<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                        ------------------------------

                                   FORM 10-K

|X|  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

|_|  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from ________ to _________

For the Year Ended December 31, 1998            Commission File Number 000-21091
                                     ----------

                         ADVANCED RADIO TELECOM CORP.
            (Exact name of registrant as specified in its charter)


                Delaware                                     52-1869023
      (State or other jurisdiction                        (I.R.S. Employer
   of incorporation or organization)                     Identification No.)

          500 108th Avenue, NE
               Suite 2600
          Bellevue, Washington                                  98004
(Address of principal executive offices)                     (Zip Code)

                                (425) 688-8700
             (Registrant's telephone number, including area code)
                                 -------------

          Securities registered pursuant to Section 12(b) of the Act:


                                                        Name of Each Exchange
  Title of Each Class                                     on Which Registered
  -------------------                                   ---------------------
          None                                                  None

          Securities registered pursuant to Section 12(g) of the Act:

  Title of Each Class:                           Common Stock ($.001 Par Value)
  --------------------                                                         
     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 [_].

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

     The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $271 million on April 12, 1999, based on the
closing sales price of the registrant's common stock as reported on the Nasdaq
National Market as of such date.

     The number of shares outstanding of each of the registrant's classes of
common stock as of April 12, 1999 was as follows:

        Common Stock, $.001 par value:  27,142,409

                      DOCUMENTS INCORPORATED BY REFERENCE

     The following documents are incorporated herein by reference: PART III:
Portions of the Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the Registrant's 1999
Annual Meeting of Stockholders.

                         Exhibit Index is on page 24.
<PAGE>
 
                                    PART I

ITEM 1.  BUSINESS

     Advanced Radio Telecom Corp. ("ART" or the "Company") intends to become the
leading provider of broadband Internet services to businesses not served by
fiber-optic networks. Utilizing its national footprint of 38 GHz spectrum
licenses, the Company currently serves Seattle, Washington, Portland, Oregon,
and Phoenix, Arizona and plans to serve up to 100 of the top metropolitan
markets over the next five years. With Lucent Technologies, Inc. ("Lucent") as
the Company's technology partner, the Company is building its own fixed
wireless, packet-based broadband data networks utilizing Internet Protocol
("IP") and Asynchronous Transfer Mode ("ATM") technology. As networks are
deployed and interconnected using a leased fiber-optic backbone, ART plans to
provide its customers with end-to-end connectivity on a metropolitan, regional
and national basis. ART offers an integrated package of data solutions including
Internet access, web hosting, web based content, virtual private networks, web
design and Internet portal service and intends to also offer electronic commerce
applications, multimedia services, voice and fax over IP and other value-added
data services.

     The data services market has been the fastest growing segment of the
communications industry over the last five years, expanding at a rate five times
faster than voice. Bandwidth-intensive data applications require high-speed
connectivity that today is generally only available on fiber-optic networks.
However, approximately 95% of U.S. commercial buildings are not currently served
by fiber and receive their data services through the copper telephone networks
provided by the incumbent local exchange carriers ("ILECs"). These copper
networks are limited in their ability to meet the demand for data services,
creating a "bottleneck" in the local connection to end-users. The Company
believes that a significant portion of these off-fiber buildings are not
currently economically attractive to fiber-based providers. For businesses
located in these buildings, access to the fiber backbone networks and as a
result, high-speed connectivity is generally unavailable, or is available only
at significant expense and with significant lead time.

     Recognizing this market opportunity, ART has refocused its business to
offer high-speed data connectivity and products directly to off-fiber
businesses. With its broadband data networks, the Company expects to deliver
services such as high-speed Internet access and private network services to the
customers' premises rapidly and economically.

     The Company is a Delaware corporation organized in 1993 under the name of
Advanced Radio Technologies Corporation. In October 1996, the Company through a
wholly owned subsidiary merged with Advanced Radio Telecom Corp., a corporation
organized by the Company and others in 1995 to acquire licenses and to operate
its business jointly with the Company. Upon the merger, Advanced Radio Telecom
Corp. became a wholly owned subsidiary of the Company and changed its name to
ART Licensing Corp., and the Company changed its name to Advanced Radio Telecom
Corp. In 1997 the Company acquired 129 38 GHz licenses in exchange for 6 million
shares of common stock and acquired the remaining 50% interest in a partnership
jointly owned by the Company for $6 million. The Company's original business
strategy was to sell connectivity to communications providers on a wholesale,
carriers' carrier basis.

ART's Competitive Advantages

     The Company believes that it is well-positioned to compete in offering
broadband Internet services to off-fiber commercial buildings. Advantages of
ART's wireless solution include:

     Focus on Data. ART believes it is currently the only wireless
telecommunications company focusing exclusively on data services rather than
primarily on voice telephony. Focusing on Internet applications allows ART's
networks to be completely packet-based, providing higher capacity, higher speed
data services than a circuit-switched network. ART has and intends to continue
hiring product development, technical, and sales personnel with expertise in
Internet applications and delivery, as opposed to telephony experience. ART is
directing its sales efforts toward information technology managers rather than
business managers in charge of telephony, which the Company believes will be a
sales advantage in selling Internet services.

                                      -2-
<PAGE>
 
     High-Speed, High-Capacity, High-Quality Connectivity. ART's broadband data
services are being engineered to provide high-speed, high-capacity connectivity
with quality superior to copper and comparable to fiber. Currently, ART's
wireless service provides two-way data transfer rates of up to 45 megabits per
second. Technology is available to expand the speed of two-way data transfer
rates to 155 megabits per second.

     Lower Cost Network. The Company expects its networks to cost less than its
competitors' fiber networks. The Company's fixed wireless networks do not
require the same magnitude of installation and maintenance costs as required by
fiber networks. The Company expects this cost differential to increase over time
because the cost of deploying fiber involves substantial labor and right-of-way
costs, which the Company does not expect to decrease, while the cost of ART's
networks involves substantial electronic equipment costs, which have and are
expected to continue to decline. The Company's network will be entirely
packet-based, and therefore the Company will not have to buy more expensive
circuit switches required by voice networks.

     Success-Based Capital Requirements. ART is designing its networks so that
the Company's capital will be spent incrementally as ART attracts customers,
minimizing the deployment of non-revenue generating equipment. ART's networks
are designed to reach customers within its initial clusters of buildings without
having to build out an entire market. ART's sales force initially targets
customers within hub site and other buildings ready to be connected to the ART
network, then customers in new buildings within the range of established radio
hub sites, and then customers in buildings to be connected in new clusters. As
needs change, ART's equipment can be economically and rapidly deployed or
relocated.

     Rapid Market Coverage. Leveraging its 38 GHz licenses which cover 90 of the
top 100 U.S. markets, ART intends to rapidly deploy a nationwide broadband
network dedicated to delivering data services to businesses off the fiber
network. ART believes that this rapid deployment will enable ART to establish
its position as a leading provider of broadband data services by penetrating the
market in advance of many wireline competitors who cannot or will not construct
their networks as quickly.

     Experienced Management. ART has assembled a management team with
substantial telecommunications experience. Henry C. Hirsch, ART's Chairman and
Chief Executive Officer, was formerly Vice Chairman and CEO of Williams
Communications Group and President and Chief Operating Officer of Williams
Telecommunications Systems ("WilTel"). William J. Maxwell, President and Chief
Operating Officer, previously served as Executive Vice President of Strategic
Planning, Sales and Marketing and prior to that as Executive Vice President of
ICG Communications and President of ICG Telecom Group. Robert S. McCambridge,
Executive Vice President and Chief Financial Officer, was formerly Executive
Vice President of OneComm, formerly Cable Plus Holding Company. Thomas P.
Boyhan, Executive Vice President, Sales and Marketing, previously was Senior
Vice President, National Account Sales for William's Communications Solutions, a
national systems integration company, and served as Vice President, Global
Accounts for WilTel. George R. Olexa, Executive Vice President and Chief
Technology Officer, was formerly Executive Vice President of Engineering of Dial
Call Communications Inc. and as Executive Director of Network Engineering and
Technology Applications for PacTel Cellular, was the architect of their cellular
networks in major cities in the U.S. and Europe.

Business Strategy

     ART's goal is to become a leading end-to-end solutions provider for
businesses needing a wide range of Internet based services. The Company is
implementing the following initiatives to achieve this objective:

     Target Off-Fiber Businesses. ART is focusing its primary marketing efforts
on businesses located off the fiber network. The Company identifies building
clusters in high-density off-fiber areas containing customers with high
potential for significant Internet services requirements, such as
high-technology companies that are typically located outside cities' main
business districts. Once ART deploys its network to service these initial
customers, it is able to reach new customers in the surrounding area rapidly
without having to replicate hub site infrastructure.

                                      -3-
<PAGE>
 
     Offer End-Users an Array of Broadband Internet Services. ART offers
business customers an integrated package of high-speed, Internet based services,
including Internet access, web hosting and virtual private networks and intends
to also offer electronic commerce applications, multimedia services, voice and
fax over IP and other enhanced data services. By targeting end-user customers,
ART believes it will maximize revenues and profitability.

     Develop Strategic Business Relationships. ART plans to enter into business
relationships to help the Company penetrate its markets, develop its service
offerings and provide additional distribution channels. ART intends to continue
to forge alliances with property management companies to gain access to
buildings and tenants. ART also intends to develop partnerships with
data-oriented sales agents, including local data network integrators and telecom
resellers that focus primarily on data products. ART also plans to continue to
expand its product offerings by developing relationships with web hosting
providers, electronic commerce software providers, system integrators, streaming
media providers, and other web content providers. ART will continue to seek to
develop relationships with inter-exchange carriers ("IXCs"), Internet service
providers ("ISPs"), utilities, ILECs and competitive local exchange carriers
("CLECs") to connect disparate parts of the Company's network, thereby offering
end-to-end connectivity to its customers.

     Provide Superior Customer Service. ART plans to provides superior customer
service, with service features such as a 24-hour-a-day, seven-day-a-week call
center, a network quality control system and comprehensive customer support
services. The Company plans to continue to differentiate itself from its
competitors and establish brand identity based on high quality service that is
responsive to the customer.

Network Deployment

     ART believes it is the first company to deploy state-of-the-art,
packet-based broadband metropolitan area networks ("BMANs") using IP routing and
ATM switching infrastructure. ART's BMANs are expected to provide broadband
connectivity to buildings and office campuses with significant aggregation
opportunities for a variety of Internet services. The Company will connect
buildings and campuses to the public Internet, IXCs and CLECs in a metropolitan
area.

     Over the next five years, ART intends to build BMANs in up to 100 of the
top U.S. markets. ART has initially built its networks in Seattle, Washington,
Portland, Oregon and Phoenix, Arizona. After deploying the initial hub sites,
the networks will be expanded incrementally in response to demand. Using leased
capacity on long haul fiber networks, ART plans to connect BMANs first in
neighboring markets with communities of interest, such as San Jose, Los Angeles
and San Diego, California, Las Vegas, Nevada, Tucson, Arizona, Salt Lake City,
Utah, Boise, Idaho and Spokane, Washington. Eventually, ART plans to
interconnect its BMANs into a national and global network using long haul fiber
connections. As BMANs are connected, ART will be able to offer customers
end-to-end connectivity, carrying data between two end-users through its local
wireless network in one metropolitan area, over the long haul fiber backbone,
and back through another wireless network in a different metropolitan area. As
ART interconnects its BMANs, ART will create a private inter-city IP and ATM
backbone that will allow ART to sell national intranets to its end users.

Sales & Marketing

     ART is marketing its services primarily through a direct sales force, which
is responsible for initial sales efforts in each new market. ART supports its
direct sales efforts in each market with telemarketing, direct mail and
advertising as well as with research about target markets, buildings and
customers. Lucent has agreed to provide technical support to assist ART's
salespersons with selling the Company's services to prospective customers by
assigning Lucent teams to work with ART personnel during the selling process.
ART also will employ various indirect sales channels.

                                      -4-
<PAGE>
 
     In each new market, ART uses demographic and geographic information systems
to identify those clusters of commercial buildings without access to high-speed
data services that contain tenants with significant demand for data services or
that contain large buildings with attractive opportunities for aggregating data
traffic. ART expects that its best sales opportunities will be in clusters
including office buildings, warehouses, retail buildings, office parks,
hospitals and universities. ART expects to rapidly deploy its network by
initially locating sites in each market to serve those clusters that the Company
believes present the most promising opportunities and then expanding in
secondary clusters in a market.

     In general, before any customer premise equipment is deployed in a cluster,
ART's sales personnel pre-sell its services by focusing on buildings with the
highest concentrations of significant data users. The Company simultaneously
seeks to obtain building access rights necessary to extend its network to these
new customers. Once ART begins services to a cluster, ART continues to sell
services in buildings where equipment has been deployed and will target
additional buildings within the cluster. ART will then expand its network within
the market by deploying additional clusters using the same process.

     ART believes that its data focus provides it with a significant advantage
in selling its services. Sales of data services are technical in nature, and
therefore, the Company has hired and continues to hire sales personnel in each
market who are experienced in selling and implementing data services, rather
than a sales force experienced in voice telephony. ART's data focus enables its
direct sales personnel to tailor their selling efforts to a potential customer's
information technology decision-marker, rather than the voice telephony
decision-maker. ART expects that these information technology decision-makers
will directly drive the demand for high-bandwidth broadband data services by its
target customers.

     In order to increase the scope and speed of its market penetration, ART
intends to supplement its direct sales efforts by utilizing various indirect
sales channels. ART will seek to develop relationships with data-oriented sales
agents, including local data network integrators and telecom resellers focusing
on data. These sales agents could provide ART with access to a greater number of
data-oriented business customers in each market. In addition to these
traditional indirect sales channels. ART plans to continue marketing to
nationally positioned property management companies to gain access to their
tenants and to secure roof rights necessary to deploy ART's networks.

     ART also plans to seek relationships with a variety of telecommunications
carriers to assist the Company in developing its networks, more rapidly
penetrating its markets, reducing its operating costs, and creating additional
revenue opportunities. The Company believes it would be an attractive partner
for a variety of telecommunications carriers which may be willing to jointly
deploy data networks and share capacity and revenue opportunities. For example,
capacity-swaps between ART and domestic and international high-speed data
carriers could be mutually advantageous, helping those carriers build
high-speed, packet data networks using IP technology. Capacity-swaps with
smaller fiber carriers and IXCs could provide the fiber carriers and IXCs with
broadband local access. ART believes its high-speed, high-capacity connectivity
also may be attractive to ISPs, helping them develop markets quickly,
differentiate their service from other ISPs, increase their margins and serve
higher volumes of customers.

Products and Services

     ART provides broadband Internet solutions. The Company is deploying its
networks on an initial basis to support a comprehensive and fully-integrated
product line that is designed to meet the broadband Internet telecommunications
needs of business customers located off the fiber network.

     Internet Access. ART offers business customers an end-to-end Internet
access solution by providing high-speed Internet access over ART's wireless data
networks. ART's Internet Access offering ranges in speed from 64 kilobits per
second to 10 megabits per second. ART is providing Internet service in
conjunction with one or more Internet transit partners. ART intends to partner
with additional Internet transit providers that are utilizing a private network
access point ("PNAP") strategy. It is ART's belief that a PNAP configuration
provides a higher speed Internet experience.

                                      -5-
<PAGE>
 
     Hosting Services. ART currently offers a shared web hosting service. The
service is based on state-of-the-art servers and is located in an
environmentally-controlled equipment room that is staffed 24 hours a day. The
server farm is connected to the network via a redundant DS-3 backbone
connection. ART is planning to offer dedicated web hosting service as well as
collocation service for web hosting customers that require support for a
stand-alone server or need support for a customer-owned server.

     Web Design Services. ART offers web design services for those customers
that require assistance in creating and maintaining a web site.

     Remote Access Service. ART provides remote access services to customers who
wish to access their local area network through the Internet or wish to remotely
access the Internet.

     Internet Portal. ART offers a portal that is used by customers to access
the Internet. The portal can be customized by geographic region and by the
end-user's interests.

