UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

(Mark One)

X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the fiscal year ended March 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 number 0-22888

                          CAI WIRELESS SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
             Connecticut                                                     06-1324691
   (State or other jurisdiction of                                   (IRS Employer Identification No.)
           incorporation)
<S><C><S>
</TABLE>

18 Corporate Woods Blvd., Third Floor, Albany, NY                       12211
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number, including area code (518) 462-2632

Securities Registered Pursuant to Section 12(b) of the Act:

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<CAPTION>

    Title of each class                          Name of each exchange on which registered

         None
<S><C><C>
</TABLE>

          Securities Registered Pursuant to Section 12(g) of the Act:

                          Common Stock, No Par Value
                               (Title of class)

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

      Indicate  by  check  mark  if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not  contained  herein and will not be contained,
to  the  best  of 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. (

      The aggregate market value of the voting stock held  by non-affiliates of
the Registrant at June 25, 1997 was approximately $47,250,000.

      The number of shares of Registrant's Common Stock outstanding on June 25,
1997 was 40,540,539.
<PAGE>
                              PART I


      THE  STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON FORM  10-K,  INCLUDING
THE EXHIBITS  HERETO,  RELATING  TO  CAI'S  FUTURE  OPERATIONS  MAY  CONSTITUTE
FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934,  AS  AMENDED.   ACTUAL  RESULTS OF THE COMPANY MAY DIFFER
MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS  AND MAY BE AFFECTED BY
A  NUMBER OF FACTORS INCLUDING THE AVAILABILITY OF NEW STRATEGIC  PARTNERS  AND
THEIR  WILLINGNESS  TO  ENTER  INTO  ARRANGEMENTS  WITH  CAI, THE TERMS OF SUCH
ARRANGEMENTS, THE ABILITY OF CAI TO ACHIEVE THE OPERATING  BENCHMARKS NECESSARY
TO  RECEIVE  THE  BALANCE  OF  THE  FUNDS CONTEMPLATED BY CAI'S INTERIM  CREDIT
FACILITY, THE SUCCESSFUL LAUNCH OF A  DIGITAL  SUBSCRIPTION VIDEO BUSINESS, THE
RECEIPT OF REGULATORY APPROVALS FOR ALTERNATIVE  USES OF ITS MMDS SPECTRUM, THE
SUCCESS OF CAI'S TRIALS IN VARIOUS OF ITS MARKETS,  THE COMMERCIAL VIABILITY OF
ANY ALTERNATIVE USE OF MMDS SPECTRUM, CONSUMER ACCEPTANCE  OF  ANY NEW PRODUCTS
OFFERED OR TO BE OFFERED BY CAI, SUBSCRIBER EQUIPMENT AVAILABILITY, TOWER SPACE
AVAILABILITY,  ABSENCE  OF INTERFERENCE AND THE ABILITY OF CAI TO  REDEPLOY  OR
SELL EXCESS EQUIPMENT, THE  ASSUMPTIONS,  RISKS  AND  UNCERTAINTIES  SET  FORTH
HEREIN, INCLUDING IN THE SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF  FINANCIAL  CONDITION  AND  RESULTS OF OPERATIONS," AS WELL AS OTHER FACTORS
CONTAINED HEREIN AND IN CAI'S SECURITIES FILINGS.


ITEM 1.  BUSINESS

OVERVIEW

      CAI  Wireless  Systems, Inc.  ("CAI"  or  the  "Company")  is  a  leading
developer, owner and operator  of wireless telecommunications transport systems
utilizing Multichannel Multipoint  Distribution  Services ("MMDS") spectrum, in
terms of number of subscription television subscribers  and number of Estimated
Total Service Area households.  In CAI's 14 primary markets,  there are a total
of  16,135,174  Estimated Total Service Area households, of which  the  Company
estimates they have  the  ability  to  serve between 70% and 90% of such homes.
Initially,  the  Company  focused  on  the  development  of  MMDS  subscription
television systems in major metropolitan markets,  primarily  in  the Northeast
and Mid-Atlantic regions of the United States.  More recently, the  Company has
begun  to  explore  alternative  uses  of  its  MMDS  spectrum  and has pursued
development  of  other  lines  of  business, including high speed Internet  and
intranet  access,  as  well  as digital  video  and  fixed  wireless  telephony
services.  CAI had approximately 66,500 subscribers as of June 21, 1997.

      MMDS   subscription  television   programming,   and   other   MMDS-based
telecommunications  transport  services,  are  transmitted  through the air via
microwave frequencies from a central transmission facility to a small receiving
antenna  at  each  subscriber's location, and requires a line-of-sight  ("LOS")
path  between  the transmit  point  to  the  receive  antenna.   Therefore,  in
communities  with   tall   trees,   hilly  terrain,  tall  buildings  or  other
obstructions in the transmission path,  MMDS  transmission  can be difficult or
impossible to receive at certain locations without the use of  low power signal
repeaters  (known  as  "beambenders")  or signal boosters, which retransmit  an
otherwise blocked signal over a limited  area.   The  use of beambenders and/or
signal boosters increases the costs per subscriber.

      MMDS  spectrum  is  regulated  by  the Federal Communications  Commission
("FCC"), which governs, among other things,  the issuance, renewal, assignment,
transfer and modification of licenses necessary  for  MMDS  systems to operate.
"MMDS" is the vernacular term used to describe CAI's business and includes both
MMDS  and  Multichannel  Distribution  Service  ("MDS") channels,  as  well  as
Instructional Television  Fixed Service ("ITFS")  channels.   To date, the MMDS
spectrum  has been licensed by the FCC for one-way video and data  transmission
on an industry-wide  basis.   In  addition,  CAI has applied for and received a
variety of authorizations from the FCC for fixed,  flexible  use  of  its  MMDS
spectrum  in  certain  of CAI's markets.  The Company has received from the FCC
(i) authorization for a  market  trial  of  up  to 500 customers for CAI's high
speed one-way Internet access product (which uses  a  telephone  line  for  the
return  path)  in Rochester, New York, (ii) authorization for a market trial of
up to 1,000 customers  for  CAI's high speed one-way Internet access product in
New York City, (iii) permanent authorization for fixed, two-way flexible use of
five channels for 16 customer  sites  located  in and around the Boston market,
and (iv) authorization from the FCC to utilize its MMDS spectrum in Pittsburgh,
PA for a variety of tests, including the simulation of a commercial roll-out of
fixed, two-way services to customers located within  a  20-mile radius of CAI's
main  transmission  facility  in  Pittsburgh.   The Company has  also  received
developmental  authorization  to  test  fixed, flexible  two-way  uses  on  two
channels located in its Hartford, Connecticut market; however, the Company does
not have any plans to conduct any testing in this market at this time.
<PAGE>

Item 1.  Business (continued)

      CAI is a Connecticut corporation.  Its principal  executive offices are 
located at  18 Corporate Woods Boulevard, 3rd Floor, Albany,  New  York  12211.
CAI's telephone  number  is  (518) 462-2632.  CAI also maintains offices at 101 
Ponds Edge  Drive, Suite 300, Chadds  Ford,  PA   19317,  at  which  its  
operational headquarters,   including   the  President  and  Chief  Operating  
Officer  and (beginning in July 1997) the  Company's  accounting department are
located, and at  2101  Wilson  Boulevard,  Suite 100, Arlington,  VA  22201,  at
which  the Company's engineering and regulatory  affairs  departments are 
located.  Unless the context indicates otherwise, all references to the 
"Company" or "CAI" refer collectively to CAI Wireless Systems, Inc. and its 
subsidiaries.

RECENT FINANCIAL DEVELOPMENTS

     CAI's recurring losses, restrictions on its  ability  to obtain additional
financing,  and  substantial  commitments,  raise substantial doubt  about  CAI
continuing as a going concern.  For the year ending March 31, 1998, the Company
is  obligated  to pay approximately $8,500,000  in  minimum  license  fees  and
operating lease  payments,  approximately  $1,100,000  in  MMDS license auction
fees, in addition to funding operating losses.  Management estimates  that  the
present  revenue  stream and cash resources available to the Company, including
amounts available to CAI under its recently-obtained credit facility (described
below), are adequate to sustain the Company's needs through December 1997.

      A significant portion of CAI's current subscription television operations
and MMDS spectrum rights  were  acquired from various third parties in a series
of transactions consummated throughout  1995  and  the first half of 1996, and,
prior  to  being  acquired by CAI, were not operated in  conjunction  with  one
another.  Consequently,  there  is  limited  historical  financial  information
regarding CAI's  current  operations.  In  addition,  and subject to regulatory
approval and successful completion of testing, the Company  intends  to  expand
its  business to include not only subscription video delivery, but also one-way
Internet access services and fixed, flexible two-way uses of its MMDS spectrum.
Because  these alternative uses of the MMDS spectrum are in the early stages of
development, the Company has no operating history for any such alternative uses
of the MMDS  spectrum,  and  given CAI's limited operating history, there is no
assurance that CAI can commercially  deploy  such  alternative  uses on a wide-
spread  basis,  that  it  will be able to achieve positive cash flow  from  any
operating activities and that  it  can compete successfully in the subscription
television  industry  or  in  the  data  transmission   or  telephony  delivery
industries.

      CAI has incurred net losses since inception (1991)  of approximately $147
million through March 31, 1997 and expects to realize additional  net losses on
a   consolidated  basis  while  it  develops  and  expands  its  MMDS  systems.
Additionally,  CAI  has  substantial  indebtedness, and beginning in 1999, will
have significant debt service requirements.   As  of  March  31,  1997, CAI had
outstanding  consolidated  long-term  debt  of approximately $312 million,  and
shareholders'  equity of approximately $115 million.   On  June  6,  1997,  the
Company closed a  $30  million  interim  credit  facility  provided by Foothill
Capital  Corporation  and  affiliates of Canyon Capital Management,  L.P.  (the
"Interim Debt Lenders").  The  credit  facility  is  governed by the terms of a
Loan  and  Security  Agreement  dated  as of May 16, 1997 (the  "LSA")  and  is
comprised of $25 million of two-year term  debt,  of which $10 million was made
available to CAI at the closing and is currently outstanding.   The  balance of
the  term  debt  will  be made available to CAI upon the achievement of certain
agreed-upon operational  benchmarks.   In addition to the term debt, there is a
two-year $5 million revolving loan, of which  $3  million was made available by
the  Interim  Debt  Lenders to CAI at the closing, with  the  balance  of  such
revolving loan to be  made  available  upon  the  achievement  of certain other
agreed-upon operational benchmarks.  There can be no assurance that the Company
will  be  able  to  achieve  the  operational benchmarks or, if achieved,  such
achievement will be timely, thus providing the Company with access to such loan
proceeds.  As of June 24, 1997, the  Company  had  not  yet borrowed any amount
against the revolving loan.  In addition to the foregoing indebtedness, CAI has
$70  million  of  mandatorily redeemable preferred stock outstanding  having  a
priority as to dividends and a liquidation preference over the Shares of Common
Stock.

      Pursuant to CAI's  debt  instruments,  CAI  is  restricted from incurring
additional  indebtedness  (except  in connection with purchases  of  goods  and
services  in  the  ordinary  course  of  business  and  other  ordinary  course
indebtedness  permitted  thereunder, granting  liens  to  secure  repayment  of
indebtedness, making investments (other than investments specifically permitted
thereunder),  pay  dividends,   dispose  of  assets,  enter  into  any  merger,
consolidation, reorganization, or recapitalization plan, retire long-term debt,
or make any acquisitions without the prior consent of the lenders.  Further, in
accordance with the LSA, the Company  is required to maintain minimal levels of
net worth and number of subscribers, and  is limited with respect to the amount
of annual capital expenditures.  Such debt  instruments and preferred stock and
the restrictions contained therein will have  several important consequences on
CAI's future operations, including, but not limited  to  the following: (i) CAI
will  incur  significant interest expense and principal repayment  obligations;
(ii) CAI's ability  to  obtain  additional  financing, including the balance of
proceeds
<PAGE>

Item 1.  Business (continued)

contemplated by the interim financing,  in  the future, as needed, may
be limited; (iii) CAI's leveraged position and the covenants  contained in such
debt instruments and preferred stock could limit CAI's ability  to  compete  as
well  as  its  ability  to  expand  and  make  capital improvements; (iv) CAI's
substantial leverage will make it more vulnerable  to economic downturns, limit
its ability to withstand competitive pressures and reduce  its  flexibility  in
responding  to  changing  business  and  economic  conditions;  and  (v)  CAI's
substantial  leverage will affect the extent to which the Company can implement
its  plans  to  exploit  its  MMDS  spectrum,  including,  without  limitation,
development of fixed, flexible two-way alternative uses of MMDS spectrum in any
of CAI's markets.   In  addition,  such  debt instruments and the terms of such
preferred stock contain provisions that obligate  CAI  to  redeem  or  offer to
purchase  such  securities  for specified premiums in the event of a change  of
control of CAI and certain similar events.

      The Company is seeking  longer  term  financing through arrangements with
strategic partner(s) interested and willing to  participate with the Company in
the development of its operating systems and various  alternative  uses  of its
MMDS spectrum.  Much of the Company's business plan relating to fixed, flexible
use of the MMDS spectrum is dependent upon CAI securing a new strategic partner
to  provide to CAI the necessary capital resources, as well as engineering  and
other  expertise, and subscribers for such flexible-use services.  There can be
no assurance  that the Company will be able to secure any additional financings
or strategic relationships on terms and conditions satisfactory to the Company,
if at all.  Failure  to  obtain  such  financings and relationships will have a
material adverse effect on the Company.   Further,  there  can  be no assurance
that, even with additional financing, new strategic partner(s) and  receipt  of
all  necessary  regulatory  authorizations,  the Company will be able to launch
fixed, flexible two-way uses of its MMDS spectrum  in a commercially successful
manner.

AMENDED RELATIONSHIP WITH BELL ATLANTIC AND NYNEX

      Through   a  series  of  amendments  to  the  investment   and   business
relationship agreements  among  the  Company  and  affiliates  of Bell Atlantic
Corporation ("Bell Atlantic") and NYNEX Corporation ("NYNEX"), the  Company has
been  granted  the  right  to  purchase the $30 million of BANX Term Notes  (as
defined below), $70 million of Senior  Preferred  Stock  (as defined below) and
BANX Warrants (as defined below, and together with the BANX  Term Notes and the
Senior Preferred Stock, the "CAI Securities") for an aggregate  purchase  price
of  $40  million  and  the issuance of 100,000 shares of a series of CAI junior
preferred stock having a  liquidation  value  of  $30  million.   The  right to
purchase  the CAI Securities has been granted to CAI through February 28,  1998
(the "Option  Period"),  and CAI must give notice to Bell Atlantic and NYNEX of
its election to exercise this  right  no  later  than  November  21, 1997.  The
amendments also relieve CAI from any of its obligations under the  BR Agreement
(as  defined below) with respect to its Boston, MA, Pittsburgh, PA and  Albany,
Syracuse and Buffalo, NY markets with the same effect as such markets had never
been subject to the BR Agreement, and suspend, through February 28, 1998, CAI's
obligations  under  the  BR  Agreement  with  respect  to the remaining markets
contemplated by the BR Agreement.  Upon consummation of the purchase of the CAI
Securities, the BR Agreement will terminate as to such remaining  markets.   In
addition,  Bell  Atlantic  and  NYNEX  have granted to CAI an irrevocable proxy
during the Option Period with respect to the approximately 10% interest held by
Bell  Atlantic and NYNEX in CS Wireless,  and  have  agreed  to  transfer  such
interest  to  CAI upon consummation of a purchase of the CAI Securities held by
Bell Atlantic and NYNEX.

      In the event that CAI does not deliver, on or before November 21, 1997, a
notice of election  to  exercise its right to purchase the CAI Securities, Bell
Atlantic and NYNEX have the  right to sell the CAI Securities.  If CAI does not
purchase the CAI Securities on  or  before  February 28, 1998, the BR Agreement
will be reinstated with respect to each market  contemplated  thereby  with the
exception of Boston, MA, Pittsburgh, PA and Albany, Syracuse and Buffalo, NY.

BUSINESS AND OPERATING STRATEGIES

      GENERAL.    The   Company,  since  its  formation,  has  focused  on  the
development and operation  of MMDS subscription television systems concentrated
in major metropolitan areas  located  in the northeast and mid-Atlantic regions
of  the United States.  With the suspension  of  the  BR  Agreement  with  Bell
Atlantic  and  NYNEX  and  the  receipt  of regulatory approvals not previously
sought  by MMDS operators or granted by the  FCC,  the  Company  has  begun  to
explore the  full  capabilities  of  its  MMDS  spectrum  in addition to, or in
certain CAI markets, instead of, subscription television. The  Company believes
that  its  MMDS  spectrum  can  be utilized as the transport system for  fixed,
flexible two-way uses that eventually  could  be  combined into a wireless full
service network-the Wireless Information Network ("BWN").  Although the Company
recognizes that there are significant regulatory, technological  and  financial
issues  surrounding  the  development of such a system in any of CAI's markets,
the Company believes that BWN systems can be deployed in a reasonable manner to
develop  a commercially-viable  means  of  delivering  video,  voice  and  data
transmission services.
<PAGE>

Item 1.  Business (continued)

         The Company has assembled significant spectrum rights in the northeast
and mid-Atlantic  regions  of  the  United States, and is continuing to acquire
channel rights in anticipation of developing  digital  systems  that will allow
CAI  to  utilize  higher output power and compression technologies to  increase
channel capacity.   CAI  originally  began  to acquire its spectrum capacity in
preparation for its obligations under the BR  Agreement,  which required CAI to
deliver a minimum number of channels in each of the markets  subject  to the BR
Agreement.   During  the  Option  Period,  the  Company  intends to utilize its
significant spectrum capacity to develop systems that are capable of delivering
video, voice and data, or various combinations thereof, subject  to  regulatory
approval.  Although the Company believes that it will be possible to offer  all
three services in any given market once regulatory approval for fixed, flexible
two-way  use  is obtained for such market, the allocation of channels among the
various services  is expected to be driven by consumer demand for such services
in the Company's markets  and  not  all services may be offered in all markets.
The  Company's  initial  efforts with respect  to  the  development  of  fixed,
flexible two-way use of the  MMDS  spectrum  have been limited primarily to its
Boston market and have been limited to the conduct of tests, only.

          For  most of its channel rights, CAI  is  dependent  upon  leases  of
transmission capacity  with various third-party license holders.  ITFS licenses
generally are granted for a term of ten years and are subject to renewal by the
FCC.  MDS licenses generally  will  expire  on May 1, 2001 unless renewed.  FCC
licenses also specify construction deadlines which, if not met, could result in
the loss of the license.  Requests for additional  time  to construct a channel
may be filed and are subject to review pursuant to FCC rules.  Certain of CAI's
ITFS  channel  rights  are  subject  to pending extension requests  and  it  is
anticipated that additional extensions  will  be  required.   There  can  be no
assurance  that  the FCC will grant any particular extension request or license
renewal request.   CAI's  channel  leases  typically  cover  four ITFS channels
and/or one to four MDS channels each.  Under the rules of the  FCC, the term of
leases  for  ITFS  channels,  which  constitute  up  to  20 of the 33 available
wireless  channels  within  any  major MMDS market, may not exceed  ten  years.
There is no such restriction on MMDS  leases.   Following the expiration of the
initial term of a lease for ITFS channels, the leases  under which CAI operates
generally provide that the ITFS license holders may negotiate  for the lease of
channel capacity for one or more additional renewal terms with only  CAI or its
sublessor.   In  addition,  if  a  renewal  agreement  is not reached within  a
specified time frame during which only CAI or its sublessor  has the use of the
channel capacity, CAI will thereafter typically have a right of  first  refusal
to match any competing offers from one or more third parties.  Because the ITFS
license holders have generally received their FCC licenses within the last  ten
years,  CAI  and  other  similarly  situated  entities in the industry have had
little or no experience negotiating renewals of  ITFS channel lease agreements.
CAI anticipates, however, that it will be able to negotiate additional renewals
with either the incumbent license holder, or with  successor  license  holders,
although  there  is  no assurance that it will be successful in doing so.   The
MMDS channel leases held  by  CAI  generally  grant  CAI the right to renew the
channel  lease.   All  ITFS  and  MMDS  channel leases are dependent  upon  the
continued validity of the corresponding FCC license.  CAI anticipates that upon
the expiration of the current license terms,  all  such  FCC  licenses  will be
renewed  following  completion of the FCC review process, although there is  no
assurance that such renewal  applications  will be granted.  The termination of
or failure to renew a channel license or lease  (due to a breach by CAI, or its
lessor, cancellation of the license held by a third party lessor for failure to
timely construct and/or perfect the wireless cable  facility  or  otherwise) or
the  failure  to grant an application for an extension of time to construct  an
authorized station,  would result in CAI being unable to deliver programming on
such channel(s) unless  it  were able to lease excess capacity from a successor
license holder.  Such a termination  or  failure in a market which CAI actively
serves could have a material adverse effect on CAI.

      The excess channel capacity leases with Boston Catholic Television Center
and Northeastern University, involving a total  of  14 ITFS channels in Boston,
contain  provisions  that  required the Company to have  commenced  offering  a
commercial subscription television  service  by  a  certain  date   that passed
without  a  service being put into operation.  Neither institution has  invoked
the termination  provision, and negotiations are ongoing.  The Company believes
such negotiations  will  result  in  each  of the lessors entering into amended
agreements that will cover a variety of issues,  including  an extension of the
date by which the Company must initiate subscriber services.   There  can be no
assurance,  however,  that  such  negotiations  will  result  in  such  amended
agreements  or  that such amended agreements will be on terms favorable to  the
Company.

     ANALOG-BASED  SUBSCRIPTION  VIDEO.  CAI operates six analog-based wireless
cable systems in New York City, Rochester  and  Albany,  NY,  Philadelphia, PA,
Washington,  DC,  and  Norfolk/Virginia  Beach,  VA.   In addition, CAI  has  a
portfolio  of  wireless  cable  channel  rights  in  eight additional  markets,
including Long Island, Buffalo and Syracuse, NY, Providence,  RI, Hartford, CT,
Boston,  MA,  Baltimore,  MD,  and  Pittsburgh, PA.  As of June 21,  1997,  CAI
provided subscription video services to approximately 66,500 subscribers.
<PAGE>

Item 1.  Business (continued)

      The Company's principal subscription  video  competitors  in  each of its
markets  are  the  hard-wire cable companies, and include Comcast Corp.,  Tele-
Communications,  Inc.,   Cox   Cable  Communications,  Time  Warner  Cable  and
Cablevision Systems Corp.

      The table below outlines as of March 31, 1997 (except as indicated in the
footnotes) the characteristics of  the  markets  in  which  the  Company has an
operational  subscription  television  system  or  in  which the Company  holds
significant spectrum rights:

                                    TABLE I
<TABLE>
<CAPTION>
                                       Estimated                   Number of             New  
                                      Total Service              Analog/Digital      Analog/Digital
                    DMA                   Area                      Channels          Channels
 MARKET             RANK{(1)}          HOUSEHOLDS{(2)}            AVAILABLE{(3)}       APPLIED FOR 
<S>                  <C>               <C>                           <C>                  <C>
New York City         1                 4,996,976                    36                    0
Long Island{(4)}     N/A                1,083,780                    20                   13
Philadelphia          4                 2,154,389                    41                    2
Boston                6                 1,007,198                    30                    3
Washington, DC        7                 1,479,278                    24                    4
Pittsburgh           19                 1,011,310                    23                    9
Baltimore            23                 1,053,959                    32                    1
Hartford             26                   471,532                    20                    3
Buffalo              39                   501,314                    31                    2
Norfolk              40                   531,833                    32                    1
Providence           46                   842,658                    23                   10
Albany               52                   320,742                    32                    0
Syracuse             69                   278,630                    18                    7
Rochester            73                   401,575                    27                    6

SUB TOTAL                              16,135,174
BTA MARKETS (SEE TABLE II BELOW)        3,354,615
GRAND TOTAL                            19,489,789

</TABLE>

{(1)} DMA is the Designated Market Area as determined by A.C. Nielsen Company
   as of December 1995.

{(2)}  The  Estimated  Total  Service  Area  Households  in  the  service  area
   represents the approximate number of households within a 35  mile  radius of
   the Company's Tower sites.  These households may have been adjusted downward
   if  any  of the Company's markets overlapped with a newly acquired BTA  (see
   table II).   This  information  is based on estimates obtained using two EDX
   Engineering  software programs, MSITE{TM}  and  POP90{TM}.   Both  of  these
   programs use 1990  Census  data to compile their information.  Some of these
   households will be "shadowed"  and therefore unable to receive the Company's
   service  due  to  line-of-sight  ("LOS")  constraints.   The  percentage  of
   Estimated Households in the Service  Area  that the Company estimates may be
   shadowed due to LOS constraints generally ranges  from  10% to 60% depending
   upon the market.  A certain amount of these LOS constraints  may be overcome
   by the placement of beambenders and/or signal boosters.

{(3)}  The  Number of Channels Available comprises wireless cable channels  and
   local broadcast  channels  that  can  be  received by subscribers.  Wireless
   cable  channels  are either licensed to CAI or  leased  to  CAI  from  other
   license holders.   The  Number  of  Channels  Available  includes 10 off-air
   channels  in Philadelphia and 11 in New York City.  The Number  of  Channels
   Available includes  certain  channels  that  are subject to FCC approvals or
   third  party  interference  agreements.  CAI has  pending  FCC  applications
   concerning co-location of transmission sites and/or an increase in broadcast
   power with respect to 4 channels  in Philadelphia, 5 channels in Hartford, 8
   channels in New York City, 7 channels  in  Washington,  D.C., 20 channels in
   Rochester, 17 channels in Providence, 3 channels in Buffalo,  16 channels in
   Syracuse, 20 channels in Norfolk, 22 channels in Boston and 16  channels  in
   Long  Island.   The Number of Channels Available includes ITFS channels that
   may not be available for commercial programming by CAI.

{(4)} The Long Island market includes Nassau and Suffolk counties in New York
   State.
<PAGE>

Item 1.  Business (continued)

      The table below outlines as of March 31, 1997 the characteristics of the
potential markets for which CAI was the successful bidder at the completion of
the FCC Auction (defined below.  See "-Regulation-Licensing Procedures" below.
The Estimated Service Area households in the table above may have been adjusted
if the 35-mile Protected Service Area (PSA) overlapped with any of the markets
identified below.  To the extent there was overlap between two PSAs, the number
of Estimated Total Service Area households in such overlapping area was divided
equally between the two affected markets.

                                      TABLE II

<TABLE>
<CAPTION>
                                         Estimated          Number of            New
                                       Total Service     Analog/Digital     Analog/Digital
                      DMA                  Area            Channels           Channels
     MARKET           RANK               HOUSEHOLDS       AVAILABLE{(1)}     APPLIED FOR
<S>                   <C>               <C>                  <C>                  <C>
Dover, DE             N/A                 155,360             3                   12
Hyannis, MA           N/A                 213,629             1                    0
Manchester, NH        N/A                 316,004             1                    0
Portsmouth, NH        N/A                 232,477             4                    0
Worcester, MA         N/A                 352,646             9                   20
New Haven, CT         N/A                 541,263             3                    6
New London, CT        N/A                  96,380             1                    0
Springfield, MA       102                 366,198             9                   20
Poughkeepsie, NY      N/A                 258,221             2                    4
Pittsfield, MA        N/A                 116,365             1                    0
Glens Falls, NY       N/A                 141,702             4                    9
Ithaca, NY            N/A                 183,496             1                    8
Utica, NY             166                 153,219             2                    4
Summit, NJ            N/A                 227,655             9                    6
TOTAL                                   3,354,615
</TABLE>

{(1)} The number of channels currently owned or leased by CAI.

      The table below outlines as of June 21, 1997 the characteristics of the
markets in which CAI operates subscription television systems.

                                      TABLE III

<TABLE>
<CAPTION>

                           Number of         Monthly Revenue
      MARKET             SUBSCRIBERS         PER SUBSCRIBER ($)        PREMIUM PENETRATION{(1)}
<S>                         <C>                      <C>                        <C>    
New York City               10,100                   44.09                      190%
Philadelphia                40,000                   35.61                      136%
Washington, DC               2,500                   36.68                      130%
Norfolk                      2,500                   31.09                      116%
Albany                       8,700                   29.46                      131%
Rochester                    2,100                   27.22                       58%
Providence (SMATV)             600                   24.96                       72%
</TABLE>
_________________________
{(1)} Premium penetration  is the ratio of the total number of premium channels
    received by subscribers in a market divided by the number of subscribers in
    that market.  In certain  markets,  the basic subscription service includes
    one premium channel.

      The Company has not actively sought to increase its television subscriber
base in its existing analog operating systems.   Originally,  this decision was
made in connection with the BR Agreement, which contemplated that  CAI would be
required   to  transfer  all  of  its  analog  television  subscribers  to  the
appropriate  BANX  Affiliate (as defined below) at the time such BANX Affiliate
became the provider  of  video programming in a particular market.  CAI was not
entitled to any compensation  for  subscribers so transferred, and there was no
incentive for CAI to increase its subscriber  base.  With the suspension of the
BR Agreement, the Company plans to explore the  full  capabilities  of its MMDS
spectrum,  including  uses for such spectrum other than subscription television
delivery.  Consequently,  the  Company  has  maintained  its  strategy  of  not
pursuing   television   subscriber  growth  while  it  evaluates  its  business
opportunities other than  subscription  television services.  The policy of not
pursuing subscriber growth has a negative  impact on the
<PAGE>

Item 1.  Business (continued)

Company's revenues, 
which is only partially mitigated by the cost-savings associated  with  reduced
marketing and other efforts ordinarily pursued in connection with increasing  a
subscriber base.

      The  Company  intends to commence digital subscription television service
in the Boston market  during  the fall of 1997, pending the availability to the
Company  of the necessary subscriber  equipment  and  access  to  pre-digitized
compressed programming.  Utilizing portions of the digital MMDS system built by
the Company in Boston last year, CAI intends to launch the digital subscription
television   service   in  certain  locations  served  by  the  Company's  main
transmitter located in downtown Boston and by selected booster sites throughout
the greater Boston area.  To  replace programming that would have been provided
by the BANX Affiliates under the  BR Agreement, the Company is currently in the
process of negotiating a joint venture  with  TelQuest Communications, Inc., an
entity of which Jared E. Abbruzzese, Chairman of  the Company, is the principal
stockholder, and CS Wireless, to form an entity (hereinafter,  "TelQuest  Joint
Venture") capable of providing pre-digitized compressed programming to CAI,  CS
Wireless and other MMDS and hard-wire cable operators.  CAI intends to use such
programming for Boston and any other markets in which it determines to roll-out
a  digital  video  product.   See  "Item  13. Certain Relationships and Related
Transactions."  In the event that the TelQuest Joint Venture is not formed, CAI
would have to construct a compression facility  capable  of  serving the Boston
market  to  provide digital programming or make other arrangements  to  receive
pre-digitized  compressed programming via satellite.  The Company estimates the
cost of constructing a digital compression facility is approximately $5 million
as of June 1997.   There  can  be  no  assurance  that the necessary subscriber
equipment or access to pre-digitized compressed programming  will  be available
to the Company in the Boston market, and if available, that the Company will be
able  to  successfully  launch  and  operate  a digital subscription television
business in this market.

