SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    --------

                                  F O R M 10-K

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

                   For the Fiscal Year Ended December 31, 1997

                                       OR

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

              For the Transition Period From _________ to ________

                        Commission File No. 333-26055-01

                  CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                               13-3517074
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

110 East 59th Street, New York, New York                            10022
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)

                                 (212) 906-8481
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                    --------

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

                                      NONE

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

              Guarantee of 10% Senior Subordinated Notes due 2007
                         issued by CCPR Services, Inc.
              ---------------------------------------------------
                                (Title of Class)

<PAGE>


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

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

As of March 20, 1998, there were 1,000 shares of the  Registrant's  common stock
outstanding.   The   Registrant  is  a   wholly-owned   subsidiary  of  CoreComm
Incorporated, and there is no market for the Registrant's common stock.

The Registrant  meets the conditions set forth in General  Instructions  I(1)(a)
and  I(1)(b) of Form 10-K and is filing  this form with the  reduced  disclosure
format pursuant to General Instructions.


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

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

<PAGE>


                                TABLE OF CONTENTS

PART I                                                                      PAGE
------

Item 1     Business......................................................      1

Item 2     Property......................................................     17

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

Item 4     Submission of Matters to a Vote of Stockholders...............     18

PART II
-------

Item 5     Market for the Registrant's Common Stock and
           Related Stockholder Matters...................................     18

Item 6     Selected Financial Data.......................................     19

Item 7     Management's Discussion and Analysis of Results
           of Operations and Financial Condition.........................     20

Item 7A    Quantitative and Qualitative Disclosures About Market Risk....     24

Item 8     Financial Statements and Supplementary Data...................     25

Item 9     Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure...........................     26

PART III
--------

Items 10, 11, 12 and 13..................................................     26

PART IV
-------

Item 14    Exhibits, Financial Statement Schedules, and
           Reports on Form 8-K...........................................     26

Exhibit Index............................................................     27

Signatures...............................................................     29

Index to Financial Statements ...........................................    F-1


<PAGE>


                                     PART I
                                     ------

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

GENERAL

     Cellular   Communications  of  Puerto  Rico,  Inc.  (the  "Company")  is  a
wholly-owned subsidiary of CoreComm Incorporated ("CoreComm").  The Company is a
Delaware   corporation   that  was  originally   organized  under  the  name  EC
Acquisition,  Inc. on May 18,  1998.  The Company,  through  wholly and majority
owned entities,  owns,  operates and markets  cellular and paging systems in the
Commonwealth  of Puerto  Rico and the U.S.  Virgin  Islands and  conducts  other
cellular and paging related operations  described below. The Company's executive
offices are located at 110 East 59th  Street,  New York,  New York 10022 and its
telephone number is (212) 906-8481.

     Prior to January  31, 1997 (the  "Merger  Date") the Company was a publicly
traded entity. On the Merger Date the Company effected a corporate restructuring
(the "Restructuring") whereby shareholders of the Company became shareholders of
CoreComm on a one-for-one  basis upon the  completion of a merger of the Company
with  and into a  subsidiary  of  CoreComm.  As a  result  of the  Restructuring
CoreComm  replaced  the Company as the  publicly  traded  entity and the Company
became a wholly-owned subsidiary of CoreComm.

COMMONWEALTH OF PUERTO RICO

     The  Commonwealth  of Puerto Rico has been a territory of the United States
since 1898 and a Commonwealth  since 1952.  Puerto Ricans are U.S. citizens with
non-voting  representation  in Congress,  who cannot vote in national  elections
unless they reside in the United  States.  The system of  government  is modeled
after the state  governments  of the United  States,  with an  executive  branch
headed by a Governor and a legislature  consisting  of a 27-member  Senate and a
53-member House of Representatives. The judicial system is closely linked to the
United  States  system.  Most United States laws apply in Puerto Rico and Puerto
Rico is under the  jurisdiction  of the First  Circuit,  United  States Court of
Appeals, which maintains a United States District Court in Puerto Rico. Judicial
decisions  may be appealed to the Supreme Court of the United States in the same
manner that  decisions  are appealed  from state  courts.  The United States and
Puerto Rico also share common monetary, defense and postal systems.

     The  Commonwealth of Puerto Rico has a land area  approximately  70 percent
the size of  Connecticut  and has a  population  of  approximately  3.8  million
people.  The population is  concentrated  primarily in the coastal  regions,  in
particular in the San Juan  metropolitan  area.  Puerto Rico maintains a highway
and road network of approximately  8,600 miles,  including a partially completed
all island beltway loop.

THE  U.S. VIRGIN ISLANDS

     The U.S.  Virgin  Islands has been a territory  of the United  States since
1917.  Virgin  Islanders are U.S.  citizens with  non-voting  representation  in
Congress, who cannot vote in national


                                       1
<PAGE>


elections  unless they reside in the United States.  The system of government is
modeled  after the state  governments  of the  United  States,  with  three main
branches of government.  The executive  branch is headed by a Governor,  elected
every four years through a direct vote. The  legislative  branch consists of one
chamber having 14 members.  The judicial  system is closely linked to the United
States system with a Territorial  Court that has jurisdiction over local matters
and a United States  District Court,  which falls under the  jurisdiction of the
Third  Circuit,  United  States  Court of  Appeals.  Judicial  decisions  may be
appealed  to the  Supreme  Court of the United  States in the same  manner  that
decisions are appealed from state courts.  United States  Federal law applies in
the U.S.  Virgin  Islands.  The United States and the U. S. Virgin Islands share
common monetary, defense and postal systems.

     The U.S.  Virgin Islands has a land area of  approximately  84 square miles
and has a population of approximately  102,000 people. The population is divided
in three islands: St. Thomas (with a population of approximately 46,000 people),
St. Croix (with a population of approximately  50,000 people) and St. John (with
a population of approximately 6,000 people).

CELLULAR TELEPHONE OWNERSHIP INTERESTS

     The  following  table  sets  forth  the  Company's  cellular   Metropolitan
Statistical  Area ("MSA") and Rural Service Area ("RSA") markets and approximate
percentage ownership as of March 20, 1998:
<TABLE>
<CAPTION>

        MARKET                                         POPULATION(1)(2)   OWNERSHIP       POPS (3)
     ---------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>           <C>
     San Juan/Caguas MSA ...........................       2,124,891       100.00%       2,124,891
     Aguadilla MSA..................................         180,687        99.01          178,898
     Mayaguez MSA...................................         227,941       100.00          227,941
     Ponce MSA......................................         261,585       100.00          261,585
     Arecibo MSA....................................         195,843       100.00          195,843
     PR-1 Rincon RSA................................          13,726       100.00           13,726
     PR-2 Adjuntas RSA..............................         276,517       100.00          276,517
     PR-3 Ciales RSA................................         126,052       100.00          126,052
     PR-4 Aibonito RSA(4)...........................         295,140       100.00          295,140
     PR-5 Ceiba RSA(5)..............................          42,172         0.00                0
     PR-6 Vieques RSA...............................           8,975       100.00            8,975
     PR-7 Culebra RSA...............................           1,598       100.00            1,598
     U.S. Virgin Islands-1 St. Thomas/St. John......          51,670       100.00           51,670
     U.S. Virgin Islands-2 St. Croix................          50,139       100.00           50,139
                                                           ---------                     ---------
          Total.....................................       3,856,936                     3,812,975
                                                           =========                     =========
</TABLE>
---------------------
(1)  1995 U.S. Census Bureau Population Estimates for Puerto Rico.
(2)  1990 U.S. Census Bureau Population Estimates for the U.S. Virgin Islands.
(3)  A cellular system  operator's "pops" is currently the most common technique
     for  measuring  the relative  size of  different  companies in the cellular
     telephone  business.  Pops are  defined as the  estimated  population  of a
     market multiplied by a company's ownership interest in the entity operating
     the system in that market.  The number of pops owned by a cellular operator
     does not  represent  the  number of users of  cellular  service  and is not


                                       2
<PAGE>


     necessarily indicative of the number of potential subscribers. Rather, this
     term is used only as a basis for comparison of the current size of cellular
     system operators.
(4)  In January 1998, a subsidiary of the Company  acquired all of the assets of
     Cellular Uno Limited  Partnership,  the entity that held the license to own
     and operate the non-wireline system for PR-4 Aibonito-RSA.
(5)  The Company has received interim operating  authority in the PR-5 Ceiba RSA
     from the FCC and from Puerto Rico  authorities.  In 1997, the U.S. Congress
     directed the FCC to use the auction mechanism to grant permanent  operating
     authority  with this and other  RSA's if and when the FCC  decided to grant
     such licenses.

     The Company  had, as of December 31,  1997,  an aggregate of  approximately
196,400  subscribers  which  represents a penetration  rate (i.e., the number of
subscribers divided by the total estimated  population of the Company's markets)
for the Company of approximately 5.1% See "Sales and Marketing".

PAGING

     A  subsidiary  of the Company has  received  authorization  from the FCC to
operate  two 900 MHz paging  systems to serve  Puerto  Rico and the U.S.  Virgin
Islands. The Company completed the construction of the Puerto Rico paging system
and began operations  during March 1995. The Company  completed  construction of
the U.S. Virgin Islands paging system and began  operations in November 1995. As
of December 31, 1997, the Company's paging operations had  approximately  49,000
pagers in use.

SALES AND MARKETING

     The Company attracts  subscribers through direct and indirect  distribution
channels  and  aggressive  advertising.  The Company  relies on its direct sales
force,  indirect  channels  such as  dealers,  retailers  and  resellers,  sales
literature,  sponsorship of local events, and substantial television,  print and
radio  advertising  campaigns  to  create  awareness  of  its  services  and  to
communicate the benefits and promotional offers associated with them.

     Sales are  targeted  at two  primary  segments:  individual  and  corporate
accounts.  Each segment has its own  dedicated  direct sales force.  The Company
introduced  prepaid service  (primarily for low usage individual users) in 1997.
This payment  option  eliminates  the necessity of credit checks and billing and
allows users to closely monitor their usage.

     The Company has over 300 employees in sales and marketing functions. Direct
sales, including corporate accounts, represented over 60% of the Company's total
sales in 1997. The 180-person  direct sales force is distributed  among 12 fixed
sales and service  centers  throughout  Puerto Rico and the U.S. Virgin Islands,
with five in San Juan/Caguas,  one in Ponce, one in Fajardo, one in Arecibo, one
in Mayaguez and three in the U.S. Virgin Islands,  as well as six kiosks located
in major  shopping  centers,  31  mini-kiosks  inside large retail stores (e.g.,
WalMart,  Sams,  Western Auto, Sears,  Blockbuster Video) and four mobile units.
The sales and  service  centers  are  designed  for  up-market  consumers,  have
convenient  hours of  operation,  and the ability to sell and  service  cellular
telephones  while the customer waits.  The sales and service centers also play a
major role in the Company's ability to provide superior  customer  service.  See


                                       3
<PAGE>


"Customer  Service".  In addition,  the Company  utilizes a network of carefully
selected  independent  dealers and large retailers (such as Let's Talk Cellular)
which  accounted  for  over  30% of  the  Company's  new  activations  in  1997.
Currently, resellers account for only a small percentage of new activations.

     The use of a broad mix of  different  distribution  channels in Puerto Rico
gives the Company a widespread  marketing  presence and provides  easy access to
its  subscriber  base  while  maintaining  a  high  quality  of  service  to its
subscribers. In addition, the Company's growing network of direct sales, dealers
and large retailers provide it with a strong presence in the  telecommunications
market.  The  Company  markets  its  services  under the  nationally  recognized
CELLULAR  ONE  (registered  trademark)  brand  name and its sales and  marketing
strategy carefully promotes CELLULAR ONE (registered  trademark)'s premium brand
image.

     Although the Company employs a segmented  pricing approach whereby specific
pricing plans are  developed to attract  different  segments of the market,  the
Company  has  differentiated  itself  from the  Puerto  Rico  Telephone  Company
("PRTC"),  the  Company's  significant  competitor  and the  landline  telephone
service  provider in Puerto  Rico,  primarily  by offering  premium  services at
premium  prices and  directing  significant  efforts  toward  customer  service,
technical  excellence and advanced calling  features.  In contrast,  the Company
believes  that the PRTC has tended to  compete on the basis of name  recognition
and appeal to local sentiment.  Centennial de Puerto Rico, Inc., a subsidiary of
Centennial  Cellular  Corp.  ("Centennial")  was a new  personal  communications
systems ("PCS") entrant to the market in late 1996 and has competed successfully
with the Company and the PRTC on the bases of price and its all digital network.

CUSTOMER SERVICE

     An important  element in the Company's  business strategy is to provide the
highest quality, localized customer service in the individual markets it serves.
This is especially  significant because, in the Company's view, customer service
has not been emphasized by the PRTC.

     The Company's  commitment to superior  quality  service is reflected by the
92% overall  satisfaction  rating it received from its  subscribers in an annual
independent survey of customer satisfaction  conducted by the Cellular One Group
in 1997. This rating far exceeded the 85% United States national average.

     The  Company has  introduced  a  full-service  program  utilizing  customer
service  representatives  and local customer service centers in all of its major
markets.  Customer service centers are located within existing sales and service
distribution outlets,  offering a specific,  non-sales-oriented point of contact
where existing customers can pay their bills, ask questions about their cellular
service or hardware,  etc. In addition,  the Company provides a 24-hour customer
service hotline.  This full-service  policy means that a customer service person
is available at all times to answer inquiries and to respond rapidly to customer
emergencies.

