inventory is reported net of a market valuation reserve
relating to art inventory of $1,574,000 and $1,582,000 at September 30, 1996
and December 31, 1995, respectively.


6.   MARKETABLE EQUITY SECURITIES

The cost and market value of marketable equity securities classified as
available for sale at September 30, 1996, are as follows:

<TABLE>
<CAPTION>
                                                                                 Cost of          Market Value of
           Name of Issuer and                               Number of          Each Issue           Each Issue
           Title of Each Issue                                Shares          In Thousands         In Thousands
-------------------------------------------------------- ----------------- -------------------- --------------------
<S>                                                      <C>               <C>                  <C>
Tele-Communications, Inc.:
     TCI Group Series A Common Stock                         12,479,976           $ 3,839              $186,420
     TCI Group Series B Common Stock                          7,071,852             1,268               109,614
     Liberty Media Group Series A Common Stock                3,119,993             1,229                89,310
     Liberty Media Group Series B Common Stock                1,767,963               410                51,492

General Communication, Inc.:
     Class A Common Stock                                       326,000                 9                 1,875
     Class B Common Stock                                       138,668                 4                   728

Others                                                          Various               123                   545
                                                                           -------------------- --------------------
                                                                                  $ 6,882              $439,984
                                                                           ==================== ====================
</TABLE>



During March 1996, the Company sold 41,598 shares of Tele-Communications, Inc.
("TCI") Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
for pretax proceeds of approximately $2,690,000, and has recognized a gain on
the sale of approximately $2,678,000. During the second quarter of 1996, the
Company sold 90,000 shares of General Communication, Inc. ("GCI") Class A
Common Stock for pretax proceeds of approximately $722,000, and has recognized
a gain on the sale of approximately $719,000.

Including the effects of the sale of marketable equity securities during the
period, the adjustment to the unrealized gain on marketable equity securities,
net of tax, recorded as a separate component of stockholders' equity was a
decrease of $65,053,000 and an increase of $27,218,000 in the nine months ended
September 30, 1996 and 1995, respectively.

As of November 13, 1996, the aggregate market value of the marketable equity
securities held by the Company was approximately $401,877,000, representing an

approximate $38,107,000 decrease from September 30, 1996.


7.  NOTES RECEIVABLE

Included in noncurrent notes receivable at September 30, 1996 and December 31,
1995 are amounts and accrued interest due from certain Mexican stockholders of
Grupo of $20,457,000 and $11,240,000, respectively. Of the increase between
periods, $7,162,000 is the result of the formation of and initial contributions
of notes receivable to Grupo Holdings by the minority member of Grupo Holdings
as discussed in Note 2.

Also included in noncurrent notes receivable at September 30, 1996 is a note
and accrued interest of $8,291,000 due from the Chairman and CEO (the
"Executive") of Associated Communications, L.L.C. ("ACom"), in which Microwave
Services, Inc. ("MSI"), a wholly owned subsidiary of the Company, has a 55%
equity interest. Under the terms of the Executive's employment agreement,
one-fifth of the principal and interest due under the note will be forgiven on
each of the Executive's first two employment anniversary dates if he is still
employed by ACom, and the remainder due will be forgiven on the fifth
anniversary of employment. In the event that the Executive terminates his
employment prior to the fifth anniversary date (other than by reason of his
death or disability or for good reason as defined in the employment agreement),
any outstanding principal and accrued interest on the note will become
immediately due and payable.


8.   OTHER NONCURRENT ASSETS

At September 30, 1996, included in other noncurrent assets are amounts for
preoperating expenses of Grupo of $1,263,000, net of accumulated amortization
of $1,707,000, and amounts for the cost of concession rights granted to
Portatel from the Mexican Ministry of Communications and Transportation ("SCT")
to operate cellular telephone services in the southeast region of Mexico of
$2,497,000, net of accumulated amortization of $1,028,000. The preoperating
expenses are being amortized over a ten year period and the cost of concession
rights is being amortized over twenty years, the life of the concession.

At September 30, 1996, also included in other noncurrent assets are amounts for
goodwill and noncompete agreements related to the second quarter 1996 purchase
of the assets of WCEZ-FM (see Note 3) of $2,417,000, net of accumulated
amortization of $116,000. The goodwill is being amortized over a fifteen year
period and the noncompete agreements are being amortized over three years, the
term of the agreements.