      CAI has substantially completed construction  of  a second digital system
in Hampton Roads, VA.  The Company does not yet have a definitive timetable for
the commercial deployment of digital subscription television  service  in  this
market;  however,  if  and  when  CAI  decides to launch a digital subscription
television service in Hampton Roads or any other of CAI's markets, availability
of  necessary  subscriber  equipment  and access  to  pre-digitized  compressed
programming must be secured in connection with any such service launch.

      In  each of the principal analog-based  subscription  television  markets
served by CAI  there  is  and,  the  Company believes there will continue to be
significant competition for households  that  are  presently  subscribers  of a
hard-wire  cable  service.  Additionally,  the  Company has experienced loss of
subscribers to hard-wire cable providers in markets where the Company's channel
offering  is  significantly less, as a result of channel  capacity  limitations
inherent in an analog-based MMDS operation, than the hard-wire cable providers,
such as in the Company's New York City market.

      In addition  to the markets set forth above, CAI holds 48% of CS Wireless
Systems, Inc., a Delaware  corporation  ("CS Wireless"), formed on February 23,
1996  by  the  Company and Heartland Wireless  Communications,  Inc.,  an  MMDS
subscription  television   operator   of   small-   and   medium-sized  markets
("Heartland").   Pursuant  to  the  terms  of  a Participation Agreement  dated
December  12,  1995  (as  amended,  the "Participation  Agreement")  among  the
Company, Heartland and CS Wireless, each  of CAI and Heartland contributed MMDS
assets and channel rights or the stock of subsidiaries  owning  such assets and
channel  rights  to  CS  Wireless.   As  a  result  of  the  contributions  and
transactions  effected  by  CS  Wireless following its formation,  CS  Wireless
currently has 18 markets, encompassing  approximately  7.5  million  television
households.   As  of  December  31,  1996,  CS  Wireless  provided  service  to
approximately 65,600 subscribers.

      ONE-WAY,  HIGH-SPEED  INTERNET  ACCESS.   The  Company believes that MMDS
technology  presents a viable option to traditional telephony  providers  as  a
"pipeline" through  which  Internet  and  commercial  on-line  services  can be
carried,  especially  for  small-  to  medium -sized businesses seeking a cost-
effective means of accessing such on-line  services.   To  date,  the  FCC  has
licensed  the  MMDS  spectrum  for  one-way  video  and data transmission.  CAI
further believes that the MMDS industry's systems, which  can  currently  reach
more than 50% of the nation's households, are superior to traditional telephone
lines  in terms of speed.  An MMDS system can transmit data at speeds of up  to
27 Mbps,  nearly  1,000  times  faster than traditional telephony rates of 28.8
Kbps.  Several MMDS operators, including  CAI, have successfully tested one-way
Internet access capabilities over their existing  systems,  using a traditional
telephone line for the typically less data-intensive return path.   CAI intends
to  enter  the  Internet  access  market  as a retail Internet Access  Provider
("IAP"), but is also expected to offer wholesale  transmission  services.   The
Company's wholesale service is expected to be offered to other IAPs.
<PAGE>

Item 1.  Business (continued)

      CAI  recently  initiated  a commercial one-way Internet access service in
its Rochester and New York City,  New  York  markets, where the FCC has granted
CAI developmental authorization to conduct a market  trial  of  up  to  500 and
1,000  Internet  subscribers, respectively.  The Company's service consists  of
one-way  wireless high-speed  downstream  data  transmission  at  those  market
transmission  rates of up to 10 Mbps in Rochester and 27 Mbps in New York City.
The service utilizes  the  Company's  existing  MMDS network for the downstream
transmission, while the return path is handled using  a  traditional  telephone
line.   The  Company  is  marketing its Internet access service principally  to
small- to medium-sized businesses  and  residential  consumers,  for which, the
Company  believes, there is a significant need for high speed Internet  access,
but  not  necessarily  the  financial  resources  to  install  costly  advanced
telephone circuits  capable  of  providing comparable transmission speed.   The
Company is also conducting Internet  trials in Washington, D.C.  There has been
no  definitive agreement to pursue commercial  authorization  for  an  Internet
access service in Washington, D.C. as of the date hereof.

      In  both  of  the  above markets, the Company has established an Internet
Point of Presence ("PoP")  at  its existing transmission facilities.  Equipment
at  each  PoP includes modem banks  for  upstream  traffic,  routers,  servers,
Internet wireless transmission hubs and high speed connectivity to the Internet
backbone.

      Internet  access  service  is  a  new  application for the MMDS platform.
Although the Company has previously demonstrated  the  technology and equipment
necessary to transmit data over its MMDS spectrum on several  occasions  and in
various  markets,  there  can  be no assurance that the Company will be able to
successfully deploy, in a commercial  manner,  an  Internet access service over
its MMDS spectrum in Rochester, New York City or any  other  market in which it
may seek to initiate such a service.

      FIXED,  FLEXIBLE TWO-WAY USE OF MMDS SPECTRUM.  CAI has recently  applied
for, and has received from the FCC, additional authorizations permitting CAI to
develop fixed,  flexible  two-way  uses  of  its MMDS spectrum in specified CAI
markets  for specific customer locations.  The  Company  believes  that  fixed,
flexible two-way  use  of  the  MMDS  spectrum  offers a significantly enhanced
service capability and would present new opportunities  for  CAI and other MMDS
operators.   Based  upon  policy  statements in which the FCC has  consistently
recognized that MMDS spectrum may be employed for a variety of video, voice and
data  transmission  services,  including   two-way  transmission,  the  Company
believes that FCC policy regarding the use of  MMDS  spectrum  is moving toward
flexible  two-way  use so long as favorable technical and interference  studies
can be demonstrated.   The  Company  believes that fixed, flexible two-way uses
include  data  transmission  such  as  two-way  Internet  and  intranet  access
(eliminating  the use of a traditional telephone  line  return  path  currently
utilized by CAI's Internet access service) and local loop bypass telephony.

      The Company,  in  anticipation of such FCC policy regarding flexible two-
way use, has recently applied  for,  and  received  from  the  FCC, a permanent
authorization for fixed, flexible two-way use of five of its MMDS  channels for
16 sites located in and around CAI's Boston market.  This authority  represents
the  first  of  its  kind awarded to an MMDS operator.  CAI is actively seeking
strategic partners interested  in  developing  fixed, flexible two-way uses for
its MMDS spectrum in Boston, and potentially, other  CAI  markets.  The Company
is  engaged  in discussions with potential strategic investors;  however,  such
discussions are  in the preliminary stages.  There can be no assurance that CAI
will be successful  in attracting a strategic partner, or if successful, that a
business arrangement  between CAI and such strategic investor can be reached on
satisfactory terms and  conditions,  if  at  all.   Further,  there  can  be no
assurance  that CAI, alone or in conjunction with a strategic partner, will  be
able to successfully  develop  fixed, flexible uses of its MMDS spectrum, or if
successfully  developed,  that such  uses  can  be  deployed  profitably  in  a
commercial manner.

      Additionally, the permanent authorization granted to Boston is limited to
five MMDS channels for 16 customer  locations.   There can be no assurance that
such customer locations will enable CAI to successfully develop fixed, flexible
uses of its MMDS spectrum in Boston in a commercial  manner and, therefore, CAI
will need to apply for authorization in Boston for additional  channels  and/or
additional customer locations.  Such applications have not been made as of  the
date  hereof.   There  can  be  no assurance, however, if such applications are
made, that CAI would receive authorization from the FCC for additional channels
and/or additional customer locations in the Boston market.

      In connection with the Company's  intention  to  develop  fixed, flexible
two-way  uses  of  its MMDS spectrum, the Company entered into a memorandum  of
understanding  in  January   1997   with   ADC   Telecommunications,   Inc.,  a
telecommunications  equipment  manufacturer  ("ADC"), to pursue the design  and
implementation of fixed two-way broadband wireless  communications  systems for
the  transmission of video, voice and data over the MMDS spectrum.  Subject  to
receipt  of  the  requisite regulatory authority, the Company and ADC expect to
use certain of the channels in CAI's Pittsburgh market for the initial phase of
the joint development  project.   If  such phase is successful, the Company and
ADC have agreed to deploy a demonstration  system  in Boston, which the Company
believes will be conducted 
<PAGE>

Item 1.  Business (continued)

pursuant to the permanent  authority  it has already
received  for  fixed,  flexible  two-way  use  in  that market.  Further  joint
development would be the subject of a definitive agreement  among  CAI and ADC,
however,  there  can  be  no  assurance that the initial phase or demonstration
system  will  be successful, or if  successful,  that  a  definitive  agreement
relating to additional  joint  development  of fixed two-way broadband wireless
communications systems with ADC will be reached  on  terms  and conditions that
are satisfactory to the Company, if at all.

      The Company also believes that fixed, flexible two-way  use  of  its MMDS
spectrum  includes telephony delivery services.  The Company believes that  the
combination of digital compression, fiber loop and cellular technologies can be
integrated  into  the  MMDS  spectrum,  resulting in a single wireless platform
capable of delivering a wide range of services,  including  telephony  delivery
services.   Adaptation of newly available, but as of yet commercially untested,
technologies  has been explored by the Company, with the intention of assessing
Broadband MMDS  spectrum's  ability  to simultaneously provide a combination of
video, voice and data delivery services.   See "--Wireless Network" below.  CAI
believes that an MMDS system having one main  transmitter  and multiple booster
sites  can  be  designed using standard cellular network design  principles  to
produce a relatively  low-cost  telephony  delivery  platform.  The Company has
commenced  preliminary testing and has taken initial steps  in  furtherance  of
developing a telephony application for its MMDS spectrum.  Although the Company
believes that  an  MMDS  system  can  be designed to provide telephony delivery
services, there can be no assurance that  such  a  system could be designed, or
that the Company would be capable of designing and constructing  such a system.
Furthermore, in the event that such a system could be designed, there can be no
assurance that the Company would receive the requisite regulatory  approval  to
offer  a  telephony delivery service, that the Company would have the financial
resources,  alone  or  in  conjunction  with  a strategic partner, necessary to
design  and  construct a telephony delivery service  in  one  or  more  of  its
markets, or that  such  service,  if  it  was  designed  and constructed by the
Company  in  one  or  more  markets,  could  be  successfully  deployed   in  a
commercially successful manner.

        BROADBAND WIRELESS NETWORK.   Subject to receipt of regulatory approval
for  fixed,  flexible  use of its MMDS spectrum  and  successful  testing,  the
successful deployment of  digital video, one- and two-way data transmission and
telephony delivery services  utilizing the MMDS platform and sufficient capital
resources, the Company intends to launch a wireless version of the full service
network, the Broadband Wireless Network ("BWN").  The Company believes that its
BWN systems would be able to provide quick and relatively inexpensive household
coverage on a broad scale.  CAI  believes  that  the  BWN  system  concept will
enhance  the  Company's  ability to attract one or more strategic investors  by
giving such partners the ability  to  provide  competitive access products over
CAI's MMDS spectrum.  The Company believes that its BWN systems will be capable
of  providing  a  combination  of  analog  and/or digital  video  services  for
residential,   as   well   as  for  corporate  and  institutional/instructional
subscribers, bundled with high speed Internet and intranet access services, and
ultimately, telephony delivery  services.   The  Company  expects to be able to
alter the channel allocation among the various services depending  on the needs
of the strategic partner and consumer demand, thereby deriving multiple revenue
streams from each BWN system.

   The Company has not yet implemented a BWN system in any of its markets.  CAI
believes  that  the various regulatory approvals it has received and the  joint
development projects  with  which  it is involved will enable CAI to assess the
viability of the BWN system and present  it  to  potential  strategic partners.
The Company has not, however, tested a BWN system in any of its markets.  There
are  a number of risk factors, including, without limitation,  receipt  of  all
requisite  regulatory approvals, technology development and the availability of
additional financing,  that  will  affect the implementation of a BWN system in
any of the Company's markets, some of  which  are  outside  the  control of the
Company.  There can be no assurance that the Company will be able  to develop a
BWN  system  in any of its markets, or that if a BWN system is developed,  that
the Company will  be  able  to  deploy  a variety of services in a commercially
reasonable manner, if at all.

   MMDS subscription television is not a  new  technology; however, it is a new
industry with a relatively short operating history.   Fixed,  flexible  two-way
uses  of  the  MMDS  spectrum  have relatively no operating history.  There are
difficulties and uncertainties normally associated with new industries, such as
lack  of consumer acceptance, difficulty  in  obtaining  financing,  increasing
competition, advances in technology and changes in laws and regulations.  There
can be no assurance that the MMDS industry will develop or continue as a viable
or profitable industry.

REGULATION

      General.  The wireless cable industry is subject to regulation by the FCC
pursuant to the Communications  Act  of  1934,  as amended (the "Communications
Act"). The Communications Act empowers the FCC, among  other  things, to issue,
revoke,  modify  and renew licenses within the spectrum available  to  wireless
cable; to approve  the  assignment
<PAGE>

Item 1.  Business (continued)

and/or transfer of control of such licenses;
to approve the location of  wireless  cable  system  headends;  to regulate the
kind, configuration and operation of equipment used by wireless cable  systems;
and  to  impose certain equal employment opportunity and other obligations  and
reporting requirements on wireless cable channel license holders and operators.

      The  FCC  has  determined  that  wireless  cable  systems  are not "cable
systems" for purposes of the Communications Act. Accordingly, a wireless  cable
system  does  not  require  a  local  franchise  and  is subject to fewer local
regulations  than  a  hard-wire  cable system. Moreover, all  transmission  and
reception equipment for a wireless  cable  system  can  be  located  on private
property;  hence,  there  is  no need to make use of utility poles or dedicated
easements or other public rights  of  way.  Although  wireless  cable operators
typically  have to lease from third parties the right to use a certain  portion
of the channels  utilized in any given system, unlike hard-wire cable operators
they do not have to  pay  local franchise fees.  Recently, legislation has been
introduced  in some states,  including  Illinois,  Maryland,  Pennsylvania  and
Virginia, to  authorize  state  and  local  authorities  to impose on all video
program  distributors  (including  wireless  cable  operators)  a  tax  on  the
distributors' gross receipts comparable to the franchise  fees  cable operators
pay.  Similar  legislation might be introduced in several other states.   While
the proposals vary  among  states,  the  bills all would require, if passed, as
much as 5.0% of gross receipts to be paid  by  wireless  distributors  to local
authorities.  Efforts are underway by the industry trade association to preempt
such state taxes  through  federal  legislation.  In  addition, the industry is
opposing the state bills as they are introduced, and, in Virginia and Maryland,
it has succeeded in either blocking the legislation or  being exempted from the
video tax that was eventually enacted into law. However,  it is not possible to
predict  whether  new  state  laws will be enacted which impose  new  taxes  on
wireless cable operators.

      The FCC licenses and regulates the use of channels by license holders and
system operators.  In the 50 largest  markets,  33 6-MHz channels are available
for  wireless  cable  delivery services (in addition  to  any  local  broadcast
television channels that can be offered to subscribers via an off-air antenna).
In each geographic service  area  of  all  other markets, 32 6-MHz channels are
available for wireless cable (in addition to  any  local  broadcast  television
channels that can be offered to subcribers via an off-air antenna).  Except  in
limited  circumstances,  20 wireless cable channels in each of these geographic
service areas are generally  licensed  only to qualified non-profit educational
organizations (commonly referred to as ITFS  channels).  In  general,  each  of
these  channels  must  be  used  a minimum of 20 hours per week per channel for
instructional programming. The remaining  "excess  air time" on an ITFS channel
may be leased to wireless cable operators for commercial  use,  without further
restrictions (other than the right of the ITFS license holder, at  its  option,
to  recapture up to an additional 20 hours of air time per week for educational
programming).   Lessees  of  ITFS'  "excess  air  time," including the Company,
generally  have  the  right  to  transmit  to their customers  the  educational
programming provided by the lessor at no incremental  cost.  The  FCC  recently
amended  its  rules  to  permit  ITFS  license  holders  to  consolidate  their
educational  programming  on  one  or  more  of  their  ITFS  channels, thereby
providing  wireless  cable  operators  leasing  such  channels,  including  the
Company,  greater  flexibility in their use of ITFS channels. The remaining  13
analog channels available  in  most  of  the  Company's  operating and targeted
markets are made available by the FCC for full-time usage  without  programming
restrictions.

      LICENSING  PROCEDURES.  The  actual  number  of  wireless  cable channels
available  for  licensing in any market is determined by the FCC's interference
protection and channel  allocation rules. The FCC awards ITFS and MMDS licenses
based  upon  applications  demonstrating   that   the   applicant  is  legally,
financially  and  technically  qualified  to  hold  the license  and  that  the
operation of the proposed station will not cause harmful  interference to other
stations or proposed stations entitled to interference protection.

      During the year ended March 31, 1996, CAI participated  in the FCC's MMDS
Spectrum auction (the "FCC Auction") for awarding available commercial wireless
spectrum in 493 markets (the "Auction Markets") throughout the  United  States,
identified  as Basic Trading Areas( in accordance with material copyrighted  by
Rand McNally & Company.  The winner of an Auction Market has the right to apply
for the available  MDS  frequencies  throughout  the Auction Market, consistent
with certain specified interference criteria that  protect  existing  ITFS  and
MMDS  channels.  Existing ITFS and MMDS channel right holders also must protect
the Auction Market winner's spectrum from power increases or tower relocations.
CAI was  the  successful  bidder  for 32 Auction Markets costing CAI a total of
$48.8 million.  Pursuant to an agreement  with CS Wireless, CAI has transferred
five Auction Markets located in CS Wireless'  operating  regions  and for which
CAI  was the successful bidder, costing an aggregate of $12.6  million,  to  CS
Wireless  at  cost, and will transfer two additional Auction Markets located in
CS Wireless' operating regions and for which CAI was the successful bidder upon
the granting of such Auction Market awards by the FCC.  For each of the Auction
Markets in which  CAI was the successful bidder, CAI was required to submit the
requisite FCC applications and make a down-payment (20% of such successful bid)
within five days of  the  announcement  by Public Notice of the successful bid.
When the authorization for an Auction Market  is ready to be issued by the FCC,
<PAGE>

Item 1.  Business (continued)

the FCC will release a Public Notice to that effect.   Within  5  days  of such
Public  Notice,  the successful bidder is required to remit the balance of  its
bid to the FCC, whereupon  the  Auction  Market authorization will be issued by
the FCC.  As of March 31, 1997, authorizations  for all but two Auction Markets
for  which  CAI was the successful bidder (excluding  those  markets  that  are
required to be conveyed at cost to CS Wireless) have been issued by the FCC and
paid for by CAI.   Authorizations  for  the  remaining  two Auction Markets are
expected  to  be  issued  during  the fiscal year ending March  31,  1998,  and
payment, in the aggregate amount of  $1.1  million  for  such remaining Auction
Markets will be due upon such issuance.

      In order to be eligible for the FCC Auction, CAI, prior  to  the start of
the  auctions, was required to file applications and make up-front payments  in
accordance with the rules of the FCC Auction. CAI, as the winning bidder, is in
the process  of  fulfilling certain post-auction filing obligations, including,
but  not  limited  to,   filing  applications  that  propose  new  transmission
facilities, exhibits concerning  its  involvement  in  bidding  consortia,  and
descriptions  of  its plans to build-out two-thirds of each market over a five-
year period. Due  to  the  unique  nature of the FCC Auction, there is no prior
regulatory history regarding the scope  and  nature  of the information the FCC
will require, or how the FCC will treat the information.

      Under rules and policies for applications for new  MDS  facilities  filed
before  the  FCC  Auction,  the FCC would generally issue a conditional license
that  permits  the  conditional   licensee  to  commence  construction  of  its
facilities upon the satisfaction of  specified  conditions. Construction of MDS
stations  generally  must  be  completed  within  one  year  of  grant  of  the
conditional license.

      In February 1995, the FCC amended its rules and established "windows" for
the filing of new ITFS applications or major modifications  to  authorized ITFS
facilities.  The  first filing "window" was October 16-20, 1995. Where  two  or
more ITFS applicants  file  applications for the same channels and the proposed
facilities could not be operated  without  impermissible  interference, the FCC
employs  a  set  of  comparative  criteria to select from among  the  competing
applicants. Construction of ITFS stations generally must be completed within 18
months of the date of grant of the authorization.

      If construction of MDS or ITFS  stations  is  not  completed  within  the
authorized  construction period, the licensee must file an application with the
FCC seeking additional  time  to  construct the station and demonstrate therein
compliance with certain FCC standards.  If  the  extension  application  is not
filed  or  is  not  granted, the license will be deemed forfeited. ITFS and MDS
licenses generally have terms of 10 years. Licenses must be renewed thereafter,
and may be revoked for  cause  in  a  manner similar to other FCC licenses. FCC
rules  prohibit  the  sale  for  profit  of a  conditional  MDS  license  or  a
controlling interest in the conditional licensee  prior  to construction of the
station or, in certain circumstances, prior to the completion  of  one  year of
operation.   However,  the  FCC  does  permit  the  leasing  of  100% of an MDS
licensee's spectrum to a wireless cable operator and the granting of options to
purchase  a  controlling interest in a license even before such holding  period
has lapsed.

      Wireless  cable  transmissions  are  subject to FCC regulations governing
interference and reception quality. These regulations  specify important signal
characteristics such as modulation (i.e., AM/FM) or encoding formats (analog or
digital).  Until recently, FCC regulations required wireless  cable  systems to
transmit  only  analog  signals  and  those  regulations needed to be modified,
either by rulemaking or by individual application, to permit the use of digital
transmissions. CAI was a party to a petition for  declaratory  ruling  filed in
July   1995   seeking  adoption  of  interim  regulations  authorizing  digital
transmission.   This  petition was granted on July 9, 1996, and allows wireless
licenseholders to operate  digitally under current FCC interference rules.  The
license holder is, however,  required to file for digital authorization.  It is
likely that, in the longer term,  the  FCC  will  consider  adopting  both  new
technical  and service rules tailored to digital operations.  The service rules
could modify  the  respective  rights  and  obligations of the ITFS lessors and
their  commercial  lessees  of "excess air time"  in  light  of  the  increased
capacity that would result from  digital  compression.   Even  if  the FCC does
adopt  new  service  rules governing the allocation of "excess air time"  in  a
digital environment, it  is anticipated that there would be a dramatic increase
in the number of channels  that  will be available to the Company following the
conversion to digital transmission.   The  Company demonstrated transmission of
digital satellite television programming and digital local broadcast television
signals in its Rochester, NY market in June  1996.   The  Company believes that
the  necessary  FCC  approvals  will  be  obtained  to  permit use  of  digital
compression  by  the time it becomes commercially available  on  a  wide-spread
basis; however, there  can  be  no  assurance  that  these  approvals  will  be
forthcoming or timely. In addition, such modifications filed with the FCC after
the  FCC  Auction  will  be  subject  to  the interference protection rights of
adjacent FCC Auction winners.
<PAGE>

Item 1.  Business (continued)

      The FCC also regulates transmitter locations  and  signal  strength.  The
operation  of  a wireless cable television system requires the co-location of a
commercially viable  number  of  MMDS channels and operations with transmission
characteristics  (such  as  power and  polarity).  In  order  to  commence  the
operations of certain of the  Company's markets, applications have been or will
be filed with the FCC to relocate and modify existing transmission facilities.

      Under current FCC regulations,  a  wireless  cable operator generally may
serve  subscribers  anywhere  within  the  LOS  of  its transmission  facility,
provided that the signal complies with FCC interference  standards. Under rules
adopted by the FCC on June 15, 1995, an MMDS channel license  holder  generally
has  a  protected  service  area  of  35 miles around its transmitter site. The
current rules became effective on September  15,  1995. An ITFS channel license
holder has protection as to all of its receive sites,  but  the  same protected
service area during excess capacity use by a wireless cable operator as an MMDS
license  holder.  In launching or upgrading a system, the Company may  wish  to
relocate its transmission  facility  or  increase  its height or power. If such
changes  cause  the  Company's  signal to violate interference  standards  with
respect to the protected service  area  of  other wireless license holders, the
Company would be required to obtain the consent  of such other license holders;
however, there can be no assurance that such consents would be received.

      INTERFERENCE ISSUES. Interference from other  wireless  cable systems can
limit the ability of a wireless cable system to serve any particular  point. In
licensing  ITFS  and  MDS  systems,  a  primary  concern of the FCC is avoiding
situations where proposed stations are predicted to cause interference with the
reception of previously proposed stations. Pursuant  to  FCC  rules, a wireless
cable  system is generally protected from interference within a  radius  of  35
miles  of   the  transmission  site.  In  addition,  modification  applications
submitted after the FCC Auction will be required to protect FCC Auction winners
from  interference.    The FCC's interference protection standards may make one
or more of these proposed  modifications  or  new  grants  unavailable. In such
event,  it  may  be  necessary  to negotiate interference agreements  with  the
licensees of the systems which would  otherwise  block  such  modifications  or
grants.  There  can  be no assurance that the Company will be able to negotiate
all necessary interference  agreements  that  are  on  terms  acceptable to the
Company.  In  the  event  the  Company  cannot  obtain  interference agreements
required to implement the Company's plans for a market, the Company may have to
curtail  or  modify  operations  in that market, utilize a less  optimal  tower
location, or reduce the height or  power  of  the transmission facility, any of
which could have a material adverse effect on the growth of the Company in that
market. In addition, while the Company's leases  with  ITFS  and  MDS licensees
require  their  cooperation,  it  is possible that one or more of the Company's
channel lessors may hinder or delay  the  Company's efforts to use the channels
in accordance with the Company's plans for the particular market.

      THE 1992 CABLE ACT.  On October 5, 1992,  Congress enacted the 1992 Cable
Act,  which  compels the FCC to, among other things,  (i)  adopt  comprehensive
federal standards  for  the  local regulation of certain rates charged by hard-
wire cable operators, (ii) impose customer service standards on hard-wire cable
operators, (iii) govern carriage  of  certain  broadcast  signals by all multi-
channel  video  providers,  and  (iv)  compel  non-discriminatory   access   to
programming owned or controlled by vertically-integrated cable operators.

      The  rate regulations adopted by the FCC do not regulate cable rates once
other multi-channel  video  providers  serve, in the aggregate, at least 15% of
the households within the cable franchise  area.  The  customer  service  rules
adopted  by  the  FCC  establish  certain minimum standards to be maintained by
traditional hard-wire cable operators. These standards include prompt responses
to customer telephone inquiries, reliable and timely installations and repairs,
and readily understandable billing  practices.  These  rules  do  not  apply to
wireless  cable  operators, although the Company believes that it provides  and
will continue to provide  customer  service  superior  to  its  hard-wire cable
competitors.

      Under the retransmission consent provisions of the 1992 Cable Act and the
FCC's  implementing  regulations, all multi-channel video providers  (including
both hard-wire and wireless  cable)  seeking  to  retransmit certain commercial
broadcast signals must first obtain the permission  of  the  broadcast station.
Hard-wire cable systems, but not wireless cable systems, are required under the
1992  Cable  Act  and  the FCC's "must carry" rules to retransmit  a  specified
number  of  local commercial  television  or  qualified  low  power  television
signals. See "Retransmission Consent."

      The 1992  Cable  Act and the FCC's implementing regulations impose limits
on exclusive programming  contracts  and  prohibit programmers in which a cable
operator  has  an  attributable  interest  from  discriminating  against  cable
competitors with respect to the price, terms  and  conditions  of  programming.
Certain provisions of the 1992 
<PAGE>

Item 1.  Business (continued)

Cable Act and the FCC's implementing regulations
have   been   challenged   in   the  courts  and  before  the  FCC.  Under  the
Telecommunications Act of 1996 (the  "1996 Act"), Congress has directed the FCC
to eliminate cable rate regulations for "small systems," as defined in the 1996
Act, and for large systems under certain  prescribed circumstances, and for all
cable systems effective three years after enactment of the 1996 Act.

      While current FCC regulations are intended  to promote the development of
a  competitive  subscription  television industry, the  rules  and  regulations
affecting the wireless cable industry may change, and any future changes in FCC
rules, regulations, policies and  procedures  could  have  a  material  adverse
effect  on  the  Company. In addition, a number of legal challenges to the 1992
Cable Act and the  regulations  promulgated thereunder have been filed, both in
the courts and before the FCC. These challenges, if successful, could result in
increases  in the Company's operating  costs  and  otherwise  have  a  material
adverse effect  on  the  Company.  The  Company's  costs  to acquire satellite-
delivered programming may be affected by the outcome of those challenges. Other
aspects of the 1992 Cable Act that have been challenged, the  outcome  of which
could  adversely  affect the Company, including the 1992 Cable Act's provisions
governing rate regulation  to  be met by traditional hard-wire cable companies.
The 1992 Cable Act empowered the FCC to regulate the basic subscription rates 
charged by traditional hard-wire cable operators.  The FCC recently issued rules
requiring such cable operators, under certain circumstances,  to reduce the 
rates charged for non-premium services by as much as 17%. Should these  
regulations withstand court and regulatory challenges, the extent to which 
wireless  cable operators may  continue  to  maintain  a price advantage over
traditional hard-wire cable operators  could be diminished.  On  the  other 
hand,  continued strict  rate regulation of  cable  rates would tend to 
impede the ability of hard-wire cable operators to upgrade their  cable  
plant  and gain a competitive advantage over wireless cable.

      THE  1996 ACT. The Telecommunications  Act  of  1996  (the  "1996  Act"),
enacted in February 1996, could have a material impact on the MMDS industry and
the competitive  environment  in which the Company operates.  The 1996 Act will
result  in  comprehensive  changes   to  the  regulatory  environment  for  the
telecommunications industry as a whole.   The  legislation  will,  among  other
things,  substantially  reduce  regulatory authority over cable rates.  Another
provision  of  the  1996  Act will afford  hard-wire  cable  operators  greater
flexibility to offer lower  rates  to  certain  of  its  subscribers, and would
thereby permit cable operators to offer discounts on hard-wire cable service to
the  Company's  subscribers or prospective subscribers.  The  legislation  will
permit telephone companies to enter the video distribution business, subject to
certain  conditions.    The   entry  of  telephone  companies  into  the  video
distribution business, with greater  access  to  capital  and  other resources,
could  provide  significant competition to the companies in the MMDS  industry,
including the Company.   In addition, the legislation will afford relief to DBS
providers by exempting such  providers  from  local  restrictions  on reception
antennas  and  preempting the authority of local governments to impose  certain
taxes.  The Company  cannot  predict  the substance of rules and policies to be
adopted by the FCC in implementing the provisions of the legislation.