     The Company also employs a proactive,  segment-driven  approach to customer
retention  and  loyalty,  beginning  with  a  "welcome  call"  shortly  after  a
subscriber  receives its first bill.  Subsequently,  each  subscriber is classed
according to segment  (corporate  or  individual),


                                       4
<PAGE>


usage (high, medium, low), tenure, payment history, etc., and subsequent contact
patterns and methods depend on a subscriber's  class. This allows the Company to
service and satisfy its subscriber  base according to their value to the Company
in a cost effective manner.

     The  Company  proactively  implements  fraud  detection  and  sophisticated
prevention mechanisms to protect its subscribers from fraud. In 1992 the Company
implemented  fraud  identification  software  and has recently  implemented  the
additional  state-of-the-art  fraud  detection and  prevention  systems known as
fingerprinting and authentication.  The Company has also taken a leading role in
the  industry  to  educate  the public  about the  growing  problem of  cellular
telephone  fraud and how to detect and  prevent  its  occurrence.  In  addition,
through its participation in the North American  Cellular Network ("NACN"),  the
Company is assured that only bona-fide subscribers enjoy roaming services.

CELLULAR TECHNOLOGY

     Cellular  mobile radio  technology  was  developed to provide high quality,
high capacity mobile and portable  telephone  systems.  In a cellular  telephone
system, the service area is subdivided into smaller geographic areas or "cells."
Each  cell has its own  relatively  low  power  transmitter  and  receiver  that
communicates by radio signal with cellular  telephones located in the cell. Each
cell is connected by microwave or telephone line to a mobile telephone switching
office ("MTSO"),  which in turn is connected to the worldwide telephone network.
See " - Regulation  - Federal  Communications  Commission  Regulation"  for  the
interconnection arrangements with the worldwide telephone network.

     When a cellular  subscriber in a particular cell dials a number, the mobile
telephone sends the call by radio to the cell's  transmitter/receiver,  where it
is sent to the MTSO.  The MTSO then  completes  the call through its  connection
with the landline telephone network. Conversely,  incoming calls are received by
the MTSO,  which instructs the appropriate  cell to complete the  communications
link by radio signal  between the cell's  transmitter/receiver  and the cellular
telephone.

     The MTSO controls communications within the cellular system,  including the
"hand-off"  process as a cellular  telephone moves from one cell to another.  In
this process, the system recognizes that a cell boundary has been crossed, finds
an available  channel in the new cell,  and transfers the call to that channel -
all within a fraction of a second.

     Cellular  telephone systems have a high capacity because of the substantial
frequency  spectrum  generally  allocated for the purpose of cellular service by
the FCC and  because  all  frequencies  can be  reused  throughout  the  system.
Frequency  reuse  is  possible  because  the  transmission  power  of cell  site
equipment  and mobile  units is  relatively  low and signals on the same channel
will not  interfere  with each other if they are  transmitted  in cells that are
sufficiently far apart. Reuse multiplies the number of channels available to the
system operator and thereby increases the telephone calling capacity. A cellular
licensee  may  also  use  its  cellular  frequencies  to  provide  paging,  data
transmission, and other services so long as the provision of these services does
not impair its ability to provide cellular service,  cause interference to other
cellular licensees and, when required, has the appropriate regulatory approval.


                                       5
<PAGE>


NETWORK AND SYSTEM CONSTRUCTION

     The  Company's  network was designed  specifically  for the Puerto Rico and
U.S. Virgin Islands markets using extensive  geographic and engineering studies.
The Company  continually  updates its network in order to ensure quality service
and maximum geographic coverage.  The Company has completed a network that as of
December 31, 1997,  included  approximately 99 cell sites and two MTSOs covering
over  90% of the  population  of  Puerto  Rico  and  the  U.S.  Virgin  Islands.
Engineering  and  system   construction  is  carried  out  by  approximately  80
employees.

     Cell sites are  equipped  with both  analog and dual mode (i.e.  digital or
analog  cellular)  radio  transceivers.  Digital Time Division  Multiple  Access
("TDMA") was originally installed in 1995 and commercially  implemented in 1997.
Digital  technology  offers many  advantages over analog  technology,  including
substantially  increased  capacity,  lower costs and the  opportunity to provide
enhanced services such as data transmission. In early 1997 the Company initiated
the use of an enhanced voice coder in its TDMA system.  The enhanced voice coder
provides this system with improved voice quality. The Company has introduced and
distributed to selected groups of subscribers,  including  internal users,  dual
mode phones using the TDMA format for digital signaling. Because existing analog
cellular  telephones will not be able to receive digital  transmissions from the
base station,  the Company  expects that the  transition  from analog to digital
will be phased in over a number of years,  during  which  time the  system  will
maintain both analog and digital transmitting equipment and will thus be able to
serve both analog and  digital  forms of cellular  telephones  and  transmitting
equipment.

     In order to hasten cell site  commissioning,  increase network  reliability
and reduce  ongoing  operating  costs,  the  Company  has built its own  digital
microwave  transmission  network to connect  its cell  sites and  switches.  The
backbone of the network is a ring around the mountainous  regions of the island,
providing substantial capacity (135 Mb/sec). The ring network provides redundant
communication  paths to ensure minimal network disruption in the event of a cell
site  outage and spurs  provide at least 6 Mb/sec of capacity to each cell site.
The Company  resells spare capacity on this network to major  telecommunications
users.

     In 1997,  the  Company  began to use a Network  Management  Center  ("NMC")
provided by C-Net, Inc. The NMC enables the Company to monitor the entire system
on a 24 hour  basis and  allows  for  nearly  instant  detection  of any  system
malfunction or failure.

     The Company uses a Computer  Automated  Design  system to choose the proper
network configuration that will provide maximum capacity and service reliability
in the island's heavily populated coastal areas. The design is based on the ring
network  concept,  which provides a good fit with Puerto Rico's  topography.  In
addition,  to test the network  design,  the Company uses a performance  testing
system to predict and measure signal levels. By utilizing  sophisticated network
design and system testing  techniques,  the Company's completed network provides
similar  geographic  coverage to the PRTC with fewer cell sites and with greater
service reliability.

     Cellular systems are capital  intensive,  requiring  significant  levels of
investment  for  equipment,  construction  and  cell  site  acquisition.  As  of
December 31, 1997, the Company


                                       6
<PAGE>


had  operating  plant  and  equipment  and   construction-in-progress   with  an
historical cost of approximately $142,000,000.

INTERCONNECTION AGREEMENT

     Effective  September  2,  1997,  after  negotiations  between  PRTC and the
Company and  arbitration by the  Telecommunications  Regulatory  Board of Puerto
Rico,  the Company  and PRTC  entered  into an  interconnection  agreement.  The
agreement is for a two year term.  The agreement  establishes  the rate at which
the  Company  will pay PRTC for calls  placed by the  Company's  subscribers  to
PRTC's customers.  In addition, the agreement provides that PRTC is obligated to
pay the Company the same amount for calls made by its customers to the Company's
subscribers.   This   agreement   reflects   a   reduction   in  the   Company's
interconnection rate of almost 50% and, unlike the previous contract between the
parties,  requires  PRTC to pay the  Company  for  calls  originated  on  PRTC's
network.  Moreover,  the  Company  is no  longer  required  to pay  PRTC for the
telephone numbers the Company supplies to its customers.

     The interconnection  agreement gives PRTC the right to assess long-distance
toll charges on any of its own customers who call from outside the Metro area to
any of the Company's subscribers.  The agreement further provides, however, that
PRTC will not assess such charges on its customers if the Company  either agrees
to assume the long distance  charges or if the Company  interconnects  with, and
picks up PRTC's  incoming  calls, at each of the 17 host end offices outside the
Metro area. The Company chose the option of end office  interconnection  but, in
November 1997, before PRTC installed such points of interconnection,  PRTC began
assessing,  retroactively  to  September  2,  1997 and  without  warning  to its
customers,  toll charges to its  customers who had placed calls to the Company's
subscribers.  By  December  17,  1997,  PRTC  had  installed  all the  point  of
interconnection  requested by the Company. On December 24, 1997, the Board ruled
that PRTC had violated its good faith duty to its customers by assessing charges
to them  retroactively  and without any advance notice.  Accordingly,  the Board
ordered PRTC to refund any payments  already  collected  and to cease and desist
from attempting to collect charges not yet rendered.  PRTC subsequently  filed a
complaint in Federal  District Court for the District of Puerto Rico against the
Board and the Company and asked for a preliminary injunction. Both the complaint
and preliminary injunction request remain pending. The Company believes there is
no merit to PRTC's lawsuit and intends to defend itself vigorously.

SOURCES OF REVENUE

     The cellular  mobile  telephone  services  available  to customers  and the
sources of revenue available to a system operator are similar to those available
with standard home and office  telephones.  Cellular  telephone  subscribers are
generally charged separately for monthly access, air time, toll calls and custom
calling  features such as voice mail,  call  forwarding,  call waiting and third
party conferencing. Cellular telephone subscribers are generally responsible for
purchasing  or otherwise  obtaining  their own cellular  mobile  telephone.  The
Company introduced prepaid service (primarily for low usage individual users) in
1997. This payment option  eliminates the necessity of credit checks and billing
and allows users to closely monitor their usage.  Paging subscribers are charged
on a monthly  basis for service and are  generally  responsible  for  purchasing
their own pager.  The Company also generates some revenue from the resale of its
digital microwave transmission network.


                                       7
<PAGE>

     When  service is provided to  "roamers"  (i.e.,  registered  customers of a
cellular system other than the Company's  cellular system who place calls on the
Company's  cellular  system),  the  Company  charges a daily  access fee and the
roamer air time rate,  which is  typically  higher than  standard  usage  rates.
Roaming is an added  service  offered by the Company  which allows a customer to
place or receive a call in a cellular service area away from the customer's home
market area. The Company has entered into "roaming agreements" with operators of
other  cellular  systems  covering most of the United States  cellular  systems.
These reciprocal agreements allow a subscriber of a participating system to roam
or travel  into a Company  market and make and  receive  calls on the  Company's
system. The charge for this service is billed by the Company to the subscriber's
home system,  which then bills the subscriber.  Roamers from systems that do not
participate in this  arrangement  are routed to an outside  service bureau which
completes  the call upon the receipt of a valid credit card number.  The Company
receives a fee from the  service  bureau for each  completed  call.  The Company
provides roaming services under the NACN, which allows calls to and from roamers
from systems who participate in NACN to be delivered  automatically  without the
use of access  codes.  NACN also  provides such roamers the ability to use their
custom calling features in roaming markets.

     The cellular  telephone  industry is typically  characterized by high fixed
costs and low  variable  costs.  Therefore,  once  revenues  exceed fixed costs,
incremental  revenues  should  yield a high  incremental  operating  profit.  In
addition,  once initial system  capacity has been reached,  additional  cellular
system capacity can be added in increments that closely match demand and at less
than the proportionate cost of the initial capacity.

PATENTS, COPYRIGHTS AND LICENSES

     The Company  does not have any patents or  copyrights  nor does the Company
believe patents or copyrights  play a material role in its business.  Other than
the  Company's FCC  licenses,  the Company's  only license is for the use of the
service mark and trademark  CELLULAR ONE (registered  trademark),  which is also
licensed to many of the non-wireline  systems in the United States. In 1992, the
owners of such mark  entered  into a new  agreement  with the  Company,  with an
effective  twenty-year  term,  under  which the  Company is required to maintain
certain service quality standards. Under this agreement, the Company is required
to pay licensing and other fees for the use of the service mark.  The total fees
paid in the year ended December 31, 1997 were $216,000, which were determined by
the size of the Company's markets.

COMPETITION

     FCC rules  formerly  provided  that two  licensees  will be  authorized  to
provide  wireless  communications  service  in each  market.  PRTC is one of the
licensees (the "Wireline  Licensee") in each Puerto Rico market.  VitelCellular,
Inc., an affiliate of Virgin Islands Telephone Company (the provider of landline
telephone  service in each market in the U.S.  Virgin  Islands) is the  Wireline
Licensee in each U.S. Virgin Islands market. The second authorization in each of
Puerto Rico and the U.S.  Virgin  Islands was  available for  applications  by a
non-telephone company carrier (the "Non-Wireline  Licensees").  The Company is a
Non-Wireline  Licensee.  The FCC's  regulation  of  cellular  system  licensing,
construction and operation is  substantially  the same for both the Non-Wireline
Licensee and the Wireline  Licensee.  Each  Licensee is assigned 25 megahertz of
the radio spectrum,  which is further divided into 416 two-way  channels.  Given
the cellular market duopoly, the Company faces  facilities-based


                                       8
<PAGE>


competition  in each of its Puerto Rico markets from the PRTC and in each of its
U.S.  Virgin  Islands  markets from  VitelCellular,  Inc.  Although the cellular
services offered by the Company, the PRTC and VitelCellular, Inc. are similar in
terms of price, the Company has attempted to differentiate  itself from the PRTC
and  VitelCellular,  Inc.  by  directing  significant  efforts  toward  customer
service, technical services and calling features.

     The PRTC and  VitelCellular,  Inc.  are  significantly  larger  and  better
capitalized than the Company.  The Company believes the PRTC currently  provides
service to less than approximately 40% of the subscribers of wireless service in
Puerto  Rico.  In  the  U.S.   Virgin   Islands,   the  Company   believes  that
VitelCellular,  Inc.  currently  provides  service to  approximately  45% of the
subscribers  of cellular  service in the U.S.  Virgin  Islands.  In Puerto Rico,
Centennial,  a competitor using PCS frequencies,  had  approximately  15% of the
wireless market at year end 1997.