9.   SHORT-TERM OBLIGATIONS

As of September 30, 1996, the Company has outstanding short-term obligations of
$63,148,000 under its demand discretionary bank line of credit and a brokerage
margin loan facility, with an aggregate of 8,499,980 shares of TCI Group Series
A Common Stock pledged as collateral under the Company's credit facilities.
Subsequent to September 30, 1996 and through November 13, 1996, an additional
800,000 shares of TCI Group Series A 




Common Stock were pledged, increasing the total number of shares pledged to
9,299,980. The Company has obtained a commitment to extend the demand
discretionary bank line of credit through November 30, 1997.


10.  LONG-TERM DEBT AND AMOUNTS DUE TO CELLULAR EQUIPMENT VENDOR

Portatel has long-term debt obligations under various credit facilities with a
U.S. bank and various related parties (the "Portatel Credit Agreements"). Such
long-term obligations are denominated in U.S. dollars and were incurred for
working capital, including the purchase and construction of cellular telephone
infrastructure equipment. The outstanding debt under the Portatel Credit
Agreements is guaranteed by a cellular equipment vendor of Portatel (the
"Guarantor"). During 1995 and January 1996, Portatel failed to meet a portion
of its debt obligations under such credit facilities. Accordingly, payments
were made by the Guarantor to Portatel's lenders on Portatel's behalf. Such
amounts are included in current liabilities at September 30, 1996. As a result
of Portatel's failure to make such payments, the Guarantor had the right to
require Grupo to transfer to the Guarantor 40% of the stock of Portatel held in
trust as collateral for such guarantee, but did not exercise its right to
acquire such shares. Grupo, Portatel and certain shareholders of Grupo
(including the Company) entered into a Contribution Agreement with the
Guarantor, effective January 31, 1996, to convert the payments made by the
Guarantor in 1995 and January 1996 on behalf of Portatel into capital stock of
Grupo. Closing under the Contribution Agreement is contingent upon certain
Mexican regulatory consents and approvals, the last of which is currently
expected to be obtained in the fourth quarter of 1996. Upon closing, excluding
the effects of the AP Agreement, the conversion provided for in the
Contribution Agreement will result in a reduction of the Company's ownership
interest in Grupo to approximately 23.6%. The effect of the anticipated
reduction in the Company's ownership interest in Grupo will be a
reclassification of $14,952,000 between due to cellular equipment vendor and
minority interests on the Company's consolidated balance sheet. The Guarantor
will continue to guarantee the remaining debt of Portatel secured by an
approximate 30.7% equity interest in Portatel.

The remaining debt of Portatel is subdivided into various pieces, referred to
as Tranches. The loans under Tranche I bear interest at the LIBOR rate plus
2.5%. Interest and principal are payable in semiannual installments through
November 15, 2001. The loans under Tranche II bear interest at the LIBOR rate
plus 6%. Interest and principal are payable in semiannual installments through
September 25, 2001. The amounts outstanding under the Portatel Credit
Agreements at September 30, 1996 (in thousands) are as follows:


                                Tranche I        Tranche II            Total
                                ---------        ----------            -----
Current                           $ 1,742          $    340         $  2,082
Long-Term                           7,835             1,362            9,197
                                    -----            ------           ------
                                  $ 9,577           $ 1,702          $11,279

                                  =======           =======          =======



11.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest was approximately $1,565,000 and $838,000 for the nine
months ended September 30, 1996 and 1995, respectively. The Company made no
federal and state income tax payments during the nine months ended September
30, 1996 and 1995. Grupo paid approximately $475,000 in Mexican taxes in the
nine months ended September 30, 1996.


12.  PER SHARE DATA

Weighted average common shares outstanding do not include common stock
equivalents since their effect on the net loss per common share would be
antidilutive.








Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations


         As discussed in Note 2 to the consolidated financial statements
included elsewhere herein, as of and for the three and nine months ended
September 30, 1996, the Company has consolidated the financial statements of
Grupo, which investment was accounted for under the equity method in 1995. As a
result of the consolidation of Grupo and the formation of Grupo Holdings,
equity in loss of affiliates in the 1996 period no longer reflects Grupo, and
the Company's minority interests at September 30, 1996 include third-party
ownership interests of 69.8% and 38.4% for Grupo and Grupo Holdings,
respectively. In addition, the Company's balance sheet at September 30, 1996
reflects higher notes receivable due to the formation of and initial
contributions to Grupo Holdings by the minority member of Grupo Holdings.

         This Form 10-Q contains certain forward looking statements about the
Company's completion of pending transactions and availability of certain tax
benefits. Any such statements are subject to risks that could cause the actual
results or needs to vary materially.


Financial Condition


         Currently, the Company is financing its cash requirements from three
credit facilities: a $100,000,000 demand discretionary bank line of credit (the
"line of credit") and two brokerage margin loan facilities. The Company has

obtained a commitment to extend the line of credit through November 30, 1997.
As of November 13, 1996, the Company has pledged in the aggregate 9,299,980
shares of TCI Group Series A Common Stock as collateral, and borrowings under
the line of credit and one of the brokerage margin loan facilities are limited
to 65% of the market value of such stock pledged, with an additional 15%
collateral requirement on the brokerage margin loan facility if borrowings
exceed $100,000,000, up to a maximum of $200,000,000. Borrowings under the
other brokerage margin loan facility are limited to 50% of the market value of
such stock pledged. Based on the market value of the stock currently pledged,
and outstanding short-term obligations of approximately $70,281,000 as of
November 13, 1996, the Company's unused borrowing capacity under the three
existing credit facilities is approximately $10,328,000. A significant portion
of the Company's assets are liquid, and can be pledged as collateral for added
borrowing capacity. Given the market value of the remaining shares of
marketable equity securities that could potentially be pledged as additional
collateral as of November 13, 1996, the Company's credit facilities provide for
additional borrowings of up to approximately $176,060,000. The Company's
ability to meet cash needs in the near term for future development depends in
large part on the value of its portfolio of securities. The Company
periodically evaluates its financial position and alternative financing
arrangements.

         In March 1996, the Company sold 41,598 shares of TCI Class B 6%
Cumulative Redeemable Exchangeable Junior Preferred Stock for pretax proceeds
of approximately $2,690,000, and recognized a gain on the sale of approximately
$2,678,000. In the second quarter of 1996, the Company sold 90,000 shares of
General Communication, Inc. Class A Common Stock for pretax proceeds of
approximately $722,000, and recognized a gain on the sale of approximately
$719,000. The Company will utilize current year losses and/or net operating
loss carryforwards to offset the federal income taxes resulting from these
gains. Proceeds from these sales were used for working capital and to fund the
development of the Company's wireless technologies, as well as for the
repayment of $1,600,000 of short-term obligations in March 1996.

         Portatel has long-term debt obligations under various credit
facilities with a U.S. bank and various related parties (the "Portatel Credit
Agreements"). Such long-term obligations are denominated in U.S. dollars and
were incurred for working capital, including the purchase and construction of
cellular telephone infrastructure equipment. The outstanding debt under the
Portatel Credit Agreements is guaranteed by a cellular equipment vendor of
Portatel (the "Guarantor"). During 1995 and January 1996, Portatel failed to
meet a portion of its debt obligations under such credit facilities.
Accordingly, payments were made by the Guarantor to Portatel's lenders on
Portatel's behalf. Such amounts are included in current liabilities at
September 30, 1996. As a result of Portatel's failure to make such payments, 
the Guarantor had the right to require Grupo to transfer to the Guarantor 40% 
of the stock of Portatel held in trust as collateral for such guarantee, but 
did not exercise its right to acquire 



such shares. Grupo, Portatel and certain shareholders of Grupo (including the
Company) entered into a Contribution Agreement with the Guarantor, effective
January 31, 1996, to convert the payments made by the Guarantor in 1995 and

January 1996 on behalf of Portatel into capital stock of Grupo. Closing under
the Contribution Agreement is contingent upon certain Mexican regulatory
consents and approvals, the last of which is currently expected to be obtained
in the fourth quarter of 1996. Upon closing, excluding the effects of the AP
Agreement, the conversion provided for in the Contribution Agreement will result
in a reduction of the Company's ownership interest in Grupo from 30.2% to
approximately 23.6%. The effect of the anticipated reduction in the Company's
ownership interest in Grupo will be a reclassification of $14,952,000 between
due to cellular equipment vendor and minority interests on the Company's
consolidated balance sheet. The Guarantor will continue to guarantee the
remaining debt of Portatel of $11,279,000 at September 30, 1996, secured by an
approximate 30.7% equity interest in Portatel.