      COPYRIGHT.  Under  the  federal  copyright   laws,  permission  from  the
copyright  holder  generally  must be secured before a  video  program  may  be
retransmitted.  Under Section 111 of the Copyright Act, certain "cable systems"
are entitled to engage in the secondary transmission of programming without the
prior permission of the holders  of  copyrights in the programming. In order to
do  so,  a  cable system must secure a compulsory  copyright  license.  Such  a
license may be obtained upon the filing of certain reports with and the payment
of certain fees  to  the  U.S.  Copyright Office. In 1994, Congress enacted the
Satellite Home Viewers Act of 1994  which  enables  operators of wireless cable
television systems to rely on the cable compulsory license under Section 111 of
the Copyright Act.

      RETRANSMISSION CONSENT. Under the retransmission consent provisions of
the 1992 Cable Act, wireless and hard-wire cable operators seeking to
retransmit certain commercial television broadcast signals must first obtain
the permission of the broadcast station in order to cover their signal.
However, wireless cable systems, unlike hard-wire cable systems, are not
required under the FCC's "must carry" rules to retransmit a specified number of
local commercial television or qualified low power television signals. Although
there can be no assurances that the Company will be able to obtain requisite
broadcaster consents, the Company believes in most cases it will be able to do
so for little or no additional cost.

      In  addition  to  regulation by the FCC, MMDS operators  are  subject  to
regulations by the Federal  Aviation  Administration  ("FAA")  with  respect to
construction  of  transmission  towers  and to certain local zoning regulations
affecting  construction of towers and other  facilities.   There  also  may  be
restrictions  imposed by local authorities, neighborhood associations and other
similar organizations  limiting the use of certain types of reception equipment
used  by  CAI.  Future changes  in  the  foregoing  regulations  or  any  other
regulations  applicable  to  CAI  could have a material adverse effect on CAI's
results of operations and financial condition.
<PAGE>

Item 1.  Business (continued)

      Certain states have legislated  that each resident of a Multiple Dwelling
Unit ("MDU") should not be denied access  to programming provided by franchised
cable systems, notwithstanding the fact that  the MDU entered into an exclusive
agreement with a non-franchised video program distributor.   States  with  such
"mandatory  access"  laws  where CAI provides MMDS service include Connecticut,
Delaware, District of Columbia,  New  Jersey,  New York, Pennsylvania and Rhode
Island.   In  several district courts, mandatory access  laws  have  been  held
unconstitutional.   Such laws could increase the competition for subscribers in
MDUs. There may also be restrictions imposed by local authorities. There can be
no assurance that the Company will not be required to incur additional costs in
complying with such regulations or restrictions.

      Due to the regulated  nature of the subscription television industry, the
Company's growth and operations  may  be  adversely impacted by the adoption of
new,  or  changes  to  existing,  laws or regulations  or  the  interpretations
thereof.

COMPETITION

         The subscription television  industry  is  highly  competitive.  CAI's
principal  subscription television competitors in each market  are  traditional
hard-wire  cable,   direct   broadcast  satellite  ("DBS")  and  private  cable
operators.  Hard-wire cable companies  generally are well established and known
to  potential  customers and have significantly  greater  financial  and  other
resources than CAI.   Premium  movie  services  offered by the cable television
systems have encountered significant competition  from  the home video cassette
recorder  industry.   In  areas where several local off-air  VHF/UHF  broadcast
channels can be received without  the benefit of subscription television, cable
television  systems  also  have faced  competition  from  the  availability  of
broadcast signals generally  and  have  found  market  penetration  to  be more
difficult.   Legislative,  regulatory and technological developments may result
in additional and significant  competition,  including  competition  from local
telephone  companies  and  from a proposed new wireless service known as  Local
Multipoint Distribution Service ("LMDS").  A more detailed discussion follows:

      HARD-WIRE CABLE. CAI's  principal  subscription television competitors in
each  market  are  traditional  hard-wire  cable  operators.   Hard-wire  cable
companies are generally well established and  known  to potential customers and
have significantly greater financial and other resources  than  CAI.  The hard-
wire cable companies competing in CAI's markets generally offer between  34  to
82  channels  to  their  subscribers,  compared  to  between  22 to 42 channels
(consisting of between 17 and 33 wireless cable channels and between  5  and 10
local  off-air  VHF/UHF  broadcast  channels)  generally  offered by CAI in its
markets.

      DIRECT-TO-HOME ("DTH"). DTH satellite television services originally were
available  via  satellite  receivers which generally were 7-to-12  foot  dishes
mounted in the yards of homes  to  receive  television  signals  from  orbiting
satellites.   Until  the  implementation  of  encryption,  these dishes enabled
reception of any and all signals without payment of fees.  Having  to  purchase
decoders  and  pay  for programming has reduced their popularity, although  CAI
will to some degree compete  with  these  systems  in  marketing  its services.
Another form of DTH service is Direct Broadcast Satellite ("DBS"). DBS involves
the transmission of an encoded signal direct from a satellite to the customer's
home.   Because the signal is at a higher power level and frequency  than  most
satellite-transmitted  signals,  its  reception  can  be  accomplished  with  a
relatively  small  (18-inch)  dish  mounted  on  a rooftop or in the yard.  DBS
cannot,  for  technical  and  legal  reasons, provide local  VHF/UHF  broadcast
channels as part of its service, although  many  DBS  subscribers  receive such
channels via standard over-the air receive antennas.  Moreover, DBS may provide
subscribers  with  access  to broadcast network distant signals only when  such
subscribers reside in areas  unserved  by any broadcast station.  The cost to a
DBS subscriber for equipment and service is generally substantially higher than
the cost to wireless cable subscribers.

      PRIVATE CABLE. Private cable is a  multi-channel  subscription television
service  where  the  programming  is  received by satellite receiver  and  then
transmitted via coaxial cable throughout  private property, often MDUs, without
crossing public rights of way.  Private cable  operates under an agreement with
a  private  landowner  to service a specific MDU, commercial  establishment  or
hotel.  The FCC amended  its  rules to provide point-to-point delivery of video
programming by private cable operators  and other video delivery systems in the
18 GHz band.  Private cable operators compete  with CAI for exclusive rights of
entry into larger MDUs.

      TELEPHONE COMPANIES. In July 1995, Pacific  Telesis  Group  ("PacTel"), a
local  exchange  carrier based in California, acquired Cross Country  Wireless,
Inc.,  a  wireless  cable   system   operator   in   southern  California,  for
approximately  $175 million.  PacTel recently launched  a  150-channel  digital
video system in  Los Angeles, CA.  Bell South Corp. has acquired wireless cable
channel rights Miami,  FL;  Atlanta, GA, and New Orleans, LA, and has 
<PAGE>

Item 1.  Business (continued)

announced
plans to launch digital video  systems in each of these markets over the course
of the next 12 to 24 months. The  competitive  effect of the entry of telephone
companies into the subscription television business,  including wireless cable,
is still uncertain.

      LOCAL  OFF-AIR  VHF/UHF  BROADCASTS.   Local  off-air  VHF/UHF  broadcast
television stations (such as ABC, NBC, CBS and Fox) provide free programming to
the  public.   Previously, subscription television operators  could  retransmit
these broadcast  signals  without  permission.   However,  effective October 6,
1993,  pursuant  to  the  1992 Cable Act, local broadcasters may  require  that
subscription television operators  obtain  their  consent before retransmitting
local television broadcasts.  The Company has obtained  such  consents  for its
operating  systems.  See "Risk Factors--Restrictions Imposed by Government  and
Community Regulation."  The Company will be required to obtain such consents in
certain of its markets to re-broadcast any such channels.  The Company believes
that it will  be  able  to  obtain such consents, but no assurance can be given
that it will be able to obtain  all  such  consents.  The FCC also has recently
permitted  broadcast  networks  to  acquire, subject  to  certain  restriction,
ownership interests in hard-wire cable  systems.   In  some  areas, several low
power  television ("LPTV") stations authorized by the FCC are used  to  provide
multi-channel subscription television service to the public.  LPTV transmits on
conventional  VHF/UHF  broadcast  channels, but is restricted to very low power
levels, which limits the area where a high-quality signal can be received.

      LOCAL MULTI-POINT DISTRIBUTION  SERVICE ("LMDS").  On March 11, 1997, the
FCC established service and competitive  bidding  rules for LMDS, a new service
that will use spectrum in the 27.5-28.35 GHz, 29.1-29.25 GHz, and 31.0-31.3 GHz
bands.  LMDS licensees will be able to use their spectrum for a wide variety of
services, including voice, video and data.  Two licenses  will  be  awarded  in
each  of  493 Auction Markets, one for 1150 MHz and one for 150 MHz.  Incumbent
local exchange  carriers  ("LECs")  and cable companies will not be eligible to
obtain in-region 1150 MHz licenses for  three years.  However, several LECs and
cable companies have appealed this FCC restriction,  and  those  appeals remain
pending  in  several  U.S. Courts of Appeals around the country.  The  FCC  had
intended to conduct the  LMDS  auction  in the summer or fall of 1997, however,
the pendency of the appeals will prevent  the  FCC  from  conducting  the  LMDS
auction  until  one  or  more  of  the  appeals are resolved.  Depending on the
outcome, the LMDS auction could be delayed beyond 1997.

      In addition, within each market, the  Company initially must compete with
others to acquire, from the limited number of MMDS channels issued or issuable,
rights to a minimum number of MMDS channels needed  to establish a commercially
viable system.  Digital capability is essential for MMDS  to compete with hard-
wire cable, which in its current analog state offers between  36  to 90 channel
offerings  depending on a given market.  With the deployment of digital,  hard-
wire cable is  expected  to  offer  over  150  channels.   The Company has lost
television subscribers to hard-wire cable competitors in each  of  its  markets
due  to  the  channel  capacity  limitations  inherent  in an analog-based MMDS
operation.    In  addition,  within  each  market, the Company  initially  must
compete with others to acquire, from the limited number of MMDS channels issued
or issuable, rights to a minimum number of MMDS  channels needed to establish a
commercially viable system.  Aggressive price competition  or  the passing of a
substantial  number  of  presently unpassed households by any existing  or  new
subscription television service  could  have  a  material adverse effect on the
Company's results of operations and financial condition.

      New and advanced technologies for the subscription  television  industry,
such  as  digital  compression,  fiber  optic networks, DBS transmission, video
dialtone  and  LMDS,  are  in  various  stages  of  development  of  commercial
deployment.  These technologies are being  developed and supported by entities,
such as hard-wire cable companies and regional  telephone  companies, that have
significantly  greater  financial  and  other  resources than CAI.   These  new
technologies  could  have a material adverse effect  on  the  demand  for  MMDS
subscription television  services.   There can be no assurance that CAI will be
able to compete successfully with existing  competitors  or new entrants in the
market for subscription television services.

      The Company will also face intense competition from  other  providers  of
data  and  telephony  transmission  services  if  the  Company implements, on a
commercial basis, such services.  Such competition is increased due to the fact
that  MMDS  spectrum  has  not  traditionally  been  utilized to  deliver  such
alternative services, and consumer acceptance of such  services  delivered  via
MMDS  technology  is  unknown  at this time.  Many of the existing providers of
data transmission and telephony  services,  such  as long distance and regional
telephone companies have significantly greater financial  and  other  resources
than  the  Company.   In  addition, in recent months ASkyB, a satellite venture
between News Corp. and MCI, and PRIMESTAR, Inc., a DBS provider, announced that
the two companies would be  combining  their assets and resources into a single
DBS  unit.   Also  recently,  Microsoft  Corporation  and  Comcast  Corporation
announced that Microsoft will be investing  $1 billion in Comcast, the nation's
fourth largest
<PAGE>

Item 1.  Business (continued)

cable television operator.  Both  transactions  will  impact the
competitive  nature  of  the video, voice and data markets.  In addition,  both
transactions may make it more  difficult for wireless cable providers to obtain
access to attractive video programming.   News Corp. may be reluctant to permit
its local Fox television affiliates to be retransmitted  on  the wireless cable
system,  and  Microsoft  may  be  more reluctant to make its MSNBC  programming
available to wireless cable systems.

      There  can  be  no assurance that  there  will  be  consumer  demand  for
alternative uses of the  MMDS  spectrum  such  as  data transmission, including
Internet  access services, and telephony delivery services,  that  the  Company
will be able  to  compete successfully against other providers of such services
or that the Company will be able to achieve profitability from such services in
future years.

BACKGROUND

       GENERAL.  The  Company  was formed in 1991 to invest in and operate MMDS
subscription television systems.   Through a series of acquisitions culminating
in  the  September 29, 1995 acquisition  of  ACS  Enterprises,  Inc.,  an  MMDS
operator  based   in  Philadelphia,  Pennsylvania  with  operating  systems  in
Philadelphia, Cleveland,  Ohio  and  Bakersfield, California, and Eastern Cable
Networks of Washington, Inc. ("ECNW")  that  operated the Washington, D.C. MMDS
system, the Company has grown to become the largest MMDS operator in the United
States in terms of both television and LOS households.   The  Company  enhanced
its  spectrum  capacity  during 1996 by being the top bidder in the FCC Auction
with a bid of $36.2 million for the BTA rights for its existing markets as well
as for its new markets.

         The rapid growth  CAI  has experienced in the number of employees, the
scope  of its operating and financial  systems,  the  geographic  area  of  its
operations,  and  the exploration of alternative uses of its MMDS spectrum, has
increased the operating  complexity  of  CAI, as well as increased the level of
responsibility  for both existing and new management  personnel.   In  managing
this growth, CAI  has  been  and  will  be  required to continue to improve its
operating  and financial systems to expand, train  and  manage  its  employees.
There can be no assurance that CAI will be able to attract and retain qualified
employees.   Any inability to attract and retain qualified employees may impede
CAI's growth and  its  ability  to  compete  with other subscription television
providers.  In addition, beginning in the fiscal year ended March 31, 1997, the
Company  has  implemented  a  series  of  cost-cutting  measures,  including  a
reduction  of  its  workforce,  in  an effort to  manage  the  increased  costs
associated with this growth.

      The Company made its initial public offering in February 1994, and issued
$275 million aggregate principal amount  of  its  12 1/4% Senior Notes due 2002
(the "Senior Notes") in September 1995.  As of March  31, 1997, the Company had
40,540,539  shares  of  its common stock, without par value  (the  "CAI  Common
Stock"), issued and outstanding.

      BANX  TRANSACTIONS.    In   addition   to  the  consummation  of  several
acquisitions and the offering of CAI's Senior Notes, the Company also completed
a  series  of  transactions  with  affiliates of Bell  Atlantic  and  NYNEX  in
September  1995.   In  March  1995,  CAI  entered  into  a  strategic  business
relationship with BANX Partnership, an  affiliate  of  Bell  Atlantic and NYNEX
(the "BANX Partnership") and with other affiliates of Bell Atlantic  and  NYNEX
(the "BANX Affiliates"). This relationship consisted of (i) the signing of  the
Business  Relationship Agreement, as amended (the "BR Agreement") with the BANX
Affiliates,  (ii)  the  purchase  by  the  BANX  Partnership  of $30 million of
convertible  Term Notes due May 9, 2005 ("BANX Term Notes") and  Warrants  (the
"BANX Warrants")  to  purchase  convertible  preferred stock, no par value (the
"Voting Preferred Stock") (the "Stage I Closing"),  and  (iii)  the purchase by
the BANX Partnership of $70 million of 14% Senior Convertible Preferred  Stock,
par  value $10,000 per share ("Senior Preferred Stock" and additional Warrants;
and together  with the BANX Term Notes and BANX Warrants, the "CAI Securities")
(the "Stage II  Closing").   Upon  issuance  of the CAI Securities in September
1995, the full conversion or exercise of the CAI Securities would have resulted
in the BANX Partnership having to make an additional  investment, at that time,
in CAI of approximately $202 million (subject to adjustment  in accordance with
the terms of the Modification Agreement (as defined below), and  its  pro forma
ownership interest in CAI increasing to approximately 45%.

      Pursuant to the BR Agreement, which was intended to allow CAI to  realize
revenue  in  certain  of  its  markets  without  incurring  substantial capital
expenditures  required  for subscriber equipment and installation  as  well  as
eliminate  most  operating   costs,   other   than  channel  license  fees  and
distribution system expenses, CAI granted to each  BANX  Affiliate the ability,
on a market by market basis, to elect to become the marketer  and  provider  of
subscription  television services using CAI's MMDS transmission systems in each
market in their  respective  service
<PAGE>

Item 1.  Business (continued)

areas  in  exchange  for  monthly service
revenues based on the number of serviceable households and subscribers  in each
market  so  optioned  by  a  BANX  Affiliate.  In connection with the Company's
obligations  under  the  BR  Agreement,   CAI   substantially   completed   the
construction of digital video delivery systems in Boston, MA and Hampton Roads,
VA.   Through  December 12, 1996, however, neither BANX Affiliate had exercised
their respective  options  under the BR Agreement in these or any other markets
contemplated by the BR Agreement.

      On December 12, 1996,  the  Company and the various BANX entities reached
an agreement (the "Modification Agreement")  modifying  certain terms of the BR
Agreement and providing CAI or its designee with the right  to  acquire the CAI
Securities.   In  connection  with the Modification Agreement, the average  per
share exercise/conversion price of the CAI Securities was reduced from $8.19 to
$5.31, on full conversion and exercise.   This  reduction  would  result in the
BANX   Partnership   having   to  make  an  additional  investment  in  CAI  of
approximately $95.0 million to  acquire an approximately 45% ownership interest
in CAI.  The Modification Agreement was subsequently amended on April 29, 1997,
pursuant to Amendment No.1 to the Modification Agreement ( the "Amendment").

      The Amendment represents the renegotiation of an option granted to CAI to
repurchase the $100 million face  amount  of  CAI  securities  held by the BANX
Partnership.  The repurchase consideration is $40 million in cash  and  100,000
shares  of  convertible  junior  preferred  stock.  The junior preferred stock,
which is non-voting, carries no coupon and has no maturity, is convertible into
2.5 million shares of CAI Common Stock.  The  repurchase  option is exercisable
through February 28, 1998.

      As  part of the Amendment, the BANX Affiliates also immediately  released
CAI from its  obligation  under  the  BR  Agreement to make CAI's wireless MMDS
spectrum available to the BANX Affiliates at  a  future  date  in  Boston,  MA,
Pittsburgh,  PA and Albany, Syracuse and Buffalo, NY.  Upon a repurchase of the
CAI securities,  as  contemplated by the Amendment, the BR Agreement will lapse
in its entirety, releasing a similar obligation in CAI's other markets.

      In connection with  the  execution of the Amendment, the BANX Partnership
also suspended or released CAI from  a  number  of  covenant  restrictions  and
governance  rights  and  provided CAI with a blanket proxy on the approximately
10% interest in CS Wireless  held  by  BANX  entities.   If  the  repurchase is
consummated, the CS Wireless shares would be returned to CAI without additional
consideration.   The  parties  also  exchanged  mutual releases and reached  an
agreement to share certain patent and intellectual  property  rights related to
their digital wireless venture.

      In  addition  to  the $40 million in cash, Bell Atlantic and  NYNEX  will
receive as consideration  for  the  surrender  of their CAI Securities, 100,000
shares of a series of non-voting junior preferred  stock  of  CAI.   The junior
preferred  stock  carries  a  liquidation  preference  of  $30  million  in the
aggregate,  but  carries  no special dividends, covenants or governance rights,
except as provided by the Connecticut Business Corporation Act, under which CAI
is incorporated.  Each of the  100,000  shares  of  junior  preferred  stock is
convertible  into  25  shares  of CAI Common Stock in the hands of a subsequent
purchaser unrelated to Bell Atlantic  or  NYNEX.  If the junior preferred stock
continues to be held by Bell Atlantic and NYNEX  at the end of three years, and
the value of the CAI common stock is not at least  $14.00  per share, then Bell
Atlantic  and  NYNEX  would  be  entitled  to  a  value floor representing  the
difference between the then-market value of the CAI common stock and $14.00 per
share (the "Value Floor").  At CAI's election, the Value Floor would be payable
either in the form of up to, but not more than, 1 million  additional shares of
CAI Common Stock or in the form of a ten-year subordinated note  in a principal
amount  of  up to $15 million, bearing interest at 8%, which is payable-in-kind
for the first five years.

      INVESTMENT  IN  CS  WIRELESS.   Pursuant  to the terms of a Participation
Agreement dated December 12, 1995 between CAI, CS  Wireless  and Heartland, CAI
and  Heartland  agreed  to  contribute  to  CS Wireless certain wireless  cable
assets, including related operating liabilities,  or  the stock of subsidiaries
owning wireless cable assets for systems located principally  in the Midwestern
and Southwestern regions of the country. The combination of these  assets  into
CS  Wireless  resulted  in  a  company with approximately 7.5 million Estimated
Total Service Area households and  56,500  subscribers,  as  of March 31, 1996,
making it one of the largest wireless cable companies in the United  States  in
terms of subscribers and Estimated Total Service Area households.

      The   transaction  closed  on  February  23,  1996  (the  "CS  Closing").
Immediately following  the  CS Closing, and after giving effect to the issuance
of equity by CS Wireless in connection  with  the Unit Offering (defined below)
and true-up adjustments contemplated by the Participation  Agreement, CAI owned
approximately  52% of the equity in CS Wireless, Heartland owned  approximately
37% of the equity in CS Wireless, and affiliates of Bell Atlantic and NYNEX own
approximately 10%  of  the  equity  in  CS  Wireless.   The remaining 1% equity
interest was sold to purchasers of an aggregate of 100,000  units  ("the  "Unit
Offering"), each unit consisting of four $1,000 principal amount at maturity of
11
<PAGE>

Item 1.  Business (continued)

3/8%  Senior  Discount  Notes due 2006 and 1.1 shares of common stock of CS
Wireless in a private placement  closing contemporaneously with the CS Closing.
The notes will accrete in value for  five  years and cash interest will be paid
beginning 2001.  The gross proceeds to CS Wireless  were  approximately  $230.0
million.   The net proceeds of the Unit Offering were used in part to make  the
cash  payment   to   Heartland  at  the  CS  Closing,  as  required  under  the
Participation Agreement,  and  the  remaining  net  proceeds will be used by CS
Wireless  for  capital  expenditures  to  build-out  its  systems  and  to  add
subscribers,  for  certain  formation  costs,  working  capital,   and  general
corporate purposes.

      Prior  to  the contributions contemplated by the Participation Agreement,
CS Wireless, a wholly-owned  subsidiary  of  the  Company,  operated a wireless
cable  system  in  Cleveland,  Ohio.   Under  the  Participation Agreement,  CS
Wireless  acquired,  or  had contributed to it, stock of  subsidiaries  of  CAI
owning wireless cable systems  or  channel rights, and operating wireless cable
systems or wireless channel rights held  by  CAI in Bakersfield, CA, Charlotte,
NC, and Stockton/Modesto, CA and held by Heartland  in  Dallas, Fort Worth, and
San Antonio, TX, Dayton, OH, Maysville and Sweet Springs,  MO, Minneapolis, MN,
Grand  Rapids, MI, and Salt Lake City, UT.  The CAI assets contributed  in  the
transactions  consisted  of the above-mentioned four properties located outside
the  operating  territories   of   Bell  Atlantic  and  NYNEX.   The  Heartland
contribution  was  originally  valued  at  approximately  $138.7  million,  the
estimated  fair value.  Heartland received  3,578,834  shares  of  CS  Wireless
common stock,  approximately  $28.3 million of cash, and $40.0 million of notes
from CS Wireless, before "true-up" adjustments.

      Pursuant to the terms of  the Participation Agreement regarding a true-up
of the amounts contributed by each  of  CAI and Heartland to CS Wireless (based
on the value of MMDS assets or channel rights  or stock of entities owning such
assets or rights), and the consummation of the exchange  of certain MMDS assets
and channel rights relating to Portsmouth, New Hampshire owned by Heartland and
certain of its affiliates for shares of CS Wireless owned  by  the Company, the
Company's  52%  interest  in CS Wireless was reduced to approximately  48%  and
Heartland's  interest  in  CS  Wireless  was  increased  to  approximately  39%
Although CAI's stock ownership in CS Wireless fell below 50%, CAI will continue
to be the largest single stockholder  of CS Wireless following the consummation
of the Portsmouth transaction and the true-up adjustment.

RECENT DEVELOPMENTS

      On  June  6,  1997,  the Company closed  a  $30  million  interim  credit
facility provided by  Foothill  Capital  Corporation  and  affiliates of Canyon
Capital Management, L.P. (the "Interim Debt Lenders").  The  credit facility is
governed by the terms of the LSA, and is comprised of $25 million of term debt,
of  which  $10  million  was  made  available  at the closing and is  currently
outstanding.  The balance of the term debt will  be  made available to CAI upon
the achievement of certain agreed-upon operational benchmarks.   The  term debt
bears interest at the rate of 13% per annum.  So long as the Company is  not in
default of its obligations under the credit facility, the Company can elect  to
have  one-half  of  the  interest  on  the term debt accrue and be added to the
principal amount outstanding on the term  debt.   The  remaining portion of the
term  debt interest is payable monthly in arrears.  The term  debt  matures  on
March 1,  1999,  at which time all accrued and unpaid interest on and principal
of the outstanding amount of the term debt shall be due and payable in full.

      The Interim  Debt  Lenders  have  also made available to CAI a $5 million
revolving loan, of which $3 million was made  available  to CAI at the June 6th
closing.  The remaining $2 million of the revolving loan will be made available
to  CAI upon the achievement by the Company of certain operational  benchmarks.
The revolving  loan bears interest at four and three-quarters percent above the
Reference Rate,  as announced from time to time by Norwest Bank.  Principal and
interest on the revolving  loan  is  payable  monthly,  and  the revolving loan
expires  on  March  1,  1999.   As  of June 24, 1997, the Company had  not  yet
borrowed any amount against the revolving loan.

      The credit facility is collateralized  by  a pledge of the assets of CAI,
including the stock of its wholly-owned subsidiaries,  certain investments held
by  the  Company  and a pledge of the stock of CS Wireless  held  by  CAI.   In
connection with the  closing of the credit facility, the Company is required to
effect certain corporate  restructurings  in  an  effort to enhance the Interim
Debt Lender's collateral position.  The proceeds from  the credit facility will
be used by the Company to continue to build-out its wireless cable business and
for general working capital purposes.

      In  addition  to $1.5 million in cash fees payable to  the  Interim  Debt
Lenders at the closing  of  the  credit  facility  and  the  fees and expenses,
including fees and expenses of counsel and special FCC counsel  to  the Interim
Debt  Lenders,  incurred  in connection with the credit facility, CAI was  also
required to (i) pay an additional  $1.5  million  fee,  evidenced by a two-year
promissory note bearing interest at 14% per annum, which  interest shall accrue
and  be  payable  in  full  at the maturity date of such note, and  (ii)  issue
warrants to purchase CAI common  stock  at any time
<PAGE>

Item 1.  Business (continued)

between the closing and the
fifth anniversary of such closing.  The warrants entitle the holders thereof to
purchase, in the aggregate that number of  shares  of CAI Common Stock equal to
the  quotient  of (i) the maximum amount outstanding (including  principal  and
accrued interest)  on  the above-mentioned promissory note, DIVIDED BY (ii) the
lowest of (A) $1.90 per  share,  (B)  the  lowest  effective  net price for the
Common Stock (or its equivalent) which CAI receives in connection  with any new
capital  investment,  merger,  strategic  partnership,  joint venture or  other
significant corporate transaction, which makes available  to  CAI  in excess of
$50  million,  (C)  the  lowest  20-day  fair  market value of the Common Stock
following the consummation of a transaction identified in clause (B) above, and
(D)  the  20-day  fair market value of the Common Stock  immediately  following
confirmation of a plan  of reorganization under Chapter 11 of the United States
Bankruptcy Code.  The warrants  contain  certain  anti-dilution  provisions and
registration rights, and have been allocated among the Interim Debt Lenders.

      The Company and its subsidiaries are subject to several restrictions that
are contained in the LSA, including, without limitation, restrictions on the
Company's ability to (i) incur additional indebtedness, contingent or otherwise
(ii) grant liens, (iii) dispose of assets or make certain investments other
than in accordance with the terms of the LSA, and (iv) the use of the proceeds
from the credit facility.  The indebtedness under the credit facility is
permitted under the Company's Indenture governing its 12 1/4 % Senior Notes,
and under the terms of the various investment and business relationship
agreements among the Company and affiliates of Bell Atlantic and NYNEX, as
amended.

      OTHER.   It  is  likely  that CAI will consider acquisitions of  wireless
cable companies or licenses from  time  to  time,  subject to the covenants and
restrictions  imposed  by the various CAI Securities,  Senior  Notes  and  LSA.
These acquisitions, if any,  would  be  financed  by  the  sale  or exchange of
securities of CAI, borrowings from existing lenders or others, or a combination
thereof.   It  is  CAI's  policy  not  to  discuss or comment upon negotiations
regarding such acquisitions until a definitive  agreement is signed, unless the
law otherwise requires.  There can be no assurance  that CAI will be successful
in identifying, negotiating and completing such transactions.

INDUSTRY OVERVIEW

     SUBSCRIPTION  TELEVISION INDUSTRY.  The subscription  television  industry
began in the late 1940s  to serve the needs of residents in predominantly rural
areas with limited access to local broadcast television stations.  The industry
expanded to metropolitan areas  due  to,  among  other things, the fact that it
offered better reception and more programming.  Currently,  such  systems offer
various  types of programming, which generally include basic service,  enhanced
basic, premium service and, in some instances, pay-per-view service.