     Internet Value-Added Services. ART offers an array of value-added Internet
services, including domain name service, IP Fax, local caching, e-mail service,
web hosting, security services and news services.

     Gateway Services. ART's Gateway Services provide broadband connectivity
between end-users or between a wholesale customer's networks. Gateway Services
connect end-users' private networks, including remote office LAN and client
server interconnectivity, integrated voice, multimedia and data offerings.
Gateway services also enable ART to create virtual private networks ("VPNs") or
intranets, facilitating enterprise-wide communications with local and national
private networking capabilities. Gateway Services also offer end-users extranet
services giving outside customers and clients access to specific elements within
an end user's VPN or intranet. Gateway Services will support ATM, IP, Ethernet
and Frame Relay technologies.

     Future Products and Services. ART plans to offer an array of other services
which are currently under development. ART expects future Internet services will
include security service and security consulting services, distributed network
caching and electronic commerce services, IP voice and IP video conferencing
service, multimedia streaming applications, network consulting and other
value-added services as they are developed.

ART's Network

     ART is deploying a state-of-the-art packet-based broadband network using
wireless facilities interfaced with the fiber backbone in metropolitan areas and
nationally to provide end-to-end, high-bandwidth data services. ART has been
building packet-switched, point-to-point fixed wireless BMANs using ATM,
Ethernet, Frame Relay and IP technologies. ART intends to incorporate
point-to-multipoint equipment as soon as it becomes commercially available.

     The network equipment uses digital wireless technology designed to deliver
high-quality data services that ART believes is comparable in quality to
fiber-based systems. The Company will use radio hubs to transmit to and receive
signals from wireless equipment on customers' premises. The customers' premises
equipment includes two components: (1) an integrated antenna/radio unit
installed on the roof or an exterior wall and (2) the indoor customer interface
equipment installed within the building. The radio/antenna unit will communicate
with the hub via radio signal. The base stations hubs will have an average
line-of-sight service radius of approximately one mile, depending on a number of
factors such as power levels used and local weather environment. A
point-to-multipoint hub will have the capability to support customers within
line-of-sight in every direction within a 360 degree coverage area.

     The Company's point-to-multipoint hardware and network capacity will be
shared among all the customers within the coverage area of a hub sector. A key
feature of the Company's network architecture will be its ability to provide
bandwidth-on-demand, giving customers as much or as little bandwidth as they
need.

                                      -6-
<PAGE>
 
     Traffic between hub sites and the Company's ATM switching centers will be
carried over a backhaul network that will be a combination of wireless links and
fiber-optic transmission facilities, as appropriate. The Company expects to work
with fiber network providers, through leasing arrangements or partnerships.

38 GHz Wireless Broadband Licenses

     The FCC has allocated the 38.6-40.0 GHz (the "38 GHz") band for wireless
broadband transmissions consisting of fourteen 100 MHz channels for the
provision of wireless telecommunications services within a specified geographic
footprint.

     The Company owns 363 38 GHz licenses (excluding certain licenses being
transferred pursuant to the option described below). Taken together, these
licenses allow the Company to provide 38 GHz wireless broadband services in 210
U.S. markets, allowing it to provide between 100 and 500 MHz of transmission
capacity in 90 of the top 100 U.S. markets. An option to acquire from the
Company 12 38 GHz licenses in specified markets in which the Company has more
than one license was exercised in June 1997, with closing subject to FCC
approval. The Company has the right to be a reseller with respect to these
licenses for a term of five years at market rates.

     The Company may selectively utilize other radio frequencies to provide its
services under certain circumstances. The Company may seek to acquire additional
licenses or businesses which hold licenses to expand its geographic footprint or
to enhance its ability to provide service within its current markets.

Foreign Licenses

     Foreign subsidiaries of the Company have been granted broadband wireless
authorizations covering Norway, Denmark and the United Kingdom which allow the
provision of broadband wireless connectivity for communications services with
certain limitations. Other foreign subsidiaries have applied for licenses in
other countries. There can be no assurance that any of these entities will be
able to acquire, retain or exploit licenses, comply with applicable license
restrictions, obtain any other necessary governmental approvals, obtain
financing, implement business plans or operate in any country on a profitable
basis or at all.

Competition

     ART does not believe any other company is currently offering broadband
Internet services to off-fiber businesses. However, ART faces significant
competition from other entities that currently or could in the future deliver
data services over copper wire, fiber and wireless networks, including ISPs, web
hosting and web application providers, ILECs, CLECs, fiber service providers,
cable television operators, wireless service providers and satellite
communications companies. In addition, the consolidation of telecommunications
companies and the formation of strategic alliances and cooperative relationships
in the telecommunications and related industries, as well as the development of
new technologies, could give rise to significant new competitors to the Company.
The Company expects to compete primarily on the basis of responsiveness to
customer needs, features, service, quality, price, high-speed services and
reliability. There can be no assurance that the Company will be able to compete
effectively in any of its market areas with any of its existing and potential
competitors. Many of the Company's competitors have long-standing relationships
with customers and suppliers, greater name recognition and greater financial,
technical and marketing resources than the Company. As a result, these
competitors, among other things, may be able to develop and exploit new or
emerging technologies or adapt to changes in customer requirements more quickly
than the Company or devote greater resources to the marketing and sale of their
services than the Company.

     ISPs. The Company faces significant competition from ISPs which deliver
Internet access services as well as valued-added, web-based services. ART
competes against Tier 1, Tier 2, and Tier 3 ISPs. Tier 1 ISPs generally have
substantial brand recognition and a robust suite of value-added, web-based
services. Tier 2 and Tier 3 ISPs have regional brand recognition and are
expanding rapidly with low-cost services like digital subscriber line ("DSL")
services.

                                      -7-
<PAGE>
 
     Web Hosting and Application Providers. The Company faces significant
competition from web hosting and web application providers. These companies
specialize in niche markets and offer value-added, web-based services that
compete directly with ART's value-added services.

     ILECs' Copper Networks. The Company faces significant competition from
incumbent LECs, which typically deliver data services over copper networks.
Incumbent LECs have long-standing relationships with their customers and
substantial name recognition. In addition, the incumbent LECs have employed or
will likely employ digital subscriber line products such as ADSL (asymmetrical
digital subscriber line), which is currently available. Commercial DSL services
currently are limited to 7 megabits of throughput downstream and 1 megabit of
throughput upstream. ART currently has the capability to provide much higher
bandwidth.

     Fiber Networks. The Company also faces competition from expanding
fiber-optic networks owned by incumbent and competitive LECs, IXCs, electric
utilities and other companies. Many of these companies have greater name
recognition and greater financial, technical and marketing resources than the
Company. Fiber-optic service generally offers broadband connectivity that is
comparable, if not superior to, the company's wireless broadband connections. In
addition, fiber technology may enjoy a greater degree of market acceptance than
wireless broadband technology.

     Coaxial Cable Networks. The Company is likely to face competition from
cable television operators deploying cable modems, which provide high-speed data
capability over installed coaxial cable television networks, and there can be no
assurance that such competition will not be significant. Notwithstanding the
cable industry's interest in rapid deployment of cable modems, the Company
believes that in order to provide broadband capacity to a significant number of
businesses and government users, cable operators will be required to spend
significant time and capital in order to upgrade their existing networks to a
more advanced hybrid fiber coaxial network architecture and to extend these
networks to reach businesses. However, there can be no assurance that cable
modems will not emerge as a significant source of competition.

     Other Fixed Wireless Networks. The Company also faces competition from
other fixed wireless service providers within its market areas including WinStar
Communications, Inc., Teleport Communications Group, Inc. ("TCG") and Teligent,
Inc. ("Teligent"). In many cases, one or all of these service providers hold
licenses to operate in the Company's market areas. WinStar and Teligent have
positioned themselves as wireless CLECs, and therefore will compete with the
Company in offering off-fiber connectivity to businesses and buildings, with the
potential to offer broadband data services. TCG, which AT&T has acquired, also
has the ability to provide wireless broadband services. All three companies have
substantially greater financial resources than the Company.

     Various other entities also have 38 GHz and other wireless broadband
licenses. Due to the relative ease and speed of deployment of fixed wireless
technology, the Company could face intense price competition and competition for
customers from other service providers.

     The Company also faces potential competition from new entrants acquiring
licenses from FCC auctions. The FCC has recently auctioned 28 GHZ LMDS licenses
in all markets for the provision of high-capacity, wide-area fixed wireless
point-to-multipoint systems. LMDS licensees may use the spectrum to offer a
variety of services such as multichannel video programming, telephony, video
communications and data services in competition with the Company. The FCC has
announced an auction of geographical wide area licenses for the operation of
fixed wireless point-to-point and point-to-multipoint communications services in
the 38 GHz band.

     MMDS service, provided at the 2 GHz spectrum band, also known as "wireless
cable," and ISM service also compete for metropolitan wireless broadband
services. At present, wireless cable licenses are used primarily for the
distribution of video programming and have only a limited capability to provide
two-way communications needed for wireless broadband telecommunications
services, but there can be no assurance that this will continue to be the case.

                                      -8-
<PAGE>
 
     In January 1997, the FCC allocated 300 MHz of spectrum in the 5 GHz band
for unlicensed devices to provide short-range, high-speed wireless digital
communications. These frequencies must be shared with incumbent users without
causing interference. The allocation was designed to facilitate the creation of
new wireless local area networks, and thus may compete with the Company's
strategy of providing wireless connections between LANs. It is too early to
predict, however, how and to what extent this particular frequency may be used
in competition with the Company.

     Mobile Wireless Networks. Cellular, personal communications services and
other mobile service providers may also offer data services over their licensed
frequencies. The FCC has also allocated a number of spectrum blocks for use by
wireless devices that do not require site or network licensing. A number of
vendors have developed such devices, which may provide competition to the
Company particularly for certain low-speed data transmission services. However,
ART has positioned itself to provide high-speed Internet services, and mobile
wireless networks generally offer lower transmission speeds.

     Satellite Networks. Many other companies have filed applications with the
FCC to develop global broadband satellite systems which may be used to provide
broadband voice and date services. Satellite is currently a broadcast medium in
which two-way communications are not readily available. However, if the
satellite providers can develop two-way communications, this could represent a
significant competitive threat.

Government Regulation

     The Company's wireless broadband services are subject to regulation by
federal, state and local governmental agencies. At the federal level, the FCC
has jurisdiction over the use of the electromagnetic spectrum (i.e., wireless
services) and has exclusive jurisdiction over all interstate telecommunications
services, that is, those that originate in one state and terminate in another
state. State regulatory commissions have jurisdiction over intrastate
communications, that is, those that originate and terminate in the same state.
Municipalities may regulate limited aspects of the Company's business by, for
example, imposing zoning requirements and requiring installation permits.

Federal Regulation

     FCC Licensing. The Communications Act of 1934, as amended, and the FCC
Rules and Regulations ("Communications Laws") impose requirements on radio
licensees and carriers, including, among other things, regulations on the
ownership, operation, acquisition and sale of the broadband operating radio
systems that are needed to provide the services offered by the Company. On
October 24, 1997, the FCC issued a Report and Order and Second Notice of
Proposed Rulemaking ("Order") that substantially modified the regulations
applied to 38 GHz licensees, such as the Company. The Order allocated new
spectrum at 37.0-38.6 GHz; conformed the rules for operation in the 37.0-38.6
GHz band with the rules for operation in the 38.6-40.0 GHz band; modified
certain operational rules for both bands; adopted a competitive bidding
licensing scheme for authorizing new spectrum in these bands over geographic
areas defined by the Rand-McNally Basic Trading Areas ("BTAs") and, adopted
rules for the protection of incumbent licensees, such as the Company.

     The new operational rules generally expand the flexibility of licensees
operating in the 37.0-40.0 GHz band. For example, licensees are now permitted to
offer point-to-multipoint and point to point services, and will be permitted to
provide mobile services upon adoption of inter-licensee coordination policies.

     All of the 38 GHz licenses owned or to be acquired by the Company are due
to expire in February of 2001. Under the new operational rules, the Company will
be entitled to a "renewal expectancy," a dispositive preference in renewal
proceedings, for a license if the Company can demonstrate that it is providing
"substantial service" within the licensed area when it files its renewal
application. The FCC has not provided definitive guidance on what level of
service is considered "substantial." If the Company were not to receive a
renewal expectancy, the Company's operations could be adversely affected.

                                      -9-
<PAGE>
 
     Under the FCC's rules, the Company is also subject to certain build-out
requirements. The Company must construct facilities to place each licensed
station in operation within 18 months of the date of grant of the license.
Although, under current FCC regulations, the term "in operation" is not defined
beyond the requirement that the station be capable of providing service, the
industry custom is to establish at least one link between two transceivers in
each licensed market area. Failure to meet the construction deadline results in
the automatic cancellation of the license. In addition, if a station does not
transmit operational traffic (not test or maintenance signals) for a consecutive
period of twelve months at any time after construction is complete, or if
removal of equipment or facilities renders the station incapable of providing
service, the license is subject to cancellation or forfeiture, absent a waiver
of the FCC's rules.

     Petitions for reconsideration of various aspects of the Order, including
but not limited to the treatment of pending applications and amendments, have
been filed by a number of parties, including the Company. It is not possible to
determine when the FCC will act on these petitions or what changes, if any, will
be made to the final rules. Thus, there can be no assurance that the final rules
will not have a material adverse effect on the Company's operations.

     The FCC has not yet scheduled an auction for licenses in the 37.0-40.0 GHz
band. The Company has not made a determination as to whether it would seek
additional licenses in the event of an auction.

     Competition. Over the last several years, the FCC has issued a series of
decisions and Congress has recently enacted legislation making the interstate
access services market more competitive by requiring reasonable and fair
interconnection by LECs. The Telecommunications Act of 1996 substantially
departs from prior legislation in the telecommunications industry by
establishing local exchange competition as a national policy through the removal
of state regulatory barriers to competition and the preemption of laws
restricting competition in the local exchange market. The provisions of the
Telecommunications Act are designed to ensure that regional Bell operating
companies ("RBOCs") take affirmative steps to level the playing field for their
competitors so that Competitive Access Providers, CLECs and others can compete
effectively. The FCC, with advice from the United States Department of Justice,
and the states are given jurisdiction to enforce these requirements. There can
be no assurance, however, that the states and the FCC will implement the
Telecommunications Act in a manner favorable to the Company.

State Regulation

     Many of the Company's services, either now or in the future, may be
classified as intrastate and therefore may be subject to state regulation. Under
current state regulatory schemes, entities can compete with ILECs in the
provision of (i) local access services, (ii) dedicated access services, (iii)
private network services, including WAN services, for businesses and other
entities and (iv) long distance toll services.

Research and Development

     During 1998, 1997 and 1996, the Company spent $593,595, $421,236 and
$1,269,579, respectively, with respect to research and development.

Employees

     As of March 1, 1999 the Company had a total of 133 employees. None of the
Company's employees is represented by a collective bargaining agreement.


ITEM 2.  PROPERTIES

     The Company leases approximately 57,443 square feet of office, technical
operations and engineering field services depot space in Bellevue, Washington,
under leases expiring in April and May 2002 of which 5,227 square feet has been
subleased. In addition, the Company also leases approximately 31,000 square feet
of office space in 8 cities nationwide of which 12,822 square feet has been
subleased.

                                      -10-
<PAGE>
 
ITEM 3.  LEGAL PROCEEDINGS

     The Company is not a party to any material litigation.

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

     The Company did not submit any matter to a vote of the security holders
during the fourth quarter of the 1998 fiscal year.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name                        Age     Position
----                        ---     --------
<S>                         <C>     <C>  
Henry C. Hirsch..............57     Chairman of the Board of Directors and Chief Executive Officer
William J. Maxwell...........56     President and Chief Operating Officer
Thomas P. Boyhan.............54     Executive Vice President, Sales and Marketing
Robert S. McCambridge........40     Executive Vice President, Chief Financial Officer
George R. Olexa..............43     Executive Vice President, Chief Technology Officer
</TABLE>
     Henry C. Hirsch has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since November 1997. From 1996 to 1997, Mr.
Hirsch was the Vice Chairman and Chief Executive Officer of Williams
Communications Group, a wholly-owned subsidiary of The Williams Companies that
provides businesses with enterprise network solutions, services and advanced
multimedia applications. From 1992 to 1996, Mr. Hirsch served as President and
Chief Operating Officer of WilTel, a nationwide systems integration company.
From 1989 to 1992, he was Executive Vice President of Sales and Marketing as
well as Chief Financial Officer of WilTel.