         Grupo and Portatel have no external available lines of credit as of
September 30, 1996. The Company may be required to meet additional capital
requirements with respect to its ownership interest in Grupo, and is committed
to making additional loans to the Grupo stockholder who is a Mexican national
and a party to the AP Agreement for a portion of any such capital requirements
with respect to his ownership interest.

         Net cash used in operating activities was $23,960,000 and $13,216,000
for the nine months ended September 30, 1996 and 1995, respectively. The
Company's operating cash needs increased in the 1996 period primarily for
direct research and development expenses and ACom start-up expenses (including
the advance to the ACom Executive discussed in Note 7 to the consolidated
financial statements included elsewhere herein), as well as for interest
expense. The 1995 period includes payments for accrued transaction expenses of
$5,433,000 related to the December 1994 merger and spin-off of the Company from
Associated Communications Corporation. Net cash used in investing activities
was $8,087,000 and $1,827,000 for the nine months ended September 30, 1996 and
1995, respectively. The increase in net cash used in investing activities of
$6,260,000 was primarily due to $2,639,000 paid for WCEZ-FM, $3,056,000 in
capital expenditures which are primarily for the build-out of the ACom
microwave network, and equity investments of $3,530,000 in Teletrac, Inc.
("Teletrac") in the 1996 period. These cash outlays were partially offset by
proceeds of $3,414,000 from the sale of marketable equity securities in the
1996 period. The Company's borrowings comprise most of the net cash provided by
financing activities in the 1996 and 1995 periods of $32,829,000 and
$13,643,000, respectively. The increase between periods is primarily the result
of higher borrowings in the 1996 period to finance the investing and operating
activities described above.



Operating Results for the Three Months Ended September 30, 1996, Compared
  to the Three Months Ended September 30, 1995

         Total revenues and revenues from wireless communication services
increased $4,123,000 and $3,698,000, respectively, in the 1996 period compared
to the 1995 period. The majority of the increases is attributable to the
inclusion of cellular communication revenues resulting from the consolidation
of Grupo described above. Cost of wireless communication services also
increased between periods principally due to the consolidation of Grupo.


         Broadcasting revenues increased $362,000, or 75% for the 1996 period
compared to the 1995 period, and the cost of radio broadcasting increased
$24,000, or 15%. The increase in revenues and costs is principally the result
of the acquisition of WCEZ-FM in the second quarter of 1996.

         Art gallery revenues and cost of sales increased $63,000 and $51,000,
respectively, for the 1996 period compared to the 1995 period. The increases
reflect higher valued sales in the 1996 period as compared to the third quarter
of 1995.

         Direct research and development expenses were $2,392,000 and
$1,974,000 in the 1996 and 1995 periods, respectively. The increase in 1996 was
primarily due to increased expenditures for TruePosition(trademark), the
Company's cellular telephone and wireless transmitter location system. Sales,
general and administrative 



expenses were $7,818,000 and $2,481,000 in the 1996 and 1995 periods,
respectively. The increase from 1995 to 1996 of $5,337,000 was the result of the
consolidation of Grupo, as well as start-up expenditures for ACom, which began
providing microwave services in the third quarter of 1996. The increase in
depreciation and amortization expense from 1995 to 1996 of $1,054,000 was
primarily the result of the consolidation of Grupo.

         The Company's equity in loss of affiliates was $618,000 and $702,000
in the 1996 and 1995 periods, respectively. Due to the consolidation of Grupo
in the 1996 period, the Company's equity in loss of affiliates in 1996 reflects
only the Company's approximate 20% share of the results of Teletrac for the
three months ended September 30, 1996. The Company's initial equity investment
in Teletrac was made in November 1995. The Company's equity in loss of
affiliates in the 1995 period reflects only the Company's share of the results
of Grupo for the three months ended September 30, 1995.