     A subscription  television  customer  generally pays an initial connection
charge and a fixed monthly fee for basic service.   The  amount  of the monthly
basic service fee varies from one area to another and is a function,  in  part,
of  the  number  of channels and services included in the basic service package
and the cost of such  services  to  the  television  system  operator.  In most
instances,  a separate monthly fee for each premium service and  certain  other
specific  programming   is  charged  to  customers,  with  discounts  generally
available to customers receiving  multiple  premium  services.  Monthly service
fees for basic, enhanced basic and premium services constitute the major source
of  revenue  for  subscription television systems.  Converter  rentals,  remote
control rentals, installation  charges  and reconnect charges for customers who
were previously disconnected are also included  in  a  subscription  television
system's  revenues,  but  generally are not a major component of such revenues.
Traditional cable systems,  as defined in Section 602 of the Communications Act
of 1934 (the "Communications  Act"),  are  subject  to  both  federal and local
regulation.   In  addition,  the  Cable  Television  Consumer  Protection   and
Competition Act of 1992 (the "1992 Cable Act") imposed strict federal and local
rules  governing  aspects  of  cable prices for programming and equipment.  See
"Business 3/4  Regulation."

     WIRELESS  CABLE INDUSTRY BACKGROUND.   In  1983,  the  FCC  reallocated  a
portion of the electromagnetic  radio spectrum located between 2.5 and 2.7 GHz,
permitted this spectrum to be used  for  commercial  purposes, and modified its
rules on the usage of the remaining portion of such spectrum.   Regulatory  and
other  obstacles nevertheless impeded the growth of the wireless cable industry
through  the  remainder  of  the 1980s.  In addition, before the 1992 Cable Act
became effective, wireless cable  operators' ability to obtain programming from
cable-controlled,  hard-wire cable owned  programmers  was  not  assured.   The
factors contributing  to  the increasing growth of wireless cable systems since
that time include (i) regulatory  reforms  by the FCC to facilitate competition
with hard-wire cable, (ii) federal legislation  that increased the availability
of  programming  for  wireless  cable  systems,  (iii)   consumer   demand  for
alternatives  to traditional hard-wire cable service, (iv) enhanced ability  of
wireless cable  operators  to aggregate a sufficient number of channels in each
market to create a competitive  product,  and  (v)  increased  availability  of
capital  to  wireless  cable  operators  in  the  public  and  private markets.
According  to  Paul
>PAGE>

Item 1.  Business (continued)

Kagan Associates, Inc. ("Kagan"), there were approximately
200 wireless cable systems  currently  operating  in the United States, serving
approximately 850,000 subscribers at the end of 1995.

     Wireless cable systems can provide subscribers  with  the same or superior
video television signal as that of traditional hard-wire systems.   Both  hard-
wire cable systems and wireless cable systems receive programming at a headend.
Wireless  cable  programming,  however,  is  then  retransmitted  by  microwave
transmitters from an antenna located on a tower associated with the headend  to
a small receiving antenna located on a subscriber's rooftop.  At the customer's
location,  the  signals  are  converted  to  frequencies  that can pass through
conventional coaxial cable into a descrambling converter located  on  top  of a
television  set.   Wireless  cable  requires a clear LOS, because the microwave
frequencies used will not pass through dense foliage, hills, buildings or other
obstructions.  To ensure the clearest  line-of-sight possible in CAI's markets,
CAI has placed, and plans to place, such  towers  on  top  of tall buildings or
accessible  mountain tops located in such markets.  There exists,  in  each  of
CAI's operating  and targeted markets, a number of acceptable locations for the
placement of its towers,  and  CAI  does not believe that the failure to secure
any one location for such placement in any single market will materially affect
CAI's operations in such market.  Additionally,  some  LOS  obstructions can be
overcome with the use of signal boosters and beam benders which  retransmit  an
otherwise  blocked  signal over a limited area.  CAI believes that its coverage
will be further enhanced  upon  the implementation of digital technology and/or
cellularization.  Since wireless  cable  systems  do  not  require an extensive
cable plant, wireless cable operators can provide customers with a high quality
picture resulting in a reliable signal with few transmission  disruptions  at a
significantly lower system capital cost per installed customer than traditional
hard-wire cable systems.

      Wireless  cable  programming is transmitted through the air via microwave
frequencies from a transmission  facility  to a small receiving antenna at each
subscriber's location, which generally requires  an  unobstructed  LOS from the
transmission facility to the subscriber's receiving antenna.  Traditional hard-
wire cable television systems also transmit signals from a central transmission
facility,  but  deliver  the  signal  to  a  subscriber's  location through  an
extensive  network  of fiber optic and/or coaxial cable and amplifiers.   Since
wireless cable systems  do  not  require  a  network of fiber optic and coaxial
cable, wireless cable operators such as CAI can provide subscribers with a high
quality picture with fewer transmission disruptions  at  a  significantly lower
capital cost per installed subscriber than traditional hard-wire cable systems.
In addition, not having to maintain a hard-wire transmission  system results in
lower ongoing maintenance costs for wireless cable systems.  As a result of the
generally low capital expenditure requirements and low maintenance  costs,  CAI
believes  it  should  be  able to achieve positive cash flow at lower levels of
subscriber penetration than hard-wire cable companies.

      CAI provides its subscribers  with  a  variety  of  programming  choices,
including  local television broadcast stations; cable television networks  such
as CNN, ESPN,  A&E, MTV, Nickelodeon, Discovery, HBO, Showtime and Disney; pay-
per-view programming  services;  and various feature films and sporting events.
CAI  currently  offers variations of  such  programming  packages  in  its  six
operating markets.   The  majority of CAI's subscribers are equipped with fully
addressable converter boxes  which  enables CAI to offer pay-per-view and other
pay video services to such subscribers.   The  channels that CAI offers vary in
each market depending upon subscribers' viewing preferences.

EMPLOYEES

      As of June 24, 1997, CAI had a total of 204 employees, of which none were
subject to collective bargaining agreements.  CAI  has never experienced a work
stoppage and believes that employee relations are good.


                              ITEM 2.  PROPERTIES

     CAI leases various office sites in Albany, New York; Arlington, Virginia;
Chadds Ford, Pennsylvania (as of April 1, 1997); and  in  each region in which
an  operating  system  exists  or  is  being  constructed.   CAI  also  leases
transmission  tower  sites  in  the  regions  of  its operating systems.   CAI
believes adequate office space and tower sites are  readily  available  in all
markets.

     CAI owns substantially all of the equipment which is necessary to conduct
its operations, except certain vehicles, test equipment, and office equipment.
A  significant portion of CAI's investment in plant and equipment consists  of
subscriber  equipment,  which  includes  antennas, block downs, converters and
remotes,  and  related  installation  costs,  principally   located   at   the
subscribers'  premises, and the reception and transmitter equipment located at
the transmitter sites.
<PAGE>


                          ITEM 3.  LEGAL PROCEEDINGS


      CAI  has been  named  in  six  class  action  lawsuits  alleging  various
violations of  the  federal securities laws filed in the United States District
Court for the Northern  District  of  New  York.  The actions were consolidated
into  one  lawsuit  entitled  IN  RE  CAI  WIRELESS  SYSTEMS,  INC.  SECURITIES
LITIGATION (96-CV-1857) (the "Securities Lawsuit"),  which is currently pending
in  the  Northern  District of New York.  The amended, consolidated  complaint,
which names the Company,  Jared  E.  Abbruzzese,  Chairman  and Chief Executive
Officer of the Company, John J. Prisco, President, Chief Operating  Officer and
a  Director  of the Company, and Alan Sonnenberg, the former President  of  the
Company and currently  a  member  of  its  Board  of  Directors, as defendants,
alleges  a variety of violations of the anti-fraud provisions  of  the  Federal
securities  laws  by  CAI  arising  out  of  its alleged disclosure (or alleged
omission from disclosure) regarding its Internet and other flexible use of MMDS
spectrum, as well as its business relationship  with  Bell  Atlantic and NYNEX.
Specifically, the complaint alleges that defendants violated Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, as amended (the  "Exchange  Act")
and  Rule  10b-5  promulgated under the Exchange Act during the specified Class
Period (May 23, 1996 through December 6, 1996).

      The Company has  notified  the  carrier  of  its Directors' and Officers'
Liability insurance policy, which is intended to cover  not  only the Company's
officers and directors, but also the Company, itself, against  claims  such  as
those  made  in  the Securities Lawsuit.  The policy covers up to $5 million of
any covered liability, subject to a retention amount of $500,000.

      The Securities  Lawsuit  is  in  its  preliminary  stages.   A scheduling
conference  was  held  on  June  3,  1997,  at which the briefing schedule  for
defendants' motion to dismiss was agreed upon among the parties.  Based on such
schedule, the Company believes that such motion  will  not  be ruled upon until
the  fall of 1997.  While the motion is pending, all other deadlines  affecting
motions and discovery have been postponed.

      The  Company  and  individual  defendants  are  contesting the Securities
Lawsuit  vigorously  and  believe it is entirely without merit  at  this  time.
Accordingly,  management believes  the  Securities  Lawsuit  will  not  have  a
material adverse  effect  on  the  Company's  earnings,  financial condition or
liquidity.

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

      No matters were submitted to stockholders during the last three months of
the fiscal year ended March 31, 1997.
<PAGE>

                           PART II


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

      The principal market in which CAI Common Stock is traded  is  the  NASDAQ
National  Market System under the ticker symbol "CAWS."  The approximate number
of stockholders  of  record  on  June 17, 1997 was 775.  The high and low sales
prices for the Common Stock on the NASDAQ are as follows:

<TABLE>
<CAPTION>
                                                              HIGH                     LOW
<S>                                                        <C>                     <C>
FISCAL YEAR ENDED MARCH 31, 1996
    First Quarter                                            $13.75                  $ 9.75
    Second Quarter                                            13.00                    8.38
    Third Quarter                                             10.50                    7.25
    Fourth Quarter                                            10.38                    7.25
FISCAL YEAR ENDED MARCH 31, 1997
    First Quarter                                             17.50                    6.25
    Second Quarter                                             9.38                    6.63
    Third Quarter                                              7.38                    0.84
    Fourth Quarter                                             4.00                    0.97
FISCAL YEAR ENDING MARCH 31, 1998
    First Quarter (through June 25, 1997)                      2.00                    1.03
</TABLE>

DIVIDENDS

      The Company has never paid cash  dividends  on  the  CAI Common Stock and
does not currently intend to pay cash dividends on the CAI Common  Stock in the
foreseeable future.

      Since  the  Company  generally  conducts,  and  in the future intends  to
conduct, operations through subsidiaries, the Company's  ability  to declare or
pay cash dividends will depend in part on the ability of the Company's  present
and future subsidiaries to declare or pay cash dividends to the Company.

      Any future determination by the Company to pay cash dividends on the  CAI
Common  Stock will be within the discretion of the Company's Board of Directors
and will  depend  upon  the  earnings  of  the Company, the Company's financial
condition  and  capital  requirements and other  financial  factors  which  are
considered relevant by the Company's Board of Directors.

      The Company has accrued  dividends  of  $18,660,734  on  its  outstanding
Senior  Preferred  Stock as of March 31, 1997.  The Company is not required  to
pay dividends on the  Senior  Preferred  Stock  until  December  1,  1998.  The
Company  began  paying  quarterly  dividends  on  the 8% Redeemable Convertible
Series A Preferred Stock, no par value (the "Series A Preferred Stock"), of CAI
in March 1996.  All of the Series A Preferred Stock  was  converted into common
stock by March 31, 1997.

      Pursuant  to  certain restrictive covenants contained in  the  BANX  Term
Notes and the Senior  Notes  and  the  Loan and Security Agreement, the Company
cannot declare or pay any dividends or make  any distributions on shares of the
Company  except  for dividends required to be paid  on  the   Senior  Preferred
Stock.  Also, the  Company  may  not  purchase  or  redeem  any  of its shares,
including warrants and options.
<PAGE>

                       ITEM 6.  SELECTED FINANCIAL DATA

      The following summary should be read in conjunction with the consolidated
financial statements and related notes contained elsewhere herein (in
thousands, except per share data):

<TABLE>
<CAPTION>

                                                                   Seven-      Eight-
                                                                   month        month
                                                                   Period       Period       Year
                        Year Ended     Year Ended    Year Ended    Ended        Ended        Ended
                         March 31,      March  31,    March 31,    March 31,   August 31,    Dec. 31,
                           1997          1996{(2)}    1995{(3)}     1994         1993         1992
<S>                       <C>          <C>           <C>          <C>         <C>           <C>
Summary of Operations:
  Revenue                $ 36,327      $   30,682    $   5,148    $   918      $     -       $    -
  Net loss                (82,298)        (40,986)     (14,107)    (7,521)      (1,378)        (189)
  Preferred dividend
   requirement             13,011           5,879          328          -            -            -
  Ratio of earnings to
   fixed charges{(1)}           -               -            -          -            -            -
Per Share Data:
  Loss per common share     (2.38)          (1.73)        (.93)      (.61)        (.12)        (.02)
Weighted average number
  of shares outstanding    40,069          27,076       15,457     12,278       11,777       11,777
</TABLE>


<TABLE>
<CAPTION>
                           March 31,    March 31,    March 31,    March 31,    August 31,    Dec. 31,
                             1997         1996         1995         1994         1993          1992
<S>                        <C>          <C>          <C>          <C>          <C>           <C>
Financial Condition:
  Wireless channel rights  $ 207,681    $ 205,974    $ 46,192     $ 10,791     $ 1,350       $   -
  Investment in CS Wireless   88,535      113,054           -            -           -           -
  Property and equipment      69,767       52,569      21,840        2,434         763           -
  Total assets               542,340      698,795      78,461       41,047       2,499         395
  Debt                       311,787      318,435      29,532        3,130       3,511         312
  Redeemable preferred
   stock                      87,821       92,883      18,378            -           -           -
  Shareholders' equity       114,690      192,611      22,115       34,346      (1,597)         75
</TABLE>


{(1)}  In  calculating  the  ratio  of earnings to fixed charges, earnings
   consists of losses prior to income  tax  benefit,  minority interest in
   loss, and fixed charges.  Fixed charges consists of  interest  expense,
   amortization of debt issuance costs and one-third of rental payments on
   operating  leases  (such  amount having been deemed by CAI to represent
   the interest portion of such  payments).   Earnings  were inadequate to
   cover fixed charges by the amount of $97,298, $53,307, $15,004, $7,552,
   $1,378, and $189 for the periods ended in 1997, 1996, 1995, 1994, 1993,
   and 1992, respectively.

{(2)} The Company acquired ACS and ECNW on September 29,  1995.   Also,  the
   Company  closed  a  series  of  transactions  with  Heartland  wherein CS
   Wireless  received  certain  assets  from  Heartland  in exchange for  CS
   Wireless  common  stock  and  cash  (see  Notes 2 and 5 to the  Financial
   Statements).

{(3)} The Company acquired the New York System  on January 9, 1995 (see Note
   2 to the Financial Statements).
<PAGE>

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

      The statements contained in this Annual Report  on Form 10-K, including
the  exhibits  hereto,  relating  to CAI's future operations  may  constitute
forward-looking  statements  within  the   meaning  of  Section  21E  of  the
Securities Exchange Act of 1934, as amended.   Actual  results of the Company
may differ materially from those in the forward-looking statements and may be
affected by a number of factors including the availability  of  new strategic
partners and their willingness to enter into arrangements with CAI, the terms
of such arrangements, the ability of CAI to achieve the operating  benchmarks
necessary  to receive the balance of the funds contemplated by CAI's  interim
credit facility,  the  successful  launch  of  a  digital  subscription video
business,  the receipt of regulatory approvals for alternative  uses  of  its
MMDS Spectrum,  the  success  of  CAI's trials in various of its markets, the
commercial  viability  of any alternative  use  of  MMDS  Spectrum,  consumer
acceptance of any new products  offered  or  to be offered by CAI, subscriber
equipment availability, tower space availability, absence of interference and
the  ability of CAI to redeploy or sell excess  equipment,  the  assumptions,
risks  and uncertainties set forth herein, including in the following section
entitled  "Management's  Discussion  and  Analysis of Financial Condition and
Results  of Operations," as well as other factors  contained  herein  and  in
CAI's securities filings.

LIQUIDITY AND CAPITAL RESOURCES

      The  wireless  cable industry requires significant capital.  CAI's plan
for  continued  expansion   requires  substantial  capital  investment  on  a
continuing basis and availability  of  sufficient  financing  is essential to
that  plan.   Funds  are  required  for  the lease or acquisition of  channel
rights, the acquisition of wireless cable systems, the construction of system
head-end  and  transmission  equipment,  start-up   costs   related   to  the
commencement  of  operations  and  subscriber  installation  costs.   CAI has
financed  its  capital requirements since inception through a combination  of
the issuance of  debt  and equity securities, the incurrence of loans and the
assumption of debt and other  liabilities  in  connection  with acquisitions.
CAI  has  incurred  operating losses since inception and its cash  flow  from
operating activities  has  to  date  been insufficient to cover its operating
expenses.

      CAI has incurred net losses since  inception  in  1991 of approximately
$147  million  through March 31, 1997 and expects to realize  additional  net
losses on a consolidated  basis  while  it  develops  and  expands  its  MMDS
systems.    Additionally,  CAI has substantial indebtedness and, beginning in
fiscal year 1999, will have  significant  debt  service  requirements.  As of
March  31,  1997,  CAI  had  outstanding  consolidated  long-term   debt   of
approximately  $312  million,  mandatorily  redeemable  preferred  stock  and
accrued  dividends  of approximately $88 million, and shareholders' equity of
approximately $115 million.

      Pursuant to CAI's  debt  instruments,  CAI is restricted from incurring
additional indebtedness (except in connection  with  purchases  of  goods and
services  in  the  ordinary  course  of  business,  and other ordinary course
indebtedness  permitted thereunder), granting liens to  secure  repayment  of
indebtedness,  making   investments   (other  than  investments  specifically
permitted  thereunder), pay dividends, dispose  of  assets,  enter  into  any
merger, consolidation, reorganization, or recapitalization plan, retire long-
term debt, or make any acquisitions without the prior consent of the lenders.
Further, in  accordance  with  the  LSA,  the Company is required to maintain
minimal levels of net worth and number of subscribers,  and  is  limited with
respect to the amount of annual capital expenditures.

      CAI's  recurring  losses,  substantial  commitments,  and ongoing  cash
requirements in the development of alternate uses of its MMDS  Spectrum raise
substantial doubt about CAI continuing as a going concern.  The  Company  has
outstanding  purchase  orders  of  approximately $3.2 million as of March 31,
1997, with approximately $5.0 million  in  additional  purchase  orders as of
June 17, 1997 (relating primarily to the Boston project), is obligated to pay
approximately  $8.5  million  in  minimum  license  fees  and operating lease
payments,  approximately $1.1 million in MMDS license auction  fees,  and  to
fund operating costs.

      Management  of  CAI  plans to mitigate the uncertainties related to the
Company's  continued  existence  as  a  going  concern  by  securing  interim
financing, exploring alternative  uses  of  its  MMDS spectrum in addition to
subscription television and pursuing longer term financing  through obtaining
strategic partner(s) interested and willing to participate with  the  Company
in  the development of its operating systems and various alternative uses  of
its  MMDS  spectrum.   Although  certain  qualified  parties  have  expressed
interest  in entering into a strategic alliance with the Company, CAI has not
yet reached a definitive agreement with any such qualified party. Much of the
Company's business  plan relating to fixed, flexible use of the MMDS spectrum
is dependent upon CAI  securing  a  new  strategic  partner  to  provide  the
necessary  capital resources, as well as engineering and other expertise, and
subscribers  for  such  flexible-use  services,  to  CAI as it develops these
business segments.  There can be no assurance that the
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)

Company  will be able
to secure any additional financings or strategic relationships on  terms  and
conditions  satisfactory  to  the Company, if at all.  Failure to obtain such
financings and relationships will  have  a  material  adverse  effect  on the
Company.   Further,  there  can  be  no  assurance that, even with additional
financing, new strategic partner(s) and receipt  of  all necessary regulatory
authorizations,  the Company will be able to launch fixed,  flexible  two-way
uses of its MMDS spectrum in a commercially successful manner.

     On June 6, 1997,  CAI  completed  a $30 million interim financing
arrangement  with  Foothill  Capital Corporation  and  Canyon  Capital
Management,  L.P.  to  fund  the  Company's  current  working  capital
requirements. This credit facility  consists  of   $25 million in term
loans and a $5 million revolving loan, both of which  mature  on March
1,  1999.   Management  estimates that the present revenue stream  and
cash  resources available  to  the  Company,  including  this  interim
financing  in  June 1997,  are adequate to sustain the Company's needs
through December  1997,  subject to meeting the terms of the financing
agreement.  The LSA permits  four drawdowns on the term loan, of which
the  first  for  $10 million took  place  in  June  1997.   The  other
drawdowns are predicated  on  meeting  certain operational benchmarks.
There is no assurance that these benchmarks can be met.

      Additional  funding may take the form  of  debt  or  equity  securities
issuances, borrowings  under  loan  arrangements or sales of assets including
channel  rights  or  wireless  cable systems.  CAI's  ability  to  engage  in
financings,  asset  sales  or acquisition  transactions  is  limited  by  the
contractual arrangements entered  into with BANX, and restrictions imposed by
the  Senior  Notes  and  the interim financing  arrangement  and  significant
transactions likely will require  their  prior  consents.   The  Senior Notes
impose similar restrictions on the incurrence of additional debt and  on  the
ability  to  effect  asset  sales.  There is no assurance that any additional
financings  will be available  to  the  Company  on  satisfactory  terms  and
conditions, if  at  all,  especially  in  light  of  the BANX and Senior Note
restrictions.

      The Company's business strategy has shifted away from analog to digital
wireless cable systems for its MMDS subscription television  services  and to
alternative uses of its MMDS spectrum for a variety of applications including
video,  voice  and  data  transmission.   In  management's  opinion,  the new
strategy  will help meet the current and perceived future competition and  in
relation to  obtaining  a  new strategic partner, demonstrate the flexibility
and increased value of the Company's MMDS spectrum.

      The Company's operating  plans include digital video, two-way voice and
data, Internet and Intranet access  services  and testing.  Additionally, CAI
has received FCC approval in selected markets to test and/or provide wireless
services in addition to subscription video, using  the  MMDS spectrum.  These
services  include  Internet and intranet access and two-way  voice  and  data
transmission.  The design and full implementation of these systems capable of
delivering these services  will require additional financing from a strategic
partner.

     Additionally,  pursuant   to   the   terms  of  the  Modification
Agreement,  CAI  has  been  granted  the  right to  purchase  the  CAI
Securities. Upon the consummation of such purchase,  the  BR Agreement
would  terminate,  eliminating  CAI's strategic relationship with  the
BANX  Affiliates  including  all restrictions  relating  thereto.  The
amended Modification Agreement  allows  CAI or its designee to buy out
the BANX investment for $40 million plus  100,000 shares of CAI junior
preferred stock.

      The Company intends to commence digital  subscription television service
in the Boston market during the fall of 1997, pending  the availability to the
Company  of  the  necessary subscriber equipment and access  to  pre-digitized
compressed programming.   Utilizing  portions of the digital MMDS system built
by  the  Company  in  Boston last year, CAI  intends  to  launch  the  digital
subscription television  service  in certain locations served by the Company's
main transmitter located in downtown  Boston  and  by  selected  booster sites
throughout  the  greater Boston area.  The Company plans on using an  internal
marketing staff to  obtain  subscribers  costing  an  estimated $45 to $50 per
potential subscriber.  Subscriber equipment cost, assuming  one  converter per
subscriber,  is  estimated at $610 per subscriber including installation.   To
replace programming  that would have been provided by the BANX Affiliate under
the BR Agreement, the  Company  is  currently  in the process of negotiating a
joint venture with TelQuest Communications, Inc.,  an entity of which Jared E.
Abbruzzese,  Chairman  of the Company, is the principal  stockholder,  and  CS
Wireless, to form an entity (hereinafter, "TelQuest Joint Venture") capable of
providing pre-digitized  compressed  programming to CAI, CS Wireless and other
MMDS and hard-wire cable operators.  CAI  intends  to use such programming for
Boston  and any other markets in which it determines  to  roll-out  a  digital
video product.  See "Item 13. Certain Relationships and Related Transactions."
In the event  that the TelQuest Joint Venture is not formed, CAI would have to
construct a compression  facility  in  the  Boston  area  to  provide  digital
programming,  or  make  other arrangements to receive pre-
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)

digitized compressed
programming  via  satellite.    The   Company   estimates  the  cost  of  such
construction of a digital compression facility to  be approximately $5 million
as  of  June  1997.  There can be no assurance that the  necessary  subscriber
equipment or access  to pre-digitized compressed programming will be available
to the Company in the  Boston  market, and if available, that the Company will
be able to successfully launch and  operate  a digital subscription television
business in this market.

EQUIPMENT REPLACEMENT.  Due to interference caused  by the new PCS telephone
frequencies, the Company intends to replace approximately  24,000 subscriber
downconverters  in  the  Philadelphia market at a rate of approximately  500
replacements per month plus  all  of the new installations receiving the new
equipment.  Replacements will cost  approximately  $84  per  unit, while new
installations  will  incur  a  $62 per unit additional cash outflow  by  not
reusing currently owned equipment.   The  total  cost of this replacement in
Philadelphia is approximately $1.7 million.  Replacement  costs in other CAI
markets, if deemed necessary, are not expected to be material.

CASH FLOW INFORMATION

      During the year ended March 31, 1997, CAI expended approximately  $37.1
million  to  purchase  equipment, $34.8 million to fund operating activities,
$3.7 million to acquire  wireless  channel  rights  and  $45.3 million to pay
senior  and  other  debt,  including  $34.0 million due to the  FCC  for  the
purchase  of  MMDS licenses at the 1996 auction.   During  this  period,  CAI
funded its cash  requirements  out  of  existing cash balances.  At March 31,
1997, CAI had cash and cash equivalents of approximately $10.5 million.

      During the year ended March 31, 1996,  CAI expended approximately $14.5
million to purchase equipment, $34.6 million to fund operating activities and
$24.5 million to acquire wireless channel rights.   During  fiscal  1996, CAI
funded its cash requirements out of existing cash balances and the financings
more  fully  described  above.   At  March  31,  1996,  CAI had cash and cash
equivalents of approximately $103.3 million.

      On  September 29, 1995, the Company received $265.9  million  from  the
Senior Notes  Offering,  net  of  $9.1  million  in  underwriting  costs  and
interest, of which $90.6 million was placed in escrow to cover three years of
interest,  plus $70 million from the sale of 7,000 shares of Senior Preferred
Stock and the  Stage  II  Warrants to BANX.  These funds were used in part to
pay the cash portions of the  following  acquisitions:   ACS ($41.1 million),
ECNW ($8.9 million), the Baltimore Assets ($11.3 million)  and the Pittsburgh
Assets  ($6.4  million).   The  non-cash portion of the purchase  prices  was
satisfied with CAI Common Stock or debt, primarily notes.

      Additionally, the Company loaned ACS $22.3 million to repay certain ACS
bank debt and another $11.3 million  to  pay  other  costs  incurred  by  ACS
relating  to  the ACS acquisition and for other corporate purposes.  CAI also
used $12.4 million  to  repay  the  interim  financing it received from Smith
Barney  Holdings, Inc. in June 1995, including  interest,  and  another  $2.1
million to  pay  legal  and  other fees relating to the acquisition, Stage II
Closing and the offering of the Senior Notes.

      In April 1995, CAI raised  an additional $1.5 million of equity capital
through the issuance of 179,765 shares  of  common stock.  On May 9, 1995, at
the Stage I Closing CAI received $30.0 million  from Bell Atlantic and NYNEX,
the proceeds of which were used to retire $21.3 million  of  short-term notes
issued  in  connection  with the purchase of the New York System,  provide  a
required $4.0 million cash deposit under the ACS Merger Agreement, and to pay
$3.0 million of cost associated  with  the  short-term  debt  issued  for the
acquisition  of  the New York System and for transaction expenses and working
capital.   In June  1995,  CAI  received  $12.0  million  from  Smith  Barney
Holdings, Inc. for working capital purposes.

During the year  ended  March  31,  1995,  CAI  expended  
approximately $15.0
million  to  purchase  equipment, $8.1 million to fund operating  activities,
$9.9 million to acquire  the  New  York  System,  and $1.3 million to acquire
wireless channel rights.  During this period CAI funded its cash requirements
out  of existing cash balances, an issuance of equity  securities  generating
net proceeds  of  approximately  $7.1 million, debt proceeds of $9.8 million,
and the disposition of equipment generating  net  proceeds  of  approximately
$0.6  million.   At  March  31,  1995,  CAI  had  unrestricted  cash and cash
equivalents of approximately $1.2 million.
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)


                                 OPERATIONS

     As  of  March  31,  1997,  the  Company  had approximately 70,800
wireless  systems  subscribers compared to 82,900  subscribers  as  of
March 31, 1996. The 12,100 net decline in subscribers is due primarily
to the New York System decline of approximately 5,100 subscribers, the
Philadelphia System  decrease  of  approximately 6,400 subscribers and
other system net decreases of approximately  600  subscribers  for the
comparable  periods.   The  New  York  System is losing subscribers to
hardwire cable operators primarily due to the system's limited channel
capacity. This trend in New York is likely  to  continue.  The Company
has  implemented  a  program to increase retention of  subscribers  in
Philadelphia and other  systems  through  an  increase in installation
fees, which the Company believes will increase  subscriber commitment,
and  thus,  retention.   This  retention policy has slowed  subscriber
additions.   The  decrease in subscribers  experienced  in  the  other
systems was primarily due to a curtailment of marketing efforts in the
first half of the year  ended  March  31, 1997, in anticipation of the
then  expected implementation of the BR  Agreement.   The  decline  in
subscribers  in  Philadelphia  and New York has continued through June
21,  1997  at  which  time the total  subscribers  were  approximately
66,500.

     The net result of  disconnects  minus  reconnects  divided by the
number of subscribers at the beginning of the period is considered the
churn rate in the subscription television industry. The churn  rate is
calculated monthly and year to date for an average monthly rate over a
year.  CAI's  average monthly churn rate for the year ended March  31,
1997  was 4.6%  overall with individual operating systems ranging from
2.5% to 5.5%. CAI's  average  monthly  churn  rate  for the year ended
March  31,  1996   was 4.0% overall with individual operating  systems
ranging from 2.8% to  5.4%.  Churn rates within the 2% to 5% range are
common in this industry,  with  2%  being  excellent,  3% the standard
norm, and 5% or above being unfavorable.

      The  cost of disconnecting and/or reconnecting customers  is  generally
expensed. Subscriber equipment includes the capitalized labor to install, but
depreciation  rates  are  different  based on recoverability or lack thereof.
Subscriber equipment that is recoverable  (i.e.  antennas  and converters) is
generally depreciated over five years based on the life of the equipment. The
non-recoverable portion, consisting of installation labor, wire,  small parts
and supplies, is generally depreciated over two or three years based  on  the
applicable churn rate of each operating system, which approximates subscriber
lives.