     William J. Maxwell has served as President and Chief Operating Officer
since October 1998 and previously as Executive Vice President of Strategic
Planning, Sales and Marketing of the Company since December 1997. From 1992 to
1997, Mr. Maxwell was Executive Vice President of ICG Communications Inc. and
the President and Chief Executive Officer of ICG Telecom Group. From 1991 to
1992, Mr. Maxwell was the senior marketing executive with WilTel. From 1989 to
1991, Mr. Maxwell was the President and Chief Executive Officer of MidAmerican
Communications Corporation, a regional long distance company.

     Thomas P. Boyhan has served as Executive Vice President, Sales and
Marketing of the Company since September, 1998. From January 1997 to August
1998, Mr. Boyhan was Senior Vice President, National Account Sales of William's
Communications Solutions, a national $1.3 billion systems integration company,
70 percent owned by William's Communications Group, Inc. From July 1994 to
December 1997, Mr. Boyhan was Vice President, Global Accounts of WilTel. From
February 1991 to June 1994, Mr. Boyhan was Director of Sales, Eastern U.S.
Region of Bell South Communications.

     Robert S. McCambridge has served as Executive Vice President and Chief
Financial Officer of the Company since October 1998. From September 1996 to
October 1998, Mr. McCambridge was Executive Vice President and earlier Vice
President and Chief Financial Officer of One Comm, formerly Cable Plus Holding
Company. From May 1995 to September 1996, Mr. McCambridge was President of the
Robert S. McCambridge Company. From March 1994 to May 1995 Mr. McCambridge was
Senior Vice President and Director of Pacific Northwest Corporate Finance of
Dain Bosworth Inc. From December 1991 to January 1994 Mr. McCambridge was
Treasurer and Vice President of Corporate Development of Cerdian Corporation,
formerly Control Data Corporation.

     George R. Olexa has served as Executive Vice President and Chief Technology
Officer since February 1998. From 1996 to 1997, Mr. Olexa was Chief Operating
Officer at Superconducting Core Technologies, a high-technology 

                                      -11-
<PAGE>
 
equipment manufacturer for the telecommunications industry, supplying
high-performance, superconducting filters and cryoelectronics for wireless
infrastructures. From 1993 to 1996, Mr Olexa served as Executive Vice President
of Engineering of Dial Call. From 1988 to 1993, he was Executive Director of
Network Engineering and Technology Applications for PacTel Cellular.

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

     ART's common stock is traded in the over-the-counter market and is reported
on the Nasdaq National Market under the symbol "ARTT." The following table sets
forth for the periods indicated the high and low bid information of the common
stock as reported on the Nasdaq National Market. Such transactions reflect
inter-dealer prices, without retail markup, markdown or commission and may not
necessarily represent actual transactions.

                                                            PRICE RANGE     
                                                            -----------     
                                                       High             Low   
                                                       ----             ---   

     1997 First Quarter........................      $14.625           $10.375
          Second Quarter.......................      $11.250            $6.625
          Third Quarter........................      $ 9.500            $6.313
          Fourth Quarter.......................      $10.625            $7.500

     1998 First Quarter........................      $17.000            $7.500
          Second Quarter.......................      $16.375            $9.688
          Third Quarter........................      $10.000            $2.938
          Fourth Quarter.......................       $7.500            $2.125

     On April 12, 1999, the last sale price of common stock as reported on the
Nasdaq National Market was $12.9375 per share. As of April 12, 1999 there were
136 record holders of ART's common stock.

     ART has not paid any cash dividends on its common stock in the past and
does not anticipate paying any cash dividends on its common stock in the
foreseeable future. ART's Board of Directors intends to retain earnings to
finance the expansion of ART's business and fund ongoing operations for the
foreseeable future. In addition, the terms of the indenture relating to the
Company's 14% Senior Notes due 2007 restrict the ability of the Company to pay
dividends on common stock.

                                      -12-
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA

     The selected financial data presented below as of December 31, 1994, 1995,
1996, 1997 and 1998 and for the years ended December 31, 1994, 1995, 1996, 1997
and 1998 were derived from and should be read in conjunction with the audited
financial statements of the Company.
<TABLE>
<CAPTION>
                                                                              Year ended December 31
                                              ---------------------------------------------------------------------------------
                                                   1994             1995             1996             1997             1998 
                                              -------------    -------------    -------------    -------------    -------------
<S>                                           <C>              <C>              <C>              <C>              <C>           
Statement of Operations Data:
Service revenue ............................  $          --    $       5,793    $     247,116    $     708,883    $     840,822
Equipment sales and construction revenue ...             --               --        2,660,811          396,970               --
Consulting revenue .........................        137,489               --               --               --               --
Technical and network operations expenses ..             --               --        3,402,948        7,252,512        8,603,576
Cost of equipment sales and construction ...             --               --        1,590,779          254,444
Sales and marketing expenses ...............             --          191,693        5,548,584       13,469,898        5,679,222
General and administrative expenses ........        253,453        2,911,273       12,896,134       12,789,866       11,992,874
Research and development expenses ..........             --               --        1,269,579          421,236          593,595
Equipment impairment .......................             --               --               --        7,166,920        2,753,105
Depreciation and amortization ..............          8,281           15,684        1,017,959        6,018,172        7,354,378
Loss from operations .......................       (124,245)      (3,112,857)     (22,818,056)     (46,266,995)     (36,135,928)
Interest and other expenses, net ...........          4,375          121,986        6,512,251       16,817,180       19,978,994
Income tax benefit .........................             --               --               --        1,355,249        9,132,237
Extraordinary loss .........................             --               --        1,339,996               --               --
Net loss ...................................       (128,620)      (3,234,843)     (30,670,303)     (61,728,926)     (46,982,685)
Basic and diluted net loss per share .......          (0.04)           (0.54)           (3.97)           (3.23)           (1.89)
Weighted average number of shares of
     common stock outstanding ..............      3,337,685        5,946,338        7,717,755       19,083,304       24,890,177

Other Financial Data:
EBITDA (1) .................................  $    (115,964)   $  (2,007,568)   $ (14,348,920)   $ (30,811,151)     (25,186,686)
Capital expenditures .......................          5,175        3,585,144       16,631,451       16,685,436       11,049,743
<CAPTION>

                                                                                As of December 31
                                              ---------------------------------------------------------------------------------
                                                    1994            1995             1996             1997             1998 
                                              -------------    -------------    -------------    -------------    -------------
<S>                                           <C>              <C>              <C>              <C>              <C>           
Balance Sheet Data:
Working capital surplus (deficit) ..........  $     (76,556)   $  (3,008,510)   $  (9,623,905)   $  25,608,821    $  (2,930,428)
Property and equipment, net ................          3,448        3,581,561       19,303,849       25,294,946       33,202,310
FCC licenses, net ..........................             --        4,235,734        4,330,906      131,210,102      186,513,591
Total assets ...............................         42,611        9,876,559       36,648,701      232,559,749      265,721,291
Long-term debt .............................             --        6,450,000        4,977,246      108,299,359      118,371,245
Accumulated deficit ........................       (135,214)      (3,370,057)     (34,040,360)     (95,769,286)    (142,751,971)
Total stockholders' equity (deficit) .......        (39,078)        (312,860)      19,949,920       76,257,063       82,354,920
</TABLE>

------------
(1)  EBITDA consists of loss before interest and financing expense (net of
     interest income), income tax expense, depreciation and amortization
     expense, non-cash compensation expense, non-cash equipment charges and
     non-cash market development expense. EBITDA is not intended to represent
     cash flows from operating activities, as determined in accordance with
     generally accepted accounting principles. EBITDA should not be considered
     as an alternative to, or more meaningful than, operating income or loss,
     net income or loss or cash flow as an indicator of the Company's
     performance. Not all companies calculate EBITDA in the same fashion and
     therefore EBITDA as presented may not be comparable to other similarly
     titled measures of other companies.

                                      -13-
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Restatement of Quarters and Significant Provisions

The Company has restated its interim financial results for the first, second and
third quarters of fiscal 1998 as a result of a change in tax law that was not
previously considered, which increased the net operating loss carryforward
period from 15 to 20 years. As a result of this and an increase in the Company's
tax liability accrual, the 1998 year end results reflected in this report differ
from the unaudited results previously reported by the Company.

The following table presents a summary of unaudited quarterly financial
information for the three quarters of fiscal 1998, as reported and as restated.
<TABLE>
<CAPTION>
                                       Three Months Ended             Three Months Ended             Three Months Ended
                                         March 31, 1998                  June 30, 1998               September 30, 1998  
                                 ----------------------------    ----------------------------    ----------------------------
                                  Previously          As          Previously          As          Previously          As
                                   Reported        Restated        Reported        Restated        Reported        Restated
                                 ------------    ------------    ------------    ------------    ------------    ------------ 
<S>                              <C>             <C>             <C>             <C>             <C>             <C>         
Total revenue ................   $    236,557    $    236,557    $    205,770    $    205,770    $    186,756    $    186,756
Total operating
  costs and expenses .........      7,089,860       7,089,860       7,370,331       7,370,331      10,660,279      10,660,279
                                 ------------    ------------    ------------    ------------    ------------    ------------ 
Operating loss ...............     (6,853,303)     (6,853,303)     (7,164,561)     (7,164,561)    (10,473,523)    (10,473,523)
Total interest and other .....      4,299,281       4,299,281       4,614,100       4,614,100       5,170,632       5,170,632
                                 ------------    ------------    ------------    ------------    ------------    ------------ 
Loss before income taxes .....    (11,152,584)    (11,152,584)    (11,778,661)    (11,778,661)    (15,644,155)    (15,644,155)
Deferred income tax benefit ..        329,170       2,051,789       1,464,053       2,207,090         808,974       1,936,645
                                 ------------    ------------    ------------    ------------    ------------    ------------ 
Net loss .....................   $(10,823,414)   $ (9,100,795)   $(10,314,608)   $ (9,571,571)   $(14,835,181)   $(13,707,510)
                                 ============    ============    ============    ============    ============    ============ 

Basic and diluted net loss
  per common share ...........   $      (0.50)   $      (0.42)   $      (0.42)   $      (0.39)   $      (0.56)   $      (0.51)
                                 ============    ============    ============    ============    ============    ============ 
Weighted average common
  shares .....................     21,736,800      21,736,800      24,332,349      24,332,349      26,701,030      26,701,030
                                 ============    ============    ============    ============    ============    ============ 
</TABLE>

Overview

     From its inception in 1993 to the fourth quarter of 1996, the Company
primarily focused on acquiring licenses, hiring management and other key
personnel, raising capital, acquiring equipment and roof rights and developing
operating and support systems to support its initial business of selling
connectivity to various telecommunications companies as a wholesale carriers'
carrier, which the Company commenced in the fourth quarter of 1996. Following
the establishment of a new core management team, the Company altered its
strategy in the first quarter of 1998 to sell a variety of broadband Internet
services to end-user customers and to deploy a broadband data network. The
results from operations in 1997 reflect a business no longer being pursued by
the Company. During the year ended December 31, 1998, ART began offering its
Internet services in the Seattle, Washington, Portland, Oregon and Phoenix,
Arizona areas and, as such, revenues to date have been limited.

Results of Operations

1998 Compared to 1997

     Revenue for 1998, was approximately $0.8 million compared to approximately
$1.1 million for the same period in 1997. The revenue for 1997 included
approximately $0.4 million of non-recurring equipment sales and construction
revenue associated with radio links installed for a third party.

                                      -14-
<PAGE>
 
     Operating costs and expenses were approximately $37.0 million for 1998,
compared to approximately $47.4 million in 1997. The Company initiated certain
restructuring activities in the third and fourth quarters of 1997 to align the
Company's organization more closely with its marketing and business development
plans and to conserve capital resources. While such restructuring activities
reduced certain expenses, in future periods the Company expects increases in
expenses for network operations and sales and marketing as the Company
implements its business plan. During 1998, the Company recorded approximately
$650,000 of non-recurring severance expenses and non-cash compensation charges
of approximately $657,500 with respect to a deferred stock grant. In 1997, the
Company incurred a charge of approximately $1.2 million with respect to a
deferred stock grant and other compensation expenses. The Company incurred non-
recurring severance and office closure costs of approximately $1.0 million in
the third and fourth quarters of 1997. Cost of equipment sales and construction
of approximately $0.3 million incurred in the 1997 period related to non-
recurring equipment sales and construction revenue. During the fourth quarter of
1998, the Company recorded an additional accrued liability for sales and
property taxes of approximately $3.3 million, of which approximately $2.4
million was charged to operations in the fourth quarter of 1998. Depreciation
and amortization was approximately $7.4 million for 1998, compared to
approximately $6.0 million for 1997. The increase was primarily due to
amortization of additional FCC licenses and equipment placed in service. In
1998, the Company recorded approximately $2.8 million to write down equipment
which is not expected to be utilized in its broadband data network. In 1997, the
Company recorded an equipment charge of approximately $8.1 million, which
included a charge of approximately $7.2 million to write down equipment not
expected to be utilized in its broadband data network. The Company expects to
record an additional charge of approximately $6.4 million in the first quarter
of 1999 to write down the carrying value of additional equipment which the
Company determined, in the first quarter of 1999, will not be used in its
broadband data network build out.

     Net interest and other expenses were approximately $20.0 million for 1998
compared to approximately $16.8 million for 1997. Included in net interest and
other expenses for 1998 was a charge of approximately $448,000 related to an
unsuccessful high yield debt offering and a charge of approximately $1.0 million
related to the amortization of deferred financing costs related to the financing
commitment under the Working Capital Facility (defined below). Included in net
interest and other expenses for 1997 was approximately $2.7 million related to a
financing commitment which was terminated in 1997 upon the sale of the Company's
14% Senior Notes due 2007 (the "Senior Notes"). Interest expense will also
increase in future quarters as a result of borrowings under the Working Capital
Facility and Purchase Money Facility (defined below).

     Deferred income tax benefit was approximately $9.1 million for 1998
compared to approximately $1.4 million in 1997 as a result of a change in tax
law which increased the net operating loss carryforward period from 15 to 20
years.

1997 Compared to 1996

     Revenues for the year ended December 31, 1997 were approximately $1.1
million compared to $2.9 million in 1996. Included in revenues was approximately
$0.4 million in 1997 and $2.7 million in 1996 representing non-recurring sales
and construction revenue associated with radio links installed for a third
party.

     Operating costs and expenses were approximately $47.4 million for the year
ended December 31, 1997 compared to approximately $25.7 million in 1996. The
increase was primarily due to an overall increase in expenses associated with
the commencement of commercial operations. Included in operating costs and
expenses for 1997 and 1996 was approximately $0.3 million and $1.6 million,
respectively, related to non-recurring sales and construction revenue. Sales and
marketing expenses in 1996 included a $1.1 million charge relating to a
distribution agreement. General and administrative expenses in 1996 included
$7.6 million of non-cash compensation charges, including $6.8 million related to
release of escrowed shares to executive officers. In connection with employment
arrangements with its new Chairman and Chief Executive Officer, the Company
incurred a charge of approximately $1.2 million in 1997 with respect to a
deferred stock grant and other expenses. During 1997 the Company recorded $8.1
million of non-cash equipment charges, including approximately $7.2 million to
write down certain radio equipment that is not expected to be an integral part
of the Company's broadband data network. The Company incurred non-recurring
severance and office closure costs of approximately $1.0 million in the third
and fourth quarters of 1997 in connection with management-initiated
restructuring activities intended to align the Company's organization with its
marketing and business 

                                      -15-
<PAGE>
 
development plans and to conserve capital resources. Depreciation and
amortization was approximately $6.0 million for 1997 compared to approximately
$1.0 million in 1996. The increase was due to additional equipment placed in
service and amortization of FCC licenses.