         Interest and dividend income was $523,000 and $250,000 in the 1996 and
1995 periods, respectively. The increase in 1996 of $273,000 is the result of
additional interest income on notes receivable included as a result of the
formation and consolidation of Grupo Holdings. Interest expense was $1,108,000
and $455,000 in the 1996 and 1995 periods, respectively. The increase in 1996
of $653,000 is the result of the consolidation of the financial statements of
Grupo and an increase in the level of outstanding short-term obligations.
Minority interests increased $2,478,000 in the 1996 period over the 1995
period, reflecting the 45% outside ownership interest in ACom, as well as the
69.8% and 38.4% third-party ownership interests in Grupo and Grupo Holdings,
respectively, also described above.

         The Company recognized an income tax benefit (net of foreign tax
expense of Grupo) at an effective rate of approximately 35% and 34% in the 1996
and 1995 periods, respectively. The tax benefit recorded for the three months
ended September 30, 1996 includes approximately $1,766,000 of net operating
loss. Based on current projections, the Company anticipates it will generate a
net operating loss for federal income taxes for the year ended December 31,
1996.


         The Company's net loss was $4,966,000 for the three months ended
September 30, 1996, compared to a net loss of $3,339,000 for the three months
ended September 30, 1995. The primary reason for the increased loss of
$1,627,000 in the 1996 period was increased research and development costs
relating to TruePosition(trademark) of $418,000, start-up expenditures for ACom,
and the equity in loss of affiliates of $618,000 relating to the Company's
investment in Teletrac. The consolidation of the financial statements of Grupo
had no effect on the Company's consolidated net loss.



Operating Results for the Nine Months Ended September 30, 1996, Compared 
  to the Nine Months Ended September 30, 1995

         Total revenues and revenues from wireless communication services
increased $11,364,000 and $11,022,000, respectively, in the 1996 period
compared to the 1995 period. These increases are attributable to the inclusion
of cellular communication revenues resulting from the consolidation of Grupo
described above. The cost of wireless communication services also increased as
a result of the consolidation of costs for Grupo.

         Broadcasting revenues increased $356,000, or 25% for the 1996 period
compared to the 1995 period, and the cost of radio broadcasting increased
$86,000, or 20%. 1996 revenues and costs reflect the acquisition of WCEZ-FM in
the second quarter of 1996.

         Art gallery revenues decreased $14,000, or 3% for the 1996 period
compared to the 1995 period. The decrease in art gallery revenues for the nine
months ended September 30, 1996 reflects a decline in sales volume in the first
half of 1996. The cost of art sales decreased $66,000, or 17% in the 1996
period compared to the 1995 period due to the reduced sales volume in the 1996
period and inventory reserve adjustments in the 1995 period.

         Direct research and development expenses were $6,075,000 and
$4,210,000 in the 1996 and 1995 periods, respectively. The increase in 1996 was
primarily due to increased expenditures for TruePosition(trademark). 




Sales, general and administrative expenses were $16,355,000 and $7,556,000 in
the 1996 and 1995 periods, respectively. The increase from 1995 to 1996 of
$8,799,000 was the result of the consolidation of Grupo, as well as start-up
expenditures for ACom, which began providing microwave services in the third
quarter of 1996. The increase in depreciation and amortization expense from 1995
to 1996 of $2,898,000 was primarily the result of the consolidation of Grupo.

         The Company's equity in loss of affiliates was $1,412,000 and
$1,859,000 in the 1996 and 1995 periods, respectively. Due to the consolidation
of Grupo in the 1996 period, the Company's equity in loss of affiliates in 1996
reflects only the Company's approximate 20% share of the results of Teletrac
for the nine months ended September 30, 1996. The Company's initial equity
investment in Teletrac was made in November 1995. The Company's equity in loss
of affiliates in the 1995 period reflects only the Company's share of the

results of Grupo for the nine months ended September 30, 1995.