     Long-lived  assets  and  certain  identifiable  intangibles  are
periodically  reviewed  for  impairment whenever events or changes in
circumstances indicate that the  carrying  amount of an asset may not
be recoverable.  Recoverability of assets to  be  held  and  used  is
measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset.  If such assets
are  considered  to  be  impaired, the impairment to be recognized is
measured by the amount by  which  the  carrying  amount of the assets
exceeds the fair value of the assets.  Assets to be  disposed  of are
reported at the lower of the carrying amount or fair value less costs
to  sell.   The  Company periodically reviews wireless channel rights
and  other  long-lived   assets   whenever   events   or  changes  in
circumstances  indicate that the carrying amount of such  assets  may
not be recoverable.   When  such  circumstances  occur,  the  Company
evaluates the possible effects on the carrying amount of such assets.
The  Modification Agreement with BANX did not result in an impairment
of the Company's long-lived assets.

      The  Company's  estimates  of future gross revenues and operating cash
flows, the remaining estimated lives  of long-lived assets, or both could be
reduced in the future due to changes in, among other things, technology, the
Company's ability to obtain permission  for  flexible  use  of  the wireless
channel  rights,  government regulation, available financing or competition.
As a result, the carrying  amounts of long-lived assets, including goodwill,
could  be reduced by amounts  which  would  be  material  to  the  financial
statements.
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)

COMPARISON OF OPERATING RESULTS

      YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH 31, 1996

      The following tables illustrate the changes discussed below in
management's discussion of the results of operations.

<TABLE>
<CAPTION>
                                                       OPERATING REVENUES
                                                    (in millions of dollars)
                                                   YEAR ENDED MARCH 31,

                                       1997                  1996            CHANGE
<S>                                  <C>                   <C>                <C>
Same Systems                          $13.4               $15.4               $ (2.0)
Acquired Systems (FY 96)               22.9                12.0                 10.9
   Total                               36.3                27.4                  8.9
Disposals:
  Disposed Systems (FY 96)                -                 3.3                 (3.3)
   Total operating revenues           $36.3               $30.7                $ 5.6
</TABLE>


<TABLE>
<CAPTION>
                                                  OPERATING EXPENSES
                                               (in millions of dollars)
                                                   YEAR ENDED MARCH 31,

                                         1997                 1996              CHANGE
<S>                                      <C>                 <C>                <C>
Same Systems                             $27.9               $30.9              $  (3.0)
Acquired Systems (FY 96)                  33.3                16.4                 16.9
Corporate operations                      20.4                13.1                  7.3
   Total                                  81.6                60.4                 21.2
Disposals:
  Disposed Systems (FY 96)                 -                   5.1                 (5.1)
   Total operating expenses              $81.6               $65.5               $ 16.1
</TABLE>


      CAI's  revenue  increased $5.6 million ($36.3 million FY 1997;
$30.7 million FY 1996)  in  the  year  ended March 31, 1997 over the
same period in the prior year.  The increase resulted primarily from
the  acquisition  of  ACS, with operating systems  in  Philadelphia,
Cleveland, and Bakersfield,  and  the  acquisition  of ECNW, with an
operating system in Washington D.C. ("Acquired Systems"  except  for
the  "Disposed  Systems"  (Cleveland  and  Bakersfield)  which  were
contributed  to  CS  Wireless).   Both  acquisitions  were  made  on
September  29,  1995.   Acquired  Systems  revenue  increased  $10.9
million ($22.9 million FY 1997; $12.0 million FY 1996) over the six-
month  period  included  in  the prior year. Revenue from operations
that were owned throughout both  years  ("Same  Systems")  decreased
$2.0 million ($13.4 million FY 1997; $15.4 million FY 1996)  in  the
year  ended  March  31,  1997,  primarily due to the decrease in the
number of subscribers mentioned above.   During  December  1996, CAI
instituted  a $2 per subscriber rate increase that, while increasing
the average revenue  per  subscriber; may have caused additional net
reduction of subscribers in  the  last  quarter  FY  97 and into the
future.

      CAI's  television subscription revenue was $33.1  million  for
the year ended  March  31, 1997 as compared to $28.1 million for the
year  ended  March 31, 1996  generated  by  the  following  systems:
Albany ($3.2 vs.  $3.1  million), Rochester ($0.7 vs. $0.7 million),
New York City ($7.3  vs. $9.2 million), Hampton Roads ($1.1 vs. $0.8
million), Philadelphia ($19.4 vs. $10.8 million) , Cleveland ($0 vs.
$2.1 million), Bakersfield  ($0  vs. $0.9 million), Washington ($1.2
vs.  $0.2  million),  Hartford  VDT  ($0   vs.  $0.1  million),  and
Providence SMATV ($0.2 vs. $0.2 million).  The systems with zero for
the current year were either Disposed Systems  or  systems  in which
service was discontinued (Hartford VDT) in the prior year.

      Operating  expenses  were $81.6 million and $65.5 million  for
the years ended March 31, 1997  and  1996,  respectively.  The $21.2
million  increase, excluding the Disposed Systems,  is  attributable
primarily  to  increases  in (a) operations of acquired systems (ACS
and ECNW) of $10.3 million  ($20.3 million FY 1997; $10.0 million FY
1996), excluding depreciation  and  amortization,  due  to a year of
operations  of  the Philadelphia and Washington systems in  FY  1997
versus only six months  in  FY  1996; (b) general and administrative
corporate operations of $3.2 million  ($9.4  million  FY  1997; $6.2
million  FY 1996), excluding depreciation and amortization, primarily
due to increased staffing
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)

and effort to maintain a larger operation,
developing  digital  markets, and developing other potential uses of
the wireless channel rights;  (c)  depreciation  and amortization of
$9.4  million  ($32.3  million  FY  1997;  $22.9  million  FY  1996)
primarily  due  to  the  acquisition  of ACS and ECNW fixed  assets,
wireless channel rights, and goodwill;  and  (d)  abandoned  project
costs  of  $2.1  million in FY 97; offset by a decrease in marketing
costs of the Same  Systems  of  $1.1  million ($2.0 million FY 1997;
$3.1  million  FY  1996)  due  to a concentrated  effort  to  reduce
marketing costs and limit subscriber  growth  in  light  of the then
anticipated implementation of the BR Agreement with BANX.

      CAI  has  a $17.6 million equity in net loss of affiliate  for
the year ended March  31, 1997, relating to its 48% investment in CS
Wireless.  In the prior year, CAI's operating systems contributed to
CS Wireless on February  23, 1996 were consolidated in the operating
results of CAI from October 1, 1995 to December 31, 1995.

      Interest income increased  $0.4 million ($6.4 million FY 1997;
$6.0  million FY 1996) for  the year  ended  March  31,  1997.   The
increase  is  primarily  due  to interest earned on the Debt Service
Escrow established in connection  with  the  Company's  offering  of
12.25%  Senior  Notes  Due  2002  and  the  investment  of  the cash
remaining  from  the net proceeds of the Senior Notes offering.   In
future periods, interest  income is anticipated to steadily decrease
as the Debt Service Escrow  and  investments  are  used to fund debt
service,  project  costs, capital purchases, and operations  of  the
Company.

      Interest expense  increased  $16.2  million  ($40.8 million FY
1997; $24.6 million FY 1996) for the year ended March 31, 1997.  The
increase is primarily due to interest expense incurred on the Senior
Notes issued on September 29, 1995.  Interest expense is expected to
increase in FY 1998 with the addition of the $30 million  of interim
financing (see Note 19 to the Financial Statements).

      YEAR  ENDED  MARCH  31, 1996 COMPARED TO YEAR ENDED MARCH  31,
1995

      CAI's total revenue was $30.7 million for the year ended March
31, 1996 as compared to $5.1  million  for  the year ended March 31,
1995 primarily due to the ACS acquisition on  September 29, 1995 and
a full year of operations for the New York System.   ACS contributed
$15.0 million to the overall increase of $25.6 million  for  its six
months  of  operations included since the date of acquisition.   The
New York System  contributed  $7.5 million of the increased revenue.
The remaining increase of $3.1 million is attributable to the growth
of subscribers in the other systems.

      CAI's television subscription  revenue  was  $28.1 million for
the  year ended March 31, 1996 as compared to $4.9 million  for  the
year ended  March  31,  1995  resulted  from  the following systems:
Albany ($3.1 vs. $1.9 million), Rochester ($0.7  vs.  $0.1 million),
New York City ($9.2 vs. $2.6 million), Hampton Roads ($0.8  vs. $0.1
million),  Philadelphia ($10.8 vs. $0 million), Cleveland ($2.1  vs.
$0 million), Bakersfield ($0.9 vs. $0 million), Washington ($0.2 vs.
$0 million),  Hartford  VDT  ($.01 vs. $0.1 million), and Providence
SMATV ($0.2 vs. $0.1 million).   The systems with zero for the prior
year were acquired in the current  year.   The  increase  in the New
York City television subscription revenue is due to a full  year  of
operations  for  the  year  ended March 31, 1996 as compared to only
three months of operations included  in  the  year  ended  March 31,
1995.   The   television  subscription  revenue  for  Cleveland  and
Bakersfield totaling  $3.0  million is for the period that these two
systems were part of CAI. Cleveland and Bakersfield were acquired as
part  of  the ACS acquisition and  subsequently  contributed  to  CS
Wireless.   CS  Wireless  was  consolidated  with  CAI  until the CS
Closing (February 23, 1996).  CS Wireless' revenue and expenses  are
not  included  in CAI's consolidated financial statements after that
date.  CAI accounts  for  CS  Wireless  on  a  three-month  lag that
corresponds with CS Wireless' December 31 fiscal year end.

      CAI's  net loss of $41.0 million for the year ended March  31,
1996 is higher than the net loss of $14.1 million for the year ended
March  31, 1995  by  $26.9  million  due  primarily  to  substantial
increases  in  depreciation  and  amortization  ($21.1  million) and
interest  expense  ($22.9  million) offset by a deferred income  tax
benefit  of $12.0 million and  increased  interest  income  of  $5.4
million.

      The  operating  loss  increased  to $34.8 million for the year
ended March 31, 1996 from $14.2 million for the year ended March 31,
1995, a change of $20.6 million, which approximated the depreciation
and  amortization  increase  of   $21.1 million.   The  increase  is
primarily due to the depreciation and  amortization  associated with
property  and  equipment,  wireless  channel  rights,  and  goodwill
acquired in connection with the ACS and ECNW acquisitions and  to  a
lesser extent on additional investment in property and equipment.
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)

      Programming  and  license  fees  were  up  six times from $2.0
million for the year ended March 31, 1995 to $12.6  million  for the
year  ended  March  31,  1996  in  line with television subscription
revenue  also  up  almost  six  times. Marketing  expenses  were  up
slightly from $2.5 million for the year ended March 31, 1995 to $3.5
million for the year ended March  31,  1996 reflecting less emphasis
on marketing and more on acquisitions during  the year.  General and
administrative expenses increased from $11.1 million  for  the  year
ended  March  31, 1995 to $24.7 million for the year ended March 31,
1996, primarily  due  to  the general and administrative expenses of
then-newly acquired ACS and  ECNW  ($6.3 million) and a full year of
the New York System (net increase of $5.2 million).

      General  and  administrative  expenses,   other   than   those
associated  with new acquisitions and the New York System, increased
$2.1  million  over  the  prior  year  primarily  due  to  increased
salaries,  personnel  and  professional  fees  incurred  to develop,
acquire, integrate and manage new systems.

      Interest expense increased to $24.6 million for the year ended
March 31, 1996 from $1.7 million for the year ended March  31, 1995,
a  change  of   $22.9  million,  primarily  due  to interest expense
incurred on the Senior Notes issued on September 29,  1995  and  the
Term Notes issued on May 9, 1995.

      Interest  income was $6.0 million for the year ended March 31,
1996 as compared  to $0.6 million for the year ended March 31, 1995.
The increase is primarily  due  to income earned on the debt service
escrow for the Senior Notes and on funds remaining from the issuance
of the Senior Notes which are invested until used.

      The operating loss of $34.8  million  for the year ended March
31, 1996 includes $1.8 million for the Disposed  Systems  which  are
now  part of CS Wireless.  While CAI will no longer include Disposed
Systems'  revenue  and expenses in its Statements of Operations, CAI
will include its share  of  CS  Wireless's net loss to the extent of
its ownership.  CAI has not guaranteed any debt or commitments of CS
Wireless.

INFLATION

      Management does not believe  that  inflation  has  had or will
have a material impact on the Company's results of operations.

SEASONALITY OF INSTALLATION ACTIVITIES

      The  rate at which new subscriber installations occur  can  be
affected by  severe  winter  or other weather conditions and limited
daylight hours in the winter months  in certain markets.  Therefore,
CAI may experience lower than average  subscriber growth and capital
expenditures primarily during the winter season.

NEW ACCOUNTING STANDARDS

      Financial Accounting Standards Board No. 125 - "Accounting for
Transfers and Servicing of Financial Assets  and  Extinguishments of
Liabilities."   This  statement  which  would be effective  for  all
transfers after December 31, 1997, addresses  several  matters  that
have  a  significant impact on certain industries.  It addresses how
and  when  to   record  transferred  assets,  transfers  of  partial
interests, servicing of financial assets, securitizations, transfers
of sales-type and  direct  financing  lease  receivables, securities
lending   transactions,  repurchase  agreements  including   "dollar
rolls," "wash  sales,"  loan  syndications  and participations, risk
participations  in  banker's  acceptances,  factoring  arrangements,
transfers  of  receivables  with  recourse,  and extinguishments  of
liabilities, collateral, repurchase agreements  and  how to amortize
servicing assets and liabilities.  CAI believes this statement  will
not have a material effect on CAI's financial position or results of
operations.

      Financial Accounting Standards No. 128 - "Earnings Per Share."
This  statement  which  is effective for financial statements issued
for  periods  ending  after   December   15,  1997,  simplifies  the
computation of earnings per share (EPS) by  replacing  the "primary"
EPS requirements with a "basic" EPS computation based upon weighted-
average   shares   outstanding.    This  new  standard  requires   a
reconciliation of the numerator and  denominator  of  the  basic EPS
computation  to  the  numerator  and denominator of the diluted  EPS
computation. CAI this statement will  not  have a material effect on
loss per share.

      Financial Accounting Standards Board No.  129 - "Disclosure of
Information  About  Capital  Structure."   Effective  for  financial
statement  periods ending after December 15,  1997,  this  statement
requires  disclosure   about   (a)
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS (continued)

the  liquidation  preference  of
preferred  stock,  (b)  redeemable   stock,   and   (c)  descriptive
information of other securities previously omitted since  they  were
not  part  of  the computation of earnings per share.  CAI generally
provides  the aforementioned  disclosures,  but  will  augment  such
disclosures when and if necessary.
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                   INDEX TO FINANCIAL STATEMENTS


                                                          Page No.
                                                         IN FORM 10-K

FINANCIAL STATEMENTS

Reports of Independent Accountants                            34

Consolidated Balance Sheets - March 31, 1997 and 1996         36

Consolidated Statements of Operations - Years Ended 
March 31,1997, 1996, and 1995                                 37

Consolidated Statements of Shareholders' Equity - Years Ended
   March 31, 1997, 1996, and 1995                             38

Consolidated Statements of Cash Flows - Years Ended 
March 31,1997, 1996, and 1995                                 39

Notes to Consolidated Financial Statements                    42
<PAGE>






REPORT OF INDEPENDENT ACCOUNTANTS



Shareholders and Board of Directors
CAI Wireless Systems, Inc. and Subsidiaries
Albany, New York



We have audited the accompanying consolidated balance sheets of CAI
Wireless Systems, Inc. and Subsidiaries as of March 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
March 31, 1997.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion
on these financial statements based on our audits.  We did not audit
the financial statements of CS Wireless Systems, Inc., the Company's
investment in which is accounted for by use of the equity method.  The
Company's investment of $88,534,526 in CS Wireless Systems, Inc. as of
March 31, 1997 and its share of losses of $17,600,000 in CS Wireless
Systems, Inc.'s operation for the year ended March 31, 1997 are
included in the accompanying financial statements.  The financial
statements of CS Wireless Systems, Inc. were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for CS Wireless Systems, Inc., is
based on the report of such other auditors.

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 and the report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other
auditors, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CAI
Wireless Systems, Inc. and Subsidiaries as of March 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 March 31, 1997 in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern.  The Company has
suffered recurring losses from operations and has incurred substantial
debt to finance the acquisition of assets and sustain operations.  The
Company's operating plans require additional funds which may take the
form of debt or equity security issuances, borrowings or asset sales.
Recoverability of the Company's intangible and other long-lived assets
is dependent on the Company's ability to implement its operating
plans.  There can be no assurance that additional financings will be
available.  The uncertainty over the Company's ability to obtain such
additional financings raises substantial doubt about the ability of
the Company to continue as a going concern.  Management's plans in
regard to these matters are described in Note 18.  The financial
statements do not include any adjustments that might result from the
outcome of the uncertainty.

                                                COOPERS & LYBRAND LLP


Albany, New York
June 26, 1997
<PAGE>






                     INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
CS Wireless Systems, Inc.:

We have audited  the  accompanying  consolidated  balance  sheet of CS
Wireless  Systems, Inc. and subsidiaries as of December 31, 1996,  and
the  related  consolidated  statements  of  operations,  stockholders'
equity,  and  cash  flows for the year then ended.  These consolidated
financial  statements  are  the  responsibility  of  the  Company<O~>s
management.   Our  responsibility  is  to  express an opinion on these
consolidated financial statements based on our audit.

We  conducted  our  audit{  }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  audit  provides  a
reasonable basis for our opinion.

In  our  opinion,  the consolidated financial statements  referred  to
above present fairly, in all material respects, the financial position
of CS Wireless Systems, Inc. and subsidiaries as of December 31, 1996,
and the results of their operations and their cash flows for the year{
}then  ended  in  conformity   with   generally   accepted  accounting
principles.



                                                KPMG Peat Marwick LLP




Dallas, Texas
March 21, 1997
<PAGE>


            CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS

                     MARCH 31, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                1997                         1996
<S>                                                         <C>                          <C>         
                        ASSETS
Cash and cash equivalents                                   $  10,471,918                $103,263,094
  Accounts receivable, less allowance for bad debts
  1997 $751,000; 1996 $1,296,000                                  695,707                   1,432,674
Prepaid expenses                                                1,034,106                     698,482
Property and equipment, net                                    69,767,017                  52,568,619
Wireless channel rights, net                                  207,680,551                 205,973,840
Investment in CS Wireless Systems, Inc.                        88,534,526                 113,054,069
Debt service escrow                                            47,865,389                  77,621,088
Goodwill, net                                                 104,204,716                 131,282,996
Loan acquisition costs, net                                     9,249,934                  10,631,263
Other assets                                                    2,835,651                   2,268,847
     Total Assets                                            $542,339,515                $698,794,972
         LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
 Accounts payable                                            $  6,600,584                $  8,244,577
 Accrued expenses                                              16,138,811                  10,186,374
 Wireless channel rights obligations                            5,302,600                  41,025,866
 Senior debt                                                  275,000,000                 275,000,000
 Notes payable                                                 36,786,596                  43,434,667
 Deferred income taxes                                                  -                  35,410,000
                                                              339,828,591                 413,301,484

Commitments and contingencies

Mandatorily redeemable preferred stock
 14% Senior convertible preferred stock
   (liquidation value  $70,000,000)                            69,160,000                  69,020,002
 Series A 8% redeemable convertible preferred stock
   (liquidation value  $18,050,000)                                     -                  18,050,000
 Accrued preferred stock dividends                             18,660,734                   5,812,562
                                                               87,820,734                  92,882,564

Shareholders' Equity
 Preferred stock                                                        -                           -
 Common stock, shares issued and outstanding
   March 31, 1997 - 40,540,539
   March 31, 1996 - 37,829,482                                275,769,414                 257,701,130
 Accumulated deficit                                         (161,079,224)                (65,090,206)
                                                              114,690,190                 192,610,924
     Total Liabilities and Shareholders' Equity              $542,339,515                $698,794,972
</TABLE>

             See notes to consolidated financial statements.

<PAGE>


                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                   YEARS ENDED MARCH 31, 1997, 1996, AND 1995


<TABLE>
<CAPTION>

                                             1997               1996                  1995
<S>                                       <C>                <C>                   <C>
Revenues                                  $36,326,816        $ 30,682,486          $ 5,147,510
Costs and expenses
   Programming and license fees            16,051,094          12,582,750            2,024,943
   Marketing                                2,033,107           3,525,396            2,529,623
   General and administrative             31,196,446           24,689,572           11,139,693
   Depreciation and amortization           32,345,327          24,718,341            3,639,643
                                           81,625,974          65,516,059           19,333,902
    Operating loss                        (45,299,158)        (34,833,573)         (14,186,392)
Other income (expense)
   Equity in net loss of affiliate        (17,600,000)                  -                    -
   Interest income                          6,435,188           6,047,081              641,021
   Other income (expense)                     (28,446)             87,268              275,579
   Interest expense                       (40,805,791)        (24,608,258)          (1,733,745)
                                          (51,999,049)        (18,473,909)            (817,145)
    Loss before provision for
      income tax benefit and 
      minority interest                   (97,298,207)        (53,307,482)         (15,003,537)
Provision for income tax benefit           15,000,000          12,000,000                    -
    Loss before minority interest         (82,298,207)        (41,307,482)         (15,003,537)
Minority interest in loss                           -             321,910              896,700
    Net loss                              (82,298,207)        (40,985,572)         (14,106,837)
Preferred stock dividends                 (13,011,270)         (5,878,960)            (328,011)
    Loss applicable to common stock
      shareholders                       $(95,309,477)      $ (46,864,532)        $(14,434,848)
Loss per common share                    $      (2.38)      $       (1.73)        $      (0.93)
</TABLE>


                       See notes to consolidated financial statements.
<PAGE>

                                CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                YEARS ENDED MARCH 31, 1997, 1996, AND 1995


<TABLE>
<CAPTION>
                                                                 ADDITIONAL
                                           COMMON STOCK            PAID-IN       ACCUMULATED
                                      SHARES           AMOUNT       CAPITAL         DEFICIT                    TOTAL
<S>                              <C>             <C>          <C>            <C>               <C>
BALANCE AT APRIL 1, 1994           15,410,000    $  38,422,543    $  5,084,716   $  (9,161,496)   $ 34,345,763
Value assigned to warrants   
 exercised                             72,279           18,500         (18,500)              -               -
Preferred stock converted 
 to common stock                      271,739        1,900,000               -               -       1,900,000
Value assigned to 
 detachable warrants                        -                -         304,438               -         304,438
Preferred stock dividends                   -                -        (328,011)              -        (328,011)
Net loss for the year                       -                -               -     (14,106,837)    (14,106,837)
Balance at March 31, 1995          15,754,018       40,341,043        5,042,643     (23,268,333)     22,115,353
Net proceeds from sale 
 of common stock                      179,765        1,470,329               -               -       1,470,329
Value assigned to 
 detachable warrants                        -                -         1,350,000               -       1,350,000
Common stock issued to 
 acquire 49% minority
 interest in Hampton Roads
 Wireless, Inc.                        652,523        8,000,000               -               -       8,000,000
  Less issuance cost                         -          (47,058)              -               -         (47,058)
Common stock issued in 
 ACS Merger                         19,362,611      190,600,700               -               -     190,600,700
  Less registry costs                        -       (1,316,743)              -               -      (1,316,743)
Common stock issued in 
 ECNW Merger                         1,880,565       18,652,859               -               -      18,652,859
Senior preferred stock 
 issuance costs                              -                -      (1,349,984)              -      (1,349,984)
Preferred stock dividends                    -                -      (5,042,659)       (836,301)     (5,878,960)
Net loss for the year                        -                -                     (40,985,572)    (40,985,572)
Balance at March 31, 1996           37,829,482      257,701,130               -     (65,090,206)    192,610,924
Series A 8% preferred 
 stock converted to
 common stock                        2,637,742       18,049,955               -               -      18,049,955
Value assigned to 
 warrants exercised                     73,315           18,329               -         (18,329)              -
Senior preferred stock 
 issuance costs                              -                -               -        (661,212)       (661,212)
Preferred stock dividends                    -                -               -     (13,011,270)    (13,011,270)
Net loss for the year                        -                -               -     (82,298,207)    (82,298,207)
Balance at March 31, 1997           40,540,539     $275,769,414    $          -   $(161,079,224)  $ 114,690,190

</TABLE>
                                See notes to consolidated financial statements.
<PAGE>

                     CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                     YEARS ENDED MARCH 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
                                                            1997                     1996                    1995
<S>                                                     <C>                      <C>    <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                              $(82,298,207)         $  (40,985,572)          $  (14,106,837)
   Adjustments to reconcile net loss to
   net cash used in operating activities:
   Depreciation and amortization                          32,345,327              24,718,341                3,639,643
     Equity in net loss of CS Wireless                    17,600,000                       -                        -
   Deferred income tax benefit                           (15,000,000)            (12,000,000)                        -
   Investment and debt costs and discount                  3,336,483               1,778,893                  415,460
   amortization
   Write-off projects and other costs                      2,087,144                       -                        -
   Minority interest in loss                                       -               (321,910)                (896,700)
   Other                                                     260,969               (193,890)                (282,343)
   Changes in assets and liabilities, net of effects
     from acquisitions:
     Accounts receivable                                     690,092               (111,677)                  185,689
     Other assets                                           (382,798)               (128,117)                (173,370)
     Accounts payable and accrued expenses                 6,608,567             (7,404,356)                 3,146,463
       Net cash used in operating activities             (34,752,423)            (34,648,288)                 (8,071,995)
Cash flows from investing activities
  Cash paid for businesses acquired, net of cash                   -            (77,407,837)              (9,916,889)
  Purchase of wireless channel rights                     (3,686,989)            (24,489,840)              (1,308,678)
  Purchase of property and equipment                     (37,109,164)            (14,498,395)             (14,961,633)
  Purchase of investments                                (15,087,990)               (250,000)              (6,004,297)
  Proceeds from sale of investments                       43,495,837              13,461,558                6,000,000
  Other                                                     (278,810)             (1,025,793)              (1,174,374)
       Net cash used in investing activities             (12,667,116)           (104,210,307)             (27,365,871)
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of senior notes, other debt
   and warrants                                                    -             308,062,500                9,769,863
  Payment of senior and other debt                       (45,263,492)            (42,369,042)              (2,309,130)
  Cash paid for debt service escrow                                -             (90,638,756)                       -
   Proceeds from issuance of senior preferred stock
   and warrants                                                    -              70,000,000                        -
  Debt financing costs paid                                        -              (2,581,183)                       -
  Proceeds from issuance of common stock                           -               1,545,979                7,114,300
  Registry and other stock issuance costs paid                     -              (2,775,336)                (351,350)
  Other                                                     (108,145)               (324,405)                       -
       Net cash provided by (used in) financing          (45,371,637)            240,919,757               14,223,683
       activities
        Net increase (decrease) in cash and cash
        equivalents                                      (92,791,176)            102,061,162               (21,214,183)
Cash and cash equivalents, beginning                     103,263,094               1,201,932               22,416,115
Cash and cash equivalents, ending                       $ 10,471,918            $103,263,094            $   1,201,932
</TABLE>


                See notes to consolidated financial statements.
<PAGE>



                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     SUPPLEMENTAL INFORMATION ON NON-CASH
                      INVESTING AND FINANCING ACTIVITIES



      1. During the years ended March 31, 1997, 1996,  and  1995, in connection
with  property and equipment acquisitions, the Company accrued  obligations  of
$1,213,335, $3,673,925, and $394,275, respectively.

      2. During  the  years ended March 31, 1997, 1996, and 1995, in connection
with  certain  wireless  channel   rights  acquisitions,  the  Company  accrued
obligations of  $2,380,234, $47,256,113, and $2,942,258, respectively.

      3. During the fiscal years ended  March  31,  1997 and 1996, dividends on
preferred stock were accrued totaling $13,011,270 and $5,812,562, respectively.

      4. During the year ended March 31, 1997, all of  the  Series  A Preferred
Stock,  with  a  basis  of $18,050,000, was converted into 2,637,742 shares  of
common stock, less $45 representing cash paid in lieu of fractional shares.

      5. During August 1996,  the  Company  transferred  314,267  shares  of CS
Wireless,  valued at $6,000,000, to Heartland Wireless Communications, Inc.  in
exchange for wireless channel rights in the Portsmouth, NH market.

      6. The   Company  acquired  two  corporations  with  assets  (principally
wireless channel  rights),  approximating  $2,480,000,  for  a  cash payment of
$1,050,000  and  seller  financed  long-term debt obligations of $1,430,000  on
January 12, 1996.

      7. The  underwriter's  discount  of  $8,937,500  was  deducted  from  the
proceeds of the senior notes issued on September 29, 1995.

      8. On September 29, 1995,  the  Company  issued  CAI  common stock in two
acquisitions as follows:

<TABLE>
<CAPTION>
                                             TOTAL                  ACS                ECNW
<S>                                      <C>                   <C>                  <C>
Fair value of assets acquired           $284,375,604          $255,674,388          $28,701,216
Less:
 Cash portion of purchase price           49,438,203            41,072,206            8,365,997
 Liabilities assumed                      22,672,180            22,367,053              305,127
 Acquisition costs and fees                1,882,229             1,634,429              247,800
 Note and interest receivable offset       1,129,433                     -            1,129,433
   Value of CAI common stock issued     $209,253,559          $190,600,700          $18,652,859
</TABLE>

         In addition, as part of the ACS acquisition, the Company paid ACS bank
debt  of  $22,334,298  and  also advanced ACS $11,345,095 which is reflected in
ACS's cash balance of $8,250,488 at the date of acquisition.

         In connection with the ECNW acquisition, the Company paid $500,000 for
non-compete agreements.