     Net interest and other expenses were approximately $16.8 million for the
year ended December 31, 1997 compared to $6.5 million in 1996. Interest expense
increased in 1997 due to increased borrowings in 1997. Included in interest and
other expenses was approximately $2.7 million in 1997 and $3.7 million in 1996
related to a financing commitment which was terminated in 1997 upon the sale of
the Senior Notes. The issuance of the Senior Notes in February 1997 caused
interest expense to increase substantially and will continue to cause interest
expense to increase in future periods. Interest income increased due to the
purchases of short-term investments and pledged securities. The early repayment
in November 1996 of bridge financings resulted in a non-cash extraordinary loss
of approximately $1.3 million arising from the write-off of associated
unamortized offering discount and deferred financing costs.

Liquidity and Capital Resources

     Through December 31, 1998, funding for the Company's acquisitions, capital
expenditures and net operating losses has been provided from private placements
of equity and bridge financings in 1994 through 1996, the Company's initial
public offering in November 1996, the Company's public offering of units
consisting of its Senior Notes and warrants in February 1997, and the borrowings
from Lucent Technologies Inc. ("Lucent") described below in 1998. Approximately
$51 million of the approximately $130 million net proceeds from the sale of the
units was used to purchase a portfolio of U.S. Treasury securities that will
provide for interest payments on the Senior Notes through February 2000. Because
the Senior Notes have "significant original issue discount" for tax purposes,
the Company will not be able to deduct the interest expense related to the
accretion of this original issue discount for tax purposes.

     During 1998 and 1997, the Company issued approximately 4.5 million and 6
million shares of common stock, respectively to acquire certain FCC licenses. In
addition, as of December 31, 1998, the Company had agreements to acquire certain
additional FCC licenses for cash of approximately $4.3 million and other FCC
licenses for approximately 154,000 shares of common stock, which were
consummated subsequent to December 31, 1998. The Company may continue to acquire
additional licenses in exchange for common stock or cash.

     An option to acquire from the Company 12 38 GHz licenses in specified
markets in which the Company has more than one license was exercised in June
1997, with closing subject to FCC approval. The Company would receive
approximately $7.0 million on closing of such transaction.

     In September 1998, the Company and Lucent entered into a credit facility
(the "Working Capital Facility") for Lucent to provide the Company with up to
$25 million of unsecured revolving loans for working capital purposes. As of
December 31, 1998, the Company had drawn $17.5 million under the Working Capital
Facility and subsequent to December 31, 1998 has drawn the remaining $7.5
million. Loans made pursuant to the Working Capital Facility are due June 30,
1999, unless extended by Lucent to no later than September 17, 1999. The terms
of the Working Capital Facility require ART to apply debt or equity capital
raised by ART in excess of $50 million to permanently repay the Working Capital
Facility.

     In September 1998, the Company and Lucent entered into a purchase money
credit facility (the "Purchase Money Facility") setting forth the terms and
conditions under which Lucent will provide purchase money financing in an
aggregate amount of up to $200 million, to be used to finance the purchase of
the Company's data network from Lucent. The Company has borrowed $10 million in
initial purchase money loans (the "Initial Purchase Money Loans") under the
Purchase Money Facility. No additional amounts are currently available to the
Company under the Purchase Money Facility. Subject to certain conditions,
including ART's raising at least $50 million of certain debt or equity capital
and repayment and termination of the Working Capital Facility, Lucent will make
available purchase money loans equal to 200% of the aggregate capital raised,
not to exceed $200 million (including the $10 million Initial Purchase Money
Loans). There can be no assurance that the funding contemplated by the Purchase
Money Facility will become available to ART.

                                      -16-
<PAGE>
 
     In July 1998, ART and Lucent entered into a definitive purchase agreement
(the "Lucent Purchase Agreement"), which amended and restated the Company's
purchase agreement with Lucent entered into in April 1998, under which Lucent
will design, engineer and construct the Company's wireless broadband data
network. The Company's purchase commitment under the Lucent Purchase Agreement
is initially $240 million upon the availability from Lucent of $200 million of
purchase money loans under the Purchase Money Facility, and increases to $1.2
billion if Lucent agrees to increase the amount of ART's purchase money loans to
$600 million on terms that are acceptable to ART. The Company's commitment is
subject to various other terms and conditions, including the availability of
additional financing on terms that are acceptable to ART. Subsequent to December
31, 1998, the Company issued a purchase order for certain wireless network
equipment in the amount of $5 million under the Lucent Purchase Agreement.

     The Company will require significant additional capital to fully fund its
operations and its long-term broadband data network buildout and business plan.
The Company currently estimates that it will require in excess of $1 billion
over the next several years to fund capital expenditures, working capital and
operations. The Company has limited financial resources, has incurred recurring
losses from operations since inception and does not expect to generate
significant operating revenues in the near term. The Company's ability to
continue as a going concern at least through December 31, 1999, which includes
funding of its operations and business plan, the repayment of the $25 million
Working Capital Facility and funding of its contractual commitments, is
dependent upon its ability to raise additional financing. The Company has
engaged investment bankers to assist it in obtaining financing and is in
negotiations with potential investors to provide equity financing. However,
there can be no assurance that the Company will be successful in its efforts to
obtain such financing, or, if available, that it will be able to obtain it on
acceptable terms. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.

Inflation

     Management does not believe that its business is impacted by inflation to a
significantly different extent than is the general economy.

Year 2000 Disclosure

     Many existing computer programs use only two digits, rather than four, to
represent a year. Date-sensitive software or hardware written or developed in
this fashion may not be able to distinguish between 1900 and 2000, and programs
written in this manner that perform arithmetic operations, comparisons or
sorting of date fields may yield incorrect results when processing a Year 2000
date. This Year 2000 problem could potentially cause system failures or
miscalculations that could disrupt operations.

The Company's State of Readiness

     The Company has implemented a survey to identify Year 2000 issues in three
areas: (i) financial and information technology systems (ii) non-IT network
equipment and (iii) third-party vendors and suppliers. The Company believes its
financial and information technology systems and its non-IT equipment will be
Year 2000 compliant by the end of 1999.

     Because the Company's financial and information technology systems are
relatively new, having been purchased in 1996 or thereafter, the Company does
not expect to uncover any material noncompliant systems. The Company completed
its survey of financial and information technology systems in the first quarter
of 1999. As a result of the survey, the Company does not believe there are any
material noncompliant systems. However, the Company is conducting detailed
verification testing to confirm the results of its survey. If Year 2000 issues
are discovered, the Company will evaluate and prioritize the problems. The
Company expects to coordinate any Year 2000 problems with the vendors that
supplied the noncompliant systems. The Company expects that any remediation
efforts would continue through mid-1999. However, there can be no assurance that
the Company's survey will identify all Year 2000 problems in these systems or
that the necessary corrective actions will be completed in a timely manner.

                                      -17-
<PAGE>
 
     The Company has received warranties from its network equipment suppliers
and integrators, including Lucent, that the Company's non-IT network equipment
is Year 2000 compliant. In addition, the tests conducted by the Company before
accepting delivery of such network equipment are designed to confirm whether the
equipment is Year 2000 compliant. Based on these warranties and acceptance
tests, the Company does not plan to take further action to ascertain whether its
network equipment is Year 2000 compliant. However, there can be no assurance
that this equipment will be Year 2000 compliant as warranted or that the
acceptance tests will identify all Year 2000 problems. In addition, the Year
2000 warranties that the Company has received limit the damages that the Company
would be able to recover if such systems were not Year 2000 compliant. The
Company is also reviewing the Year 2000 compatibility of its network management
software. If the Company discovers that this software is not Year 2000
compliant, it expects to coordinate its remediation efforts with the software
provider to remediate the system. The Company expects that these remediation
efforts, if any, will continue through mid-1999.

     The Company's survey is also assessing the Company's vulnerability to the
Year 2000 problems of third-party service suppliers and is communicating with
suppliers regarding the problem. The Company relies on third-party suppliers to
deliver fiber telecommunications links, Internet access, network equipment,
banking services and payroll services. The Company also intends to develop new
relationships with several providers of fiber-optic telecommunications service,
Internet service providers, telecommunications resellers and other companies in
the telecommunications industry. The Company intends to continuously identify
and prioritize critical suppliers and communicate with them about their plans
and progress in addressing the Year 2000 problem.

The Company's Year 2000 Risk

     Based on the efforts described above, the Company currently believes that
its systems will be Year 2000 compliant in a timely manner. The Company
completed its survey of financial and information technology systems and non-IT
systems in the first quarter of 1999 and expects to complete any remediation
efforts by the end of the third quarter 1999. However, there can be no assurance
that all Year 2000 problems will be successfully identified, or that the
necessary corrective actions will be completed in a timely manner. Failure to
successfully identify and remediate such Year 2000 problems in a timely manner
could have a material adverse effect on the Company's results of operations,
financial position or cash flow.

     In addition, the Company believes that there is a risk relating to
significant service suppliers' failure to remediate their Year 2000 issues in a
timely manner. Although the Company is communicating with its suppliers
regarding the Year 2000 problem, the Company does not know whether these
suppliers' systems will be Year 2000 compliant in a timely manner. Like most
telecommunications providers, the Company's ability to provide service is
dependent on key suppliers and equipment vendors. If one or more significant
suppliers are not Year 2000 compliant, this could have a material adverse effect
on the Company's results of operations, financial position or cash flow.

The Company's Contingency Plans

     The Company has not created a formal contingency plan for Year 2000
problems. The Company intends to take appropriate actions to mitigate the
effects of third parties' failures to remediate their Year 2000 issues and for
unexpected failures in its own systems. Such actions may include having
arrangements for alternate suppliers and using manual intervention where
necessary. If it becomes necessary for the Company to take these corrective
actions, it is uncertain whether this would result in significant interruptions
in service or delays in business operations or whether it would have a material
adverse effect on the Company's results of operations, financial position or
cash flow.

Costs of Year 2000 Remediation

     As of December 31, 1998, the Company has not incurred material costs
related to the Year 2000 problem, and does not expect to in the future. The
Company has not deferred other information technology projects due to Year 2000
expenses, and does not expect to defer such projects in the future. However,
there can be no assurance that the costs associated with the Year 2000 problem
will not be greater than anticipated.

                                      -18-
<PAGE>
 
     Readers are cautioned that forward-looking statements contained in the Year
2000 Disclosure should be read in conjunction with the Company's disclosures
under the heading: "Cautionary Statement" below.

Cautionary Statement

     This Item and other Items in this Report include "forward-looking"
information as that term is defined in the Private Securities Litigation Reform
Act of 1995 or by the Securities and Exchange Commission in its rules,
regulations and releases. The Company cautions investors that any such
statements made by the Company are not guarantees of future performance and that
known and unknown risks, uncertainties and other factors including those risk
factors identified in Exhibit 99 to this Report may cause actual results to
differ materially from those in the forward-looking statements. The Company does
not undertake to update or revise its forward-looking statements publicly even
if experience or future changes make it clear that any projected results
expressed or implied herein will not be realized.

                                      -19-
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Advanced Radio Telecom Corp.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and stockholders' equity (deficit)
and of cash flows present fairly, in all material respects, the financial
position of Advanced Radio Telecom Corp. and Subsidiaries at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has limited financial resources, requires
significant additional capital to fund its operations and business plan and has
incurred recurring losses from operations since inception and does not expect to
generate significant operating revenues in the near term. The Company's
continued funding of its operations and business plan is dependent upon its
ability to raise additional financing. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

PriceWaterhouseCoopers LLP


Seattle, Washington 
March 29, 1999

                                      F-1
<PAGE>
 
                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                          December 31, 1998 and 1997
<TABLE>
<CAPTION>
                                                                                1998             1997 
                                                                            -------------    -------------
<S>                                                                         <C>              <C>
                                     ASSETS
Current assets:
     Cash and cash equivalents ..........................................   $  11,864,218    $   7,135,427
     Short-term investments .............................................                       18,210,220 
     Pledged securities .................................................      18,504,263       18,517,640
     Restricted cash ....................................................          32,060        1,032,060
     Accounts receivable ................................................         125,976          199,316
     Prepaid expenses and other current assets ..........................         681,468          112,825
                                                                            -------------    -------------
                  Total current assets ..................................      31,207,985       45,207,488
Pledged securities ......................................................       8,854,569       25,842,275
Property and equipment, net .............................................      33,202,310       25,294,946
FCC licenses, net .......................................................     186,513,591      131,210,102
Deferred financing costs, net ...........................................       5,503,172        4,502,330
Other assets ............................................................         439,664          502,608
                                                                            -------------    -------------
         Total assets ...................................................   $ 265,721,291    $ 232,559,749
                                                                            =============    =============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Working capital facility ...........................................   $  16,229,121
     Book overdraft .....................................................                    $   3,055,759
     Trade accounts payable .............................................       2,533,612        3,067,984
     Accrued compensation and benefits ..................................       2,936,454        1,775,646
     Other accrued liabilities ..........................................       4,759,689        3,109,631
     Accrued interest payable ...........................................       7,154,224        7,113,391
     Current portion of long-term debt ..................................         525,313        1,476,256
                                                                            -------------    -------------
         Total current liabilities ......................................      34,138,413       19,598,667
Long-term debt, net of current portion ..................................     117,845,932      106,823,103
Deferred income tax liabilities .........................................      31,382,026       29,880,916
                                                                            -------------    -------------
         Total liabilities ..............................................     183,366,371      156,302,686
                                                                            -------------    -------------

Commitments and contingencies (Note 9)

Stockholders' equity:
         Common stock, $.001 par value, 100,000,000 shares authorized,
                  26,707,036 and 21,429,485 shares issued and outstanding          26,707           21,429
     Additional paid-in capital .........................................     225,967,684      172,892,420
     Note receivable from stockholder ...................................        (887,500)        (887,500)
     Accumulated deficit ................................................    (142,751,971)     (95,769,286)
                                                                            -------------    -------------
         Total stockholders' equity .....................................      82,354,920       76,257,063
                                                                            -------------    -------------
              Total liabilities and stockholders' equity ................   $ 265,721,291    $ 232,559,749
                                                                            =============    =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-2
<PAGE>
 
                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

             for the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                        1998            1997            1996 
                                                                    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>
Service revenue .................................................   $    840,822    $    708,883    $    247,116
Equipment sales and construction revenue ........................                        396,970       2,660,811
                                                                    ------------    ------------    ------------
         Total revenue ..........................................        840,822       1,105,853       2,907,927
                                                                    ------------    ------------    ------------
Costs and expenses:
     Technical and network operations ...........................      8,603,576       7,252,512       3,402,948
     Cost of equipment sales and construction ...................                        254,444       1,590,779
     Sales and marketing ........................................      5,679,222      13,469,898       5,548,584
     General and administrative .................................     11,992,874      12,789,866      12,896,134
     Research and development ...................................        593,595         421,236       1,269,579
     Equipment impairment .......................................      2,753,105       7,166,720
     Depreciation and amortization ..............................      7,354,378       6,018,172       1,017,959
                                                                    ------------    ------------    ------------
         Total operating costs and expenses .....................     36,976,750      47,372,848      25,725,983
                                                                    ------------    ------------    ------------
Operating loss ..................................................    (36,135,928)    (46,266,995)    (22,818,056)

Interest and other:
     Interest expense ...........................................     21,173,374      18,931,303       1,695,489
     Financing commitment expense ...............................      1,004,393       2,699,881       3,687,644
     Interest income ............................................     (2,693,257)     (4,814,004)       (118,882)
     Other ......................................................        494,484                       1,248,000
                                                                    ------------    ------------    ------------
         Loss before income taxes and extraordinary item ........    (56,114,922)    (63,084,175)    (29,330,307)

Deferred income tax benefit .....................................      9,132,237       1,355,249
                                                                    ------------    ------------    ------------
         Loss before extraordinary item .........................    (46,982,685)    (61,728,926)    (29,330,307)
Extraordinary loss on early retirement of debt ..................                                     (1,339,996)
                                                                    ------------    ------------    ------------
         Net loss ...............................................   $(46,982,685)   $(61,728,926)   $(30,670,303)
                                                                    ============    ============    ============