         The $3,398,000 gain on the sale of marketable equity securities in the
1996 period is the result of the sale of 41,598 shares of TCI Class B 6%
Cumulative Redeemable Exchangeable Junior Preferred Stock and 90,000 shares of
General Communication, Inc. Class A Common Stock. Interest and dividend income
was $1,651,000 and $968,000 in the 1996 and 1995 periods, respectively. The
increase in 1996 of $683,000 is the result of additional interest income on
notes receivable included as a result of the formation and consolidation of
Grupo Holdings. Interest expense was $3,115,000 and $1,179,000 in the 1996 and
1995 periods, respectively. The increase in 1996 of $1,936,000 is the result of
the consolidation of the financial statements of Grupo and an increase in the
level of outstanding short-term obligations. Minority interests increased
$3,830,000 in the 1996 period over the 1995 period, reflecting a 45% outside
ownership interest in ACom, as well as the 69.8% and 38.4% third-party
ownership interests in Grupo and Grupo Holdings, respectively, also described
above.

         The Company recognized an income tax benefit (net of foreign tax
expense of Grupo) at an effective rate of approximately 34% in both the 1996
and 1995 periods. The tax benefit recorded for the nine months ended September
30, 1996 includes approximately $3,525,000 of net operating loss. Based on
current projections, the Company anticipates it will generate a net operating
loss for federal income taxes for the year ended December 31, 1996.

         The Company's net loss was $9,768,000 for the nine months ended
September 30, 1996, compared to a net loss of $8,500,000 for the nine
months ended September 30, 1995. The primary reason for the increased
loss of $1,268,000 in the 1996 period was increased research and
development costs relating to TruePosition(trademark) of $1,865,000,
increased interest expense,  start-up  expenditures for ACom, and the
equity loss of affiliates of $1,412,000 relating to the Company's
investment in Teletrac. Such expenses and loss were offset in part by
the gain on marketable equity securities of $3,398,000. The
consolidation of the financial statements of Grupo had no effect on the
Company's consolidated net loss.




PART II--OTHER INFORMATION

Item 1.  Legal Proceedings

         On August 30, 1996, the Federal Communications Commission ("FCC")
issued an Order (the "Freeze Order") freezing the filing of applications for
new licenses (including amendments and modifications to existing licenses) for
Digital Electronic Message Services ("DEMS") in the 18 GHz frequency band. MSI
and Digital Services Corporation ("DSC"), a joint venture equity participant in
ACom, hold DEMS licenses in the top 31 U.S. markets in the 18 GHz band. The
Freeze Order freezes ACom's pending applications for spectrum in markets
outside the top 31 markets pending the outcome of an FCC review of the current
licensing approach and related issues in the 18 GHz band. The Freeze Order
specifically authorizes existing DEMS licensees, including MSI and DSC, to
continue to build out their licensed markets, subject to limited conditions in
certain markets. On September 30, 1996, MSI and DSC filed a joint petition for
reconsideration of the Freeze Order requesting clarification or amendment of
portions thereof.

         Teledesic Corporation ("Teledesic") and MSI and DSC have filed
petitions and pleadings with the FCC with respect to the grant of DEMS licenses
held by MSI and DSC, and whether or not Teledesic's proposed satellite system
can frequency coordinate in the 18 GHz band with existing licensed terrestrial
microwave networks and therefore co-exist in the 18 GHz band. MSI and DSC have
consistently asserted, and continue to assert, that the satellite and
terrestrial networks can co-exist pursuant to traditional frequency
coordination procedures. On September 6, 1996, Teledesic, which is not
currently a FCC licensee of spectrum in the 18 GHz band, filed a Consolidated
Petition to Deny and Petition to Determine Status of Licenses with respect to
the DEMS licenses held by MSI and DSC. On September 16, 1996, MSI and DSC filed
with the FCC a Joint Petition to Deny Teledesic's Applications for a
Non-Geostationary Orbit Fixed Satellite Service System, seeking a denial of
Teledesic's application for licenses in the 18 GHz band on the grounds that, in
its FCC applications, Teledesic misled the FCC about Teledesic's ability to
coordinate with terrestrial microwave networks. In its Consolidated Petition
and other FCC filings, Teledesic states that it was unaware of the FCC's public
notice process pursuant to which MSI was granted DEMS licenses and that it
cannot co-exist with terrestrial based microwave networks.