      9. On July 13, 1995, the  Company  purchased the 49% minority interest in
Hampton Roads Wireless, Inc. for $8,000,000 in CAI common stock.
<PAGE>





                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     SUPPLEMENTAL INFORMATION ON NON-CASH
                      INVESTING AND FINANCING ACTIVITIES



     10. In  January  1995,  the Company acquired  the  New  York  System.   In
conjunction with the acquisition,  the  Company  issued $18,050,000 of Series A
preferred stock and $11,000,000 of short-term notes as follows:

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

Fair value of assets acquired,
 net of cash acquired                                $ 40,691,463
Liabilities assumed                                    (1,724,574)
Preferred stock issued                                (18,050,000)
Short term notes issued                               (11,000,000)
 Cash paid                                          $   9,916,889
</TABLE>


               SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                       1997                   1996                   1995
<S>                                 <C>                    <C>                    <C>
Cash payments for interest          $34,341,025            $18,541,227            $271,427
</TABLE>

             See notes to consolidated financial statements.
<PAGE>


               CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS.  CAI Wireless Systems, Inc. (the "Company" or "CAI") was
incorporated  in  August  1991,  to invest in, lease, and  purchase wireless
channel rights (including multi-channel,  multi-point  distribution services
("MMDS")  licenses  and  instructional  television  fixed services  ("ITFS")
licenses) and develop wireless cable systems.  As of  June 25, 1997, CAI had
40,540,539  shares  of  common  stock,  without par value (the  "CAI  Common
Stock"),  issued  and outstanding.  The Company  operates  six  analog-based
wireless cable systems providing service to approximately 70,800 subscribers
in New York City, Rochester,  and  Albany, NY, Philadelphia, PA, Washington,
DC, and Norfolk/Virginia Beach, VA.   In  addition,  CAI  has a portfolio of
wireless  cable channel rights in eight additional markets,  including  Long
Island, Buffalo  and Syracuse, NY, Providence, RI, Hartford, CT, Boston, MA,
Baltimore, MD, and  Pittsburgh,  PA.   For  the  fiscal year ended March 31,
1997, approximately 59% of total revenue was derived  from  the Philadelphia
System and approximately 22% from the New York City System.

PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements  include
the  accounts  of  the  Company  and  its  wholly-owned  subsidiaries and CS
Wireless Systems, Inc. ("CS Wireless") until February 23,  1996,  when, as a
result  of  the  CAI-Heartland  closing,  it  became  52% owned.  Subsequent
transactions  have  reduced  the  Company's  interest to 47.7%.   Since  the
closing date, CS Wireless has been accounted for  on  the  equity  method of
accounting.  All material inter-company accounts and transactions have  been
eliminated in consolidation.

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 and assumptions.

CASH  EQUIVALENTS.   For  purposes  of  reporting  cash  flows,  the Company
considers  all  highly liquid debt instruments purchased with a maturity  of
three months or less  to  be  cash  equivalents.   Cash  equivalents consist
primarily  of  money market type funds.  The Company has a concentration  of
credit risk with  regard  to  its  cash  in  excess of the amount subject to
federal insurance and money market type funds.  The Company does not require
collateral  on  cash equivalents.  The Company has  mitigated  its  risk  by
depositing its cash  in  high  credit  quality financial institutions and by
investing in low risk, high grade money  market  type  funds which invest in
U.S. government securities or high grade commercial paper.

ACCOUNTS RECEIVABLE.  The Company has a geographic concentration  of  credit
risk  with  respect  to accounts receivable since all of its subscribers are
located in the northeastern  section  of  the  United States.  However, this
risk  is  mitigated  based on subscribers being primarily  residential  with
diverse economic backgrounds.

PROPERTY  AND EQUIPMENT.   Property  and  equipment  are  carried  at  cost.
Depreciation  and  amortization  is  calculated  by  the  straight-line  and
accelerated  methods  over the estimated useful lives of the related assets.
The  Company capitalizes  subcontractor  and  direct  employee  labor  costs
incurred  in  connection  with  the installation of its television reception
equipment on subscriber premises.   Amortization  of  such costs is based on
the  estimated  subscriber  turnover rate for each system.   These  turnover
rates range from 2 to 5 years.  In addition, projects in process are carried
at cost, including capitalized  interest  amounting to $953,300 and $144,900
for the years ended March 31, 1997 and 1996, respectively.

ACQUISITIONS.  All acquisitions of companies  have been accounted for on the
purchase  method of accounting and the purchase  prices  have  been  "pushed
down" to the  acquired  companies,  primarily to wireless channel rights and
goodwill, including provisions for deferred  income  taxes where applicable.
Some acquisitions required issuance of CAI common stock  which  was recorded
at the average market price per share as defined in the purchase agreements,
usually over a ten day period. Also, direct acquisition costs were  included
as  part  of  the  purchase  price.   Costs  to register CAI common stock in
connection  with an acquisition were treated as  a  reduction  of  the  fair
market value of shares issued for that acquisition.
<PAGE>

               CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE  OF  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

INVESTMENT IN CS WIRELESS  SYSTEMS,  INC.   The investment in CS Wireless is
recorded  at cost and the difference between CAI's  cost  and  the  pro-rata
ownership of  the  underlying  equity  of approximately $34,000,000 is being
amortized over 15 years, commensurate with  goodwill  and  wireless  channel
rights  amortization periods to which the investment primarily relates.  CAI
records its share of CS Wireless' net loss, adjusted for the amortization of
its investment, under the equity method because the Company does not control
day to day  operations.   CS  Wireless  was  a wholly-owned subsidiary until
February 23, 1996.  CS Wireless has adopted a  December  31  fiscal year and
accordingly the Company records its proportionate share of the results of CS
Wireless'  operations  based  on  their  fiscal  period ending three  months
earlier than that of the Company.

INTANGIBLES.

      WIRELESS CHANNEL RIGHTS.  Wireless channel rights  are  carried  at cost
and  amortized  over  their estimated useful lives, generally 15 years, when
the related market is placed in service or available for service.

      GOODWILL.  Goodwill,  consisting of acquisition costs in excess of the
amounts allocated to assets and  liabilities  of  the companies acquired, is
amortized  over  15  years.  Accumulated amortization  was  $11,578,300  and
$4,336,158 as of March 31, 1997 and 1996, respectively.

      LOAN ACQUISITION  COSTS.   Costs  incurred to obtain financing for the
acquisitions  and  for general corporate purposes  are  amortized  over  the
respective  terms of the debt, primarily seven years.

LONG-LIVED ASSETS.   The  Company  adopted  the  provisions of SFAS No. 121,
"Accounting  for  the  Impairment of Long-Lived Assets  and  for  Long-Lived
Assets to be Disposed of,"  on  April 1, 1996.  This statement requires that
long-lived  assets  and  certain identifiable  intangibles  be  periodically
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  Recoverability
of assets to be held and used  is  measured  by a comparison of the carrying
amount of an asset to future net cash flows expected  to be generated by the
asset.  If such assets are considered to be impaired, the  impairment  to be
recognized  is  measured  by  the amount by which the carrying amount of the
assets exceeds the fair value of  the  assets.  Assets to be disposed of are
reported at the lower of the carrying amount  or  fair  value  less costs to
sell.   Pursuant to SFAS No. 121, the Company periodically reviews  wireless
channel rights  and  other  long-lived  assets whenever events or changes in
circumstances indicate that the carrying  amount  of  such assets may not be
recoverable.   When  such  circumstances  occur, the Company  evaluates  the
possible effects on the carrying amount of  such  assets.   The  adoption of
this Statement did not have a significant effect on the Company's  financial
position, results of operations, or liquidity.

The  Company's estimates of future gross revenues and operating cash  flows,
the remaining estimated lives of long-lived assets, or both could be reduced
in the  future  due  to  changes  in,  among  other  things, technology, the
Company's  ability  to obtain permission for flexible use  of  the  wireless
channel rights, government  regulation,  available financing or competition.
The Company's estimate of future gross revenues  and  operating  cash  flows
assumes  that  the  Company  will  successfully  develop and provide digital
wireless cable systems as well as video, voice and data transmission such as
Internet access and telephony.  Because these alternative  uses  of the MMDS
spectrum are in the early stages of development, there is no assurance  that
the  Company  can  commercially  deploy such alternatives or that it will be
able to achieve positive cash flow  from  any  operating  activities.   As a
result, the carrying amounts of long-lived assets, including goodwill, could
be reduced by amounts which would be material to the financial statements.

INVESTMENTS IN DEBT SERVICE ESCROW.  Investments in the debt service escrow,
consisting  of  debt instruments maturing through September 1998 to coincide
with the interest  payment  dates  of  the senior notes, are carried at cost
since  they  will  be  held to maturity. Each  investment  is  adjusted  for
accretion of discounts and  amortization  of premiums which are reflected in
interest income.

REVENUE RECOGNITION.  Revenues from subscribers are recognized in the period
that service is rendered. Installation fees  are recognized as revenues upon
subscriber hook-up to the extent of costs to obtain subscribers.
<PAGE>

               CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES
(continued)

STOCK  OPTIONS.   On  April  1,  1996,  the  Company  adopted  SFAS No. 123,
"Accounting  for  Stock-Based  Compensation,"  which  requires  entities  to
recognize  as expense over the vesting period, the fair value of all  stock-
based awards on the date of grant or alternatively, to continue to apply the
provisions  of   Accounting   Principles   Board  ("APB")  Opinion  No.  25,
"Accounting for Stock Issued to Employees," and provide pro forma net income
and  pro  forma earnings per share disclosures  for  employee  stock  option
grants made  in  1995  and  future  years  as if the fair value-based method
defined  in  SFAS  No. 123 had been applied.  The  Company  has  elected  to
continue to apply the  provisions  of APB Opinion No. 25 and provide the pro
forma disclosures of SFAS No. 123.   Under  APB Opinion No. 25, compensation
expense would be recorded on the date of grant  only  if  the current market
price of the underlying stock exceeded the exercise price.

INCOME  TAXES.  The Company files a consolidated federal income  tax  return
with its subsidiaries in which it owns 80% or more of the outstanding common
stock.  Deferred  income  taxes  are  recognized for the tax consequences of
"temporary differences" by applying enacted  statutory  tax rates applicable
for future years to the difference between the financial  statement  and tax
basis of existing assets and liabilities. The effect of tax rate changes  on
deferred  taxes is recognized in the income tax provision in the period that
includes the enactment date.  A valuation allowance is established to reduce
deferred tax assets if it is more likely than not that all, or some portion,
of such deferred tax asset will not be realized.

LOSS PER SHARE.  Loss per share has been calculated on the basis of weighted
average number  of  shares  outstanding  during  each period presented.  The
weighted  average  number  of  shares  outstanding were  40,069,258  shares,
27,075,578 shares, and 15,456,540 shares for the years ended March 31, 1997,
1996,  and 1995, respectively.  Outstanding  options,  warrants,  and  other
convertible  securities  were not considered for the purposes of calculating
the  weighted  average shares  of  common  stock  outstanding,  since  these
securities were determined to be anti-dilutive.

RECLASSIFICATION.   The  Company  has  reclassified  certain  items in prior
years'  financial  statements  to make them comparative to the current  year
presentation.   The  reclassification   had   no   effect  on  results  from
operations.

OTHER DEVELOPMENTS.

      Financial  Accounting  Standards  Board  No.  125  -   "Accounting  for
Transfers   and   Servicing  of  Financial  Assets  and  Extinguishments   of
Liabilities."  This  statement  which  would  be  effective for all transfers
after December 31, 1997, addresses several matters  that  have  a significant
impact   on  certain  industries.   It  addresses  how  and  when  to  record
transferred  assets,  transfers  of partial interests, servicing of financial
assets, securitizations, transfers  of  sales-type and direct financing lease
receivables, securities lending transactions, repurchase agreements including
"dollar  rolls,"  "wash sales," loan syndications  and  participations,  risk
participations in banker's  acceptances, factoring arrangements, transfers of
receivables with recourse, and  extinguishments  of  liabilities, collateral,
repurchase agreements and how to amortize servicing assets  and  liabilities.
CAI  believes  this  statement  will  not  have  a  material  effect on CAI's
financial position or results of operations.

      Financial  Accounting  Standards No. 128 - "Earnings Per Share."   This
statement which is effective for  financial  statements  issued  for  periods
ending  after  December 15, 1997, simplifies the computation of earnings  per
share ("EPS") by  replacing the "primary" EPS requirements with a "basic" EPS
computation  based  upon   weighted-average  shares  outstanding.   This  new
standard requires a reconciliation  of  the  numerator and denominator of the
basic EPS computation to the numerator and denominator  of  the  diluted  EPS
computation.  CAI  believes statement will not have a material effect on loss
per share.

      Financial  Accounting   Standards   Board  No.  129  -  "Disclosure  of
Information  About  Capital Structure."  Effective  for  financial  statement
periods ending after  December  15,  1997, this statement requires disclosure
about  (a)  the liquidation preference of  preferred  stock,  (b)  redeemable
stock, and (c) descriptive information of other securities previously omitted
since they were  not  part  of  the  computation  of earnings per share.  CAI
generally  provides the aforementioned disclosures,  but  will  augment  such
disclosures when and if necessary.
<PAGE>


               CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2-ACQUISITIONS

HAMPTON ROADS  WIRELESS,  INC.   On  July 13, 1995, the Company acquired the
remaining 49% minority interest in the  Hampton  Roads  Wireless,  Inc.  for
$8,000,000  in  CAI  Common  Stock.  In accordance with the purchase method of
accounting, the excess (approximately  $7,890,000)   over  the book value of
the  minority  interest acquired has been allocated to the wireless  channel
rights acquired.

TWO BOTT CORPORATIONS.   On  January  12,  1996,  the  Company  acquired two
corporations  (Chenango  Associates, Inc. and Onondaga Wireless, Inc.)  from
George Bott and a related  Bott trust. The two corporations had no revenues,
or operations and hold wireless  channel rights in Buffalo and Syracuse, NY,
respectively. The purchase price for  the two corporations was $2,480,000 of
which $1,430,000 is payable without interest  over  six years with a balloon
payment of $1,029,500.  This six year note has been recorded  at  a  present
value  of  $757,000  using a 12.25% imputed interest rate.  In accordance with
the purchase method of  accounting, the excess (approximately $1,439,000) of
the purchase price over the  carrying  value (approximately $368,000) of the
net assets acquired has been allocated to the wireless channel rights.

NEW YORK SYSTEM.  As of January 9, 1995,  the  Company,  through its wholly-
owned  subsidiary,  New York Choice Television, Inc., acquired  assets,  and
assumed certain liabilities  of  the  New York City wireless cable system of
The Microband Companies, Inc., an unaffiliated  entity  under  protection of
Chapter  11  of  the  Bankruptcy Code at that date.  The Company funded  the
acquisition price of $39,050,000  with  $18,050,000  of  Series  A preferred
stock,   $11,000,000   of  short-term  notes,  and  $10,000,000  in  cash.  In
accordance with the purchase method of accounting, the excess (approximately
$31,700,000) of the acquisition  cost  over  the  fair value of the tangible
assets and liabilities has been allocated to wireless channel rights.

ACS  ENTERPRISES,  INC.   On  September 29, 1995, the Company  acquired  ACS
Enterprises, Inc. and Subsidiaries  ("ACS"), a public company with operating
wireless cable systems in Philadelphia,  PA,  Cleveland, OH and Bakersfield,
CA and wireless channel rights in Stockton/Modesto,  CA,  for  $3.50 per ACS
common  share  and  1.65  CAI common shares for each ACS common share.  This
acquisition required $41,072,206 in cash and 19,362,611 shares of CAI common
stock  valued  at  $190,600,700.   The   purchase  price,  including  direct
acquisition costs, in excess of ACS's book  value  was allocated to wireless
channel rights and the remainder to goodwill.  (See  Note  5).  ACS has been
included in the Company's operations since September 29, 1995.

EASTERN  CABLE  NETWORKS  OF  WASHINGTON, INC.  On September 29,  1995,  the
Company acquired Eastern Cable  Networks  of Washington, Inc. ("ECNW") which
operates  a  wireless  cable  system  in  the  Washington,   DC   area   for
approximately  $8,366,000  in  cash and 1,880,565 shares of CAI common stock
valued at $18,653,000. ECNW was  merged  into  a subsidiary of CAI which was
renamed  Washington  Choice Television, Inc. The purchase  price,  including
direct acquisition costs,  in excess of book value was allocated to wireless
channel rights.  ECNW has been  included  in  the Company's operations since
September 29, 1995.



<PAGE>


                CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                 Useful
                                                  LIFE                  1997                      1996
<S>                                       <C>                      <C>                      <C>
Transmission equipment                          3-7 years          $10,529,180              $  9,542,449
Subscriber equipment                            2-5 years           46,982,451                41,950,370
Leasehold improvements                          5-20 years           1,124,354                   939,090
Office furniture and equipment                  5-7 years            3,508,961                 3,056,631
Vehicles                                        3 years                529,656                   584,761
                                                                    62,674,602                56,073,301
  Less accumulated depreciation
  and amortization                                                  28,767,392                14,063,102
                                                                    33,907,210                42,010,199
Projects in process                                                 35,859,807                10,558,420
                                                                   $69,767,017               $52,568,619
</TABLE>

      Subscriber   equipment   includes  recoverable   equipment   (antennas,
downconverters, set-top converters,  and  remote  controls);  non-recoverable
equipment   (wiring,   connectors,   and  miscellaneous  small  parts);   and
installation costs (outside subcontractor charges, internal direct labor, and
other  related installation costs are capitalized).   The  Company  generally
does not capitalize the cost of disconnecting or reconnecting subscribers.

      The  projects  in  process  primarily  represent costs incurred to date
relative to establishing digital systems in Norfolk/Virginia  Beach,  VA  and
Boston,  MA.   In  connection  with  building  the Boston digital system (the
"Boston Project") in accordance with the BR Agreement,  CAI abandoned certain
improvements with a cost of approximately $2 million.

      Depreciation and amortization of property and equipment  for  the years
ended  March  31,  1997,  1996,  and  1995  was $14,920,000, $12,922,000, and
$2,518,000, respectively.

NOTE 4 - WIRELESS CHANNEL RIGHTS

      The  Company  has  acquired  wireless  channel  rights  through  direct
negotiation with licenseholders and with sub-lessors  of certain licenses and
through  business  combinations.  The Company's wireless channel  rights  are
predominately lease arrangements, however, the Company is the direct licensee
of certain licenses and has purchase  options  with  respect  to  others. The
Company's  wireless  channel  rights are principally located in the New  York
City,  Albany,  Long Island, Buffalo,  and  Rochester,  New  York;  Hartford,
Connecticut;  Norfolk/Virginia   Beach,   Virginia;   Boston,  Massachusetts;
Philadelphia and Pittsburgh, Pennsylvania; Washington,  D.C.,  and Baltimore,
Maryland markets.

      The  lease  and  sub-lease  agreements frequently require initial  fees
followed  by  monthly fees based on subscriber  volume,  subject  to  certain
minimum  fees.    Some   agreements   require   profit   sharing   with   the
licenseholders.  The lease and sub-lease periods generally follow the periods
corresponding  to the actual FCC license dates with provisions for extensions
upon license renewal from the FCC. The FCC licenses are typically granted for
a ten-year period  and  there  is no automatic renewal of such licenses.  The
use of such channels by the lessors  is subject to regulation by the FCC and,
therefore, the Company's ability to continue  to  enjoy the benefits of these
leases is dependent upon the lessors' continuing compliance  with  applicable
regulations.   Most  of  the  Company's  leases  provide  that the lessor may
negotiate lease renewals with only the Company and, if a renewal agreement is
not  reached  within  a  specified time, grant the Company a right  of  first
refusal to match any competing offers.  Although the Company does not believe
that the termination of or  failure  to  renew  a  single channel lease would
adversely affect the Company, several of such terminations or failures in one
or  more  markets  that  the Company actively serves could  have  a  material
adverse effect on the Company.
<PAGE>

               CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - WIRELESS CHANNEL RIGHTS (CONTINUED)

      The Company is obligated  to pay, as of March 31, 1997, minimum fees to
licenseholders or sub-lessors in future years as follows:

<TABLE>
<CAPTION>
        Years ending
        MARCH 31,
<S>                                                 <C>
           1998                                     $  5,032,000
           1999                                        5,345,000
           2000                                        5,602,000
           2001                                        5,751,000
           2002                                        5,780,000
           Thereafter                                 12,792,000
             Total                                   $40,302,000
</TABLE>

      Lease expense for the years  ended  March 31, 1997 and 1996 was
approximately $3,654,000 and $1,700,000, respectively.   The  Company
capitalizes the wireless channel rights acquisition costs and initial
fees  and amortizes such costs when operations commence in the market
to which  they  relate.   The  non-operating wireless channel rights,
totaling  approximately  $52,000,000   as  of  March  31,  1997,  and
$89,000,000 as of March 31, 1996, will be  amortized when the related
market  is  either   available  for  service  or placed  in  service,
whichever  occurs  first.   The  following is a summary  of  wireless
channel rights:

<TABLE>
<CAPTION>
                                                           1997                     1996
<S>                                                  <C>                          <C>
Cost of wireless channel rights                       $224,259,175                $212,691,464
Less accumulated amortization                           16,578,624                   6,717,624
                                                      $207,680,551                $205,973,840
</TABLE>

       Amortization of the wireless  channel  rights  for  the  years
ended March 31, 1997, 1996, and 1995 was $9,861,000, $6,468,000,  and
$1,112,000, respectively.

      Wireless  channel  rights  obligations are generally due
within one year without interest.   The amount due as of March
31,  1996 includes $35,101,033 due from  the  March  1996  FCC
Auction,  and  was net of $12,600,000 due from CS Wireless for
rights acquired  by  CAI  on  behalf  of CS Wireless which was
substantially  paid  to CAI during the year  ended  March  31,
1997.  FCC Auction obligations  of  $1,089,600 are anticipated
to become due in fiscal 1998.

NOTE 5 - INVESTMENT IN CS WIRELESS SYSTEMS, INC.

      CAI closed a series of transactions on February 23, 1996
with Heartland Wireless Communications, Inc. ("Heartland") and
CS Wireless pursuant to a participation  agreement between CAI
and  Heartland  dated  December  12, 1995 (the  "Participation
Agreement").   Concurrently,  CS  Wireless   also   closed  an
offering  of  $400,000,000  face  amount  of  units with gross
proceeds approximating $230,000,000 which were used in part to
make the cash payment to Heartland on February  23, 1996. Each
unit  consisted  of  four  $1,000  face amount 11.375%  senior
discount  notes,  due  March  1, 2006 and  1.1  shares  of  CS
Wireless common stock. CAI has  not  guaranteed  this  or  any
other  CS Wireless debt.  Immediately following the closing of
such transactions, CAI owned approximately 52% of CS Wireless,
Heartland  approximately  37%,  an  affiliate of Bell Atlantic
Corporation  and  NYNEX Corporation (the  "BANX  Partnership")
approximately 10%,  and  the  unit  holders  approximately 1%,
taking into account certain true-up provisions.

      CS Wireless, which had been a wholly-owned subsidiary of
CAI and the operator of a wireless cable system  in Cleveland,
OH, acquired or had contributed to it, under the Participation
Agreement,   operating  wireless  cable  systems  or  wireless
channel rights  held by CAI in Bakersfield, CA, Charlotte, NC,
and Stockton/Modesto, CA and held by Heartland in Dallas, Fort
Worth, and San Antonio,  TX,  Dayton,  OH, Maysville and Sweet
Springs, MO, Minneapolis,
<PAGE>


        CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - INVESTMENT IN CS WIRELESS SYSTEMS, INC. (CONTINUED)

MN,  Grand Rapids, MI and Salt Lake City,  UT.  The  Heartland
contribution  was  valued  at  approximately $138,663,000, the
estimated fair value. Heartland originally received  3,578,834
shares of CS Wireless common stock,  approximately $28,300,000
of cash, and $40,000,000 of notes from CS Wireless.  Heartland
received another $5,000,000 and 257,201  shares of CS Wireless
pursuant  to  the  "true-up"  provisions of the  Participation
Agreement.

      Subsequently, CAI transferred 314,267 shares of its CS
Wireless common stock to acquire wireless channel rights in
Portsmouth, NH and CS Wireless issued additional shares in
another transaction causing CAI's ownership in CS Wireless to
decrease to 47.7% as of March 31, 1997.

      The following is a condensed version of the Consolidated
Balance Sheet of CS Wireless Systems, Inc. and Subsidiaries as
of December 31, 1996 as presented  in its Form 10-K as of that
date.

<TABLE>
<CAPTION>
     ASSETS
<S>                                                          <C>
Cash and cash equivalents                                    $113,072,000
Other current assets                                            3,278,000
Systems and equipment, net                                     42,955,000
Wireless channel rights, net                                  172,953,000
Excess of cost over fair value of net assets acquired          52,011,000
(goodwill)
Net assets held for sale                                       19,366,000
Loan acquisition costs, net                                    10,602,000
                                                             $414,237,000
     LIABILITIES AND EQUITY
Accounts payable and accrued expenses                      $    6,655,000
Other current liabilities                                       1,043,000
BTA auction payable to affiliates                               4,902,000
Long-term debt                                                  4,737,000
Heartland long-term note                                       15,000,000
Senior discount notes                                         251,637,000
Deferred income taxes                                           5,429,000
Common stock and paid-in capital                              154,568,000
Accumulated deficit                                           (29,734,000)
                                                             $414,237,000
</TABLE>
<PAGE>




     CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      The  following  is  a  condensed  version  of  the
Consolidated  Statement  of Operations for  CS  Wireless
Systems,  Inc.  and  Subsidiaries  for  the  year  ended
December 31, 1996 as presented in its Form 10-K for that
period.

<TABLE>
<CAPTION>
<S>                                                                       <C>
Total revenues                                                            $  22,738,000
Operating expenses:
  Systems operations                                                         13,258,000
  Selling, general and administrative                                        13,934,000
  Depreciation and amortization                                              20,345,000
   Total operating expenses                                                  47,537,000
     Operating loss                                                         (24,799,000)
Interest expense                                                            (24,959,000)
Interest income                                                               6,600,000
     Loss before income tax benefit                                         (43,158,000)
Income tax benefit                                                           14,631,000
     Net loss                                                              $(28,527,000)
Loss per common share                                                          $  (3.06)
</TABLE>

NOTE 6 - DEBT SERVICE ESCROW

      The debt service escrow relating to the $275,000,000 of 12.25%
Senior Notes (the "Senior  Notes")  is  being  used to pay the first
three years of interest on the Senior Notes.  The  escrow is held in
trust  and  consists of marketable government debt instruments  that
mature as follows:

<TABLE>
<CAPTION>
                                                         GROSS UNREALIZED
                                    AMORTIZED COST     GAINS         LOSSES            MARKET VALUE
<S>                                 <C>                <C>         <C>               <C>

Maturing in fiscal year ending:
 March 31, 1998                     $31,276,518        $ 12,926    $  48,038         $31,241,406
 March 31, 1999                      16,371,585               -      111,137           16,260,448
   Total invested                    47,648,103        $ 12,926     $159,175           47,501,854
Cash balance                             23,532                                            23,532
Accrued interest                        193,754                                           193,754
   Total escrow balance             $47,865,389                                       $47,719,140
</TABLE>

      The  Company   receives   face  value  upon  maturity  of  the
securities in the escrow account  with  no  gain  or loss.  Also the
Company  has  a  concentration  of credit risk with respect  to  the
investments in the escrow account which is mitigated by investing in
marketable U.S. government debt instruments.

NOTE 7 - OTHER ASSETS

      Other assets consist of :
<TABLE>
<CAPTION>
                                                              1997                        1996
<S>                                                       <C>                         <C>
Notes receivable                                          $   692,952                 $  501,815
Notes receivable-related parties                              880,054                          -
Other intangible assets                                       209,505                    522,812
Deposits                                                      637,143                    579,273
Other                                                         415,997                    664,947
                                                           $2,835,651                 $2,268,847
</TABLE>
<PAGE>


       CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - DEBT

      Debt consists of the following:
<TABLE>
<CAPTION>
                                                                     1997                      1996
<S>                                                              <C>                      <C>

SENIOR DEBT
 12.25% senior notes due 2002{ (a)}                              $275,000,000             $275,000,000
NOTES PAYABLE
 Term notes due May 9, 2005{ (b)}                                  29,813,550               29,753,550
 Acquisitions{ (c)}                                                 6,799,029               12,138,186
 Vehicles, equipment and other                                        174,017                1,542,931
                                                                 $311,786,596             $318,434,667
</TABLE>


Scheduled maturities of debt at March 31, 1997, are as follows:

<TABLE>
<CAPTION>
                       YEARS ENDING MARCH 31,
<S>                                                                   <C>
                            1998                                  $       536,680
                            1999                                          274,865
                            2000                                          232,560
                            2001                                        5,390,880
                            2002                                          538,060
                            Thereafter                                304,813,550
                                                                     $311,786,596
</TABLE>


{(a)} CAI's offering of $275,000,000  of  12 1/4%
   Senior Notes due 2002 closed on September  29,
   1995.  The  proceeds  were used in part to pay
   the cash portions of certain  acquisitions and
   to   fund   a   debt  service  escrow  account
   ("Escrow")  with  approximately three years of
   interest pursuant to the Indenture dated as of
   September 15, 1995 (the "Indenture") governing
   the Senior Notes. The Indenture requires semi-
   annual interest payments (March and September)
   from  Escrow.   The principal  amount  of  the
   Senior Notes is due  in  full on September 15,
   2002. The Senior Notes are  general  unsecured
   obligations of CAI except for a first priority
   security interest in the Escrow and would rank
   equal  with  any  other  senior  debt  of  the
   Company   to  be  issued  and  senior  to  the
   Company's other  debt with respect to right of
   payment.  The  Senior  Notes  are  effectively
   subordinated to all collateralized debt to the
   extent of the value  of assets collateralizing
   such debt. The Indenture  also imposes certain
   limitations and restrictions on CAI, including
   the ability to incur additional  indebtedness,
   pay  dividends,  make  investments, consummate
   certain  asset  sales,  enter   into   certain
   transactions  with  affiliates,  incur  liens,
   engage  in  unrelated  businesses,  and  enter
   into  mergers  and/or  consolidations  without
   express  consent.  (See Note 19 for subsequent
   financing).