Basic and diluted loss per common share before extraordinary item   $      (1.89)   $      (3.23)   $      (3.80)
Basic and diluted extraordinary loss per common share ...........                                          (0.17)
                                                                    ------------    ------------    ------------
Basic and diluted net loss per common share .....................   $      (1.89)   $      (3.23)   $      (3.97)
                                                                    ============    ============    ============

         Weighted average common shares .........................     24,890,177      19,083,304       7,717,755
                                                                    ============    ============    ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-3
<PAGE>
 
                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

             for the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                                                        Serial
                                                                    Common Stock                    Preferred Stock
                                                             --------------------------          ------------------------
                                                               Shares       Par Value            Shares       Par Value
                                                             ---------    -------------          -------    -------------
<S>                                                          <C>          <C>                    <C>        <C>
Balance, December 31, 1995 ...........................       6,529,975       $ 6,530               488,492          $ 488 
Issuance of serial preferred stock for cash ..........                                             232,826            233 
Shares issued to reflect anti-dilution adjustments ...          56,984            57               150,740            151 
Issuance of serial preferred stock and warrants
 in exchange for cash and the strategic
 distribution agreement ..............................                                              48,893             49 
Preferred stock issuance costs .......................                                                                    
Increase in additional paid-in capital as a result
 of the release of Escrow Shares .....................                                                                    
Value ascribed to the equipment financing warrants ...                                                                    
Value ascribed to the bridge financing warrants ......                                                                    
Issuance of common stock in an initial public offering       2,300,500         2,301
Initial public offering common stock issuance costs ..                                                                    
Conversion of preferred stock to common stock
 in connection with the initial public offering ......       4,353,587         4,353              (920,951)          (921)
Value ascribed to the CIBC Warrants ..................                                                                    
Accrued stock option compensation ....................                                                                    
Warrants exercised ...................................         318,374           318                                   
Net loss .............................................
                                                            ----------       -------              --------           ----
Balance, December 31, 1996 ...........................      13,559,420        13,559                                   
Common stock issued in connection with the
  acquisition of the CommcoCCC, Inc. licenses ........       6,000,000         6,000                                   
Value ascribed to warrants issued with
  Senior Notes .......................................                                                                    
Warrant issuance costs ...............................                                                                    
Accrued stock option compensation ....................                                                                    
Stock options exercised ..............................         286,100           286                                   
Warrants exercised ...................................       1,583,965         1,584                                   
Common stock issuable for note receivable
 from stockholder ....................................                                                                    
Common stock issuable under employment agreement .....                                                                    
Net loss .............................................
                                                            ----------       -------              --------           ----
Balance December 31, 1997 ............................      21,429,485       $21,429                                   
Common stock issued in connection with the
  acquisition of certain FCC licenses ................       4,529,519         4,530                                   
Common stock issued for note receivable
 from stockholder ....................................         100,000           100                                   
Value ascribed to warrants issued in connection
  with the working capital facility ..................                                                                    
Warrants exercised ...................................         632,314           632                                   
Stock options exercised ..............................          15,718            16                                   
Accrued stock option compensation ....................                                                                    
Common stock issuable under employment
  agreements .........................................                                                                    
Net loss .............................................
                                                            ----------       -------              --------           ----
Balance December 31, 1998 ............................      26,707,036       $26,707
                                                            ==========       =======              ========           ====
<CAPTION>

                                                                               Note
                                                             Additional      Receivable
                                                              Paid-In          from          Accumulated
                                                              Capital       Stockholder        Deficit            Total
                                                           ------------     -----------     ------------       -----------
<S>                                                        <C>              <C>             <C>                <C>
Balance, December 31, 1995 ...........................     $  3,050,179                     $ (3,370,057)      $  (312,860)    
Issuance of serial preferred stock for cash ..........        4,672,953                                          4,673,186     
Shares issued to reflect anti-dilution adjustments ...             (208)
Issuance of serial preferred stock and warrants                                                                                
 in exchange for cash and the strategic                                                                                        
 distribution agreement ..............................        3,552,951                                          3,553,000     
Preferred stock issuance costs .......................         (150,000)                                          (150,000)    
Increase in additional paid-in capital as a result                                                                             
 of the release of Escrow Shares .....................        6,795,514                                          6,795,514     
Value ascribed to the equipment financing warrants ...          484,937                                            484,937     
Value ascribed to the bridge financing warrants ......        1,795,533                                          1,795,533     
Issuance of common stock in an initial public offering       34,505,199                                         34,507,500     
Initial public offering common stock issuance costs ..       (6,081,098)                                        (6,081,098)    
Conversion of preferred stock to common stock                                                                                  
 in connection with the initial public offering ......           (3,432)                                                       
Value ascribed to the CIBC Warrants ..................        4,503,848                                          4,503,848     
Accrued stock option compensation ....................          850,663                                            850,663     
Warrants exercised ...................................             (318)                                                       
Net loss .............................................                                        (30,670,303)     (30,670,303)
                                                            -----------        ----------     -----------      ------------  
Balance, December 31, 1996 ...........................       53,976,721                       (34,040,360)      19,949,920     
Common stock issued in connection with the                                                                                     
  acquisition of the CommcoCCC, Inc. licenses ........       87,744,000                                         87,750,000     
Value ascribed to warrants issued with                                                                                         
  Senior Notes .......................................       29,707,509                                         29,707,509     
Warrant issuance costs ...............................       (1,254,698)                                        (1,254,698)    
Accrued stock option compensation ....................          449,313                                            449,313     
Stock options exercised ..............................          496,159                                            496,445     
Warrants exercised ...................................           (1,584)                                                       
Common stock issuable for note receivable                                                                                      
 from stockholder ....................................          887,500        $(887,500)                                      
Common stock issuable under employment agreement .....          887,500                                            887,500     
Net loss .............................................                                        (61,728,926)     (61,728,926)
                                                            -----------        ----------     -----------      ------------      
Balance December 31, 1997 ............................     $172,892,420        $(887,500)   $ (95,769,286)   $  76,257,063     
Common stock issued in connection with the                                                                                     
  acquisition of certain FCC licenses ................       48,343,268                                         48,347,798     
Common stock issued for note receivable                                                                                        
 from stockholder ....................................             (100)                                                       
Value ascribed to warrants issued in connection                                                                                
  with the working capital facility ..................        3,282,351                                          3,282,351     
Warrants exercised ...................................           19,057                                             19,689     
Stock options exercised ..............................           94,445                                             94,461     
Accrued stock option compensation ....................          678,743                                            678,743     
Common stock issuable under employment                                                                                         
  agreements .........................................          657,500                                            657,500     
Net loss .............................................                                        (46,982,685)     (46,982,685)
                                                            -----------        ----------     -----------      ------------      
Balance December 31, 1998 ............................     $225,967,684        $ (887,500)  $(142,751,971)   $  82,354,920   
                                                            ===========        ==========     ===========      ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-4
<PAGE>
 
                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

             for the years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                      1998             1997             1996 
                                                                 -------------    -------------    -------------
<S>                                                              <C>              <C>              <C>
Cash Flows from operating activities:
     Net loss ................................................    $(46,982,685)    $(61,728,926)    $(30,670,303)
     Adjustments to reconcile net loss to net cash
         used in operating activities:
       Non-cash compensation expense .........................       1,336,243        1,336,813        7,646,177
       Non-cash equipment charges ............................       2,753,105        8,100,859
       Non-cash marketing expense ............................                                         1,053,000
       Depreciation and amortization .........................       7,354,378        6,018,172        1,017,959
       Non-cash interest expense .............................       1,699,784        1,466,698          772,221
       Non-cash financing commitment expense .................       1,004,393        2,699,881        3,687,644
       Deferred income tax benefit ...........................      (9,132,237)      (1,355,249)
       Extraordinary loss on early debt retirement ...........                                         1,339,996
       Changes in operating assets and liabilities:
         Accrued interest payable ............................          40,833        7,096,232           17,159
         Accounts receivable .................................          73,340        1,620,277       (1,819,593)
         Accrued interest on investments and securities ......      (1,928,243)      (2,194,497)
         Accounts payable and other current liabilities ......       4,164,189        1,098,448        3,615,884
         Prepaid expenses and other current assets ...........        (568,643)          83,966         (144,466)
         Other assets ........................................          62,944         (137,321)
                                                                 -------------    -------------    -------------
              Net cash used in operating activities ..........     (40,122,599)     (35,894,647)     (13,484,322)
                                                                 -------------    -------------    -------------

Cash flows from investing activities:
     Purchases of property and equipment .....................      (5,678,062)     (24,051,854)      (9,439,481)
     Additions to and acquisitions of FCC licenses ...........        (518,278)      (5,747,844)      (3,201,183)
     Purchases of pledged securities .........................                      (51,245,250)
     Purchases of short-term investments .....................      (9,126,454)     (47,065,154)
     Proceeds from sales of short-term investments ...........      27,636,000       29,071,448
     Proceeds from maturities of pledged securities ..........      18,630,000        8,863,315
     Investment in restricted cash ...........................                                        (1,032,060)
     Proceeds from maturities of restricted cash .............       1,000,000
     Proceeds from the disposition of property and equipment .         621,101           88,718
     Additions to other assets ...............................                                        (1,425,032)
                                                                 -------------    -------------    -------------
         Net cash provided by (used in) investing activities .      32,564,307      (90,086,621)     (15,097,756)
                                                                 -------------    -------------    -------------

Cash flows from financing activities:
     Proceeds from issuance of Senior Notes and warrants .....                      135,000,000
     Warrant issuance costs ..................................                       (1,254,698)
     Proceeds from issuance of common stock ..................         114,150          496,445       34,507,500
     Proceeds from issuance of preferred stock ...............                                         2,500,000
     Stock issuance costs ....................................                                        (6,231,098)
     Proceeds from certain loans and debt financings .........      17,500,000                        14,445,000
     Book overdraft ..........................................      (3,055,759)       3,055,759
     Repayments of certain loans and debt financings .........      (1,727,053)      (2,018,743)     (13,131,443)
     Additions to deferred financing costs ...................        (544,255)      (4,136,475)      (2,167,128)
                                                                 -------------    -------------    -------------
         Net cash provided by financing activities ...........      12,287,083      131,142,288       29,922,831
                                                                 -------------    -------------    -------------

Net increase in cash and cash equivalents ....................       4,728,791        5,161,020        1,340,753
Cash and cash equivalents, beginning of period ...............       7,135,427        1,974,407          633,654
                                                                 -------------    -------------    -------------
Cash and cash equivalents, end of period .....................   $  11,864,218    $   7,135,427    $   1,974,407
                                                                 =============    =============    =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-5
<PAGE>
 
                 ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   The Company and Basis of Presentation:

     Advanced Radio Telecom Corp. (collectively with its subsidiaries, "ART" or
the "Company") provides wireless broadband telecommunications services in the 38
GHz band of the radio spectrum. From its inception in 1993 to the fourth quarter
of 1996, the Company primarily focused on the acquisition of spectrum rights,
hiring managements and other key personnel, raising capital, acquiring equipment
and roof rights and developing operating and support systems to support its
initial business of selling connectivity to various telecommunications companies
as a wholesale carriers' carrier, which commenced in the fourth quarter of 1996.
The Company altered its strategy in 1998 to sell a variety of broadband Internet
services to end-user customers and to deploy a broadband data network. The
results from operations in 1997 reflect a business no longer being pursued by
the Company. During the year ended 1998, the Company began offering its Internet
services in the Seattle, Washington, Portland, Oregon and Phoenix, Arizona areas
and, as such, revenues to date have been limited.

     ART, formerly named Advanced Radio Technologies Corporation, was organized
as a Delaware corporation in August 1993. Advanced Radio Technology Ltd.,
renamed Advanced Radio Telecom Corp. ("Telecom"), was organized in March 1995 by
ART and Landover Holdings Corporation ("Landover") for the purpose of acquiring
certain 38 GHz licenses and to facilitate Landover's commitment to invest or
cause to invest $7 million in the Company. Pursuant to the related purchase,
shareholder, and services agreements, ART and Telecom were operated as a single
entity pending approval of their merger from the Federal Communications
Commission ("FCC"). Such approval was received and Telecom became a wholly-owned
subsidiary of ART by merger in October 1996. The merger was accounted for in a
manner consistent with a reorganization of entities under common control which
is similar to that of a pooling of interests, and the financial statements of
prior periods have been restated.

     The Company will require significant additional capital to fully fund its
operations, long-term broadband data network buildout and business plan. The
Company currently estimates that it will require in excess of $1 billion over
the next several years to fund capital expenditures, working capital and
operations. During 1998, the Company and Lucent Technologies Inc. ("Lucent")
entered into a credit facility for Lucent to provide the Company with up to $25
million of unsecured revolving loans for working capital purposes, due June 30,
1999 unless extended by Lucent. During 1998, the Company and Lucent also entered
into a purchase money credit facility ("the "Purchase Money Facility") setting
forth the terms and conditions under which Lucent will provide purchase money
financing of up to $200 million, to be used to finance the purchase of the
Company's broadband data networks from Lucent. Lucent has made available $10
million in initial purchase money loans and the availability of the balance is
subject to other conditions, including the Company's ability to raise at least
$50 million of certain debt or equity capital. There can be no assurance that
the funding will become available to the Company.

     The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and liquidation of liabilities in the ordinary course of business. The
Company has limited financial resources, has incurred recurring losses from
operations since inception and does not expect to generate significant operating
revenues in the near term. The Company's ability to continue as a going concern
at least through December 31, 1999, which includes funding of its operations and
business plan, the repayment of the $25 million working capital facility and
funding of its contractual commitments, is dependent upon its ability to raise
additional financing. The Company has engaged investment bankers to assist it
in obtaining financing and is in negotiations with potential investors to
provide equity financing. However, there can be no assurance that the Company
will be successful in its efforts to obtain such financing, or, if available,
that it will be able to obtain it on acceptable terms. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

                                      F-6
<PAGE>
 
2.       Summary of Significant Accounting Policies:

Consolidation

     The consolidated financial statements include all majority owned
subsidiaries in which the Company has the ability to exercise control. All
intercompany transactions have been eliminated in consolidation.

Development Stage Enterprise

     During 1996, the Company commenced commercial operations, and was no longer
considered to be in the development stage as defined in Statement of Financial
Accounting Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises." Such change in classification of the Company had no impact on the
net loss or stockholders' equity (deficit) for any periods presented.

Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with
remaining maturities of three months or less to be cash equivalents. The Company
places its temporary cash investments with major financial institutions in
amounts which may exceed Federally insured limits. At December 31, 1998, the
Company's temporary cash investments were principally placed in two entities.
Checks issued but not presented to banks are classified as "Book overdrafts" for
accounting purposes in the consolidated balance sheet.

Short-term Investments and Pledged Securities

     Short-term investments are comprised of commercial paper and other similar
investments purchased with a term to maturity of more than three months.
Short-term investments are held as available for sale and are carried at market
value. Pledged securities consist of U.S. Treasury securities that are held to
maturity and are carried at amortized cost.

Property and Equipment

     Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives,
generally three to five years for wireless network equipment placed in service
and other property and equipment. Subsequent to year end, the Company reduced
the estimated useful lives of certain wireless network equipment not yet placed
in service from five years to two years.

     The costs of normal maintenance and repairs are charged to expense as
incurred. Direct costs of placing assets into service and major improvements are
capitalized. Gains or losses on the disposition of assets are recorded at the
time of disposition.

Capitalized Software

     Purchased software used for internal purposes is capitalized at cost and
amortized over its estimated useful life, which is generally three years.

FCC Licenses

     The direct costs of obtaining 38 GHz radio spectrum licenses by grant from
the FCC or by purchase from others and the cost of perfecting such licenses are
capitalized and amortized on a straight-line basis over a 40 year period.
Accumulated amortization as of December 31, 1998 and 1997 totaled $7,174,629 and
$2,930,798, respectively. All of the Company's licenses expire in 2001 and it is
management's expectation that they will be renewed by the FCC for successive ten
year periods.