     In 1990, the  Commonwealth  of Puerto Rico attempted to sell the PRTC to an
independent third party, but did not consummate such a transaction. In 1997, the
Commonwealth  announced  that it intended to restart this process and  indicated
that it intended to complete such sale by the end of 1998. Such sale could be to
another experienced cellular operator or to a telecommunications  company,  such
as an affiliate of a Bell Operating Company.  Given that the FCC-defined markets
and the  technical  standards are the same for both  licensees in a market,  the
Company  believes that its ability to make and implement  decisions  rapidly and
its customer service oriented  strategy should enable it to compete  effectively
with the PRTC or any other competitor.

     Broadband PCS has become  increasingly  competitive with cellular services.
Broadband  PCS is a digital,  wireless  communications  service  consisting of a
variety of new mobile and  portable  services and  technologies,  such as small,
lightweight  telephone  handsets  that work at home,  in the  office,  or on the
streets;  portable,   wireless  facsimile  machines;  wireless  electronic  mail
services;   advanced  paging  techniques;   and  other  wireless  communications
services. Broadband PCS providers are deploying a large number of low power base
stations to take advantage of the radio propagation characteristics of the 2 GHz
spectrum.  Accordingly,  more PCS base  stations than cellular base stations are
needed  to cover a  particular  area,  although  PCS  facilities  cost less than
comparable cellular facilities.

     The FCC  completed  the first  auction  process for  broadband PCS in March
1995. In the Puerto  Rico-Virgin  Islands MTA, the three high bidders were AT&T,
Centennial  and PCS  2000,  now  known  as Clear  Comm,  Inc.  Centennial  began
marketing  its PCS  services  in December  1996 and as of December  31, 1997 had
approximately  55,000  subscribers.   Centennial's  network  provides  a  single
seamless  system  substantially  overlapping the Company's  system.  None of the
other PCS licensees have commenced  operations,  although AT&T has begun limited
construction.

     In the D-F block PCS auction, the PRTC and VitelCom,  Inc., an affiliate of
VitelCellular,  Inc., each purchased 10 MHz licenses that cover their respective
cellular  service  areas.  Accordingly,  after the FCC  completes  the licensing
process,  each of these companies will hold 35 MHz of wireless spectrum in their
regions. The remaining D, E, and F blocks PCS licenses were acquired by entities
which include Sprint  Communications Inc. and Omnipoint


                                       9
<PAGE>


Corp. in Puerto Rico and the U.S. Virgin Islands.

     In total,  the FCC awarded six  broadband  PCS  licenses by auction in each
market,  with each licensee  holding either 10 MHz, 20 MHz, 30 MHz, or 40 MHz of
spectrum in service areas larger than most individual cellular markets. Eligible
entities are  permitted to  aggregate  up to 45 MHz of  commercial  mobile radio
services  spectrum  in  any  given  area.  Thus,  the  Company,  the  PRTC,  and
VitelCellular,  Inc.  are  eligible to own 20 MHz each of PCS  spectrum in their
cellular markets. Like cellular licensees,  PCS licensees will also be permitted
to aggregate markets to create regional and national systems.  In addition,  the
FCC  recently   modified  its  rules  to  permit   broadband  PCS  licensees  to
disaggregate  their spectrum or  geographically  partition  their service areas.
Therefore,  the auction  winners in Puerto Rico and the U.S.  Virgin Islands may
now sell blocks of their  spectrum or portions of their  service  areas to other
competitors.

     The FCC has also issued  local and  nationwide  licenses in the 220-222 MHz
band for the provision of land mobile  service.  These  licenses are expected to
provide  various  one-way  acknowledgment,  and certain  two-way  voice and data
services.  Further,  the FCC has completed the licensing of "narrowband  PCS" in
the 900 MHz band, which includes, among other services, data messaging, advanced
one-way and two-way paging, and facsimile. The messaging and paging services are
expected to include electronic mail and digitized voice messages. These licenses
were issued by auction on a local,  regional,  and national basis,  including in
the  Company's  markets.  Narrowband  PCS will  likely be  competitive  with the
Company's paging operations.

     Cellular  telephone  systems also face competition from specialized  mobile
radio ("SMR") systems. Although the rules for SMR service permit interconnection
with the landline network, the Company believes that SMR has been most effective
as a two-way radio (i.e.,  dispatch)  service.  The FCC  promulgation of certain
rules have permitted SMR companies to overcome  certain  regulatory  limitations
and replace  analog SMR systems with advanced  digital  mobile  systems known as
enhanced SMR ("ESMR").  In 1995 the FCC adopted rules applicable to SMR services
in both  the 800 and 900 MHz  bands  that  facilitate  the  growth  of  seamless
regional or national SMR systems. The FCC established 175 economic-areas ("EAs")
as the  geographic  area for licensing the upper 10 MHz block of the 800 MHz SMR
band and provided for 3 SMR licenses (120, 60, and 20 channel blocks) per EA for
a total of 525 EA licenses. The FCC established a licensing scheme which divided
the 900 MHz band into 20 ten-channel blocks in each of 51 MTAs. Similar to other
commercial  wireless services,  800 Mhz and 900 MHz SMR licensees may construct,
operate or modify  systems  without  obtaining  prior FCC approval.  The FCC has
tentatively  scheduled  an  auction  for the  lower 80 MHz  block of 800 MHz SMR
spectrum  and "general  category"  channels  for the third  quarter of 1998.  In
addition,  the FCC has tentatively  scheduled an auction of 220 MHz SMR licenses
for May 19, 1998.  The auction will  consist of 908 licenses (3  nationwide,  30
regional  economic-area  groupings  and 875 EA).

     Technological  advances  in the  communications  field  continue to make it
impossible to predict the extent of future  competition  for cellular  services.
For  example,  the FCC has  licensed  four  mobile  satellite  systems  in which
transmissions   from  mobile  units  to  satellites  would  augment  or  replace
transmissions to cell sites. There are a number of large, well-financed entities
involved  in  the  mobile  satellite  business.  One  international   investment
consortium,  Iridium  LLC,  has stated  its  intent to  provide a  cellular-type
telephone  service via satellite


                                       10
<PAGE>


technology  that will be available  anywhere in the world beginning in September
1998.  Iridium  also plans to offer a means of roaming  among the world's  major
ground-based cellular phone standards.  Other mobile satellite service providers
are expected to include  Globalstar  LP, which has announced its intention to be
in  operation  by  1999,  and ICO  Global  Communications  LP.  The FCC has also
authorized  Basic  Exchange  Telecommunications  Radio  Service  to  make  basic
telephone service more accessible to rural households and businesses.

     Further,  various other FCC rulemaking proceedings may affect the manner in
which radio  frequency  spectrum will be allocated  among the various  potential
competitors  of  cellular  service.  For  example,  the  FCC has  adopted  rules
allocating  25 MHz below 5 GHz for  commercial  fixed and mobile radio  services
which could  eventually  compete with  cellular.  The FCC has also adopted rules
allocating a portion of the spectrum above 40 GHz for  commercial  radio service
some of which  could  compete  with  cellular.  There can be no  assurance  that
existing  cellular  operators  will be  permitted  to receive  licenses for such
spectrum,  or that the  adoption of auctions  would not increase the cost to the
Company of obtaining  such  licenses or their  renewal.  In addition,  30 MHz of
spectrum  in the 2.3 GHz band  has  been  licensed  for  wireless  communication
services  ("WCS"),  and the FCC has adopted rules permitting  licensees to offer
virtually any wireless service on this band, subject to specific technical rules
to prevent  interference  with services in adjacent  bands.  Because the FCC has
adopted  restrictive  out-of-band  emission  limits for WCS  spectrum,  which it
believes  will  render  WCS  spectrum  technologically   infeasible  for  mobile
operations,  WCS licensees will probably not present significant  competition to
the  Company's  operations  for  the  foreseeable  future.  Other  technological
advances  or  regulatory   changes  in  the  future  may  make  available  other
alternatives  to  cellular  service,  thereby  creating  additional  sources  of
competition.

REGULATION

     Federal  Communications  Commission  Regulation.  The Communications Act of
1934 (the  "Communications  Act") requires  cellular  system,  paging system and
microwave station operators such as the Company to obtain authorization from the
FCC prior to constructing or operating their systems.

     For  cellular  licensing  purposes,  the FCC  divided  the  United  States,
including  Puerto  Rico and  other  areas  under the  FCC's  jurisdiction,  into
separate geographic  markets,  known as MSAs and RSAs. Licenses have been issued
in all 306 MSAs  and in all 428  RSAs.  There  are no  pre-designated  microwave
markets.  Applicants  may apply for  microwave  licenses  anywhere  they seek to
provide microwave services, provided that operation of the microwave facility at
that location will not cause interference to other parties.

     When the  initial  phase of a cellular  system has been  constructed  in an
authorized  manner, the licensee is required to notify the FCC that construction
has been completed  before it is authorized to offer  commercial  service to the
public. The licensee then is said to have "operating authority" and is issued an
operating license.  The Company has obtained operating authority for each of its
currently  operating cellular systems.  Initial licenses are granted for 10-year
periods and are renewable upon application to the FCC for periods of 10 years.

     The  Company's  initial  operating  licenses for its systems were issued in
1988  through  1993.  Licenses may be revoked and license  renewal  applications
denied for cause.  Prior


                                       11
<PAGE>


to the expiration of its license term,  each cellular  licensee  seeking renewal
must file an  application.  Other  parties  seeking  authorization  to serve the
licensee's market may also file competing  applications.  The FCC has ruled that
an  incumbent  licensee  would  receive a "renewal  expectancy"  if,  during its
license term, (i) its  performance  has been  "substantial,"  defined as "sound,
favorable, and substantially above a level of mediocre service;" and (ii) it had
substantially   complied  with   applicable   FCC  rules,   policies,   and  the
Communications  Act. The FCC may award an incumbent its license  renewal and not
require a full  comparative  hearing if the  incumbent  qualifies  for a renewal
expectancy.  If the licensee does not qualify for a renewal expectancy,  the FCC
will consider all competing  applications in a comparative  hearing. The FCC may
grant an  uncontested  renewal  application  without  conducting  a  comparative
hearing  or  finding a renewal  expectancy.  There  can be no  assurance  that a
license will be renewed.

     On January 22, 1998, the Company  successfully renewed its licenses for the
Ponce and Mayaguez MSAs for additional ten year terms.  During 1998, the Company
will apply for renewal of its licenses in the San Juan and  Aguadilla  MSAs,  to
which it does not expect any significant challenge.

     The FCC has adopted  regulations  regarding auctions for the award of radio
spectrum  licenses.  Pursuant  to such  rules,  the FCC at any time may  require
auctions  for new or  existing  services  prior  to the  award  of any  license.
Accordingly,  the Company can give no assurance  with  respect to its  continued
ability to procure  additional  frequencies or to expand existing services using
frequencies for which the Company is licensed into new geographic areas.

     Under FCC rules,  the authorized  cellular  service area for the Company in
each of its markets is referred to as the "cellular  geographic service area" or
"CGSA". The boundaries of the CGSA are determined by a mathematical formula that
is a function  of  transmitting  station  effective  radiated  power and antenna
height.  The CGSA may be coincident with,  smaller than, or in some cases larger
than the related MSA or RSA boundary. The right to serve areas which fall within
the  licensee's MSA or RSA but outside of its CGSA is exclusive to such licensee
for a period of five years from the grant of its initial construction permit. As
licensees serve such areas, their CGSAs will be extended to cover the additional
served areas  inside the MSA or RSA and, in some cases,  area beyond the MSA/RSA
boundary.  Although overlapping service areas are common, under rules adopted by
the FCC in 1993,  service area extensions into the CGSA of a neighboring  system
on the same  frequency  block must be withdrawn from such CGSA at the request of
the  neighboring   licensee.   At  the  conclusion  of  the  initial   five-year
construction period any entity, including the licensee, may file with the FCC an
application to serve the "unserved  areas," of that MSA or RSA which are outside
of the  licensee's  CGSA,  subject  to certain  restrictions.  The  Company  has
determined  that there are no  significant  unserved  areas  within its licensed
markets.

     The Communications Act requires  telecommunications common carriers to file
and maintain with the FCC tariffs  describing rates,  terms and conditions under
which their international and certain interstate telecommunications services are
offered to the public.  Accordingly,  the Company  must file tariffs for certain
telecommunications services that it proposes to offer.


                                       12
<PAGE>


     The FCC's  rules also  prohibit  common  carrier  licensees  from  imposing
restrictions  on the resale of service by third  parties who purchase  blocks of
mobile telephone numbers from an operational  system and then resell them to the
public. The Company currently provides service to third party resellers. The FCC
recently extended this nondiscriminatory resale requirement to broadband PCS and
certain SMR licensees.  Further,  under this new policy,  all resale obligations
for cellular,  broadband PCS and SMR operators  will  terminate five years after
the date that the last group of initial PCS licenses are granted.

     On  February  8, 1996,  Congress  enacted  the 1996 Act,  which  effected a
sweeping  overhaul  of the  Communications  Act.  In  particular,  the  1996 Act
substantially  amended Title II of the Communications  Act, which governs common
carriers.  The  1996  Act  imposes  a duty on all  telecommunications  carriers,
including   cellular,   to   interconnect   with   the   facilities   of   other
telecommunications carriers. Only incumbent local exchange carriers ("LECs") are
required to provide "direct" interconnection with their facilities,  however. In
addition,  the 1996 Act  requires  that  interconnection  be the subject of good
faith negotiations  leading to voluntary  agreements that must be filed with and
approved  by state  commissions.  Moreover,  the 1996  Act  establishes  certain
guidelines for the manner in which LECs may charge for providing interconnection
services (e.g.,  tandem switching,  transport and termination) and provides that
LECs must pay wireless providers,  including cellular and paging operators,  for
termination  of  landline-originated  calls.  On September 2, 1997,  the Company
entered into a new interconnection agreement with the PRTC.