         MSI is continuing to build out its existing licensed DEMS markets. MSI
and ACom believe, and continue to assert before the FCC, that Teledesic's
allegations are completely without merit, factually and legally, and are
cooperating with the FCC in an effort to resolve the aforementioned
proceedings. The Company does not believe that the resolution of such
proceedings will have a material adverse effect on the Company, its financial
condition, or its results of operations.





Item 3.  Defaults Upon Senior Securities


         See Note 10 to the Company's consolidated financial statements
         included herein, which is incorporated herein by reference.


Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits.  The following exhibits are filed as part of this Form
                        10-Q:

                  Exhibit
                  Number                    Description

                     3.1    Restated Certificate of Incorporation, filed as
                            Exhibit 3.1 to Registration Statement on Form 10/A
                            dated November 15, 1994 and incorporated herein by
                            reference.

                     3.2    Amended and Restated By-Laws, filed as Exhibit 3.2
                            to Registration Statement on Form 10/A dated
                            November 15, 1994 and incorporated herein by
                            reference.

                     4.1    Common Stock Certificates, filed as Exhibits 4.2
                            and 4.3 to Form 8-K, dated December 22, 1994 and
                            incorporated herein by reference.

                     4.2    Rights Agreement, dated as of December 15, 1994, by
                            and between the Company and Mellon Bank, N.A.,
                            filed as Exhibit 4.1 to Form 8-K, dated December
                            22, 1994 and incorporated herein by reference.

                    10.2    Employment Agreement, dated as of August 19, 1996,
                            between Associated Communications, L.L.C. and Alex
                            J. Mandl, filed as Exhibit 99.2 to Form 8-K, dated
                            September 6, 1996 and incorporated herein by
                            reference.

                      27    Article 5 Financial Data Schedule for Quarterly
                            Report on Form 10-Q for the quarter ended September
                            30, 1996.


         (b) Reports on Form 8-K.  There was one report on Form 8-K filed in the
             third quarter of 1996:

                  September 6, 1996--Reporting that effective September 1,
                  1996, Alex J. Mandl, former president and chief operating
                  officer of AT&T Corporation, became Chairman and Chief
                  Executive Officer of Associated Communications, L.L.C., a
                  majority owned subsidiary of the Company.




                                  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.




                                            THE ASSOCIATED GROUP, INC.
                                                  (Registrant)




Date:  November 13, 1996                    By:  /s/ Myles P. Berkman
                                                 --------------------
                                                 Myles P. Berkman
                                                 Chairman, President, 
                                                 Chief Executive Officer
                                                 and Treasurer (Principal 
                                                 Financial and Accounting 
                                                 Officer)




                                       
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                              Page Where
                                                                                               Found or
   Exhibit                                                                                   Incorporated
   Number                                                                                    by Reference
   -----------                                                                             -----------------
<S>                                                                                        <C>
     3.1      Restated Certificate of Incorporation, filed as Exhibit 3.1 to
              Registration Statement on Form 10/A dated November 15, 1994 and                     *
              incorporated herein by reference.

     3.2      Amended and Restated By-Laws, filed as Exhibit 3.2 to Registration                  *
              Statement on Form 10/A dated November 15, 1994 and incorporated herein by
              reference.

     4.1      Common Stock Certificates, filed as Exhibits 4.2 and 4.3 to Form
              8-K, dated December 22, 1994 and incorporated herein by reference.                  *

     4.2      Rights Agreement, dated as of December 15, 1994, by and between
              the Company and Mellon Bank, N.A., filed as Exhibit 4.1 to Form                     *
              8-K, dated December 22, 1994 and incorporated herein by
              reference.

    10.2      Employment Agreement, dated as of August 19, 1996, between Associated               *
              Communications, L.L.C. and Alex J. Mandl, filed as Exhibit 99.2 to Form
              8-K, dated September 6, 1996 and incorporated herein by reference.

      27      Article 5 Financial Data Schedule for Quarterly Report on Form
              10-Q for the quarter ended September 30, 1996.                                      **
</TABLE>
------------------
*    Previously filed and incorporated by reference
**  Filed only electronically with the Securities and Exchange Commission