{(b)}  Two  $15,000,000   term  notes  issued  to
   affiliates of NYNEX and  Bell Atlantic are due
   on May 9, 2005 with interest  at 16%, accruing
   semi-annually  on  both principal  and  unpaid
   accrued interest.  Interest will be paid semi-
   annually on March 1  and  September  1 of each
   year,  commencing  on March 1, 1999. The  term
   notes  contain  maintenance   and   compliance
   covenants   including   compliance   with  the
   Business   Relationship   Agreement   and  the
   covenants mentioned in (a) above. The original
   discount  of $300,000 represents the value  of
   the Warrants issued with the term notes and is
   amortized  over   the   term  note  period  as
   interest expense. The term notes interest rate
   increased to 16% from 14%  per  annum pursuant
   to  an  adjunct  agreement with certain  other
   affiliates   of  Bell   Atlantic   and   NYNEX
   regarding licensing  issues.   For  the  years
   ended   March  31,  1997  and  1996,  interest
   expense  on   the   term   notes  approximated
   $5,700,000 and $4,000,000, respectively,  both
   of  which  are included in accrued expenses at
   March 31, 1997.
<PAGE>



 CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - DEBT (CONTINUED)

   The term notes are convertible into 14% Senior
   Preferred  Stock  at  the  initial  Conversion
   Price of $10,000  per  Senior  Preferred Share
   until  September  29,  2000.  The  14%  Senior
   Preferred  Shares are convertible into  Voting
   Preferred Stock  based on a formula prescribed
   in the terms of the  Senior  Preferred  Stock.
   In addition to the term notes, the Company has
   issued  to  affiliates  of  Bell  Atlantic and
   NYNEX  7,000 shares of Senior Preferred  Stock
   and  warrants  to  purchase  Voting  Preferred
   Shares  from  the  Company  from  time to time
   based on formulas prescribed in the  terms  of
   the  Stage  I  Warrants  until   September 29,
   2000.    The   Voting   Preferred   Stock   is
   convertible  into common stock.  Together, the
   terms and intent of the term notes, 14% Senior
   Preferred Stock,  and the Stage I and Stage II
   Warrants allow NYNEX and Bell Atlantic through
   their affiliates to  maintain  a  constant 45%
   common   stock   position   in  CAI,  assuming
   exercising the Warrants and full conversion of
   all shares to common shares.  (See Note 17 for
   defined  terms  and  for  updated  information
   concerning   CAI's  relationship   with   Bell
   Atlantic and NYNEX).
{
(c)} The notes payable  for  acquisitions consist
   of  (1)  a series of notes in  the  amount  of
   $2,793,000  relating  to  the  Baltimore Asset
   purchase  due  on  September  29,  2000   with
   interest  payable  quarterly  at  8% per annum
   through  September  1998  and  12%  per  annum
   thereafter   to   maturity,   the   notes  are
   subordinated to all other CAI obligations  for
   borrowed  money  unless,  by  its  terms, such
   obligations  are  not Senior Indebtedness  and
   all other obligations  collateralized by liens
   or a security interest on  CAI   property; and
   (2)  acquisition notes payable reflecting  the
   notes  issued  to Mr. Bott and the Bott Family
   Trust in connection  with the purchase of four
   corporations  with  wireless  channel  rights.
   Three Bott corporations were acquired on March
   31, 1994 partly through  the issuance of notes
   with a face value of $3,750,000, discounted to
   $2,910,000 based on an imputed  interest  rate
   of   8.5%.    Another   Bott  corporation  was
   acquired in January 1996  partly  through  the
   issuance  of  a  note  with  a  face  value of
   $1,430,000, discounted to $757,000 based on an
   imputed interest rate of 12.25%.  Each  of the
   Bott  notes  is  collateralized  by the common
   stock  of  the  company  acquired  and  mature
   through January 2002.

      Pursuant to CAI's debt instruments,  CAI is
restricted from incurring additional indebtedness
(except in connection with purchases of goods and
services in the ordinary course of business,  and
other   ordinary  course  indebtedness  permitted
thereunder, granting liens to secure repayment of
indebtedness,   making  investments  (other  than
investments specifically  permitted  thereunder),
pay dividends, dispose of assets, enter  into any
merger,    consolidation,    reorganization,   or
recapitalization plan, retire  long-term debt, or
make any acquisitions without the  prior  consent
of the lenders.  Further, in accordance with  the
loan agreement governing the subsequent financing
(see   Note  19),  the  Company  is  required  to
maintain  minimal  levels of net worth and number
of subscribers, and  is  limited  with respect to
the amount of annual capital expenditures.

      The components of the consolidated income
tax benefit for the years ended March 31, 1997,
1996, and 1995 are as follows:

<TABLE>
<CAPTION>
                           1997              1996             1995
<S>                  <C>                <C>               <C>
Current              $          -       $         -       $         -
Deferred               15,000,000        12,000,000                 -
    Total             $15,000,000       $12,000,000       $         -
</TABLE>

      The  primary  items  giving  rise   to  the
difference between the federal statutory tax rate
and  the  Company's  effective  tax  rate  is the
recognition  of  certain  tax benefits associated
with  acquisitions  as  a reduction  to  goodwill
under the purchase accounting  rules for the year
ended March 31, 1996 and the establishment  of  a
valuation  allowance  against deferred tax assets
for the years ended March 31, 1995 and 1997.
<PAGE>



 CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - DEBT (CONTINUED)

      The significant components of deferred tax
assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                         1997                     1996                     1995
<S>                                 <C>                      <C>                      <C>
Net operating loss carryovers       $ 72,100,000             $ 24,915,000             $  7,630,000
Intangibles                          (32,635,000)             (34,841,000)              (1,580,000)
Investment in CS Wireless            (18,726,000)             (24,000,000)                       -
Property and equipment                (2,352,000)              (1,434,000)                (462,000)
Other, net                               513,000                  (50,000)                 402,000
  Total net deferred tax asset
  (liability)                         18,900,000              (35,410,000)               5,990,000
Less: Valuation allowance            (18,900,000)                       -               (5,990,000)
Net deferred tax asset (liability) $          -              $(35,410,000)            $          -
</TABLE>

NOTE 9 - INCOME TAXES


      Approximately   $47,410,000   of   the
change in deferred taxes from March 31, 1995
to  March  31, 1996 was recorded  as  a  net
increase  in   goodwill   incident   to  the
purchase accounting of certain acquisitions.
Subsequently,  that  amount  was reduced  by
$20,410,000  due to available net  operating
losses  not  taken   into  account  until  a
determination    was    made     of    their
allowability.

      A  valuation allowance is provided  to
reduce deferred tax assets to a level which,
more likely than not, will be realized.  The
deferred  tax   assets   recorded   reflects
management's  estimate  of  the amount which
will   be   realized   based   upon  current
operating results and contingencies.  During
the year ended March 31, 1996 the  valuation
allowance  of  $5,990,000  as  of March  31,
1995, was eliminated.  During the year ended
March 31, 1997, a valuation allowance in the
amount of $18,900,000 was established.

      The Company has available  as of March
31, 1997 approximately $180,000,000  of  net
operating  loss carryforwards which begin to
expire   in  1998.    The   use   of   these
carryforwards are limited on an annual basis
pursuant to the Internal Revenue Code due to
certain  changes  in  ownership  and  equity
transactions.



NOTE 10 -  DISCLOSURES  ABOUT  FAIR VALUE OF
FINANCIAL INSTRUMENTS

      The following methods and  assumptions
were used to estimate the fair value of each
class of financial instruments for  which it
is practicable to estimate that value:

CASH AND CASH EQUIVALENTS.  The carrying
amount approximates fair value because of the
short maturity of those instruments.

DEBT SERVICE ESCROW.  The fair values of the
investments  in the debt service escrow  are
estimated based on market values.
<PAGE>

     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS

NOTE 10 - DISCLOSURES  ABOUT  FAIR  VALUE OF
FINANCIAL INSTRUMENTS (CONTINUED)

DEBT.  The fair value of the Company's  debt
is  primarily  based on quoted market prices
for its publicly traded Senior Notes and for
the  remaining  debt,   estimated  based  on
quoted market prices for the same or similar
issues or on the current  rates  offered  to
the  Company for debt with similar remaining
maturities.  The fair value of debt maturing
within  twelve months is estimated to be its
carrying value.

<TABLE>
<CAPTION>
                                                     CARRYING AMOUNT                            FAIR VALUE

                                      1997                  1996                   1997                 1996
<S>                                <C>                   <C>                   <C>                   <C>

Cash and cash equivalents          $10,471,918           $103,263,094          $  10,471,918          $103,263,094
Debt service escrow                 47,865,389             77,621,088             47,719,140            77,654,796
Debt
 Senior Notes                      275,000,000            275,000,000            129,250,000           292,187,500
 Term  notes and other              36,786,596             43,434,667             21,073,046            45,556,117
</TABLE>

NOTE 11 - COMMITMENTS AND CONTINGENCIES

PROGRAMMING  CONTRACTS.   In connection with
its distribution of television  programming,
the  Company  has fixed-term contracts  with
various  program  suppliers,  such  as  HBO,
Showtime,  CNN,  MTV, USA, and A&E. Contract
terms range in length  from  one year to ten
years  and  expire at various dates  through
2003.   Most  contracts   are   subject   to
automatic  renewal  upon  expiration  unless
notice  is given, by either party, of intent
not to renew.  These  contracts  require the
Company to pay fees to programmers  based on
the number of subscribers.

Equipment Replacement.  Due to interference
caused    by    the   new   PCS   telephone
frequencies, the Company intends to replace
approximately       24,000       subscriber
downconverters in the  Philadelphia  market
at a rate of approximately 500 replacements
per month plus all of the new installations
receiving  the new equipment.  Replacements
will cost approximately $84 per unit, while
new installations will incur a $62 per unit
additional  cash  outflow  by  not  reusing
currently owned  equipment.  The total cost
of  this  replacement  in  Philadelphia  is
approximately  $1.7 million.  Replace costs
in other CAI markets,  if deemed necessary,
are not expected to be material.

PURCHASE  COMMITMENTS.   As  of  March  31,
1997,   the   Company   had   approximately
$3,200,000 of outstanding purchase  orders,
primarily   relating   to   equipment   and
technical work for the digital projects.

RETIREMENT  PLAN.   Effective April 1, 1996,
the Company sponsored a defined contribution
pension plan pursuant  to  Internal  Revenue
Code  section 401(k), covering substantially
all of  its  employees.   Contributions  are
withheld  from  participating employees with
the Company matching  50% of the first 5% of
covered   employees   wages   withheld   and
contributed to the plan,  which  amounted to
$114,000 for the year ended March 31, 1997.

Legal Proceedings.

      SHAREHOLDERS' CLASS ACTION LAWSUIT. CAI
has  been named in six class action  lawsuits
alleging  various  violations  of the federal
securities  laws  filed in the United  States
District Court for  the  Northern District of
New York.  The actions were consolidated into
one  lawsuit  entitled  IN  RE  CAI  WIRELESS
SYSTEMS,  INC. SECURITIES LITIGATION  (96-CV-
1857) (the  "Securities  Lawsuit"),  which is
currently pending in the Northern District of
New    York.    The   amended,   consolidated
complaint,  which names the Company, Jared E.
Abbruzzese,  Chairman   and  Chief  Executive
Officer  of  the  Company,  John  J.  Prisco,
President,  Chief  Operating  Officer  and  a
Director of the Company, and Alan Sonnenberg,
the
<PAGE>

     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE   11  -  COMMITMENTS  AND  CONTINGENCIES
(CONTINUED)

former President  of the Company and a member
of   the   its    Board  of   Directors,   as
defendants, alleges  a  variety of violations
of the anti-fraud provisions  of  the Federal
securities  laws  by CAI arising out  of  its
alleged disclosure  (or alleged omission from
disclosure) regarding  its Internet and other
flexible use of MMDS spectrum, as well as its
business relationship with  Bell Atlantic and
NYNEX.   Specifically, the complaint  alleges
that defendants  violated  Sections 10(b) and
20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and Rule 10b-
5 promulgated under the Exchange  Act  during
the  specified  Class  Period  (May  23, 1996
through December 6, 1996).

      The Company has notified the carrier of
its   Directors'   and   Officers'  Liability
insurance policy, which is  intended to cover
not   only   the   Company's   officers   and
directors,  but  also  the  Company   itself,
against  claims  such  as  those  made in the
Securities Lawsuit.  The policy covers  up to
$5  million of any covered liability, subject
to a retention amount of $500,000.

      The   Securities   Lawsuit  is  in  its
preliminary stages.  A scheduling  conference
was  held  on  June  3,  1997,  at  which the
briefing  schedule for defendants' motion  to
dismiss was  agreed  upon  among the parties.
Based on such schedule, the  Company believes
that such motion will not be ruled upon until
the  fall  of  1997.   While  the  motion  is
pending,   all   other   deadlines  affecting
motions  and discovery have  been  postponed.
The Company  and  individual  defendants  are
contesting  the Securities Lawsuit vigorously
and believe it  is  entirely  without  merit.
Accordingly,  management  believes  that  the
Securities  Lawsuit  will not have a material
adverse  effect  on the  Company's  earnings,
financial condition or liquidity.

      OTHER  LITIGATION.    The   Company  is
involved in various claims and legal  actions
arising  in  the ordinary course of business.
In the opinion  of  management,  the ultimate
disposition of these matters will  not have a
material  adverse  effect  on  the  Company's
earnings, financial condition or liquidity.

REGULATORY  MATTERS.   Due  to the regulated
nature   of   the   subscription  television
industry,   the   Company's    growth    and
operations  may be adversely impacted by the
adoption of new,  or  changes  to  existing,
laws  or  regulations or the interpretations
thereof.

NOTE 12 - REDEEMABLE PREFERRED STOCKS

      As part  of the BANX Transactions (see
Note  17)  the  BANX  Partnership  purchased
7,000   shares   of     Senior   Convertible
Preferred Stock, par value  $10,000 ("Senior
Preferred")   and   Stage  II  Warrants   to
purchase Voting Preferred Stock, without par
value, of CAI. The Senior  Preferred  has  a
14%  cumulative  dividend, payable quarterly
(optionally  before  December  1,  1998  and
mandatorily after  December  1,  1998).  The
dividend   is   increased   by   an   amount
calculated  at  a  rate  of  14%  per annum,
compounded  semi-annually,  on  any  accrued
dividends remaining unpaid. In addition, the
Company is subject to an additional dividend
at  the rate of 0.5% per quarter on the  par
value plus unpaid accrued dividends pursuant
to an  adjunct  agreement with affiliates of
Bell Atlantic and  NYNEX regarding licensing
issues.

      The  Senior Preferred  is  convertible
into Voting  Preferred  Stock,  based  on  a
formula  prescribed  in  the  terms  of  the
Senior  Preferred for a period of five years
commencing  on  September 29, 1995, the date
of  issue. In turn,  the   Voting  Preferred
Stock  is  convertible  into  common  stock,
initially  at  the  rate  of  100  shares of
common   stock  for  one  share  of   Voting
Preferred Stock. The terms and intent of the
Senior  Preferred   and   the   Term  Notes,
together  with  the  Stage  I  and Stage  II
Warrants  held  by  affiliates of NYNEX  and
Bell Atlantic, are to allow them the ability
to  maintain a 45%  common  stock  ownership
position at all times, assuming exercise and
conversion  of  all  warrants  and preferred
shares.  The  Senior  Preferred  Stock  also
provides  for  mandatory redemption  at  par
plus any accrued  dividends on September 29,
2005, absent any conversion.

In conjunction  with  the  January  9,
1995 acquisition of the New York System, the
Company issued 180,500 shares of Series A 8%
Redeemable   Convertible   Preferred  Stock.
During the year ended March 31, 1997, all of
the   Series  A  8%  Redeemable  Convertible
Preferred  Stock  had  been converted into a
total  of  2,637,742 shares  of  CAI  Common
Stock.
<PAGE>

     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 13 - SHAREHOLDERS' EQUITY

      In  May  1996,  75,000  warrants  were
exercised on  a non-cash basis at $.25 by an
officer of the  Company for 73,315 shares of
common stock.  The  value  of  the aggregate
exercise price was $18,329.

      On  September  29,  1995, the  Company
amended  and  restated  its  Certificate  of
Incorporation, with shareholder approval, to
increase the authorized number of CAI no par
Common  Shares  available for issuance  from
45,000,000 to 100,000,000  and  to authorize
15,000  shares of a new class of 14%  Senior
Preferred Stock, par value $10,000 per share
and 2,000,000  shares  of  a  new  class  of
Voting  Preferred  Stock,  no par value. The
Senior  Preferred Stock is convertible  into
Voting  Preferred   Stock   and  the  Voting
Preferred Stock is convertible  into  common
stock.

      On   March   8,   1995,   the  Company
authorized  and  issued  20,000  shares   of
Series  B  preferred  stock  for  $2,000,000
gross  proceeds  before a $100,000 placement
fee.   All  20,000  shares   of    Series  B
preferred stock were converted into  271,739
shares of common stock.

      The stock capitalization is as follows:

<TABLE>
<CAPTION>
                                            Shares Authorized                    Shares Issued and Outstanding
        CLASS OF  STOCK                    AS OF MARCH 31, 1997              MARCH 31, 1997          MARCH 31, 1996
<S>                                            <C>                           <C>                     <C>
Preferred stock
   14% Senior convertible preferred stock,
   par value $10,000 per share                    15,000                        7,000                     7,000
  Series preferred stock, no par value
     Series A 8% redeemable convertible
     preferred stock, no par value               350,000                            -                   180,500
    Undesignated                               4,650,000                            -                         -
     Total series preferred stock              5,000,000                            -                   180,500
   Voting preferred stock, no par value        2,000,000                            -                         -
     Total preferred stock                     7,015,000                        7,000                   187,500
Common stock, no par value                   100,000,000                    40,540,539               37,829,482
</TABLE>

NOTE 14 - OPTIONS AND WARRANTS

STOCK OPTION PLANS

      INCENTIVE   AND   NONQUALIFIED   STOCK
OPTION  PLANS.  The Company's 1995 Incentive
Stock Plan  (the  "1995  Plan") provides for
the   grant   of  incentive  stock   options
qualifying under Section 422 of the Internal
Revenue Code ("ISO's"),  non-qualified stock
options   ("NQSO's"),   stock   appreciation
rights,  performance shares  and  restricted
stock or any  combination  of the foregoing,
as the Compensation Committee  of  the Board
of    Directors    (the   "Committee")   may
determine.  The 1995  Plan  will  expire  on
March  27,  2005.    The  number  of  shares
available for grants is 1,200,000 shares and
the  1995  Plan  is  administered   by   the
Committee.    Vesting   and  the  per  share
exercise  price  for stock  options  granted
under the 1995 Plan,  which will not be less
than 100% of the fair market value per share
of common stock on the  date  the  option is
granted,  is determined by the Committee  at
the time of grant.
<PAGE>


     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 14 - OPTIONS AND WARRANTS (CONTINUED)

      In November  1993, the Company adopted
its  1993 Stock Option  and  Incentive  Plan
(the "1993  Plan").  Under  the  1993  Plan,
options to purchase an aggregate of not more
than 1,000,000 shares of common stock may be
granted, from time to time, to key employees
(including     officers),    advisors    and
independent consultants to the Company or to
any of its subsidiaries.  Options granted to
officers and employees may  be designated as
incentive  stock  options ISO's  or  NQSO's.
Options granted to  independent  consultants
and   other   nonemployees   may   only   be
designated   NQSO's.    The   1993  Plan  is
administered by the Committee.   Vesting and
the  per  share  exercise  price  for  stock
options  granted under this Plan, which will
not be less  than  100%  of  the fair market
value per share of common stock  on the date
the option is granted, is determined  by the
Committee at the time of grant.

      OUTSIDE  DIRECTORS'  OPTION PLAN.   In
October 1996, the Company adopted  the  1996
Outside  Directors'  Stock  Option Plan (the
"1996  Directors'  Plan").  Under  the  1996
Directors'  Plan,  options  to  purchase  an
aggregate of not more than 45,000  shares of
common  stock  will be granted from time  to
time   to   nonemployee   directors.    Each
qualifying  director  shall  be  granted  an
option to purchase  7,500  shares at a price
not be less than 100% of fair  market  value
on the date of the grant.  Such option shall
vest:  25% on the date of grant, and 25%  on
each   of  the  second,  third,  and  fourth
anniversaries  of  the grant.  These options
are exercisable for  a  period of ten years,
but not before an initial  six-month period.
As  of  March  31,  1997,  the  Company  has
granted options under this plan to  purchase
30,000  shares of common stock at a weighted
average price of $6.63 per share.

      In  October  1993, the Company adopted
the 1993 Outside Directors' Option Plan (the
"1993  Directors'  Plan").  Under  the  1993
Directors'  Plan,  options  to  purchase  an
aggregate of not more  than 30,000 shares of
common  stock may be granted  from  time  to
time to nonemployee directors. These options
will vest  at  the  rate  of 20% a year over
five years, beginning one year after date of
grant    and    are   exercisable   for    a
period of seven years.  The  exercise  price
for  stock  options  granted  under the 1993
Directors' Plan will not be less  than  100%
of the fair market value of the common stock
on the grant date. As of March 31, 1997, the
Company   has  granted  outstanding  options
under this  plan to purchase 8,334 shares of
common stock at $11 per share.

      VALUATION  OF  OPTIONS.   The  Company
applies APB Opinion No. 25 in accounting for
its Stock Option Plans and, accordingly,  no
compensation  cost  has  been recognized for
its   stock   options   in   the   financial
statements.    Had  the  Company  determined
compensation cost based on the fair value at
the grant date for  its  stock options under
SFAS No. 123, the Company's  net  loss would
have been increased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                     YEARS ENDED MARCH 31,
                                  1997                    1996
<S>                           <C>                     <C>
Net loss:
       As reported            $ (82,298,207)          $(40,985,572)
         Pro forma              (88,839,207)           (42,942,572)
Loss per common share:
       As reported                    (2.38)                 (1.73)
         Pro forma                    (2.54)                 (1.80)
</TABLE>
<PAGE>




     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 14 - OPTIONS AND WARRANTS (continued)

The  initial  impact  of SFAS No. 123 on pro
forma  earnings  per  share   may   not   be
representative  of  the  effect on income in
future  years  because  options   vest  over
several  years and additional option  grants
may be made  each  year.   The fair value of
each option grant is estimated  on  the date
of  grant  using  the  Black-Scholes  option
pricing  model  with  the following weighted
average assumptions used  for  grants issued
in the years ended March 31, as follows:

<TABLE>
<CAPTION>

                                       1997                    1996
<S>                                    <C>                     <C>
Dividend yield                           0%                      0%
Risk free interest rate                6.0%                    6.0%
Expected life (years)                  9.2                     3.6
Volatility                             0.99                    0.72

</TABLE>

      OPTION  ACTIVITY.   A  summary  of  the
status of the Company's stock option plans as
of March 31, 1997, 1996 and 1995, and changes
during  the  years  ending  on those dates is
presented below:
<TABLE>
<CAPTION>
                                          1997                               1996                            1995
                                              Weighted                        Weighted-                    Weighted-
                                              -Average                        Average                      Average
                                               Exercise                       Exercise                     Exercise
                                SHARES          PRICE            SHARES        PRICE           SHARES        PRICE
<S>                         <C>                <C>           <C>              <C>           <C>             <C>   
 Outstanding, beginning     1,274,134          $7.74            941,834       $12.29          452,667       $11.00

 Granted                    1,071,803          $2.20          1,756,800        $8.52          743,834       $12.53

 Forfeited                    150,000          $7.75         (1,424,500)      $11.69         (254,667)      $11.00

 Outstanding, ending        2,195,937          $4.91          1,274,134        $7.74          941,834       $12.29

Fair value of options
granted                                        $1.57                           $6.43
</TABLE>

The total number of shares of  common  stock
reserved  for  options  is  2,275,000  as of
March 31, 1997.

      The    following    table   summarizes
information about stock options  outstanding
at March 31, 1997:

<TABLE>
<CAPTION>
      OPTIONS OUTSTANDING                                            OPTIONS EXERCISABLE
                                      Weighted-
                                      Average             Weighted-                           Weighted-
   RANGE OF          Number           Remaining            Average           NUMBER            Average
 EXERCISE PRICES     OUTSTANDING    CONTRACTUAL LIFE    EXERCISE PRICE       EXERCISABLE     EXERCISE PRICE

<S>                  <C>                <C>                  <C>               <C>                <C>
$1.75 to $2.06         981,803           10 years            $1.75               91,803           $1.75

$6.63 to $8.00       1,205,800           9 years             $7.68              866,150           $7.72

   $11.00                8,334           5 years            $11.00                8,334          $11.00

                     2,195,937                                                  966,287
</TABLE>

<PAGE>



 CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 14 - OPTIONS AND WARRANTS (CONTINUED)

WARRANTS

      THE    BANX    WARRANTS.    The   BANX
Partnership  holds  warrants   to   purchase
Voting Preferred Stock which are exercisable
at   an  aggregate  price  of  approximately
$95,000,000   and  which  entitle  the  BANX
Partnership to  common stock aggregating 45%
of the then total  outstanding shares of the
Company   if  exercised   along   with   the
conversion  provisions of the term notes and
senior preferred  stock  for  which  CAI has
already received $100,000,000.  See Note  17
for  updated  information  concerning  CAI's
relationship with Bell Atlantic and NYNEX.

      COMMON  STOCK  WARRANTS.   Outstanding
warrants,  except  for those issued  to  the
BANX Partnership, are as follows:

<TABLE>
<CAPTION>
                                       Weighted-Average            Number of
                                        EXERCISE PRICE              Warrants
<S>                                      <C>                       <C>
Outstanding, April 1, 1994               $9.56                     1,214,000
   Issued{(1)}                           $8.40                       880,578
   Exercised                             $0.25                       (74,000)
Outstanding, March 31, 1995              $9.40                     2,020,578
   Issued{(2)}                               -                       289,963
Outstanding, March 31, 1996              $7.72                     2,310,541
   Issued{(2)}                               -                       616,912
   Exercised                             $0.25                       (75,000)
Outstanding, March 31, 1997              $6.24                     2,852,453
</TABLE>

      {(1)  }The  warrants  were  issued  to
bridge  lenders  in  connection   with   the
acquisition of the New York System.

      {(2)  }The warrants issued and certain
         warrant   exercise  prices  revised
         during the  years  ended  March 31,
         1997  and  1996  were  pursuant  to
         anti-dilutive clauses in agreements
         relating to the warrants.

      The   average   purchase   price    of
outstanding  common  stock warrants at March
31, 1997, 1996 and 1995 was $6.24, $7.72 and
$9.40  per  share,  based  on  an  aggregate
purchase price of $17,811,114,  $17,829,083,
and  $18,989,050, respectively.  Outstanding
warrants will expire over a period ending no
later than January 2000.


NOTE 15 - OPERATING LEASES

      The  Company  leases  office  space in
each  market it currently operates in  under
non-cancelable   agreements   which   expire
through  March  2006,  and  requires various
minimum  monthly  payments  and  payment  of
property  taxes,  certain  maintenance,  and
insurance.

      The Company leases towers, land and/or
building  space  in  each  of its  operating
markets   and  certain  other  markets   for
broadcasting  purposes.  The leases are non-
cancelable   agreements   expiring   through
December  2012.  Most  of  the  leases  have
provisions for renewal periods.  The  leases
require  various  minimum   monthly payments
and  are  subject  to  periodic  fixed   and
inflationary increases.

      The   Company   leases   vehicles  for
customer  service  and other corporate  use.
The  agreements  are non-cancelable,  expire
through  April  1997   and  require  various
monthly payments. The Company is responsible
for normal maintenance and insurance.
<PAGE>




     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 15 - OPERATING LEASES (CONTINUED)

      Additionally,   the   Company   leases
certain office and broadcast  test equipment
under various lease agreements  for  periods
up  to  thirty-six  months. The Company pays
various monthly payments  and is required to
maintain and insure such equipment.


      The approximate minimum rental
commitments for operating leases as of March
31, 1997 due in future years is as follows:

<TABLE>
<CAPTION>
                     YEARS ENDING MARCH 31,
<S>                                                               <C>
                1998                                             $  3,505,000
                1999                                                3,016,000
                2000                                                2,370,000
                2001                                                1,978,000
                2002                                                  998,000
                Thereafter                                          5,583,000
                    Total                                         $17,450,000
</TABLE>


      Total rent expense for the years ended
March 31, 1997, 1996, and 1995 was
approximately $3,258,000, $2511,000, and
$1,080,000, respectively.

NOTE 16 - RELATED PARTY TRANSACTIONS

      On May 8, 1995 CAI sold, subject to an
option to repurchase exercisable at any time
prior to January 1, 1996, all  of the issued
and  outstanding  stock  of  TelQuest,  Inc.
("TelQuest") with a negative net  book value
of  approximately $70,000, to Wave Holdings,
L.L.C., a Delaware limited liability company
controlled  by  Jared  E.  Abbruzzese, CAI's
Chairman  and Chief Executive  Officer,  for
$25,000.   The   gain   on   this   sale  of
approximately  $23,000 was deferred and  was
not   included   in    income.    TelQuest's
involvement  in  certain  operations   could
have,  at  that  time, violated the Modified
Final Judgment, if  engaged in by an RBOC or
an affiliated enterprise.   In May 1996, CAI
relinquished   its   option   to  repurchase
TelQuest   for  a  2%  equity  interest   in
TelQuest  Systems,   Inc.,   the   operating
successor of TelQuest's business.

      In  consideration  of Mr. Abbruzzese's
guaranteeing the obligation  of  CAI to MMDS
Holdings,  an  affiliate  of  Bell Atlantic,
which   permitted   CAI   to  complete   the
Microband acquisition in January  1995,  the
CAI  Board  of  Directors awarded options to
acquire 150,000 CAI  Common Shares at $11.00
per share to Mr. Abbruzzese.

      In October 1996, two of CAI's officers
formed  a company, Telecom  Service  Support
LLC   ("TSS"),    to    provide   subscriber
installation, service calls,  and  warehouse
service   to   the  subscription  television
industry.    CAI   incurred    approximately
$348,000 for such services during  the  year
ended March 31, 1997.  Additionally, CAI has
advanced  $80,000, provided leased vehicles,
and provided certain facility space to TSS.

      CAI periodically  charters an airplane
from  Wave  Air,  Inc., which  is  primarily
owned by Mr. Abbruzzese,  in  order to carry
out business when airline schedules  are not
compatible. Transactions with Wave Air, Inc.
amounted   to   approximately  $278,000  and
$103,000 for the  years ended March 31, 1997
and 1996, respectively (none for 1995).
<PAGE>


     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE   16   -  RELATED  PARTY   TRANSACTIONS
(CONTINUED)

      During  the year ended March 31, 1997,
CAI loaned $800,000  to  Haig Capital L.L.C.
and  $200,000  to  TelQuest  Communications,
Inc., entities in which Mr. Abbruzzese  is a
principal     member     and    stockholder,
respectively,    of    which   approximately
$175,000  was  repaid by Haig  Capital.   In
March  1997,  Mr.   Abbruzzese   combined  a
$19,000  February  1997  loan from CAI,  the
remaining   obligation   of  Haig   Capital,
accrued  interest  on  both  loans,  and  an
additional  $100,000 advance in  April  1997
(subsequent to  year-end)  into one personal
unsecured, demand obligation  in  the amount
of  $780,054,  bearing  interest at 14%  per
annum.   In   March  1997,  CAI   separately
purchased certain  used  equipment  for  the
Boston  Project from Haig Capital L.L.C. for
$107,000.