     In exchange  for opening  their  local loops to  competition,  the 1996 Act
permits  the  Bell  Operating  Companies  ("BOCs"),  which  previously  had been
prohibited from providing interLATA services (i.e., long distance services),  to
provide such services, including, but not limited to, the provision of interLATA
services in  connection  with  commercial  mobile  radio  service  ("CMRS").  In
addition,  the 1996 Act permits  registered public utilities to provide cellular
and other telecommunications  services through separate affiliates authorized by
the FCC as "exempt telecommunications companies."

     As directed by the 1996 Act, in August 1996,  the FCC issued  comprehensive
rules regarding the introduction of competition into the local telephone market.
These rules address most aspects of the provision of competitive local telephony
services  from  both  facilities-based  and  non-facilities-based   competitors,
including cellular and paging operators.  The rules address the process by which
potential   competitors   negotiate  with  incumbent   telephone  companies  for
interconnection,  the facilities that must be available for interconnection, the
use of  components  of  the  incumbents'  networks  (referred  to as  "unbundled
access"),  the resale of services of others,  and the pricing of interconnection
and other services and facilities used for offering  competitive local telephone
services.  The rules also provide that incumbent  LECs, such as the PRTC and the
Virgin  Islands  Telephone  Company,  must begin  paying the  Company  and other
wireless providers  immediately for terminating  landline-originated  traffic on
the wireless facilities.

     A number of parties  appealed the FCC's order adopting its  interconnection
rules in Federal court seeking to vacate some or all of the rules. In a July 18,
1997 decision, the United States Court of Appeals for the Eighth Circuit vacated
significant  portions of the  Interconnection  Order,  including its  provisions
governing the pricing of local telecommunications services and unbundled network
elements,  certain  of its  unbundling  requirements  and its "pick and  choose"


                                       13
<PAGE>


provision (which enabled a  telecommunications  carrier to demand any term of an
incumbent LEC's ("ILEC's")  interconnection  contract with another carrier). The
Eighth  Circuit's  October 14 decision vacated an FCC rule that obligated ILECs,
under certain circumstances, to provide combinations of network elements, rather
than  provide them  individually.  This  decision may make it more  difficult or
expensive  for  competitors  to use  combinations  of ILEC  elements.  The  FCC,
numerous  interexchange  carriers  ("IXCs")  and  various  other  parties  filed
petitions for certiorari  with the U.S.  Supreme Court,  which accepted the case
for review on January 26,  1998.  The Supreme  Court is not  expected to issue a
decision  before the end of 1998.  Some of the same  parties and  certain  other
parties  also have  asked  the FCC to  reconsider  these  and other  regulations
implementing the Telecommunications Act. On January 22, 1998, the Eighth Circuit
Court of Appeals ruled that the FCC cannot apply its local  competition  pricing
rules in reviewing  applications of the BOCs for  authorization  to provide long
distance  service  that  originates  and certain  long  distance  services  that
terminate in one of their in-region states. If upheld,  this decision could make
it somewhat  easier for the BOCs to enter the market for in-region long distance
services.

     On  December  31,  1997,  a  U.S.   District  Court  judge  in  Texas  held
unconstitutional  certain  sections  of the  Telecommunications  Act,  including
Section 271, which  prohibits  BOCs from  providing  long distance  service that
originates (or in certain cases terminates) in one of its in-region states until
the BOC has  satisfied  certain  statutory  conditions  in  that  state  and has
received the approval of the FCC. This decision would permit the three BOCs that
are  parties to the case  immediately  to begin  offering  widespread  in-region
long-distance  services.  The District  Court has granted the request of the FCC
and certain IXCs for a stay,  and the FCC and certain IXCs have filed appeals of
the decision with the U.S. Court of Appeals for the Fifth Circuit.

     Following  enactment of the 1996 Act, no CMRS  providers,  including  those
owned or  affiliated  with BOCs,  are  required to provide  equal access to long
distance service providers. The 1996 Act, however, does permit the FCC to impose
rules requiring CMRS providers to afford subscribers  unblocked access to a long
distance  provider of their  choice  through  the use of carrier  identification
codes or other  mechanisms,  but only if the FCC  determines  that  cellular and
other CMRS  subscribers  are being denied  access to their chosen long  distance
providers and that such denial is contrary to the public interest.  It cannot be
predicted  whether the FCC will  subsequently  order cellular carriers and other
CMRS providers to provide such unblocked access.

     The  overall  impact  of the 1996 Act on the  business  of the  Company  is
unclear and will likely remain so for the  foreseeable  future.  The Company may
benefit from reduced costs in acquiring required  communications  services, such
as LEC  interconnection.  However,  other provisions of the 1996 Act relating to
interconnection,  telephone  number  portability,  equal access and resale could
subject the Company to increased competition.

     In  addition,  pursuant to the 1996 Act the FCC issued new  regulations  in
1997 regarding the implementation of the universal service program. In 1998, the
FCC  established  a  nationwide  universal  service  fund  ("USF") to  subsidize
telecommunications  carriers  operating in high-cost and rural areas and to help
provide telecommunications services to schools and libraries. The company has to
pay into the  federal  high  cost/rural  fund  based upon its  interstate  gross
revenues  and into the  school/libraries  fund  based  upon its  interstate  and
intra-island  gross


                                       14
<PAGE>


revenues. The government will reassess the contribution factors for each fund on
a quarterly  basis. The company's first quarter  contribution was  approximately
$279,000.  The company  might seek to be certified as eligible to receive  money
from  the  USF by the  Puerto  Rico  Telecommunications  Regulatory  Board  (the
"Board").  To do so, it must provide certain  services to customers in specified
areas in Puerto Rico.

     Puerto  Rico  is  currently   eligible  for  contributions  from  the  high
cost/rural USF in the amount of approximately $110,000,000.  On January 1, 1999,
all non-rural  telephone  companies  will receive  support from the federal fund
based on  forward-looking,  rather than  historical,  costs.  In  addition,  the
federal  government  will cover only 25% of the costs and states are expected to
collect  remaining 75% by establishing  state universal  service funds. PRTC has
estimated  that,  under the FCC's forward  looking  proxy models,  Puerto Rico's
federal  universal  service funding would decrease to anywhere  between $171,000
and  $9,000,000.  In that case,  the Board would  likely  establish  its own USF
program.  Given the small  number of carriers  operating  in Puerto  Rico,  each
carrier's  contribution to the Puerto Rico fund would probably be  significantly
larger than the current contributions to the federal fund. For this reason, PRTC
has requested  that the FCC continue to provide  Puerto Rico with the funding at
current  levels  until 2001,  the date on which rural  carriers  are required to
begin the transition to a  forward-looking  cost  methodology and participate in
the 25%-75% federal/state split. It cannot be predicted how the FCC will rule on
PRTC's request.

     Subsidiaries  of  the  Company  also  hold  point-to-point  common  carrier
microwave licenses to transport the Company's traffic.  These licenses have been
issued by the FCC for specified terms, and the licensed  facilities,  as well as
proposed new microwave facilities, must be authorized by the FCC and operated in
accordance  with the FCC  regulations.  FCC rules had  provided  for a universal
expiration  date  every 10 years  for all  common  carrier  microwave  licenses,
regardless of when they had been issued,  with the next expiration  occurring in
February 2001. Under new rules that became  effective in August 1996,  licensees
may select either a full 10-year license term dating from the original issuance,
modification  or renewal of license or a term of less than 10 years to allow for
consolidated renewal application filings. Microwave renewal applications are not
subject to  comparative  proceedings.  There can be no assurance  that a license
will be renewed.

     Alien  Ownership.   Section  310(b)  of  the   Communications   Act  places
significant  restrictions  on  alien  ownership  in  and  involvement  with  any
companies  that  use  electromagnetic   spectrum  frequencies  under  the  FCC's
broadcast or common carrier  authority.  Section 310(b)(3) of the Communications
Act  places an  absolute  prohibition  on aliens  owning or voting  more than 20
percent of the capital stock of any corporation holding such a license.  Section
310(b)(4)  prohibits  aliens  from owning or voting more than 25% of the capital
stock of any holding company of such a corporate licensee. The FCC has statutory
discretion to refrain from applying the holding company proscriptions of Section
310(b)(4)  in a  particular  case if it  determines  that  doing  so  would  not
adversely  affect the public  interest.  Since  February 9, 1998, FCC rules have
provided for a rebuttable  presumption that greater than 25% indirect  ownership
or control of a common carrier  licensee by citizens or companies from a country
that  is a  signatory  to  the  Telecommunications  Annex  to  the  World  Trade
Organization General Agreement on Trade in Services ("WTO Agreement") serves the
public  interest.   With  regard  to  investors  from  countries  that  are  not
signatories  to the WTO  Agreement,  the FCC  continues  to apply an  "effective


                                       15
<PAGE>


competitive  opportunities" ("ECO") test. Under this ECO test, if U.S. investors
are permitted to own an interest  greater than 25% in a  communications  carrier
offering  similar  services in the alien  investor's home market and such market
satisfies certain other open competition criteria, the FCC will generally permit
that alien to own an  equivalent  interest in a  U.S.-licensed  common  carrier.
Other factors,  such as the promotion of competition in the U.S. market and U.S.
national security concerns,  may affect this determination.  Through examination
of a recent list of the record holders of the outstanding  stock, the Company is
not aware of alien ownership of its outstanding  stock that would cause it to be
in violation of the  Communications  Act.  However,  a large  percentage  of the
Common Stock is held in nominee name and, accordingly,  the Company is not aware
of the citizenship of the actual beneficial owners of such shares.

     Puerto Rico and U.S. Virgin Islands Regulation.  On September 12, 1996, the
Governor of Puerto  Rico signed into law Puerto Rico Bill 1500,  the Puerto Rico
Telecommunications  Act of 1996  ("P.R.  Telecom  Act").  The P.R.  Telecom  Act
created the Board. The Board has primary regulatory  jurisdiction in Puerto Rico
over all  telecommunications  services,  all service providers,  and all persons
with a direct or indirect interest in said services or providers. On October 17,
1996,  the three  members of the Board,  having been selected by the Governor of
Puerto Rico,  were sworn in. Among other things,  the P.R.  Telecom Act provides
the Board with the power to guarantee  the  availability  of universal  service,
ensure the reliability of  telecommunications  services,  guarantee  services to
rural  areas,  and promote  competition.  In this  regard,  the law requires all
providers  of  telecommunications   services,  except  commercial  mobile  radio
services  providers,  to obtain  certification to do business in Puerto Rico and
directs  the  Board to adopt  regulations  specifying  the form,  contents,  and
procedures for such  certification.  Entities must be certified to obtain access
to  government-owned  property  or  notice of  proposed  Board  regulations.  In
addition, the P.R. Telecom Act provides interconnection to the PRTC's facilities
at any technically  feasible point in PRTC's networks at cost-based  rates.  The
P.R.  Telecom Act requires  that  telecommunication  carriers  provide  detailed
instructions  regarding the procedures for interconnection  between the PRTC and
other  telecommunications  providers.  Finally,  the P.R.  Telecom Act  requires
telecommunications  providers  to submit  fee and  price  lists to the Board and
gives  the  Board  jurisdiction  to  impose  fines if rates to end users are not
cost-based.

     On March 2, 1998,  the FCC  approved  the  withdrawal  by the  Company of a
petition which it had filed with the FCC alleging,  among other things, that the
P.R.  Telecom Act  constitutes  impermissible  regulation  of CMRS  providers by
enacting numerous statutory  provisions that operate as barriers to entry and to
the continued participation of CMRS providers in Puerto Rico.

     The  foregoing  does  not  purport  to be a  complete  summary  of all  the
provisions  of the  Communications  Act or the 1996 Act or the  regulations  and
policies  of the FCC  promulgated  thereunder  or of all the  provisions  of the
applicable  Puerto  Rico and U.S.  Virgin  Islands  local laws,  regulations  or
policies that relate to cellular telecommunications services.

     Other Regulation; Safety. In addition to FCC and other regulatory approvals
discussed above, the siting and construction of the cellular  transmitter towers
and  antennas are subject to certain  Federal  Aviation  Administration  ("FAA")
regulations.  The Company has


                                       16
<PAGE>


obtained FAA clearance for the  construction  of antenna  structures  where such
approval is necessary.  The siting and  construction of cellular  communications
facilities requires land use and construction approval in Puerto Rico and in the
U.S. Virgin Islands. In the past the Company has experienced delays in receiving
the  required  approvals  in Puerto Rico.  The 1996 Act  prohibits  the FCC from
preempting local and state regulations of the siting and construction of antenna
towers for commercial  mobile radio service  providers except in certain limited
circumstances.

     Media reports have  suggested that certain radio  frequency  emissions from
portable   cellular   telephones  might  be  linked  to  cancer.   The  Cellular
Telecommunications  Industry  Association,  as a result of industry concern, has
asked the Federal Food and Drug Administration and the Environmental  Protection
Agency to appoint a panel of experts to review  and  revalidate  the  previously
existing research that established the safety of cellular telephones,  and which
had resulted in an FCC  determination  in 1987 that microwave and cellular radio
transmissions did not pose a material health hazard.  The FCC enforces standards
governing the emission of electromagnetic  frequencies,  including those used by
cellular systems and portable cellular telephones. The Company believes that its
facilities  and all  cellular  telephones  currently  marketed and in use by its
subscribers comply with those standards.

CUSTOMER DEPENDENCE AND SEASONALITY

     The Company is not dependent upon any single  customer for any  significant
portion  of its  business.  The  Company's  business,  as well  as the  cellular
communications  industry,  is not generally  characterized  as having a material
seasonal  element and it is not expected to become  seasonal in the  foreseeable
future.