                                      F-7
<PAGE>
 
Recoverability of Long-Lived Assets

     The recoverability of property and equipment and capitalized FCC licenses
is dependent on, among other things, the successful deployment of networks in
each of the respective markets, or sale of such assets. Management estimates
that it will recover the carrying amount of those costs from undiscounted cash
flows generated by the networks once they have been deployed. However, it is
reasonably possible that such estimates will change in the near term as a result
of technological, regulatory or other changes. The Company periodically reviews
the carrying value of its capitalized assets for impairment and recoverability.

Financing Costs

     Direct costs associated with obtaining debt financing are deferred and
charged to interest expense using the effective interest rate method over the
term of the debt. Direct costs associated with obtaining equity are charged to
additional paid-in capital as the related funds are raised. Deferred costs
associated with unsuccessful financings are charged to expense. The Company
charged approximately $448,000 and $1,248,000 to other expense during the years
ended December 31, 1998 and 1996, respectively, associated with unsuccessful
financings. Direct costs of obtaining commitments for financing are deferred and
charged to expense over the term of the commitments. Accumulated amortization of
deferred financing costs totaled $1,338,248 and $290,756 at December 31, 1998
and 1997, respectively.

Revenue Recognition

     Revenue from telecommunications services is recognized ratably over the
period such services are provided. Equipment sales and construction revenue is
recorded at the time the equipment is delivered and construction is completed.
Cost of equipment sales are based on the average cost method.

     Two customers accounted for approximately thirty-seven and forty-five
percent of the Company's service revenues in 1998 and 1997, respectively, and a
single customer accounted for approximately forty-two percent of the Company's
service revenue in 1996. Additionally, the Company entered into an equipment
sales and construction services agreement with another customer during 1996 to
act as a sub-contractor to provide transmission facilities construction services
and the related wireless transmission equipment. This agreement was
substantially completed during 1996 and total equipment sales and construction
revenues are attributable to this customer. Receivables from five customers
accounted for approximately forty-nine percent and fifty-three percent of trade
accounts receivable at December 31, 1998 and 1997, respectively.

Research and Development

     Research and development costs are charged to expense as incurred.

Income Taxes

     The Company accounts for income taxes under the liability method of
accounting. Under the liability method, deferred taxes are determined based on
the differences between the financial statement and tax bases of assets and
liabilities at enacted tax rates in effect in the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amounts expected to be realized.

Net Loss Per Share

     During 1997 the Company adopted, and applied retroactively, Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). This
statement specifies the computation, presentation, and disclosure requirements
for earnings per share ("EPS"), simplifies the computational guidelines, and
increases comparability on an international basis. This statement replaced
"primary" EPS with "basic" EPS, the principal difference being the exclusion of
common stock equivalents in the computation of basic EPS. In connection with the
adoption of SFAS 128, the 

                                      F-8
<PAGE>
 
Company also adopted the provisions of SEC Staff Accounting Bulletin No. 98
("SAB 98"), which provides for the inclusion of nominal issuances of potentially
dilative equity instruments in the calculation of net loss per share. The
adoption of SFAS 128 and SAB 98 by the Company had no impact on previously
reported net loss per share.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates. Management of the Company will
continue to evaluate the estimated useful lives of its wireless network
equipment based on changes in industry conditions.

3.   Property and Equipment:

     Property and equipment at December 31, were as follows:
<TABLE>
<CAPTION>
                                                           1998            1997 
                                                       ------------    ------------
<S>                                                    <C>             <C>
Wireless network equipment placed in service .......   $ 14,239,886    $  5,879,673
Wireless network equipment not yet placed in service     17,925,364      16,730,010
Computer hardware ..................................      1,723,871       1,673,288
Computer software ..................................      2,168,867         934,127
Office furniture and equipment .....................      1,681,409       1,601,190
Other equipment and vehicles .......................        489,220         489,220
                                                       ------------    ------------
                                                         38,228,617      27,307,508
Accumulated depreciation ...........................     (5,026,307)     (2,012,562)
                                                       ------------    ------------
                                                       $ 33,202,310    $ 25,294,946
                                                       ============    ============
</TABLE>

     Depreciation expense for the years ended December 31, 1998, 1997 and 1996
was $3,110,503, $3,021,380, and $909,163, respectively.

     During 1998 and 1997, the Company recorded non-cash equipment charges of
approximately $2.8 million and $8.1 million, respectively, primarily related to
the write-down of certain radio equipment that is not expected to be an integral
part of the Company's expanded broadband data network. The Company expects to
record an additional charge of approximately $6.4 million in the first quarter
of 1999 to write down the carrying value of additional equipment which the
Company determined, in the first quarter of 1999, would be disposed of and not
used in its future broadband network build out. The amount of the write-downs
are based on discounted projected future cash flows from such equipment under
current deployment plans or estimated salvage value.

     In 1998, the Company sold certain non-integral radio equipment with
proceeds of approximately $536,000, which approximated the carrying value.
Amounts receivable from this sale are included in other current assets at
December 31, 1998.

4.   Other Accrued Liabilities and Fourth Quarter Adjustments:

     During the fourth quarter of 1998, as a result of a re-evaluation of its
tax posture, the Company changed its estimate of its sales and property tax
liability and recorded an additional accrual of approximately $3.3 million of
which approximately $2.4 million was charged to operations in the fourth quarter
of 1998 and approximately $900,000 was capitalized as part of the cost of
equipment.

                                      F-9
<PAGE>
 
5.   FCC Licenses:

     CommcoCCC Licenses

     In June 1996, the Company agreed to acquire certain 38 GHz licenses from
CommcoCCC, Inc. ("CommcoCCC") in exchange for 6 million shares of the Company's
common stock, which acquisition was consummated in February 1997. The total
acquisition cost was approximately $122.2 million, comprised of the aggregate
market value of the common shares issued to CommcoCCC of approximately $88
million, direct costs of approximately $3.2 million and the related deferred tax
liability of approximately $31.2 million.

     In connection with transaction, the Company gave a stockholder of CommcoCCC
an option to acquire certain 38 GHz FCC licenses in specified markets, in which
the Company has more than one license. This option was exercised in July 1997 at
an exercise price of approximately $6.9 million, determined based on the sales
price of the Company's common stock on the date the option was exercised and the
population covered by the licenses. Final terms under this option were reached
in November 1998 and the exercise price will be paid in cash upon closing of the
sale, which is subject to FCC approval. The Company has the right to be a
reseller with respect to these licenses for a term of five years at market
rates.

     ART West Licenses

     In February 1997, the Company completed its acquisition from Extended
Communications, Inc. ("Extended") of the remaining 50% interest in ART West, a
partnership jointly controlled by Extended and the Company, for $6 million in
cash, of which $3 million was paid in 1996. ART West held certain 38 GHz
licenses that were transferred to the Company upon the completion of the
acquisition.

     Columbia Licenses

     In May 1998, the Company acquired from Columbia Capital Corporation and one
of its affiliates certain 38 GHz licenses for 1,335,750 shares of common stock.
The total acquisition cost was approximately $14.8 million, comprised of the
fair value of the 1,335,750 shares of common stock issued of approximately $12.0
million, direct costs incurred of approximately $92,000 and the related deferred
tax liability of approximately $2.7 million.

     DCT Licenses

     In May 1998, the Company acquired DCT Communications Inc., which held
certain 38 GHz licenses, in exchange for 3,124,875 shares of the Company's
common stock. The total acquisition cost was approximately $43.3 million,
comprised of the fair value of the 3,124,874 shares of common stock issued of
approximately $35.2 million, direct costs incurred of approximately $241,000 and
the related deferred tax liability of approximately $7.9 million.

     Other Licenses

     In March 1998, the Company acquired a certain 38 GHz license in exchange
for 68,895 shares of the Company's common stock. The total acquisition cost was
approximately $1.2 million, which consisted of the aggregate market value of the
shares issued and direct costs.

     In January 1999, the Company consummated acquisitions of certain 38 GHz
Licenses for $4.3 million in cash and certain other licenses for 154,114 shares
of common stock valued at approximately $1.3 million.

                                      F-10
<PAGE>
 
6.   Income Taxes:

A reconciliation of the Company's effective tax rate and the Federal statutory
rate for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
                                                  1998              1997              1996 
                                             -------------     -------------     -------------
<S>                                          <C>               <C>               <C>
Net loss before taxes ....................   $ (56,114,922)    $ (63,084,175)    $ (30,670,303)
                                             =============     =============     =============
Federal income tax at
 statutory rate ..........................            35.0%             35.0%             35.0%
Non-deductible interest ..................            (0.8)             (0.6)
Non-deductible compensation ..............                                                (7.8)
State benefit, net of Federal tax benefit              2.0               2.0               1.6
Other ....................................            (0.1)             (0.1)
Valuation allowance ......................           (19.8)            (34.2)            (28.8)
                                             -------------     -------------     -------------
Effective income tax rate ................            16.3%              2.1%              0.0%
                                             =============     =============     =============
Income tax benefit .......................   $  (9,132,237)    $  (1,355,249)    $           0
                                             =============     =============     =============
</TABLE>
Deferred tax assets and liabilities at December 31, were as follows:
<TABLE>
<CAPTION>
                                                1998            1997 
                                            ------------    ------------
<S>                                         <C>             <C>
Deferred tax assets:
    Net operating loss carryforwards ....   $ 49,283,000    $ 28,385,000
    Equipment depreciation and impairment      1,965,000       3,071,000
    Accrued compensation and benefits ...        906,000         755,000
    Valuation allowance .................    (20,165,026)    (18,833,916)
                                            ------------    ------------
                                              31,988,974      13,377,084

Deferred tax liabilities:
       FCC Licenses .....................    (63,371,000)    (43,258,000)
                                            ------------    ------------
       Net deferred tax liabilities .....   $(31,382,026)   $(29,880,916)
                                            ============    ============
</TABLE>

     Differences between the tax bases of assets and liabilities and their
financial statement amounts are reflected as deferred income taxes based on
enacted tax rates. The net deferred tax assets have been reduced by a valuation
allowance based on management's determination that the recognition criteria for
realization has not been met. In 1998 and 1997, the Company reversed
approximately $10.8 million and $12.8 million, respectively, of its deferred tax
asset valuation allowance as a result of recording deferred taxes arising from
certain FCC license acquisitions.

     During the fourth quarter of 1998, the Company determined that its 1998
deferred income tax benefit was understated by approximately $6 million for a
change in the tax law that was not previously considered, which increased the
net operating loss carryforward period from 15 to 20 years. Accordingly, the
deferred income tax benefit was increased to approximately $9.1 million for the
year ended December 31, 1998. The Company has restated its 1998 quarterly
financial information to reflect the change in the tax law, increasing the
deferred income tax benefit to approximately $2.1 million, $2.2 million and $1.9
million and reducing its net loss to approximately $9.1 million, $9.6 million
and $13.7 million for the three months ended March 31, 1998, June 30, 1998 and
September 30, 1998, respectively.

     At December 31, 1998, the Company has accumulated net operating loss
carryforwards for Federal income tax purposes of approximately $133.2 million
which expire between 2008 and 2018. The Company's ability to use its net
operating losses to offset future income is subject to restrictions in the
Internal Revenue Code which could limit the Company's future use of its net
operating losses if certain stock ownership changes occur.

                                      F-11
<PAGE>
 
7.   Working Capital Facility:

     In September 1998, the Company and Lucent Technologies Inc. ("Lucent")
entered into a credit facility (the "Working Capital Facility") for Lucent to
provide the Company with up to $25 million of unsecured revolving loans for
working capital purposes. As of December 31, 1998, the Company had drawn $17.5
million under the Working Capital Facility. Interest initially accrues at an
annual rate of LIBOR plus 5% (10.7% at December 31, 1998) and increases 0.5%
each month beginning January 1999. The availability of the undrawn balance of
the Working Capital Facility is subject to the achievement of certain milestones
by the Company. Loans made pursuant to the Working Capital Facility, plus
accrued interest, are due June 30, 1999, unless extended by Lucent to no later
than September 17, 1999. The terms of the Working Capital Facility require the
Company to apply debt or equity capital raised by the Company in excess of $50
million to permanently repay the Working Capital Facility.

     ART issued warrants to purchase 277,892 shares of common stock at an
exercise price of $0.01 per share upon the Company obtaining a commitment from
Lucent for the Working Capital Facility and the warrants were valued at
approximately $1,777,000. The Company has recorded the value ascribed to these
warrants as deferred financing costs and as additional paid-in-capital.
Additionally, under the terms of the Working Capital Facility, the Company is
required to issue additional warrants to purchase common stock, at an exercise
price of $3.33 per share, each time a draw is made. In connection with $17.5
million drawn under the Working Capital Facility during 1998, the Company issued
warrants to purchase 447,972 shares of the Company's common stock. The aggregate
value ascribed to these warrants of approximately $1,505,000 was reflected as
both a debt discount and an increase in additional paid-in capital.

     Subsequent to December 31, 1999, the Company has drawn the remaining $7.5
million under the Working Capital Facility and the Company issued warrants to
purchase 191,988 shares of the Company's common stock. The aggregate value
ascribed to the warrants was approximately $1,242,000.

8.   Long-term Debt, Bridge, and Other Financings:

Long-Term Debt

     Long-term debt as of December 31 were as follows:
<TABLE>
<CAPTION>
                                                                       1998             1997 
                                                                  -------------    -------------
<S>                                                               <C>              <C>
Senior Notes, with 14% semi-annual interest, due 2007 .........   $ 135,000,000    $ 135,000,000
Discount on Senior Notes ......................................     (27,536,362)     (28,672,995)
Purchase Money Facility .......................................      10,000,000
Equipment financing note, payable in monthly installments
  of $92,694 including interest at 17.26%, and
  final payment of $642,305 due April 29, 1998 ................                          877,854
Note payable in quarterly installments of principal of $187,500
  plus interest at prime plus 2% (10.5% at December 31, 1997)
  through September 1998 ......................................                          562,500
Other .........................................................         907,607          532,000
                                                                  -------------    -------------
                                                                    118,371,245      108,299,359
Less current portion ..........................................        (525,313)      (1,476,256)
                                                                  -------------    -------------
                                                                  $ 117,845,932    $ 106,823,103
</TABLE>

                                      F-12
<PAGE>
 
     The aggregate amount of the principal payments for long-term debt as of
December 31, 1998 follows:

     Year ended December 31:

         1999..............................................     $    525,313
         2000..............................................          335,193
         2001..............................................           47,101
         2002..............................................
         2003..............................................          250,000
         Thereafter........................................      144,750,000
         Discount on Senior Notes .........................      (27,536,362)
                                                                ------------
                                                                $118,371,245
                                                                ============
Senior Notes

     In February 1997, the Company received $135 million of gross proceeds from
a public offering of $135 million of 14% Senior Notes (the "Senior Notes") and
warrants to purchase an aggregate of 2,731,725 shares of the Company's common
stock for $0.01 per share. Approximately $51 million of such proceeds were used
to purchase a portfolio of U.S. Treasury securities that will provide for
interest payments on the Senior Notes through February 2000. The aggregate value
ascribed to the warrants of approximately $29.7 million, was reflected as both a
debt discount and an increase in additional paid-in capital. The debt discount
is accounted for as a component of interest expense using the effective interest
rate method. The Senior Notes are considered to have "significant original issue
discount" under Federal tax rules and the Company is not able to deduct the
accretion of the debt discount for Federal income tax purposes.

     The Senior Notes are unsecured senior obligations of the Company, due
February 2007, with interest payable on February 15 and August 15 of each year
and are redeemable at the Company's option beginning in February 2002 at
redemption prices declining to par. The Senior Notes were issued under an
indenture which contains covenants limiting the Company's ability to incur
additional debt, pay dividends or make other distributions, incur liens, merge
or sell assets, or enter into certain transactions with related parties, among
other restrictions.