EMPLOYEES

     As of December  31,  1997,  the Company  through  its  subsidiaries  had an
aggregate of  approximately  750 employees.  No employees are represented by any
labor  organization.  The  Company  believes  that  its  relationship  with  its
employees is excellent.

ITEM 2. PROPERTY
----------------

     Certain of the Company's subsidiaries lease office space, sales and service
centers and warehouse  space in the  Commonwealth of Puerto Rico and in the U.S.
Virgin  Islands.  In  addition,   certain   subsidiaries  either  own  or  lease
transmitter  sites and lease a cellular  switch  site.  The loss of any of these
leases,  either  because  of a failure to obtain a renewal of a lease or for any
reason not known or anticipated by the Company,  could have an adverse effect on
the Company's cellular operations until a substitute site could be found.

     The Company  believes that the properties that are currently under lease or
owned by the Company are adequate to serve its present  business  operations and
its goals of providing  continuous  coverage throughout Puerto Rico and the U.S.
Virgin Islands,  although the Company may require additional  properties for new
cell  sites  and sales and  service  centers  as  demand  for  cellular  service
increases.  See the Notes to the  Company's  Consolidated  Financial  Statements
included   elsewhere  in  this  Form  10-K  for  information   concerning  lease
commitments.


                                       17
<PAGE>


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

     The Company is involved in various disputes, arising in the ordinary course
of business, which may result in pending or threatened litigation. The Company's
management  expects  no  material  adverse  effect  on the  Company's  financial
condition to result from these matters.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
-------------------------------------------------------

     Omitted pursuant to General Instruction I(2)(e) of Form 10-K.

                                     PART II
                                     -------

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

     The Company is a wholly-owned subsidiary of CoreComm.





                                       18
<PAGE>


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

     The following  table sets forth certain  financial data for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993. This information should be read in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31,
                                                   -----------------------------------------------------------------------
                                                      1997            1996          1995            1994            1993
                                                   -----------------------------------------------------------------------
                                                                            (IN THOUSANDS)
<S>                                                <C>             <C>           <C>             <C>             <C>
INCOME STATEMENT DATA:
    Revenues                                       $ 148,494       $ 133,818     $ 108,668       $  67,141       $  29,146
    Operating expenses                               129,858         115,817        97,647          65,187          42,023
    Operating income (loss)                           18,636          18,001        11,021           1,954         (12,877)
    Income (loss) before extraordinary item           (3,452)          5,114        (1,451)         (4,812)        (18,731)
    Net income (loss)                                 (6,778)          5,114        (1,451)         (4,812)        (18,731)
</TABLE>
<TABLE>
<CAPTION>

                                                                                 DECEMBER 31,
                                                   -----------------------------------------------------------------------
                                                      1997            1996           1995 (1)        1994           1993
                                                   -----------------------------------------------------------------------
<S>                                                <C>             <C>           <C>             <C>             <C>
BALANCE SHEET DATA:
     Working capital (deficiency)                  $  (8,776)      $  11,078     $  12,444       $  10,808       $  18,658
     Property, plant and equipment-net               128,451          97,945        75,769          55,077          42,653
     Total assets                                    332,124         300,722       256,997         231,371         218,669
     Long-term debt                                  200,000         115,000        90,000         101,212          95,506
     Shareholders' equity                             75,429         162,608       144,152         112,784         111,621
</TABLE>


(1)  In 1995, the $40,000,000  principal amount Convertible Senior  Subordinated
     Notes were converted into approximately 2,778,000 shares of common stock.

The  Company  did not  declare  or pay any cash  dividends  during  the  periods
indicated.


                                       19
<PAGE>


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

     On January 31, 1997, the Company effected a corporate restructuring whereby
shareholders  of  the  Company  became  shareholders  of  CoreComm  Incorporated
("CoreComm")  on a  one-for-one  basis  upon the  completion  of a merger of the
Company  with  and  into  a  subsidiary  of  CoreComm.   As  a  result  of  this
restructuring,  CoreComm  replaced the Company as the publicly traded entity and
the Company became a wholly-owned subsidiary of CoreComm.

                              RESULTS OF OPERATIONS

Years Ended December 31, 1997 and 1996
--------------------------------------

     Service revenue  increased to $131,882,000 from $119,839,000 as a result of
subscriber growth. Lower average revenue of new prepaid subscribers, a migration
of subscribers to less expensive rate plans, and a decrease in minutes of use of
existing subscribers resulted in average monthly revenue per cellular subscriber
for the year  ended  December  31  decreasing  to $62 in 1997  from $73 in 1996.
Ending  subscribers  were  196,400 and 159,300 as of December 31, 1997 and 1996,
respectively.  Ending  pagers in use were 49,000 and 31,000 as of  December  31,
1997 and 1996, respectively.

     The loss from equipment, before depreciation of rental equipment, decreased
to  $2,477,000  from  $3,983,000  primarily  because  the Company is not selling
telephones  below their cost to prepaid  subscribers.  Reductions in the cost of
cellular telephones also contributed to this decrease.

     Operating expenses decreased to $14,949,000 from $15,214,000  primarily due
to a reduction in interconnection  charges offset by additional costs associated
with the expanded network (including paging operations). Operating expenses as a
percentage of service revenue decreased to 11.3% in 1997 from 12.7% in 1996.

     Late in the fourth  quarter of 1997,  the  Puerto  Rico  Telecommunications
Regulatory  Board  announced  that the  proposed  retroactive  application  of a
universal  service charge to January 1997 had been eliminated.  As a result,  in
the fourth quarter,  subsidiaries of the Company  reversed a $1,644,000  expense
accrual for this proposed  charge which had been recorded in operating  expenses
during the prior  quarters of 1997. The Company  anticipates  that any universal
service charge adopted in Puerto Rico in 1998 will not be retroactive.

     Selling,  general and administrative expenses increased to $70,160,000 from
$63,223,000  as a result of  increased  selling and  marketing  to increase  the
customer base and additional  personnel to service the expanding  customer base.
Increases in property taxes and subscriber  billing expense also  contributed to
this increase.  The increases in selling and marketing  costs,  personnel costs,
property  taxes  and  subscriber  billing  expense  were 48%,  20%,  9% and 13%,
respectively, of the total $6,937,000 increase.


                                       20
<PAGE>


     Depreciation of rental equipment increased to $855,000 from $521,000 due to
an increase in the number of rental pagers.

     Depreciation  expense  increased to $18,390,000 from $12,710,000  primarily
because of an increase in property, plant and equipment.

     Amortization  expense increased to $6,415,000 from $6,187,000 primarily due
to increases in license acquisition costs.

     Interest  income and other,  net,  decreased to expense of $1,817,000  from
income of  $646,000  primarily  due to an increase  in loss on  write-downs  and
disposals of property, plant and equipment to $1,873,000 from $371,000.

     Interest  expense  increased to $19,400,000  from $8,181,000 as a result of
the increase in long-term debt at a higher effective interest rate.

     The provision for income taxes  decreased to $871,000 from  $5,352,000 as a
result of a decrease in Puerto Rico or U.S.  Virgin  Islands  taxable  income of
certain of the  Company's  consolidated  subsidiaries  and a federal  income tax
benefit from the tax sharing agreement with CoreComm.

     In connection with the  termination of the bank loan, the Company  recorded
an extraordinary loss of $4,067,000  ($3,326,000 net of income tax benefit) from
the write-off of unamortized deferred financing costs.

Years Ended December 31, 1996 and 1995
--------------------------------------

     Service revenue  increased to $119,839,000  from $94,409,000 as a result of
subscriber growth that increased the Company's  current revenue stream.  Average
monthly revenue per subscriber decreased to $73 in 1996 from $86 in 1995. Ending
subscribers  were  159,300  and  115,500  as of  December  31,  1996  and  1995,
respectively.

     The loss from equipment, before depreciation of rental equipment, decreased
to $3,983,000  from  $6,376,000  primarily  because of reductions in the cost of
cellular  telephones  offset by an  increase in the loss from pager  sales.  The
Company  sells  cellular  telephones  and  pagers  below  cost  in  response  to
competition and to generate subscriber growth.

     Operating expenses increased to $15,214,000 from $10,207,000  primarily due
to  increased  usage of the network and  additional  costs  associated  with the
expanded network (including paging operations), which account for 90% and 10% of
the increase, respectively.

     Selling,  general and administrative expenses increased to $63,223,000 from
$51,148,000  as a result of  increased  selling and  marketing  to increase  the
customer base and additional  personnel to service the expanding  customer base.
Increases in bad debt expense,


                                       21
<PAGE>


customer retention  expense,  property taxes and subscriber billing expense also
contributed  to this  increase.  The increases in selling and  marketing  costs,
personnel costs, bad debt expense,  customer retention  expense,  property taxes
and subscriber billing expense were 31%, 8%, 12%, 13%, 8% and 11%, respectively,
of the total $12,075,000 increase.

     Depreciation of rental equipment increased to $521,000 from $225,000 due to
an  increase  in the number of rental  pagers,  offset by a  decrease  in rental
telephone depreciation due to rental telephones becoming fully depreciated.

     Depreciation  expense  increased to $12,710,000  from $9,638,000  primarily
because of an increase in property, plant and equipment.

     Amortization  expense increased to $6,187,000 from $5,794,000 primarily due
to increases in license acquisition costs.

     Interest  income  and other,  net,  increased  to  $646,000  from  $358,000
primarily due to an increase in interest income on short term investments.

     Interest  expense  decreased to $8,181,000  from  $8,501,000 as a result of
lower effective interest rates on long-term debt outstanding during 1996.

     The provision for income taxes increased to $5,352,000 from $4,007,000 as a
result of an increase in Puerto Rico or U.S.  Virgin  Islands  taxable income of
certain of the Company's  consolidated  subsidiaries and an increase in deferred
Puerto Rico income tax liability.

                         LIQUIDITY AND CAPITAL RESOURCES

     The Company requires capital to expand its cellular and paging network, for
debt service and potentially,  for the acquisition and development of additional
wireless licenses or communications  businesses. The Company is currently adding
cell sites and increasing  capacity  throughout its Puerto Rico and U.S.  Virgin
Islands markets.  The Company expects to use  approximately  $26,300,000 in 1998
for contemplated  additions to the cellular network,  the paging network and for
other non-cell site related capital  expenditures.  The Company's commitments at
December 31, 1997 of $4,100,000 for cellular network and other equipment and for
construction  services are included in the total anticipated  expenditures.  The
Company  expects  to  be  able  to  meet  these  requirements  with  cash,  cash
equivalents and marketable securities on hand and cash from operations.

     The Company has received loans from CoreComm of  $17,056,000  through 1997,
which are  non-interest  bearing and are due on June 30,  1998.  As of March 20,
1998,  CoreComm has loaned an  additional  $11,400,000  to  subsidiaries  of the
Company.

     In January 1998, a wholly-owned subsidiary of the Company purchased the FCC
license to own and operate the non-wireline cellular system in Puerto Rico RSA 4
(Aibonito)  and


                                       22
<PAGE>


all of the  assets  of the  system  in  exchange  for  $8,400,000  in cash and a
promissory note in the amount of $8,900,000.  The promissory note bears interest
at 7.95% per annum payable semiannually beginning in July 1998 and the principal
is payable in January 2003.

     In January 1997, a wholly-owned  subsidiary of the Company,  CCPR Services,
Inc.  ("Services") issued $200,000,000  principal amount 10% Senior Subordinated
Notes due 2007  (the  "Notes")  and  received  proceeds  of  $193,233,000  after
discounts,  commissions and other related costs.  The Notes are  unconditionally
guaranteed  by  the  Company.   The  Company  and  Services  used  approximately
$116,000,000  of the proceeds to repay the  $115,000,000  principal  outstanding
plus  accrued  interest and fees under the bank loan.  In addition,  the Company
distributed   $80,000,000   to  CoreComm  in   connection   with  the  corporate
restructuring.

     The Notes are due on  February  1, 2007.  Interest  on the Notes is payable
semiannually  as of August 1,  1997.  The Notes are  redeemable,  in whole or in
part,  at the option of Services at any time on or after  February 1, 2002, at a
redemption  price of 105% that  declines  annually to 100% in 2005, in each case
together with accrued and unpaid interest to the redemption  date. The Indenture
contains  certain  convenants with respect to Services,  the Company and certain
subsidiaries  that  limit  their  ability  to,  among  other  things:  (i) incur
additional  indebtedness,  (ii) pay  dividends  or make other  distributions  or
restricted  payments  (except  for  dividend  payments  to  the  Company  and an
aggregate of up to $100,000,000 to be used for dividends or restricted  payments
to CoreComm),  (iii) create liens,  (iv) sell assets,  (v) enter into mergers or
consolidations or (vi) sell or issue stock of subsidiaries.

     In April  1995,  the  Company  and  Services  entered  into a  $200,000,000
revolving  credit facility with various banks.  The line of credit was available
until March 31,  1999,  on which date it would have  converted  into a term loan
with principal  payments based on an  amortization  schedule until September 30,
2003.

     Cash provided by operating  activities was  $27,167,000 and $28,912,000 for
the years ended December 31, 1997 and 1996, respectively. Purchases of property,
plant and equipment of $40,259,000  in 1997 were  primarily for additional  cell
sites and increased capacity in the Company's cellular and paging systems.

     Write-offs  of accounts  receivable,  net of  recoveries as a percentage of
service  revenue was 6.7% for the year ended  December 31, 1997 compared to 5.8%
for the year ended  December 31, 1996.  This  percentage  increased  because the
Company and its subsidiaries have attracted and continue to attract new segments
of the market.  The Company and its  subsidiaries  continue to attempt to reduce
this percentage by improving credit procedures and instituting  innovative forms
of payment such as prepaid billing.

     The  Company  may also  require  additional  capital  for  acquisitions  of
minority  interests in its Aguadilla  market,  or for the acquisition of certain
other RSAs or in other telecommunications  related industries,  if opportunities
for such  acquisitions  arise.  The  Company  has from time to time  engaged  in
discussions with third parties regarding such acquisitions.


                                       23
<PAGE>


YEAR 2000

     Many computer systems  experience  problems  handling dates beyond the year
1999.  Therefore,  some computer  hardware and software will need to be modified
prior to the year 2000 in order to remain  functional.  The Company is assessing
both the internal  readiness of its computer  systems and the  compliance of the
computer systems of certain  significant  customers and vendors for handling the
year 2000.  The  Company  expects to  implement  successfully  the  systems  and
programming  changes necessary to address year 2000 issues, and does not believe
that the  cost of such  actions  will  have a  material  adverse  effect  on the
Company. There can be no assurance,  however, that there will not be a delay in,
or increased costs associated with, the implementation of such changes,  and the
Company's  inability to implement  such changes could have an adverse  effect on
the Company.  In addition,  the failure of certain of the Company's  significant
customers  and  vendors  to address  the year 2000  issue  could have a material
adverse effect on the Company.

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

     The Company is required to provide these  disclosures  in its Annual Report
on Form 10-K for the year ending December 31, 1998.








                                       24
<PAGE>


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

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

     The following is a summary of the quarterly  results of operations  for the
years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
                                                                     (IN THOUSANDS)

                                                                          1997
                                                                   THREE MONTHS ENDED
                                              ----------------------------------------------------------
                                               MARCH 31        JUNE 30      SEPTEMBER 30     DECEMBER 31
                                              ----------------------------------------------------------
<S>                                           <C>             <C>             <C>             <C>
Revenues                                      $ 37,271        $ 38,438        $ 36,213        $ 36,572
Operating income                                 5,163           5,686           2,014           5,773
Income (loss) before extraordinary item             68             554          (3,317)           (757)
Net income (loss)                               (3,683)            979          (2,930)         (1,144)
</TABLE>
<TABLE>
<CAPTION>

                                                                          1996
                                                                   THREE MONTHS ENDED
                                              ----------------------------------------------------------
                                               MARCH 31        JUNE 30      SEPTEMBER 30     DECEMBER 31
                                              ----------------------------------------------------------
<S>                                           <C>             <C>             <C>             <C>
Revenues                                      $ 31,476        $ 31,714        $ 34,914        $ 35,714
Operating income                                 4,734           2,120           5,233           5,914
Net income (loss)                                1,289           (248)           2,273           1,800
</TABLE>



                                       25
<PAGE>


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

     Not applicable.

                                    PART III
                                    --------

ITEMS 10, 11, 12 AND 13.
-----------------------

     Omitted pursuant to General Instruction I(2)(e) of Form 10-K.

                                     PART IV
                                     -------

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

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

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

     (3)  Exhibits - See Exhibit Index on page 27.

  (b)     Reports on Form 8-K. The Company filed no current  reports on Form 8-K
          for the quarter ended December 31, 1997.

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

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



                                       26
<PAGE>


                                  EXHIBIT INDEX

Exhibit No.
----------

   2      Agreement  and Plan of  Merger,  dated as of January  31,  1997 by and
          among the Company,  CoreComm and CoreComm Sub, Inc.  (Incorporated  by
          reference  from Exhibit 2 to  CoreComm's  1996 Form 10-K,  File Number
          19869-99)

   3.1    Restated Certificate of Incorporation of the Company. (Incorporated by
          reference to CoreComm's Form 8-B, filed February 12, 1997, File Number
          19869-99)

   3.2    By-laws of the Company.  (Incorporated by reference to CoreComm's Form
          8-B, filed February 12, 1997, File Number 19869-99)

   4.1    Indenture  dated as of January 31, 1997 by and between  Services,  the
          Company and The Chase Manhattan Bank, N.A.  (Incorporated by reference
          from Exhibit 4.1, to CoreComm's 1996 Form 10-K, File Number 19869-99)

   4.2    Registration  Rights  Agreement  dated as of January  31,  1997 by and
          among  Services,   the  Company  and  Donaldson,   Lufkin  &  Jenrette
          Securities  Corporation,  Salomon Brothers Inc and Wasserstein Perella
          Securities,  Inc.  (Incorporated  by  reference  from  Exhibit  4.3 to
          CoreComm's 1996 Form 10-K, File Number 19869-99)

   10.1   Partnership Agreement relating to San Juan Cellular Telephone Company.
          (Incorporated by reference to Exhibit 10.4, File Number 33-44420)

   10.2   Tax  Sharing  Agreement  dated as of  January  31,  1997 by and  among
          CoreComm,  the Company and CCPR Services.  (Incorporated  by Reference
          from Exhibit 10.2 to CoreComm's 1996 Form 10-K, File Number 19869-99)

   10.3   Form of Administration and Management Agreement between CCPR Services,
          Inc.,  on the one hand and, on the other hand,  individually,  each of
          Aguadilla Cellular Telephone Company, Inc., CCI PR RSA, Inc., Cellular
          Communications  of  Arecibo,   Inc.,   Cellular  Ponce,   Inc.,  Gamma
          Communications,  Mayaguez  Cellular  Telephone  Co.,  Inc.,  San  Juan
          Cellular Telephone Company and Star Associates,  Inc. (Incorporated by
          reference to Exhibit 10.9, File Number 33-44420)

   10.4   Agreement dated as of January 31, 1997, by and between the Company and
          CCPR Services,  Inc.  (Incorporated  by Reference from Exhibit 10.4 to
          CoreComm's 1996 Form 10-K, File Number 19869-99)

   21     Omitted pursuant to General Instruction I(2)(b) of Form 10-K

   27.1   Financial Data Schedule, for the year ended December 31, 1997

   27.2   Restated Financial Data Schedule,  for the quarter ended September 30,
          1996


                                       27
<PAGE>


   27.3   Restated Financial Data Schedule, for the quarter ended June 30, 1996

   27.4   Restated Financial Data Schedule, for the quarter ended March 31, 1996





                                       28


<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.

Dated:  March 26, 1998

                                           CELLULAR COMMUNICATIONS OF
                                                PUERTO RICO, INC.


                                           By: /s/ Stanton N. Williams
                                           ----------------------------------
                                                   Stanton N. Williams
                                                   Vice President and Chief
                                                     Financial Officer

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

Signature                     Title                              Date


/s/ George S. Blumenthal      Principal Executive                March 26, 1998
--------------------------      Officer and Director
George S. Blumenthal


/s/ J. Barclay Knapp          Chief Operating Officer            March 26, 1998
--------------------------      and Director
J. Barclay Knapp


/s/ Stanton N. Williams       Principal Financial Officer        March 26, 1998
--------------------------
Stanton N. Williams


/s/ Gregg Gorelick            Principal Accounting Officer       March 26, 1998
--------------------------
Gregg Gorelick


/s/ Sidney R. Knafel          Director                           March 26, 1998
--------------------------
Sidney R. Knafel



                                       29
<PAGE>


/s/ Del Mintz                 Director                           March 26, 1998
--------------------------
Del Mintz


/s/ Alan J. Patricof          Director                           March 26, 1998
--------------------------
Alan J. Patricof


/s Warren Potash              Director                           March 26, 1998
--------------------------
Warren Potash






                                       30

<PAGE>


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

          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                   Index to Consolidated Financial Statements
                        and Financial Statement Schedule


The  following  consolidated  financial  statements  and  schedule  of  Cellular
Communications of Puerto Rico, Inc. and subsidiaries are included in Item 8:

Report of Independent Auditors...........................................    F-2
Consolidated Balance Sheets - December 31, 1997 and 1996.................    F-3
Consolidated Statements of Operations - Years Ended
   December 31, 1997, 1996 and 1995......................................    F-4
Consolidated Statement of Shareholders' Equity - Years Ended
   December 31, 1997, 1996 and 1995......................................    F-5
Consolidated Statements of Cash Flows - Years Ended
   December 31, 1997, 1996 and 1995......................................    F-6
Notes to Consolidated Financial Statements...............................    F-8

The   following   consolidated   financial   statement   schedule   of  Cellular
Communications of Puerto Rico, Inc. and subsidiaries is included in Item 14(d):

Schedule II  -  Valuation and Qualifying Accounts........................   F-18


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









                                      F-1
<PAGE>


                         Report of Independent Auditors



Shareholder and Board of Directors
Cellular Communications of Puerto Rico,  Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Cellular
Communications of Puerto Rico, Inc. and subsidiaries as of December 31, 1997 and
1996,  and the related  consolidated  statements  of  operations,  shareholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1997. Our audits also included the financial  statement  schedule  listed in
the  Index at Item  14(a).  These  financial  statements  and  schedule  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Cellular  Communications  of Puerto Rico, Inc. and  subsidiaries at December 31,
1997 and 1996, and the  consolidated  results of their operations and their cash
flows for each of the three years in the period  ended  December  31,  1997,  in
conformity with generally accepted accounting principles.  Also, in our opinion,
the related  financial  statement  schedule,  when considered in relation to the
basic  financial  statements  taken as a whole,  presents fairly in all material
respects the information set forth therein.



                                                         ERNST & YOUNG LLP


San Juan, Puerto Rico
February 27, 1998



                                      F-2
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>


                                                                               DECEMBER 31
                                                                         1997               1996
                                                                   ---------------------------------
<S>                                                                <C>                 <C>
ASSETS
Current assets:
   Cash and cash equivalents                                       $   9,445,000       $   2,307,000
   Marketable securities                                                 235,000           5,917,000
   Accounts receivable - trade, less allowance for doubtful
     accounts of $2,106,000 (1997) and $3,767,000 (1996)              19,043,000          20,034,000
   Due from CoreComm Incorporated                                        935,000                   -
   Equipment inventory                                                 2,882,000           2,912,000
   Prepaid expenses and other current assets                           5,923,000           3,022,000
                                                                   ---------------------------------
Total current assets                                                  38,463,000          34,192,000

Property, plant and equipment, net                                   128,451,000          97,945,000
Unamortized license acquisition costs                                157,467,000         162,822,000
Deferred financing costs, less accumulated amortization
   of $584,000 (1997) and $1,065,000 (1996)                            6,206,000           4,118,000
Other assets, less accumulated amortization of
   $1,088,000 (1997) and $723,000 (1996)                               1,537,000           1,645,000
                                                                   ---------------------------------
                                                                   $ 332,124,000       $ 300,722,000
                                                                   =================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                $   6,815,000       $   7,364,000
   Accrued expenses                                                   11,012,000          10,889,000
   Due to NTL Incorporated                                                71,000             102,000
   Due to CoreComm Incorporated                                       17,056,000                   -
   Interest payable                                                    8,333,000           1,678,000
   Deferred revenue                                                    3,952,000           3,081,000
                                                                   ---------------------------------
Total current liabilities                                             47,239,000          23,114,000

Long-term debt                                                       200,000,000         115,000,000
Obligation under capital lease                                         9,456,000                   -
Commitments and contingent liabilities

Shareholders' equity:
   Series preferred stock - $.01 par value; authorized
     none (1997) and 2,500,000 (1996) shares; issued
     and outstanding none                                                      -                   -
   Common stock - $.01 par value; authorized 1,000 (1997)
     and 30,000,000 (1996) shares; issued 1,000 (1997)
     and 13,432,000 (1996) shares                                              -             134,000
   Additional paid-in capital                                        137,570,000         226,160,000
   (Deficit)                                                         (62,141,000)        (55,363,000)
                                                                   ---------------------------------
                                                                      75,429,000         170,931,000
   Treasury stock - at cost, none (1997)
      and 343,000 (1996) shares                                                -          (8,323,000)
                                                                   ---------------------------------
                                                                      75,429,000         162,608,000
                                                                   ---------------------------------
                                                                   $ 332,124,000       $ 300,722,000
                                                                   =================================
</TABLE>

See accompanying notes.


                                      F-3
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31
                                                           1997                  1996                 1995
                                                      --------------------------------------------------------
<S>                                                   <C>                   <C>                  <C>
Revenues:
   Service revenue                                    $ 131,882,000         $ 119,839,000        $  94,409,000
   Equipment revenue                                     16,612,000            13,979,000           14,259,000
                                                      --------------------------------------------------------
                                                        148,494,000           133,818,000          108,668,000
                                                      --------------------------------------------------------
Costs and expenses:
   Cost of equipment sold                                19,089,000            17,962,000           20,635,000
   Operating expenses                                    14,949,000            15,214,000           10,207,000
   Selling, general and administrative expenses          70,160,000            63,223,000           51,148,000
   Depreciation of rental equipment                         855,000               521,000              225,000
   Depreciation expense                                  18,390,000            12,710,000            9,638,000
   Amortization expense                                   6,415,000             6,187,000            5,794,000
                                                      --------------------------------------------------------
                                                        129,858,000           115,817,000           97,647,000
                                                      --------------------------------------------------------
Operating income                                         18,636,000            18,001,000           11,021,000

Other income (expense):
   Interest income and other, net                        (1,817,000)              646,000              358,000
   Interest expense                                     (19,400,000)           (8,181,000)          (8,501,000)
                                                      --------------------------------------------------------
Income (loss) before income tax provision,
    minority interests and extraordinary item            (2,581,000)           10,466,000            2,878,000
Income tax provision                                       (871,000)           (5,352,000)          (4,007,000)
                                                      --------------------------------------------------------
Income (loss) before minority interests and
    extraordinary item                                   (3,452,000)            5,114,000           (1,129,000)
Minority interests                                                -                     -             (322,000)
                                                      --------------------------------------------------------
Income (loss) before extraordinary item                  (3,452,000)            5,114,000           (1,451,000)
Loss from early extinguishment of debt,
   net of income tax benefit of $741,000                 (3,326,000)                    -                    -
                                                      --------------------------------------------------------

Net income (loss)                                      $ (6,778,000)        $   5,114,000        $  (1,451,000)
                                                      ========================================================
</TABLE>


See accompanying notes.