Purchase Money Facility

     In September 1998, the Company and Lucent entered into a purchase money
credit facility (the "Purchase Money Facility") setting forth the terms and
conditions under which Lucent will provide purchase money financing in an
aggregate amount of up to $200 million, to be used to finance the purchase of
the Company's data network from Lucent. Under the Purchase Money Facility,
Lucent made $10 million in initial purchase money loans (the "Initial Purchase
Money Loans") immediately available to ART. As of December 31, 1998, the Company
has drawn the full $10 million of the Initial Purchase Money Loans and has also
incurred additional other equipment and construction related costs of
approximately $1.2 million due to Lucent, which is included in accounts payable.
Interest initially accrues at an annual rate of LIBOR plus 5% (10.7% at December
31, 1998) and increases 0.5% each month beginning January 1999. Payments under
the Initial Purchase Money Loans, plus accrued interest, will be due in
installments beginning 2003 through 2009. Subject to other conditions, upon
ART's raising at least $50 million of certain debt or equity capital and
repayment and termination of the Working Capital Facility, Lucent will make
available purchase money loans equal to 200% of the aggregate capital raised,
not to exceed $200 million, including the Initial Purchase Money Loans.

Equipment Financing Note

     The equipment financing note was repaid in full during 1998 and was
previously collateralized by a portion of the Company's wireless transmission
equipment and a $1 million certificate of deposit, which was also repaid in
1998. In connection with the issuance of the equipment financing note, certain
shareholders of the Company guaranteed 

                                      F-13
<PAGE>
 
payment of the note in exchange for warrants to purchase 118,181 shares of the
Company's common stock for $17.19 per share and $225,000 in fees. In November
1996, the shareholders were released from the guarantee.

Bridge Financings

     During 1996, the Company issued in the aggregate $12 million of bridge
financings in three private placements. Of these notes, approximately $8.1
million principal amount was issued to certain shareholders of the Company and
CommcoCCC. Warrants to purchase in the aggregate 603,637 shares of the Company's
common stock at a price per share ranging from $15.00 to $17.19, were issued in
connection with these bridge financings. In November 1996, the Company repaid
these bridge financings with the proceeds from the initial public offering of
the Company's common stock. The early repayment of these bridge financings
resulted in an extraordinary loss arising from the write-off of the unamortized
note discounts and the related deferred financing costs.

CIBC Financing Commitment

     In November 1996, in connection with Company's initial public offering of
common stock, the Company entered into agreements with certain lenders which
provided for the issuance of up to $50 million of senior collateralized notes
(the "CIBC Financing Commitment"), at any time at the Company's option through
February 1997. In connection with the CIBC Financing Commitment, the Company
paid placement and commitment fees and other expenses of approximately $1.9
million and issued warrants to purchase 300,258 shares of common stock (the
"CIBC Warrants") at an exercise price of $0.01 per share. No amounts were
borrowed under the CIBC Financing Commitment. The CIBC Financing Commitment was
terminated in connection with the issuance of the Senior Notes.

9.       Commitments and Contingencies:

Purchase Commitments

     In July 1998, the Company and Lucent entered into a definitive purchase
agreement (the "Lucent Purchase Agreement") which amended and restated the
Company's purchase agreement with Lucent entered into in April 1998, under which
Lucent will design, engineer and construct the Company's wireless broadband data
networks. The Company's purchase commitment under the Lucent Purchase Agreement
is initially $240 million upon the availability of the $200 million Purchase
Money Facility from Lucent. The Company's commitment is subject to various other
terms and conditions, including the availability of additional financing on
terms that are acceptable to the Company. Subsequent to December 31, 1998, the
Company issued a purchase order for certain wireless network equipment in the
amount of approximately $5 million under Lucent Purchase Agreement. The cost of
the wireless network equipment was based on a volume discount price.

Operating Leases

     The Company has entered into operating leases for office space and antenna
sites which expire between 1999 and 2017. Lease expense amounted to
approximately $2,523,836, $1,753,962 and $618,000 for 1998, 1997 and 1996,
respectively. Future annual minimum lease payments as of December 31, 1998 are
as follows:

       1999 .......................................    $  2,714,843
       2000 .......................................       2,259,412
       2001 .......................................       2,082,947
       2002........................................       1,567,541
       2003........................................         897,854
       Thereafter .................................       6,170,797
                                                      -------------
                                                        $15,693,394
                                                      =============

                                      F-14
<PAGE>
 
Employment Agreements

     The Company has entered into various employment agreements with certain
executives that provide for annual base salaries and cash bonuses based on
achievement of specific performance goals.

Contingencies

     The Company is party to certain claims and makes routine filings with the
FCC and state regulatory authorities. Management believes that the resolution of
any such claims or matters arising from such filings, if any, will not have a
material adverse impact on the consolidated financial position, results of
operations or cash flows of the Company.

10.      Capital Stock:

Preferred Stock

     The Company is authorized to issue 10 million shares of $0.001 par value
serial preferred stock. Each series of the preferred stock issued is a separate
class and, as a class, has a liquidation preference equal to the aggregate
purchase price paid for such class.

     The historical share information regarding the Company's preferred stock
activity follows:
<TABLE>
<CAPTION>
                                                                                 Serial  Preferred Stock
                                                                  ----------------------------------------------------------------
                                                                  Series A  Series B Series C Series D  Series E  Series F  Total
                                                                  --------  -------- -------- --------  --------  --------  -----
<S>                                                               <C>       <C>      <C>      <C>       <C>       <C>       <C>
Balance December 31, 1995 ....................................    334,943    86,507    5,402   61,640                      488,492
Issuance of serial preferred stock for cash ..................                                          232,826   48,893   281,719
Shares issued under anti-dilution provisions .................    120,607    28,172    1,961                               150,740
                                                                  --------  -------- -------- --------  --------  --------  -----
                                                                  455,550   114,679    7,363   61,640   232,826   48,893   920,951

Serial preferred stock converted to common stock in connection
   with initial public offering of common stock ..............   (455,550) (114,679)  (7,363) (61,640) (232,826) (48,893) (920,951)
Balance at December 31, 1996 .................................         --        --       --       --        --       --        --
                                                                  ========  ======== ======== ========  ========  ========  =====
</TABLE>
Common Stock

     Approximately 1.2 million shares of the Company's common stock, previously
held by certain individual shareholders in escrow ("Escrow Shares") as part of
the Landover funding commitment, were released upon attainment of certain
objectives in February 1996 as part of a reorganization of the Company. The
Escrow Shares had an estimated fair value of $6.8 million and were recorded as
compensation expense and as an increase in additional paid-in capital.

     In February 1996, the Company sold 48,893 shares of Series F preferred
stock for an aggregate purchase price of $2.5 million and the Company entered
into a strategic distribution agreement and, as partial consideration, granted
warrants to the preferred stockholder to purchase up to 318,959 shares of common
stock at an exercise price of $0.01 per share. The Company recorded the
estimated value of the strategic distribution agreement of $1.1 million as
marketing expense and additional paid-in capital in 1996. The Company incurred
fees of $150,000 in connection with this transaction. In December 1996, the
preferred stockholder exercised its warrants and was issued 318,374 shares of
common stock by the Company.

     The financial statements and footnotes reflect the effects of various
common stock splits and reverse stock splits, including a 1 for 2.75 reverse
split of the Company's common stock effected in October 1996. All references to
the number of shares, per share amounts and par value amounts have been restated
for all stock splits and reverse stock splits. Such stock splits and reverse
stock splits have no impact on the total amount of stockholders' equity
(deficit).

                                      F-15
<PAGE>
 
     During November 1996, the Company completed an initial public offering of
2,300,500 shares of common stock, raising approximately $34.5 million of gross
proceeds. The Company incurred approximately $6.1 million of expenses in
connection with this offering.

Warrants to Purchase Common Stock

     The Company has issued warrants to purchase common stock in connection with
its financing activities during 1998, 1997 and 1996. The following summarizes
the warrants outstanding related to these financing activities at December 31,
1998:
<TABLE>
<CAPTION>
                                                                                      Exercise        Period of
                                                                       Number of      Price per       Exercise
                                                                        Shares          Share          Through
                                                                       ---------      ---------       --------- 
       <S>                                                            <C>             <C>             <C> 
         Equipment financing warrants ............................     118,181          $17.19          2001
         Bridge financing warrants ...............................     400,000          $17.19          2001
         Bridge financing warrants ...............................     203,637          $15.00          2001
         CIBC Warrants............................................      66,217         $  0.01          2001
         Senior Note Warrants.....................................     749,451         $  0.01          2007
         Lucent Warrants..........................................     277,892         $  0.01          2008
         Lucent Warrants..........................................     447,972         $  3.33          2008
</TABLE>
The warrants contain certain anti-dilution provisions.

  Stock Compensation

     Pursuant to the Restated Equity Incentive Plan (the "Plan"), the Company
may grant incentive and non-qualified options and other equity incentives with
respect to up to 4 million shares to employees and certain other persons or
entities.

     Pursuant to the 1997 Equity Incentive Plan for Non-Employee Directors, non-
employee directors are given annual automatic grants of stock options and may
annually elect to take fees in common stock to be issued covering up to an
aggregate of 500,000 shares.

     The Company applies the accounting provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations for its stock-based plans. Accordingly, compensation costs for
employee stock options is measured as the excess, if any, of the fair value of
the Company's stock at the measurement date over the amount an employee must pay
to acquire the stock. Deferred compensation costs charged to operations was
$678,743, $449,313 and $850,663 in 1998, 1997 and 1996, respectively.

     In July 1997, the Company canceled and reissued certain stock options
previously granted to employees under the Company's equity incentive plan to
have exercise prices equal to the then current fair market value of $7.88 per
share of common stock.

     In October 1998, the Company authorized the cancellation and reissuance, at
the election of the recipients, of certain other stock options previously
granted to employees under the Company's equity incentive plan. Approximately
2,099,000 stock options were canceled and reissued. Of these stock options, 50%
were issued with an exercise price equal to the then current market value of
$2.19 per share of common stock. The exercise price of the remaining stock
options were based on the current fair market value upon the occurrence of
certain future events. In February 1999, the exercise prices of the remaining
options were established at the then current fair market value of $8.50 per
share of common stock.

                                      F-16
<PAGE>
 
         A summary of the stock option transactions follows:
<TABLE>
<CAPTION>
                                                                                             Weighted Average
                                                                              Shares          Exercise Price
                                                                              ------         ----------------
        <S>                                                                  <C>             <C>
         Options outstanding, December 31, 1995........................      382,630              $   2.28
              Options granted..........................................      461,112                 16.07
              Options canceled ........................................      (16,363)                12.25

         Options outstanding, December 31, 1996........................      827,379                  9.95
              Options granted..........................................    2,320,263                 10.23
              Options exercised........................................     (286,100)                 1.74
              Options canceled.........................................     (564,210                 15.87
                                                                           ---------

         Options outstanding, December 31, 1997........................    2,297,332                  9.82
              Options granted..........................................    3,381,625                  6.45
              Options exercised........................................      (15,718)                 5.98
              Options canceled.........................................   (2,656,800)                 9.45
                                                                         -----------
         Options outstanding December 31, 1998.........................    3,006,439                  6.15
                                                                         ===========
</TABLE>

     The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). Had the Company elected to recognize compensation costs as provided
for by SFAS No. 123, the Company's net loss and per share amounts on a pro forma
basis for the years ended December 31 would have been as follows:
<TABLE>
<CAPTION>
                                                                          1998              1997               1996
                                                                        Pro Forma         Pro Forma          Pro Forma
                                                                        ---------         ---------          ---------
        <S>                                                          <C>              <C>                  <C>
         Loss before extraordinary item ..........................   $(51,650,666)    $(63,848,637)         $(29,410,915)
         Extraordinary item ......................................                                            (1,339,996)
                                                                     ------------     ------------          ------------
         Net loss ................................................   $(51,650,666)    $(63,848,637)         $(30,750,911)

         Basic and diluted loss per share
           before extraordinary item .............................   $      (2.08)    $      (3.35)         $      (3.81)
         Basic and diluted extraordinary loss per share ..........                                                 (0.17)
                                                                     ------------     ------------          ------------
         Basic and diluted net loss per share ....................   $      (2.08)    $      (3.35)         $      (3.98)
                                                                     ============     ============          ============
</TABLE>
The weighted average fair value and exercise price of options granted during the
years ended December 31, were as follows:
<TABLE>
<CAPTION>
                                                                                  1998         1997        1996
                                                                                  ----         ----        ----
    <S>                                                                          <C>          <C>         <C> 
     The weighted average fair values of options granted with exercise
         prices equal to the market price of stock at the date of grant......     $3.84        $5.78       $ 6.59

     The weighted average exercise price options granted with exercise
         prices equal to the market price of the stock at the date of grant..      6.05         8.69       $14.60
</TABLE>

                                      F-17
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                  1998         1997        1996
                                                                                  ----         ----        ----
    <S>                                                                          <C>          <C>         <C> 
     The weighted average fair values of options granted with exercise
         prices greater than the market price of the stock at the date of grant   0.98         4.80         7.04

     The weighted average exercise price of options granted with exercise
         prices greater than the market price of the stock at the date of grant   9.89        12.89        16.60

     The weighted average fair values of options granted with exercise prices
         less than the market price of the stock at the date of grant........     8.80           --           --

     The weighted average exercise price of options granted with exercise
         prices less than the market price of the stock at the date of grant.     8.75           --           --
</TABLE>

     The assumptions applied in these valuations for periods prior to the
Company becoming a public entity were (i) use of the minimum value method, (ii)
risk free interest rates ranging from 6.1% to 6.5%, (iii) assumed expected lives
of 3 to 5 years, and (iv) no expected dividends. The assumptions applied for
periods subsequent to the Company becoming a public entity were (i) use of the
Black-Scholes option pricing model, (ii) risk free interest rates ranging from
4.6% to 6.0%, (iii) expected volatility rates ranging from approximately 60% to
approximately 85%, (iv) assumed expected lives of 3 to 5 years, and (v) no
expected dividends.

     The following table summarizes information about fixed-price options
outstanding at December 31, 1998 as follows:
<TABLE>
<CAPTION>
                                                 Weighted-
                                 Number           Average          Weighted-         Number           Weighted-
                               Outstanding       Remaining          Average        Exercisable         Average
     Exercise Price            at 12/31/98   Contractual Life   Exercise Price     at 12/31/98     Exercise Price
     --------------            -----------   ----------------   --------------     -----------     --------------
    <S>                        <C>           <C>                 <C>               <C>             <C>
     $1.62 to 4.94...........  1,244,064          9.41               $ 2.29            36,523           $ 3.14
     $6.00 to 8.75...........  1,409,725          8.79               $ 8.29           139,483           $ 7.98
     $9.88 to 12.75..........    342,250          8.63               $11.10            46,287           $10.70
     $14.63 to 15.00.........     10,400          7.94               $14.91             6,069           $14.95
                             -----------          ----               ------             -----           ------

     $1.62 to 15.00..........  3,006,439          9.02               $ 6.15           228,362           $ 7.94
</TABLE>
     During 1997, the Company entered into an employment agreement with its
Chief Executive Officer that provides for, among other things, the issuance of
100,000 shares of common stock deliverable in 2001 that has been reflected as a
non-cash compensation charge of $887,500 in 1997 and the issuance of 100,000
shares of common stock in exchange for a recourse note of $887,500 with interest
at the minimum applicable federal rate due 2001.

     During 1998, the Company entered into agreements with two of its officers
to issue an aggregate 85,000 shares of common stock deliverable in 2001 that has
been reflected as a non-cash compensation charge of approximately $657,500.

11.      Related Party Transactions:

     In 1996, the Company entered into various management consulting agreements
with Landover. Fees paid to Landover under the agreements totaled approximately
$830,000 in 1996. The agreements with Landover terminated in November 1996.
Additionally, the Company paid Landover approximately $390,000 for expenses in
connection with its funding commitment in 1996.

     The Company has paid legal fees to a law firm in which a principal of the
law firm was also a former officer of the Company. Total fees paid to such law
firm were approximately $666,695 and $520,000 in 1997 and 1996, respectively.

                                      F-18
<PAGE>
 
     During 1996, the Company funded approximately $400,000 of research and
development related to development of wireless transmission equipment with an
entity, of which a former executive of the Company was a shareholder and
director.

12.      Fair Values of Financial Instruments:

     The carrying amounts and the estimated fair values of the Company's
financial instruments at December 31 were as follows:
<TABLE>
<CAPTION>
                                                                1998                         1997 
                                                   ----------------------------------------------------------
                                                      Carrying           Fair        Carrying         Fair
                                                       Amount            Value        Amount          Value
                                                       ------            -----        ------          -----
<S>                                               <C>               <C>            <C>              <C>
         Cash and cash equivalents ............    $11,864,218       $11,864,218     $7,135,427       $7,135,427
         Restricted cash.......................         32,060            32,060      1,032,060        1,032,060
         Short-term investments................                                      18,210,220       18,210,220
         Pledged securities....................     27,358,832        27,585,981     44,359,915       44,230,640
         Senior Notes..........................    107,463,638        87,855,469    106,327,005      129,600,000
         Note payable..........................                                         562,500          562,500
         Equipment financing note..............                                         877,854          877,854
         Working Capital Facility..............     16,229,121        16,602,472
         Purchase Money Facility...............     10,000,000        10,000,000
         Other long-term debt..................        907,607           907,607        532,000          532,000
</TABLE>
     Cash, cash equivalents, restricted cash and short-term investments: The
carrying amount reported in the balance sheet approximates fair value. Pledged
securities: the fair values are based on published market values for the
respective investment instruments. Senior Notes: the fair value is based upon
published market value. Note payable, equipment financing note, Working Capital
Facility, Purchase Money Facility and other debt: The fair values are based upon
interest rates currently available to the Company for issuance of similar debt
with similar terms and maturities.

13.      Supplemental Cash Flow Information:

     Supplemental disclosure of cash flow information are summarized below for
the years ended December 31:
<TABLE>
<CAPTION>
                                                                              1998          1997          1996  
                                                                            --------      --------      --------
<S>                                                                      <C>            <C>           <C>
Non-cash financing and investing activities:
     Additions to property and equipment .........................       $10,818,140    $2,181,684    $9,548,102
     Value ascribed to warrants...................................         3,282,351    29,707,509     2,115,388
     Issuance of shares for licenses  ............................        48,347,798    87,750,000
     Accrued deferred financing costs ............................                                       300,405
     Exchange of notes for serial preferred stock,
       net of deferred financing costs ...........................                                     4,673,186
     Termination of software license agreement ...................                       1,774,087
     Common stock issuable in exchange for note receivable........                         887,500
Interest paid.....................................................        19,312,343    10,368,374       926,821
</TABLE>

                                      F-19
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

  None.

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information relating to the executive officers of the Company is
included in Item 4A of Part I of this Form 10-K.

         Information relating to the directors of the Company is incorporated
herein by reference to the information included under "Election of Directors"
and "Certain Transactions" in the Company's definitive Proxy Statement to be
filed with the Commission in connection with the Company's 1999 Annual Meeting
of Stockholders (the "Proxy Statement").

ITEM 11.  EXECUTIVE COMPENSATION

         The information set forth under "Compensation" in the Proxy Statement
is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information set forth under "Common Stock Ownership" in the Proxy
Statement is incorporated herein by reference.

         For the sole purpose of calculating the aggregate market value of
voting stock held by non-affiliates of the Company as set forth on the cover
page, it was assumed that only directors, executive officers and greater than
five percent stockholders as of the calculation date constituted affiliates; no
acknowledgment by such persons of affiliate status is implied.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information set forth under "Certain Transactions" in the Proxy
Statement is incorporated herein by reference.

                                    PART IV

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

         (a) The following documents are filed as part of this report:

              (1)  Consolidated Financial Statements:

                   Consolidated Balance Sheets as of December 31, 1998 and 1997.
                   Consolidated Statements of Operations for the years ended
                   December 31, 1998, 1997 and 1996. 
                   Consolidated Statements of Stockholders' Equity (Deficit) for
                   the years ended December 31, 1998, 1997 and 1996.
                   Consolidated Statements of Cash Flows for the years ended
                   December 31, 1998, 1997 and 1996.

              (2)  Financial Statement Schedules:

                  None.

                                      -20-
<PAGE>
 
              (3)  Exhibits:

                           The following Exhibits are, as indicated on the
                  Exhibit Index, either filed herewith or have heretofore been
                  filed with the Securities and Exchange Commission and are
                  referred to and incorporated herein by reference to such
                  filings.


    Exhibit No.                           Title

        3.1       Amended and Restated Certificate of Incorporation.
        3.2       Restated and Amended Bylaws of Registrant.
        4.1       Specimen of Common Stock Certificate.
        4.2       Indenture relating to the Company's 14% Senior Notes due 2007.
        4.3       Specimen of Note (included in Exhibit 4.2).
        4.4       Collateral Pledge and Security Agreement relating to the
                  Notes.
        4.5       Form of Warrant Agreement in connection with offering of
                  Notes.
        4.6       Specimen of Warrant Certificate in connection with offering of
                  Notes (included in Exhibit 4.5).
        4.7       Shareholders Rights Agreement.
        4.8       Form of Rights Certificate.
       10.1       Employment Agreement dated October 17, 1997 between the
                  Company and Henry C. Hirsch.
       10.2       Amended and Restated Change of Control Agreement dated
                  February 3, 1999 between Henry C. Hirsch and the Company.
       10.3       Employment Agreement dated February 1, 1998 between William J.
                  Maxwell and the Company. 
       10.4       Amended and Restated Change of Control Agreement dated
                  February 3, 1999 between William J. Maxwell and the Company.
       10.5       Employment Agreement dated February 1, 1998 between George R.
                  Olexa and the Company.
       10.6       Amended and Restated Change of Control Agreement dated
                  February 3, 1999 between George R. Olexa and the Company.
       10.7       Employment Agreement dated August 31, 1998 between Thomas P.
                  Boyan and the Company.
       10.8       Amended and Restated Change of Control Agreement dated
                  February 3, 1999 between Thomas P. Boyan and the Company.
       10.9       Employment Agreement dated October 16, 1998 between Robert S.
                  McCambridge and the Company. 
       10.10      Amended and Restated Change of Control Agreement dated
                  February 3, 1999 between Robert S. McCambridge and the
                  Company.
       10.11      Form of Director Indemnification Agreement.
       10.12      Company's Restated Equity Incentive Plan, as amended.
       10.13      Company's 1997 Equity Incentive Plan for Non-Employee
                  Directors.
       10.14      Company's 1996 Non-Employee Directors Incentive Stock Option
                  Plan.
       10.15      Second Restated and Amended Registration Rights Agreement
                  dated July 3, 1996 with ART Licensing and the stockholders of
                  each of ART Licensing and the Company.
       10.16      Amendment No. 1 to Registration Rights Agreement dated as of
                  October 16, 1996.
       10.17      Form of Indemnity Warrant.
       10.18      Form of Subscription Agreement dated March 8, 1996, including
                  Forms of Bridge Note and Bridge Warrant.
       10.19      Option Agreement dated July 3, 1996 with Commco, L.L.C.
       10.20      Form of September Bridge Warrant.
       10.21      Form of CIBC Warrants.
       10.22      Agreement and Plan of Merger dated as of January 23, 1998,
                  among the Company, DCT Acquisition, Inc., DCT Communications,
                  Inc.
       10.23      Registration Rights Agreement dated August 26, 1999 between
                  the Company and Lucent.  
       10.24      Amended and Restated Purchase Agreement dated July 24, 1998
                  between the Company and Lucent.
       10.25      Purchase Money Credit Agreement dated as of September 17, 1998
                  between the Company and Lucent.
       10.26      Working Capital Credit Agreement date as of September 17, 1998
                  between the Company and Lucent.
       10.27      Form of Warrants issued to Lucent pursuant to the Working
                  Capital Facility.

                                      -21-
<PAGE>
 
       10.28      Asset Purchase Agreement dated as of August 6, 1998 between
                  the Company and ICG Telecom Group, Inc.
       10.29      Asset Purchase Agreement dated as of July 3, 1998 between the
                  Company and Astrolink Communications, Inc.
       10.30      First Amendment to Asset Purchase Agreement dated as of August
                  25, 1998 between the Company and Astrolink Communications,
                  Inc.
       21         Subsidiaries of the Company.
       23         Consent of Independent Accountants.
       27         Financial Data Schedule.
       99         Risk Factors.

           (4)     Reports on Form 8-K

           The Company did not file any reports on Form 8-K during the fourth
quarter of 1998.

                                      -22-
<PAGE>
 
                                  SIGNATURES

         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON THIS 14TH DAY OF
APRIL 1999.

                                             Advanced Radio Telecom Corp.

                                             /s/ Robert S. McCambridge

                                             By: ______________________________
                                                 EXECUTIVE VICE PRESIDENT AND
                                                 CHIEF FINANCIAL OFFICER


         PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED:

         SIGNATURE                       TITLE                       DATE

/s/ Henry C. Hirsch             Chairman, Chief Executive     April 14, 1999
------------------------------- Officer and Director
HENRY C. HIRSCH                

/s/ James Cook                  Director                      April 14, 1999
------------------------------- 
JAMES COOK

/s/ Mark C. Demetree            Director                      April 14, 1999
------------------------------- 
MARK C. DEMETREE

/s/ Andrew I. Fillat            Director                      April 14, 1999
------------------------------- 
ANDREW I. FILLAT

/s/ James B. Murray, Jr.        Director                      April 14, 1999
------------------------------- 
JAMES B. MURRAY, JR.

/s/ Alan Z. Senter              Director                      April 14, 1999
------------------------------- 
ALAN Z. SENTER

/s/ Thomas Wynne                Director                      April 14, 1999
------------------------------- 
THOMAS WYNNE

/s/ Robert S. McCambridge       Executive Vice President,     April 14, 1999
------------------------------- Chief Financial Officer
ROBERT S. McCAMBRIDGE           

                                      -23-
<PAGE>
 
                                  EXHIBIT INDEX



Exhibit No.                      Title                                   Page

    3.1       Amended and Restated Certificate of Incorporation.(7)
    3.2       Restated and Amended Bylaws of Registrant.(12)
    4.1       Specimen of Common Stock Certificate.(3)
    4.2       Indenture relating to the Company's 14% Senior Notes
                due 2007.(6)
    4.3       Specimen of Note (included in Exhibit 4.2).(6)
    4.4       Collateral Pledge and Security Agreement relating to the Notes.(6)
    4.5       Form of Warrant Agreement in connection with offering of Notes.(6)
    4.6       Specimen of Warrant Certificate in connection with offering of 
               Notes (included in Exhibit 4.5).(6)
    4.7       Shareholders Rights Agreement.(8)
    4.8       Form of Rights Certificate.(8)
   10.1       Employment Agreement dated October 17, 1997 between the Company
                and Henry C. Hirsch.(9)
   10.2       Amended and Restated Change of Control Agreement dated February 3,
                1999 between Henry C. Hirsch and the Company.
   10.3       Employment Agreement dated February 1, 1998 between William J. 
                Maxwell and the Company.(11)
   10.4       Amended and Restated Change of Control Agreement dated
                February 3, 1999 between William J. Maxwell and the Company.
   10.5       Employment Agreement dated February 1, 1998 between George R. 
                Olexa and the Company.(11)
   10.6       Amended and Restated Change of Control Agreement dated February 3,
                1999 between George R. Olexa and the Company.
   10.7       Employment Agreement dated August 31, 1998 between Thomas P. Boyan
                and the Company.(17)
   10.8       Amended and Restated Change of Control Agreement dated February 3,
                1999 between Thomas P. Boyan and the Company.
   10.9       Employment Agreement dated October 16, 1998 between Robert S.
                McCambridge and the Company.
   10.10      Amended and Restated Change of Control Agreement dated February 3,
                 1999 between Robert S. McCambridge and the Company.
   10.11      Form of Director Indemnification Agreement.(1)
   10.12      Company's Restated Equity Incentive Plan, as amended.(10)
   10.13      Company's 1997 Equity Incentive Plan for Non-Employee Directors.
                 (10)
   10.14      Company's 1996 Non-Employee Directors Incentive Stock Option 
                 Plan.(1)
   10.15      Second Restated and Amended Registration Rights Agreement dated 
                July 3, 1996 with ART Licensing and the stockholders of each 
                of ART Licensing and the Company.(2)
   10.16      Amendment No. 1 to Registration Rights Agreement dated as of 
                October 16, 1996.(5)
   10.17      Form of Indemnity Warrant.(1)
   10.18      Form of Subscription Agreement dated March 8, 1996, including 
                Forms of Bridge Note and Bridge Warrant.(2)
   10.19      Option Agreement dated July 3, 1996 with Commco, L.L.C.(2)
   10.20      Form of September Bridge Warrant.(5)
<PAGE>
 
   10.21      Form of CIBC Warrants.(4)
   10.22      Agreement and Plan of Merger dated as of January 23, 1998,
                among the Company, DCT Acquisition, Inc., DCT Communications,
                Inc.(11)
   10.23      Registration Rights Agreement dated August 26, 1999 between the
                Company and Lucent.(13)
   10.24      Amended and Restated Purchase Agreement dated July 24, 1998 
                between the Company and Lucent.(13)
   10.25      Purchase Money Credit Agreement dated as of September 17, 1998 
                between the Company and Lucent.(13)
   10.26      Working Capital Credit Agreement date as of September 17, 1998 
                between the Company and Lucent.(13)
   10.27      Form of Warrants issued to Lucent pursuant to the Working Capital
                Facility.(13) 
   10.28      Asset Purchase Agreement dated as of August 6, 1998
                between the Company and ICG Telecom Group, Inc.(13)
   10.29      Asset Purchase Agreement dated as of July 3, 1998 between the 
                Company and Astrolink Communications, Inc.(13)
   10.30      First Amendment to Asset Purchase Agreement dated as of August 
                25, 1998 between the Company and Astrolink Communications, Inc.
                (13)
   21         Subsidiaries of the Company.
   23         Consent of Independent Accountants.
   27         Financial Data Schedule.
   99         Risk Factors.

--------
(1)    Previously filed with the Company's Registration Statement on Form S-1,
       effective November 5, 1996 (SEC Reg. No. 333-04388) and incorporated by
       reference herein.
(2)    Previously filed with Amendment 1 to the Company's Registration Statement
       on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
       incorporated by reference herein.
(3)    Previously filed with Amendment 2 to the Company's Registration Statement
       on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
       incorporated by reference herein.
(4)    Previously filed with Amendment 8 to the Company's Registration Statement
       on Form S-1, effective November 5, 1996 (SEC Reg. No. 333-04388) and
       incorporated by reference herein.
(5)    Previously filed with the Company's Registration Statement Form S-1,
       effective February 3, 1997 (SEC Reg. No. 333-19295) and incorporated by
       reference herein.
(6)    Previously filed with Amendment 2 to the company's Registration Statement
       on Form S-1, effective February 3, 1997 (SEC Reg. No. 333-19295) and
       incorporated by reference herein.
(7)    Previously filed with the Company's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996 and incorporated by reference herein.
(8)    Previously filed with the Company's Registration Statement on Form 8-A,
       filed on July 10, 1997 (SEC Reg. No. 000-21091) and incorporated by
       reference herein.
(9)    Previously filed with the Company's Quarterly Report on Form 10-Q, dated
       November 14, 1997 (SEC Reg. No. 000-21091) and incorporated by reference
       herein.
(10)   Previously filed with the Company's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1997 (SEC Reg. No. 000-21091) and
       Incorporated by reference herein.
(11)   Previously filed with the Company's Quarterly Report on Form 10-Q, dated
       May 14, 1998 (SEC Reg. No. 000-21091) and incorporated by reference
       herein.
(12)   Previously filed with the Company's Quarterly Report on Form 10-Q dated
       August 14, 1998 (SEC Reg. No. 000-21091) and incorporated by reference
       herein.
(13)   Previously filed with the Company's Quarterly Report on Form 10-Q, dated
       November 16, 1998 (SEC Reg. No. 21091) and incorporated by reference
       herein.