                                      F-4
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                 Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>



                                               COMMON STOCK              ADDITIONAL                            TREASURY STOCK
                                       ----------------------------      PAID-IN                        ---------------------------
                                          SHARES         AMOUNT          CAPITAL          (DEFICIT)        SHARES         AMOUNT
                                       --------------------------------------------------------------------------------------------
<S>                                    <C>             <C>            <C>               <C>               <C>          <C>
Balance, December 31, 1994              10,000,000     $  100,000     $ 171,710,000     $ (59,026,000)

Exercise of stock options                   25,000                          385,000
Conversion of Senior
   Subordinated Notes                    2,778,000         28,000        38,551,000
Common stock repurchased, at cost                                                                         (207,000)    $ (6,145,000)
Net loss for the year ended
   December 31, 1995                                                                       (1,451,000)
                                       --------------------------------------------------------------------------------------------
Balance, December 31, 1995              12,803,000        128,000       210,646,000       (60,477,000)    (207,000)      (6,145,000)

Shares issued for interests
   in cellular license                     820,000          8,000        21,528,000
Exercise of stock options                   16,000                          129,000
Common stock repurchased, at cost                                                                         (343,000)      (8,323,000)
Retirement of Treasury Stock              (207,000)        (2,000)       (6,143,000)                       207,000        6,145,000
Net income for the year ended
   December 31, 1996                                                                        5,114,000
                                       --------------------------------------------------------------------------------------------
Balance, December 31, 1996              13,432,000        134,000       226,160,000       (55,363,000)    (343,000)      (8,323,000)

Exercise of stock options                   20,000          1,000           286,000
Common stock repurchased, at cost                                                                          (35,000)        (688,000)
Corporate restructuring                (13,451,000)      (135,000)       (8,876,000)                       378,000        9,011,000
Distribution to CoreComm Incorporated                                   (80,000,000)
Net loss for the year ended
   December 31, 1997                                                                       (6,778,000)
                                       --------------------------------------------------------------------------------------------
Balance, December 31, 1997                   1,000      $       -     $ 137,570,000     $ (62,141,000)           -     $          -
                                       ============================================================================================

</TABLE>




See accompanying notes.


                                      F-5
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                             YEAR ENDED DECEMBER 31
                                                                    1997              1996              1995
                                                              -------------------------------------------------
<S>                                                           <C>               <C>               <C>
OPERATING ACTIVITIES
Net income (loss)                                             $   (6,778,000)   $   5,114,000     $  (1,451,000)
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
     Depreciation and amortization                                25,660,000       19,418,000        15,657,000
     Provision for losses on accounts receivable                   7,146,000        7,520,000         6,603,000
     Loss on disposal of property, plant and equipment             1,873,000          371,000           416,000
     Loss from early extinguishment of debt                        4,067,000                -                 -
     Minority interests                                                    -                -           322,000
     Interest paid to Cellular Communications of  Ohio, Inc.               -                -       (12,978,000)
     Changes in operating assets and liabilities net of
       effects from business acquisitions:
         Accounts receivable                                      (6,155,000)      (9,625,000)      (15,000,000)
         Due from CoreComm Incorporated                             (935,000)               -                 -
         Equipment inventory                                          30,000        3,476,000        (4,163,000)
         Prepaid expenses and other current assets                (2,901,000)        (422,000)       (1,484,000)
         Other assets                                               (171,000)        (292,000)         (461,000)
         Accounts payable                                         (1,066,000)       2,497,000        (2,400,000)
         Accrued expenses                                         (1,098,000)        (227,000)        5,004,000
         Interest payable                                          6,655,000        1,063,000          (760,000)
         Deferred revenue                                            871,000          227,000         1,237,000
         Due to Cellular Communications of Ohio, Inc.                      -                -         1,683,000
         Due to Cellular Communications, Inc.                              -         (310,000)           (4,000)
         Due to NTL Incorporated                                     (31,000)         102,000                 -
                                                              -------------------------------------------------
Net cash provided by (used in) operating activities               27,167,000       28,912,000        (7,779,000)

INVESTING ACTIVITIES
Purchase of marketable securities                                   (235,000)     (18,653,000)       (2,058,000)
Proceeds from maturities of marketable securities                  5,917,000       12,736,000        11,057,000
Purchase of property, plant and equipment                        (40,259,000)     (36,564,000)      (30,725,000)
Cost of cellular license interests                                  (146,000)      (5,811,000)                -
                                                              -------------------------------------------------
Net cash (used in) investing activities                          (34,723,000)     (48,292,000)      (21,726,000)

FINANCING ACTIVITIES
Proceeds from borrowings, net of financing costs                 193,233,000       52,000,000       121,946,000
Principal payments                                              (115,000,000)     (28,975,000)      (37,000,000)
Principal payments of capital lease obligation                      (194,000)               -                 -
Due to CoreComm Incorporated                                      17,056,000                -                 -
Additional deferred financing costs                                        -          (22,000)                -
Repayment of amount due to Cellular Communications
   of Ohio, Inc.                                                           -                -       (47,942,000)
Proceeds from exercise of stock options                              287,000          129,000           385,000
Purchase of treasury stock                                          (688,000)      (8,323,000)       (6,145,000)
Distribution to CoreComm Incorporated                            (80,000,000)               -                 -
Distribution to minority interests holders                                 -       (1,172,000)                -
                                                              -------------------------------------------------
Net cash provided by financing activities                         14,694,000       13,637,000        31,244,000
                                                              -------------------------------------------------
Increase (decrease) in cash and cash equivalents                   7,138,000       (5,743,000)        1,739,000
Cash and cash equivalents at beginning of year                     2,307,000        8,050,000         6,311,000
                                                              -------------------------------------------------
Cash and cash equivalents at end of year                      $    9,445,000    $   2,307,000     $   8,050,000
                                                              =================================================
</TABLE>


                                      F-6
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>

                                                                                       YEAR ENDED DECEMBER 31
                                                                              1997              1996             1995
                                                                         ------------------------------------------------
<S>                                                                      <C>               <C>               <C>
Supplemental disclosure of cash flow information:
   Cash paid during the period for interest exclusive of
     amounts capitalized                                                 $ 12,745,000      $  7,118,000      $ 20,556,000
   Income taxes paid                                                        4,405,000         7,239,000           620,000

Supplemental schedule of noncash investing activities:
   Liabilities incurred to acquire property, plant and equipment         $  3,038,000      $  1,595,000      $  2,381,000
   Capital lease obligation incurred to acquire office building             9,922,000                 -                 -
   Common stock issued to acquire cellular license interests                        -        21,536,000                 -

Supplemental schedule of noncash financing activities:
   Conversion of Senior Subordinated Notes, net of
      unamortized deferred financing costs of $1,421,000                 $          -      $          -      $ 38,579,000

</TABLE>















See accompanying notes.


                                      F-7
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements


1. ORGANIZATION AND NATURE OF OPERATIONS

Cellular Communications of Puerto Rico, Inc. (the "Company") was incorporated on
May 18,  1988 as a  wholly-owned  subsidiary  of Cellular  Communications,  Inc.
("CCI") to own and operate cellular telephone systems. On July 25, 1990, CCI and
AirTouch Communications, Inc. entered into a Merger and Joint Venture Agreement,
as amended,  pursuant to which,  on February 28, 1992,  CCI  distributed  to its
stockholders all of the outstanding common stock of the Company.

In January 1997, the Company completed a corporate  restructuring.  A new entity
named  CoreComm  Incorporated  ("CoreComm")  was  formed,  and a  subsidiary  of
CoreComm  was merged with and into the  Company.  Upon the  merger,  the Company
became a  wholly-owned  subsidiary of CoreComm and  shareholders  of the Company
became shareholders of CoreComm on a one for one basis.

The  Company,  through  its  subsidiaries,  owns  licenses  to operate  cellular
telephone  and paging  systems in Puerto  Rico and in the U.S.  Virgin  Islands.
Based  on  service  revenues,  the  predominant  line of  business  is  cellular
telephone services.  The Company's business is currently dependent on the trends
in the use of cellular telephone and paging services and is subject to economic,
social, political and governmental conditions in Puerto Rico and the U.S. Virgin
Islands.  The sale of  cellular  and paging  services  in each of the  Company's
markets is becoming  increasingly  competitive.  The Company  previously had one
cellular competitor in each market, but it now has many wireless competitors due
to the  introduction of broadband  personal  communications  services ("PCS") on
frequencies  auctioned  by the  Federal  Communications  Commission  ("FCC") and
specialized mobile radio ("SMR") services on existing SMR frequencies. Increased
competition  has  resulted  in  pricing  pressure,  which  contributes  to lower
revenues per customer and higher customer acquisition costs.

2. SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

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

PRINCIPLES OF CONSOLIDATION

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


                                      F-8
<PAGE>

          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LICENSE ACQUISITION COSTS

The FCC  grants  the  license  to  operate  a  cellular  telephone  system  in a
Metropolitan  Service Area or a Rural Service Area. Costs incurred to obtain FCC
licenses have been deferred and are being amortized by the straight-line  method
over ten years. In connection with the purchase of license interests, the excess
of purchase price paid over the fair value of tangible  assets acquired has been
classified as license  acquisition  costs which are amortized through charges to
operations by the straight-line  method over 40 years. License acquisition costs
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.

REVENUE RECOGNITION

Service  revenue is recognized  at the time  services are rendered.  Charges for
services  that are billed in advance are  deferred and  recognized  when earned.
Equipment  sales are recorded  when the  equipment  is shipped to the  customer.
Rental revenue is billed and recognized on a monthly basis.

CASH EQUIVALENTS

Cash  equivalents  are  short-term  highly liquid  investments  purchased with a
maturity of three months or less.

MARKETABLE SECURITIES

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

Marketable   securities  at  December  31,  1997  consisted  of  corporate  debt
securities.  Marketable  securities  at  December  31,  1996  consisted  of U.S.
Treasury  securities and  obligations of U.S.  government  agencies.  During the
years ended  December 31, 1997,  1996 and 1995,  there were no realized gains or
losses on sales of securities.  As of December 31, 1997 and 1996,  there were no
unrealized gains or losses on securities. All of the marketable securities as of
December 31, 1997 had a contractual maturity of less than one year.


                                      F-9
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EQUIPMENT INVENTORY

Equipment inventory is stated at the lower of cost (first-in,  first-out method)
or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost. Depreciation is computed by the
straight-line  method over the estimated  useful lives of the assets.  Estimated
useful lives are as follows: office building - 15 years, operating equipment - 7
to 25 years,  office  furniture and other  equipment - 1 to 5 years,  and rental
equipment - 2 years.

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

CAPITALIZED INTEREST

Interest  is  capitalized  as a  component  of the cost of  property,  plant and
equipment  constructed.  In 1997, 1996 and 1995, interest of $415,000,  $198,000
and $119,000, respectively, was capitalized.

DEFERRED FINANCING COSTS

Deferred  financing costs  represent costs incurred  relating to the issuance of
debt and are amortized over the term of the related debt.

ADVERTISING

The Company charges the cost of advertising to expense as incurred.  Advertising
expense for the years ended  December  31, 1997,  1996 and 1995 was  $3,667,000,
$3,025,000 and $2,808,000, respectively.

3. RECENT ACCOUNTING PRONOUNCEMENTS

COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 130,  "Reporting  Comprehensive
Income." SFAS No. 130 requires that all items that are required to be recognized
under accounting  standards as components of comprehensive income be reported in
a  financial  statement  that is  displayed  with the same  prominence  as other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December  15,  1997.  The Company  will adopt SFAS No. 130 in the first  interim
period for its fiscal year ending December 31, 1998.


                                      F-10
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


3. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

SEGMENT DISCLOSURES

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related Information".  SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual  financial  statements  and  requires  that these  enterprises  report
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services, geographic areas, and major customers. SFAS No. 131
is effective for financial  statements for periods  beginning after December 15,
1997.  The Company  will adopt SFAS No. 131 for its fiscal year ending  December
31, 1998.

4. UNAMORTIZED LICENSE ACQUISITION COSTS

Unamortized license acquisition costs consist of:

                                                             DECEMBER 31
                                                        1997            1996
                                                   -----------------------------
   Deferred cellular license costs                 $   5,935,000   $   5,935,000
   Excess of purchase price paid over the fair
      market value of tangible assets acquired       189,466,000     189,320,000
                                                   -----------------------------
                                                     195,401,000     195,255,000
   Accumulated amortization                           37,934,000      32,433,000
                                                   -----------------------------
                                                   $ 157,467,000   $ 162,822,000
                                                   =============================

In  February  1996,  the  Company  acquired  the  remaining  minority  interests
aggregating  approximately  6% in the San Juan  Cellular  Telephone  Company  in
exchange for  approximately  820,000 shares of the Company's  common stock.  The
stock  was  valued  at  $21,536,000,  the  fair  market  value  on the  date  of
acquisition. In addition, the San Juan Cellular Telephone Company made a special
cash distribution of $1,172,000 to the minority interest holders.  The aggregate
purchase price of $21,536,000 plus expenses of $56,000 and the deficiency in net
assets acquired of $850,000 have been classified as license acquisition costs.

In November 1996, the Company acquired the remaining interests, aggregating 49%,
in Star  Associates,  Inc.,  the  company  which  owns the FCC  license  for the
non-wireline  cellular  system in  Adjuntas,  Puerto  Rico  (RSA-2)  for cash of
$5,755,000 including expenses.


                                      F-11
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


4. UNAMORTIZED LICENSE ACQUISITION COSTS (CONTINUED)

In January  1998, a  wholly-owned  subsidiary  of the Company  purchased the FCC
license to own and operate the non-wireline cellular system in Puerto Rico RSA-4
(Aibonito)  and all of the assets of the system in exchange  for  $8,400,000  in
cash and a promissory  note in the amount of  $8,900,000.  The  promissory  note
bears  interest at 7.95% per annum payable  semiannually  beginning in July 1998
and the principal is payable in January 2003. Costs of $305,000 were incurred in
connection with this acquisition.

5.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of:

                                                             DECEMBER 31
                                                        1997             1996
                                                   -----------------------------
   Land                                            $   1,951,000   $   2,027,000
   Office building                                     9,922,000               -
   Operating equipment                               127,534,000      97,513,000
   Office furniture and other equipment               24,546,000      16,521,000
   Rental equipment                                    1,745,000       1,174,000
   Construction in progress                           12,533,000      18,674,000
                                                   -----------------------------
                                                     178,231,000     135,909,000
   Accumulated depreciation                           49,780,000      37,964,000
                                                   -----------------------------
                                                   $ 128,451,000   $  97,945,000
                                                   =============================

6.  ACCRUED EXPENSES

Accrued expenses consists of:

                                                              DECEMBER 31
                                                          1997           1996
                                                    ----------------------------
   Accrued compensation                             $    765,000    $  1,005,000
   Accrued franchise, property and income taxes        2,836,000       4,246,000
   Commissions payable                                 1,143,000       1,272,000
   Accrued equipment purchases                         1,427,000         502,000
   Subscriber deposits                                 1,544,000       1,572,000
   Other                                               3,297,000       2,292,000
                                                    ----------------------------
                                                    $ 11,012,000    $ 10,889,000
                                                    ============================


                                      F-12
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7. LONG-TERM DEBT

In January 1997, a wholly-owned  subsidiary of the Company, CCPR Services,  Inc.
("Services"), issued $200,000,000 principal amount 10% Senior Subordinated Notes
due 2007 (the "Notes") and received  proceeds of $193,233,000  after  discounts,
commissions and other related costs. The Notes are unconditionally guaranteed by
the Company.  The Company and Services used  approximately  $116,000,000  of the
proceeds to repay the $115,000,000  principal  outstanding plus accrued interest
and fees under the bank loan (see below).  In  connection  with the repayment of
the bank loan,  Services  recorded an extraordinary  loss of $4,067,000 from the
write-off of unamortized deferred financing costs. In addition,  Services made a
cash payment to the Company of $80,000,000 in exchange for a 21% interest in the
San Juan Cellular Telephone Company, and the Company distributed the $80,000,000
to CoreComm.

The  Notes  are due on  February  1,  2007.  Interest  on the  Notes is  payable
semiannually  as of August 1,  1997.  The Notes are  redeemable,  in whole or in
part,  at the option of Services at any time on or after  February 1, 2002, at a
redemption  price of 105% that  declines  annually to 100% in 2005, in each case
together with accrued and unpaid interest to the redemption  date. The Indenture
contains  certain  covenants  with respect to Services,  the Company and certain
subsidiaries  that  limit  their  ability  to,  among  other  things,  (i) incur
additional  indebtedness,  (ii) pay  dividends  or make other  distributions  or
restricted  payments  (except  for  dividend  payments  to  the  Company  and an
aggregate of up to $100,000,000 to be used for dividends or restricted  payments
to CoreComm),  (iii) create liens,  (iv) sell assets,  (v) enter into mergers or
consolidations  or (vi) sell or issue stock of  subsidiaries.  The fair value of
the  Notes  at  December  31,  1997  based  on  the  quoted   market  price  was
$194,000,000.

In April 1995, the Company and Services  entered into a  $200,000,000  revolving
credit facility with various banks. A portion of the amount borrowed was used to
repay a subsidiary of CCI,  Cellular  Communications of Ohio, Inc. ("CCI Ohio").
The line of credit was  available  until March 31, 1999,  on which date it would
have converted into a term loan. The terms included the payment of interest each
quarter at a floating rate, which was, at the borrower's option,  either (a) the
higher of the bank's  base rate or the  Federal  Funds  Rate plus 1/2%,  (b) the
London Interbank  Offering Rate or (c) the 936 Rate, plus, based on the ratio of
the Company's debt to cash flow and the floating rate in effect,  either .25% to
1.875% or 1.25% to 2.875%. The effective rate on the Company's  borrowings as of
December  31,  1996 and 1995 was 7.01% and 7.23%,  respectively.  The terms also
included an unused commitment fee of 1/2% per annum which was payable quarterly.
The  carrying  amount of the bank loan at December  31, 1996  approximated  fair
value based on discounted cash flow analysis.


                                      F-13
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7. LONG-TERM DEBT (CONTINUED)

The Company had a $47,942,000  principal  amount note payable to CCI Ohio, which
was due and payable in full on July 31, 1996. The note permitted the deferral of
interest  payments,  at the Company's  option,  throughout the term of the note.
Interest was at a floating  rate based on the interest  rate in effect under CCI
Ohio's bank line of credit and term loan agreement. Interest expense accrued for
the year ended  December  31, 1995 was  $1,683,000.  In April 1995,  the Company
repaid the principal and deferred interest due to CCI Ohio of $60,920,000.

In connection  with license  acquisitions,  subsidiaries  of the Company  issued
promissory  notes which were paid in full,  together with accrued  interest,  on
their maturity dates in 1996.

8. RELATED PARTY TRANSACTIONS

Due to  CoreComm  Incorporated  represents  cash that was loaned to  Services in
1997. The amount due to CoreComm is non-interest  bearing and is due on June 30,
1998. As of February 27, 1998, CoreComm has loaned an additional  $11,400,000 to
subsidiaries of the Company.

CCI provided  management,  financial and legal services to the Company.  Amounts
charged to the Company  included direct costs where  identifiable  and allocated
corporate overhead based upon the amount of time incurred on Company business by
the common officers and employees of CCI and the Company. Amounts charged to the
Company included in general and  administrative  expenses during the years ended
December 31, 1996 and 1995 were $429,000 and $458,000,  respectively.  In August
1996,  upon  the  merger  of  CCI  with  AirTouch   Communications,   Inc.,  NTL
Incorporated  ("NTL")  commenced  providing  management,   financial  and  legal
services  to the  Company.  NTL  charged  the  Company  for direct  costs  where
identifiable  and  allocated  corporate  overhead  based upon the amount of time
incurred on Company business by the common officers and employees of NTL and the
Company.   The  amount   charged  to  the   Company   included  in  general  and
administrative expenses in 1996 was $207,000.

In January  1997,  CoreComm  commenced  charging  the  Company  for  management,
financial and legal services.  CoreComm  charges the Company  primarily the same
amount  that NTL  charges  to it,  which is based on NTL's  direct  costs  where
identifiable  and a fixed  percentage  of its  corporate  overhead.  The  amount
charged to the Company included in general and  administrative  expenses in 1997
was  $1,780,000.  It is not practicable to determine the amount of expenses that
would have been  incurred had the Company  operated as an  unaffiliated  entity.
However,  in the opinion of management of the Company,  the allocation method is
reasonable.


                                      F-14
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9. INCOME TAXES

The provision for income taxes consists of the following:

                                            YEAR ENDED DECEMBER 31
                                    1997             1996             1995
                                 --------------------------------------------
   Current:
      Federal                    $       -      $         -       $         -
      State                        400,000                -                 -
      Puerto Rico and U.S.
        Virgin Islands             471,000        4,555,000         4,007,000
                                 --------------------------------------------
   Total current                   871,000        4,555,000         4,007,000
                                 --------------------------------------------

   Deferred:
      Federal                            -                -                 -
      Puerto Rico                        -          797,000                 -
                                 --------------------------------------------
   Total deferred                        -          797,000                 -
                                 --------------------------------------------
                                 $ 871,000      $ 5,352,000       $ 4,007,000
                                 ============================================

The provision for income taxes differs from the statutory rate  principally  due
to state and local  income  taxes.  Deferred  income  taxes  reflect the net tax
effects of  temporary  differences  between the  carrying  amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.  Significant  components of the Company's deferred tax liabilities and
assets as of December 31, 1997 and 1996 are as follows:

                                                             DECEMBER 31
                                                         1997           1996
                                                     --------------------------
Deferred tax liabilities:
   Tax over book depreciation and  amortization      $29,094,000    $21,759,000

Deferred tax assets:
   Net operating loss carryforwards                   36,352,000     27,125,000
   Valuation allowance for deferred tax assets        (8,055,000)    (6,163,000)
                                                     --------------------------
   Net deferred tax assets                            28,297,000     20,962,000
                                                     --------------------------
Net deferred tax liabilities                         $   797,000    $   797,000
                                                     ==========================

As of January 1997, the Company and its  subsidiaries are included in CoreComm's
consolidated federal income tax group. At December 31, 1997, the Company had net
operating loss  carryforwards  of  $106,900,000  for federal income tax purposes
that expire as follows:  $3,800,000 in 2004, $3,900,000 in 2006,  $20,400,000 in
2007,  $26,400,000 in 2008,  $14,100,000 in 2009, $9,600,000 in 2010, $5,500,000
in 2011 and $23,200,000 in 2012.


                                      F-15
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9. INCOME TAXES (CONTINUED)

In January 1997,  CoreComm,  the Company and Services entered into a tax sharing
agreement  which  provides  that  CCPR and  Services  will pay to  CoreComm  (or
CoreComm  will pay to CCPR or Services,  as  appropriate)  an amount which would
equal the  amount of taxes for which a company  would be liable if such  company
were not part of the CoreComm consolidated group.

10. PENSION PLANS

Two  subsidiaries  of the Company have defined  contribution  plans covering all
employees who have  completed six months of employment.  The Company's  matching
contributions  are determined  annually.  Participants  can make salary deferral
contributions  of 1% to 20% of annual  compensation  not to exceed  the  maximum
allowed by law.  The  Company's  expense for 1997,  1996 and 1995 was  $204,000,
$168,000 and $134,000, respectively.

11. LEASES

Total rent expense during the years ended  December 31, 1997,  1996 and 1995 was
$3,680,000, $3,085,000 and $2,293,000, respectively.

Future minimum annual lease payments under  noncancellable  operating  leases at
December 31, 1997 are: $3,099,000 (1998);  $2,887,000 (1999); $2,197,000 (2000);
$1,392,000 (2001); $860,000 (2002) and $3,525,000 thereafter.

In 1997, the Company entered into a lease for office space through 2012 which is
classified as a capital lease for financial reporting purposes.  Accordingly, an
asset of $9,922,000 has been recorded. Future minimum annual payments under this
lease at December 31, 1997 are as follows:


      1998                                           $ 1,196,000
      1999                                             1,196,000
      2000                                             1,196,000
      2001                                             1,196,000
      2002                                             1,257,000
      Thereafter                                      12,169,000
                                                     -----------
                                                      18,210,000
      Interest                                        (8,482,000)
                                                     -----------
      Present value of net minimum obligations         9,728,000
      Current portion                                   (272,000)
                                                     -----------
                                                     $ 9,456,000
                                                     ===========


                                      F-16
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


12. COMMITMENTS AND CONTINGENT LIABILITIES

As of December 31,  1997,  the Company was  committed to purchase  approximately
$4,100,000  for  cellular  network  and  other  equipment  and for  construction
services.  In addition,  as of December 31, 1997, the Company had commitments to
purchase telephones, pagers and accessories of approximately $1,500,000.

In 1992, the Company  entered into an agreement  which in effect  provides for a
twenty year license to use a service mark which is also  licensed to many of the
non-wireline  cellular systems in the United States.  The Company is required to
pay licensing and  advertising  fees, and to maintain  certain  service  quality
standards.  The total fees paid for 1997 were $216,000, which were determined by
the size of the Company's markets.

The Company is involved in various  disputes,  arising in the ordinary course of
business,  which may result in pending or threatened  litigation.  The Company's
management  expects  no  material  adverse  effect  on the  Company's  financial
condition to result from these matters.








                                      F-17
<PAGE>


          Cellular Communications of Puerto Rico, Inc. and Subsidiaries

                 Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>


             COL. A                      COL. B                  COL. C                 COL. D               COL. E
-----------------------------------------------------------------------------------------------------------------------
                                                                ADDITIONS
                                                        -------------------------
                                                            (1)            (2)
                                                        -------------------------
                                                                       CHARGED TO
                                       BALANCE AT       CHARGED TO        OTHER
                                      BEGINNING OF      COSTS AND       ACCOUNTS-       DEDUCTIONS -     BALANCE AT END
           DESCRIPTION                   PERIOD          EXPENSES       DESCRIBE         DESCRIBE          OF PERIOD
-----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>              <C>          <C>                 <C>
Year ended December 31, 1997:
  Allowance for doubtful accounts      $ 3,767,000      $ 7,146,000      $     -      $ (8,807,000)(a)    $ 2,106,000

Year ended December 31, 1996:
  Allowance for doubtful accounts      $ 3,233,000      $ 7,520,000      $     -      $ (6,986,000)(a)    $ 3,767,000

Year ended December 31, 1995:
  Allowance for doubtful accounts      $ 1,174,000      $ 6,603,000      $     -      $ (4,544,000)(a)    $ 3,233,000




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







                                      F-18





</TABLE>