      The  loan  to TelQuest Communications,
Inc. is evidenced  by  a  promissory note in
the  principal  amount  of  $200,000,  bears
interest at 14%, and matures  in March 2000.
The   note   is  convertible  into  TelQuest
Communications,  Inc.  common  stock  at the
election  of  CAI.  The Company is currently
negotiating the  terms  of  a  joint venture
with   TelQuest   Communications   and    CS
Wireless, pursuant to which the Company will
be  obligated to invest $2.5 million in cash
and purchase  $2.5  million  of equipment in
exchange for an initial equity  interest  in
the  joint  venture  of  25%.   The original
$200,000  loan  to  TelQuest  Communications
will  be  contributed to the joint  venture,
and  CAI  will  receive  a  credit  for  the
principal  and   accrued  interest  on  such
amount against the cash portion of its joint
venture  investment   obligation.   Interest
earned all related party  loans approximated
$63,400 for the year ended March 31, 1997.

      During    April    1997,   CAI    sold
approximately  $2,112,000  of  equipment  at
book value from the Boston Project  that was
not  needed to CS Wireless for 20% down  and
the balance  due  in 30 days after delivery.
Additionally, during  April 1997, CAI placed
purchase  orders  approximating   $1,612,000
with  CS  Wireless for equipment needed  for
the Boston  Project,  taking advantage of CS
Wireless'  favorable  pricing   arrangements
with its vendor.

NOTE 17 - TRANSACTIONS AND AGREEMENTS WITH
BELL ATLANTIC AND NYNEX

      In  March  1995,  CAI entered  into  a
strategic  business relationship  with  BANX
Partnership,  an  affiliate of Bell Atlantic
and NYNEX (the "BANX  Partnership") and with
other affiliates of Bell  Atlantic and NYNEX
(the  "BANX Affiliates"). This  relationship
consisted of (i) the signing of the Business
Relationship  Agreement, as amended (the "BR
Agreement") with  the  BANX Affiliates, (ii)
the purchase by the BANX  Partnership of $30
million of convertible Term Notes due May 9,
2005 ("BANX Term Notes") and  Warrants  (the
"BANX  Warrants")  to  purchase  convertible
preferred  stock, no par value (the  "Voting
Preferred Stock"), and (iii) the purchase by
the BANX Partnership  of  $70 million of 14%
Senior  Convertible  Preferred   Stock,  par
value  $10,000  per share ("Senior Preferred
Stock")  and  additional   Warrants.    Upon
issuance  of the CAI Securities in September
1995, the full conversion or exercise of the
CAI Securities  would  have  resulted in the
BANX   Partnership   having   to   make   an
additional     investment    in    CAI    of
approximately  $202  million,  and  its  pro
forma ownership  interest  in CAI increasing
to approximately 45%.

      Pursuant to the BR Agreement, which was
intended to allow CAI to realize  revenue  in
certain  of  its  markets  without  incurring
substantial capital expenditures required for
subscriber equipment and installation as well
as eliminate most operating costs, other than
channel license fees and distribution  system
expenses,  CAI granted to each BANX Affiliate
the ability,  on a market by market basis, to
elect to become  the marketer and provider of
subscription television  services using CAI's
MMDS transmission systems  in  each market in
their  respective  service areas in  exchange
for monthly service  revenues  based  on  the
number    of   serviceable   households   and
subscribers  in  each market so optioned by a
BANX  Affiliate.   In   connection  with  the
Company's obligations under the BR Agreement,
CAI substantially completed  the construction
of digital video delivery systems  in Boston,
MA  and  Hampton Roads, VA.  Through December
12, 1996, however, neither BANX Affiliate had
exercised  their respective options under the
BR Agreement  in  these  or any other markets
contemplated by the BR Agreement.
<PAGE>


     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 17 - TRANSACTIONS AND  AGREEMENTS  WITH
BELL ATLANTIC AND NYNEX (CONTINUED)

      On  December  12, 1996, the Company and
the   various   BANX  entities   reached   an
agreement   (the  "Modification   Agreement")
modifying certain  terms  of the BR Agreement
and  providing CAI or its designee  with  the
right  to  acquire  the  CAI Securities.  The
Modification   Agreement   was   subsequently
amended  on  April  29,  1997,  pursuant   to
Amendment No. 1 to the Modification Agreement
(the "Amendment").

      The     Amendment    represents    the
renegotiation of an option granted to CAI to
repurchase the  $100  million face amount of
CAI securities held by the BANX Partnership.
The repurchase consideration  is $40 million
in   cash   and   100,000   shares   of  CAI
convertible  junior  preferred  stock.   The
junior preferred stock, which is non-voting,
carries  no  coupon  and has no maturity, is
convertible into 2.5 million  shares  of CAI
common  stock.   The  repurchase  option  is
exercisable through February 28, 1998

      As  part  of  the  Amendment,  the BANX
Affiliates also immediately released CAI from
its obligation under the BR Agreement to make
CAI's wireless MMDS spectrum available to the
BANX  Affiliates  at a future date in Boston,
MA,
Pittsburgh,  PA,  and  Albany,  Syracuse  and
Buffalo, NY.  Upon  a  repurchase  of the CAI
securities, as contemplated by the Amendment,
the  BR Agreement will lapse in its entirety,
releasing a similar obligation in CAI's other
markets.

      In  connection  with  the execution of
the  Amendment,  the  BANX Partnership  also
suspended or released CAI  from  a number of
covenant restrictions and governance  rights
and provided CAI with a blanket proxy on the
approximately  10%  interest  in CS Wireless
held by BANX entities  If the repurchase  is
consummated, the CS Wireless shares would be
returned    to    CAI   without   additional
consideration  The  parties  also  exchanged
mutual releases and reached an agreement  to
share   certain   patent   and  intellectual
property  rights  related  to their  digital
wireless venture.

      In  addition  to  the $40  million  in
cash, Bell Atlantic and NYNEX  will  receive
as consideration for the surrender of  their
CAI  securities,  100,000 shares of a series
of non-voting junior  preferred  stock.  The
junior preferred stock carries a liquidation
preference  of $30 million in the aggregate,
but carries no  special dividends, covenants
or governance rights,  except as provided by
the  Connecticut Business  Corporation  Act,
under  which  CAI  is incorporated.  Each of
the 100,000 shares of junior preferred stock
is convertible into  25 shares of CAI common
stock in the hands of a subsequent purchaser
unrelated to Bell Atlantic or NYNEX.  If the
junior preferred stock  continues to be held
by Bell Atlantic and NYNEX  at  the  end  of
three years, and the value of the CAI common
stock is not at least $14.00 per share, then
Bell Atlantic and NYNEX would be entitled to
a  value  floor  representing the difference
between the then-market  value  of  the  CAI
common  stock  and  $14.00  per  share  (the
"Value  Floor").   At  CAI's  election,  the
Value  Floor  would be payable either in the
form of up to,  but not more than, 1 million
additional shares  of CAI common stock or in
the form of a ten-year  subordinated note in
a  principal amount of up  to  $15  million,
bearing interest at 8%, which is payable-in-
kind for the first five years.

NOTE 18 - GOING CONCERN

     CAI's recurring losses, restrictions
to  obtain   additional   financing,  and
substantial       commitments,      raise
substantial doubt about CAI continuing as
a  going concern.  For  the  year  ending
March  31, 1998, the Company is obligated
to   pay  approximately   $8,500,000   in
minimum  license fees and lease payments,
approximately  $1,100,000 in MMDS license
auction fees and to fund operating costs.

      On  June  6,   1997,  CAI  completed  a
$30,000,000  interim  financing   arrangement
with   Foothill   Capital   Corporation   and
affiliates of Canyon Capital Management, L.P.
to  fund  the  Company's  near  term  working
capital  requirements.  This  credit facility
consists of  $25,000,000 in term  loans and a
$5,000,000  revolving  loan,  both  of  which
mature on March 1, 1999. Management estimates
that  the  present  revenue  stream  and cash
resources available to the Company, including
this  interim  financing  in  June  1997  are
adequate   to  sustain  the  Company's  needs
through December 1997.
<PAGE>


     CAI WIRELESS SYSTEMS, INC. AND
              SUBSIDIARIES

     NOTES TO CONSOLIDATED FINANCIAL
               STATEMENTS


NOTE 18 - GOING CONCERN (CONTINUED)

      On   a   long-term   basis,   CAI   has
substantial indebtedness  which  beginning in
fiscal  year 1999 will have significant  debt
service  requirements  and  senior  preferred
stock dividend  payments.   As  of  March 31,
1997, CAI had outstanding consolidated  long-
term  debt  of  $312,000,000  and  14% senior
preferred stock of $70,000,000.

      Additionally, pursuant to the  terms of
the Amendment, CAI has been granted the right
to  purchase  the  CAI  Securities.  Upon the
consummation   of   such   purchase,  the  BR
Agreement  would terminate eliminating  CAI's
strategic   relationship    with   the   BANX
Affiliates    including    all   restrictions
relating thereto. The Amendment allows CAI to
buy out the BANX investment  for  $40 million
plus   100,000  shares  of  junior  preferred
stock.  The Company is actively seeking a new
strategic   partner   to   replace  the  BANX
Partnership  and  to  provide  the  necessary
interim  and long-term funding to  carry  out
CAI's short  and  long term objectives. CAI's
ability to locate such  strategic  partner(s)
to  replace  BANX may be limited by the  BANX
Partnership's  willingness  to  negotiate the
terms and conditions of the purchase  of  the
CAI Securities.

      The  Company's  business  strategy  has
shifted away from analog to digital  wireless
cable   systems  for  its  MMDS  subscription
television    services     and   to   explore
alternative uses of its MMDS  spectrum  for a
variety   of  applications  including  video,
voice and data  transmission such as Internet
access and telephony  delivery  services.  In
management's  opinion, the new strategy  will
help meet the current  and  perceived  future
competition  and  in relation to obtaining  a
new strategic partner,  show  the flexibility
and  increased  value  of the Company's  MMDS
spectrum. In connection  with  achieving  the
objectives   set   forth,  CAI  is  committed
through additional open purchase orders as of
June   17,   1997   to  spend   approximately
$5,000,000 primarily for capital expenditures
associated with additional development of the
Boston digital transmission  facilities. This
commitment  is in addition to the  $3,200,000
of open purchase orders as of March 31, 1997.
The increase in commitment is to be funded in
part by the new  interim  financing  and  the
balance through a new strategic partner.

NOTE 19 - SUBSEQUENT EVENTS

      On  June  6, 1997, the Company closed a
$30 million interim  credit facility provided
by    Foothill   Capital   Corporation    and
affiliates of Canyon Capital Management, L.P.
(the "Interim  Debt  Lenders").   The  credit
facility is comprised of $25 million of  term
debt, of which $10 million was made available
at  the closing and is currently outstanding.
The balance  of  the  term  debt will be made
available  to  CAI  upon  the achievement  of
certain  agreed-upon operational  benchmarks.
The term debt  bears  interest at the rate of
13% per annum.  So long as the Company is not
in  default  of  its  obligations  under  the
credit  facility, the Company  can  elect  to
have one-half  of  the  interest  on the term
debt  accrue  and  be  added to the principal
amount  outstanding on the  term  debt.   The
remaining  portion  of the term debt interest
is payable monthly in arrears.  The term debt
matures on March 1, 1999,  at  which time all
accrued and unpaid interest on and  principal
of  the  outstanding amount of the term  debt
shall be due and payable in full.

      The  Interim  Debt  Lenders  have also
made available to CAI a $5 million revolving
loan, of which $3 million was made available
to   CAI  at  the  June  6th  closing.   The
remaining  $2  million of the revolving loan
will  be  made available  to  CAI  upon  the
achievement   by   the  Company  of  certain
operational benchmarks.   The revolving loan
bears  interest  at four and  three-quarters
percent  above  the   Reference   Rate,   as
announced from time to time by Norwest Bank.
Principal and interest on the revolving loan
is  payable  monthly, and the revolving loan
expires on March  1,  1999.   As of June 17,
1997,  the Company had not yet borrowed  any
amount against the revolving loan.
<PAGE>

           PART III

   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
        OF CAI WIRELESS SYSTEMS, INC.

      The following table sets forth certain
information concerning each of the Company's
directors and executive officers:

<TABLE>
<CAPTION>
      NAME                         Age                Position with Company
<S>                                <C>                <C>
Jared E. Abbruzzese                42                 Chairman, Chief Executive Officer and Director (1)
John J. Prisco                     41                 President, Chief Operating Officer and Director (1)
George M. Williams                 56                 Chief Administrative Officer, Secretary, Treasurer and Director(1)
Timothy J. Santora                 42                 Executive Vice President (1)
James P. Ashman                    43                 Executive Vice President, Chief Financial Officer and Director
Craig J. Kessler                   40                 Vice President and Controller
Arthur C. Belanger                 71                 Director(2)
Harold A. Bouton                   53                 Director(3)
David M. Tallcott                  51                 Director(2)(3)
Alan Sonnenberg                    45                 Director
Robert D. Happ                     56                 Director(2)(3)
</TABLE>

(1)  Member  of  Executive  Committee.   The
   Executive  Committee conducts the affairs
   and  business   of  the  Company  between
   meetings of the Board of Directors.
(2) Member of Audit  Committee.   The  Audit
   Committee  assists the Board of Directors
   in fulfilling  its  responsibilities with
   respect to the Company's  accounting  and
   financial reporting activities.
(3)  Member  of Compensation Committee.  The
   Compensation   Committee  determines  the
   compensation to be paid by the Company to
   its officers and administers the 1995 and
   1993 Stock Option Plans, the 1993 Outside
   Directors'  Option   Plan  and  the  1996
   Outside Directors' Option Plan.

      The Certificate of  Incorporation  and
the  Bylaws  of  the  Company,  as  amended,
provide for a minimum of three and a maximum
of eleven members of the Company's Board  of
Directors (the "Board") and permit the Board
to  specify  the  number of directors within
that  range by resolution.   The  Board  has
currently  established the size of the Board
at nine members.   All directors hold office
until their successors have been elected and
qualified.  The  Company   has  agreed  with
Gerard  Klauer  Mattison  &  Co.,  LLC,  the
representative  of the Underwriters  of  the
Company's initial  public offering of Common
Stock (the "Representative"),  that  for the
five-year  period ending February 1999,  the
Company will  use its best efforts to cause,
if  requested  by   the  Representative,  an
individual  selected by  the  Representative
and reasonably  acceptable to the Company to
be  elected  to the  Board  who  may  be  an
officer,  director   or   affiliate  of  the
Representative.  To date, the Representative
has made no such request.

      JARED  E.  ABBRUZZESE  has   been  the
Chairman,  Chief  Executive  Officer  and  a
director  of the Company since its formation
in  August 1991.   From  August  1992  until
September  1993,   Mr.  Abbruzzese served in
various capacities for the prior operator of
a wireless cable system in  Albany,  NY, Mr.
Abbruzzese   served   as  President  of  The
Diabetes  Institute Foundation  in  Virginia
Beach,  Virginia  from  October  1988  until
August  1991.    Since  February  1996,  Mr.
Abbruzzese has served  as Chairman and Chief
Executive Officer of CS Wireless.

      JOHN  J.  PRISCO has  been  President,
Chief Operating Officer  and  a  director of
CAI as of March 1, 1996.  Mr. Prisco came to
CAI  from  Bell  Atlantic  Network Services,
Inc., where he spent the last three years as
a   corporate  officer,  most  recently   as
President of CellularVision of New York, the
only  LMDS  (28 GHz) wireless cable operator
in the U.S. In 1986, Mr. Prisco founded Penn
Access Corporation  , which operated a fiber
optic network in the  greater Pittsburgh, PA
area.  Mr. Prisco served  as  President  and
Chief Executive Officer of Penn Access until
its  sale  in  1993  to Tele-Communications,
Inc.  Penn Access currently operates as part
of the Teleport Communications Group.

JAMES  P. ASHMAN  has  been  Executive
Vice President  and  Chief Financial Officer
of CAI since December  1995.  Previously, he
was Senior Vice President  and  Treasurer of
the Company from September 1994 to  December
1995.   He  has  been a director since March
1994.  From November 1992 to September 1994,
he was a senior advisor  of, and independent
consultant affiliated with,  Carolina Barnes
Capital,  Inc. ("CBC"), a registered  broker
dealer.  CBC  served  as a financial advisor
to  the  Company   from January  1993  until
September  1994.   Mr.   Ashman   was   Vice
President  of  Richter & Co., Inc. from June
1990 to November 1992.  Since February 1996,
Mr. Ashman has served  as  a  director of CS
Wireless.
<PAGE>


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
   CAI WIRELESS SYSTEMS, INC. (CONTINUED)


      GEORGE  M.   WILLIAMS   has   been  
Chief  Administrative  Officer and 
Corporate Analyst, Treasurer and
Secretary  of  the  Company  since  December
1995, and served as Executive Vice President
of Finance and Chief  Financial  Officer  of
the  Company from August 1993 until December
1995.   Mr. Williams  has been a director of
the  Company   since  August  1993  and  was
Treasurer from March  1994 through September
1994.    Mr.   Williams  was   a   financial
consultant  to the  Company  from  September
1992 until his  current  appointment.   From
1986  until  August 1993 he was a partner in
Cable    Management    Services    providing
management consultation to the hard-wire and
wireless  cable   industries   in  both  the
domestic and international markets.   He was
involved   in   the   start-up  of  Schomann
Entertainment, Inc., a small hard-wire cable
multiple systems operator,  as a partner and
controller with operational responsibilities
from 1987 until August 1993.   He  also  has
been  a  consultant  in the cable television
industry  since  1986.    Mr.   Williams  is
currently  a 20% shareholder and officer  of
Hamilton County  Cable TV, Inc., a hard-wire
cable system operator.

      TIMOTHY J. SANTORA  has been Executive
Vice President of the Company since November
1995.   From May 1993 until  November  1995,
Mr. Santora  was  Senior  Vice President and
Secretary of the Company, and  from May 1993
until February 1994, Mr. Santora  served  as
the Company's Treasurer.  Mr. Santora served
as  a  director of the Company from May 1993
until  March   1996.  From  August  1991  to
September   1992,   Mr.   Santora   provided
consulting services to the Company.

      CRAIG J.  KESSLER  was  Vice President
and  Controller  of  CAI  from  March   1994
through  June  1997.   From  June 1989 until
joining  CAI,  he  was a senior manager  and
assistant  director of  quality  control  at
Urbach,  Kahn,  and  Werlin,  PC,  a  public
accounting  firm, responsible for the firm's
continuing  professional  education,  client
service, and  compliance  with  professional
standards.    Mr.  Kessler  is  a  certified
public accountant and member of the American
Institute  of Certified  Public  Accountants
and  New York  State  Society  of  Certified
Public Accountants.

      ARTHUR C. BELANGER has been a director
of  the  Company  since  March  1994.   From
December  1979  to 1984, Mr. Belanger served
as Vice President  and General Manager of GE
Cablevision.   GE  Cablevision  merged  with
United Artists Communications,  Inc.  ("UA")
in 1979.  In 1984, Mr. Belanger became  UA's
Executive Vice President and Chief Operating
Officer  and  held  that  position until his
retirement in January 1992.   At  that time,
UA    served    approximately    3   million
subscribers.  Mr. Belanger is also  a member
of  the  Board  of Directors of TCI Ventures
Five, Inc.

      HAROLD A. BOUTON  has  been a director
of  the Company since September  1994.   Mr.
Bouton  is the President and Chief Executive
Officer of  WTVI,  Channel  42,  the  Public
Broadcast   Service   ("PBS")  affiliate  in
Charlotte, North Carolina,  positions he has
held since 1983.

      DAVID M. TALLCOTT has been  a director
of  the  Company  since  March  1995.  Since
1990,  Mr.  Tallcott  has been President  of
Lortech Corporation, a  full  service  large
mainframe commercial data center serving the
insurance  industry, labor unions and direct
mailers.

      ALAN SONNENBERG has been a director of
the Company  since  September 29, 1995.  Mr.
Sonnenberg served as  President  of CAI from
September 29, 1995, when ACS was acquired by
the  Company, until February 23, 1996,  when
he  became   President   of   CS   Wireless.
Currently,  Mr.  Sonnenberg  serves as  Vice
Chairman  of  CS Wireless.  Previously,  Mr.
Sonnenberg served  as  Chairman of the Board
of Directors of ACS and  its Chief Executive
Officer  since  1988, and as  its  President
since 1987.  Since  1989, Mr. Sonnenberg has
been  a  director  of  the   Wireless  Cable
Association International, Inc.

      ROBERT D. HAPP has been  a director of
CAI  since September 1995.  Mr. Happ  served
as  Senior   Managing  Partner  of  the  New
England area for KPMG Peat Marwick ("KPMG"),
an accounting  firm,  from  1985  until  his
retirement  in  1994.   Prior  to  that,  he
served in various capacities with KPMG.  Mr.
Happ  is  also  a  member  of  the  Board of
Directors  of  Galileo  Corporation.   Since
February  1996,  Mr.  Happ  has  served as a
director of CS Wireless.

      SECTION     16    REPORTS. Under    the
securities laws of  the  United  States, the
Company's directors, its executive  officers
and any persons holding ten percent or  more
of  the  common stock are required to report
their ownership  of the Common Stock and any
changes in that ownership  to the Securities
and Exchange Commission.  Specific due dates
for  the  reports  have been established.  A
report   for   each  of  Messrs.   Belanger,
Bouton, Happ and  Tallcott  were  not timely
filed  with  respect  to  a grant of options
pursuant to a Company stock option plan.  In
making  these  statements, the  Company  has
relied on the written representations of its
incumbent directors and officers and its ten
percent holders  and  copies  of the reports
that they have filed with the Securities and
Exchange   Commission.    The  Company   has
implemented    a    Section   16   Reporting
Compliance Program in  an  effort  to assist
the   Company's   directors   and  executive
officers  with  their  Section 16  reporting
requirements.
<PAGE>


        ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

      The following table discloses three
fiscal periods of compensation received by
the Company's Executive Officers receiving
compensation in excess of $100,000 for the
year ended March 31, 1997.

                     SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                             ANNUAL COMPENSATION            LONG-TERM COMPENSATION
                                                                            Securities
NAME AND PRINCIPAL POSITION     Fiscal                        Other Annual    Underlying      All Other
                                PERIOD   SALARY       BONUS   COMPENSATION    OPTIONS       COMPENSATION
<S>                              <C>      <C>       <C>          <C>           <C>               <C>   
Jared E. Abbruzzese              1997    $350,000   $      0     $   0{(1)}    350,000           $  0
Chief Executive Officer          1996     277,300    150,000         0{(1)}          0              0
                                 1995     166,327          0         0{(1)}    525,000              0

John J. Prisco                   1997     200,000     40,000           0{(1)}  150,000              0
President and Chief Operating    1996      12,308          0           0{(1)}  200,000              0
Officer(2)

James P. Ashman                  1997     183,000          0           0{(1)}  100,000              0
Chief Financial Officer          1996     140,100          0           0{(1)}   40,000              0
                                 1995      54,400          0           0{(1)}   37,000              0

George M. Williams               1997     166,327          0           0{(1)}   65,000              0
Chief Administrative Officer     1996     144,000          0           0{(1)}   40,000              0
                                 1995     124,900          0           0{(1)}   28,000              0

Timothy J. Santora               1997     170,000          0           0{(1)}   65,000              0
Executive Vice President         1996     144,500          0           0{(1)}   40,000              0
                                 1995     112,600          0           0{(1)}   28,000              0
</TABLE>
_____________________________

(1)    Other annual compensation, including
      Company provided vehicle or
      allowances, life insurance, or
      membership dues, less than the lesser
      of 10% of total annual salary and
      bonus or $50,000 is not presented.
(2)   Mr.  Prisco  became  President  and  Chief
      Operating Officer on March 1, 1996.

COMPENSATION OF DIRECTORS

      Directors, other  than  those who are
full-time  employees  of  the Company,  are
paid an annual fee of $6,000  and  a fee of
$750  per  Board meeting attended and  $500
per committee  meeting  attended, expenses,
$375  for  each  telephonic  Board  meeting
attended,  and  $250  for  each  telephonic
committee meeting  attended,  plus,  in all
such    cases,    out-of-pocket   expenses.
Directors  who are full-time  employees  of
the Company  receive  no  remuneration  for
serving   on  the  Board  of  Directors  or
committees.     Mr.   Sonnenberg   receives
compensation    through     a    consulting
arrangement with CAI whereby  CAI  will pay
$75,000 per year through August 1998.

      CAI   has  entered  into  a  deferred
compensation agreement with David Tallcott,
which provides  that  all  compensation  he
would  otherwise be paid as a director will
instead  be  set  aside in an account to be
invested in such mutual  funds  offered  by
Smith  Barney  Inc.  as  Mr. Tallcott shall
direct.  The entire balance  of the account
will  be  paid  to  Mr.  Tallcott  when  he
attains age 59 1/2 , provided that CAI  may
elect  to  pay  the  balance in the account
earlier  in  the  event he  terminates  his
service as director.   In  the event of Mr.
Tallcott's  death,  any  balance   in   the
account  will be paid to his beneficiary or
estate.  Upon payment of the balance in the
account to  Mr. Tallcott, Mr. Tallcott will
recognize  the   amount   paid  as  taxable
income,  and  CAI  will  recognize   a  tax
deduction in the same amount.

In  October  1996,  the  Company
adopted the
1996  Outside Directors' Stock  Option  Plan
(the "1996 Directors' Plan"). Under the 1996
Directors'  Plan,  options  to  purchase  an
aggregate  of not more than 45,000 shares of
CAI Common Stock  will  be granted from time
to  time  to  nonemployee  directors.   Each
qualifying  director  shall  be  granted  an
option to purchase 7,500 shares  at  a price
of  fair  market  value  on  the date of the
grant.  Such option shall vest:   25% on the
date  of  grant,  and  25%  on  each  of the
second,  third  and fourth anniversaries  of
the grant.  These  options  are  exercisable
for a period of ten years, but not before an
initial six-month period. The exercise price
for  stock  options  granted under the  1996
Directors' Plan will not  be  less than 100%
of the fair market value of the common
<PAGE>


      {ITEM 11. EXECUTIVE COMPENSATION (continued)

COMPENSATION OF DIRECTORS

stock
on the grant date. As of March 31, 1997, the
Company has granted options under  this plan
to purchase 30,000 shares of common stock at
a weighted average price of $6.63 per share.

      Under   the   Company's  1993  Outside
Directors' Option Plan (the "1993 Directors'
Plan")  each  new  director   who   is   not
otherwise  an  employee will receive options
to  purchase  1,667   shares  on  the  first
anniversary of their election  to the Board.
Any  director  having received options  will
automatically receive  an  additional  1,667
options  on  the following two anniversaries
of  their  initial   receipt   of   options,
provided   there   are   sufficient   shares
remaining  in  the  Directors' 1993 Plan and
that  they  continue  to   be   an  eligible
director.   Options  are exercisable  for  a
period of seven years  following the date of
grant.   The  exercise  price   of   options
granted  under the 1993 Directors' Plan  may
not be less  than  the  greater  of the fair
market  value  on  the  grant  date  or  the
Company's  initial public offering price  of
$11.  During  the year ended March 31, 1995,
Mr. Belanger received  options  to  purchase
1,667  shares  of  CAI  Common  Stock  at an
exercise price of $11 per share.  During the
year ended March 31, 1996, Messrs. Belanger,
Bouton,   and  Tallcott  were  each  granted
options to  purchase  1,667  shares  of  CAI
Common Stock at an exercise price of $11 per
share under the Directors' 1993 Plan.

      Options  granted  under  both  of  the
Directors'  Plans are not transferable other
than by will  or  the  laws  of  descent and
distribution.   In  the  event  the  grantee
ceases to be a director for any reason, each
unexpired  option  may  be  exercised to the
extent  exercisable  on  the  date  of  such
cessation or at any time prior  to  the date
specified  in  such option.  Notwithstanding
the foregoing, in  the event of cessation by
reason of death, each unexpired option shall
become  exercisable  in   full  and  may  be
exercised at any time during  the  following
12  months.   If  the director is terminated
for  cause,  outstanding  options  shall  be
terminated. Options  granted  under  both of
the   Directors'  Plans  become  immediately
exercisable  upon  the occurrence of certain
events, including the death or disability of
a director or certain business combinations.

OPTION GRANTS IN LATEST FISCAL YEAR

      The following table provides
information on options to purchase shares of
CAI Common Stock granted during the fiscal
year ended March 31, 1997 to the persons
named in the Summary Compensation Table
above.

<TABLE>
<CAPTION>


                                                                                          Potential realizable value at 
                                                   % of Total                                assumed annual rates of
                             Number of      Options                                  stock price appreciation
                             Securities     Granted         Exercise                       FOR OPTION TERM
                             Underlying     to Employees    Price          Expiration                        
 NAME                        OPTIONS        IN FISCAL YEAR  Per SHARE      DATE            5%           10%

<S>                        <C>                 <C>              <C>         <C>             <C>          <C>

Jared E. Abbruzzese(1)      350,000            33.6%            $1.75       12/17/06        $171,400     $635,700
John J. Prisco(1)           150,000            14.4%            $1.75       12/17/06          73,500      272,500
James P. Ashman(1)          100,000             9.6%            $1.75       12/17/06          49,000      181,600
George M. Williams(2)        65,000             6.2%            $1.75       12/17/06          31,800      118,100
Timothy J. Santora(2)        65,000             6.2%            $1.75       12/17/06          31,800      118,100
</TABLE>
    (1) Stock  options   granted   to   these
    individuals  during  the  fiscal year
    ended  March  31, 1997, were  granted
    under the Company's 1993 Stock Option
    and  Incentive Plan.   These  options
    vest in  full  on  June 19, 1997 (six
    months following the  date of grant),
    and expire and lapse on  December 17,
    2006.

(2) Stock   options   granted   to  these
    individuals  during  the fiscal  year
    ended  March  31,  1997  were  issued
    under the Company's 1995 Stock Option
    and    Incentive   Plan,   upon   the
    surrender  of  options  to purchase a
    like number of shares of  CAI  Common
    Stock  at  an exercise price of $7.75
    per share.   These  options  vest  in
    full  on  June  19,  1997 (six months
    following  the  date of  grant),  and
    expire  and  lapse  on  December  17,
    2006.
<PAGE>


     ITEM 11. EXECUTIVE COMPENSATION (continued)

  AGGREGATE OPTION EXERCISES IN LATEST
  FISCAL YEAR AND FISCAL YEAR-END OPTION
  VALUES

      The  following  table  sets  forth
certain information  with  regard to the
outstanding  options to purchase  shares
of CAI Common Stock as of the end of the
fiscal year ended March 31, 1997 for the
persons named  in the Compensation Table
above.

<TABLE>
<CAPTION>
                                                           Number of Securities         VALUE OF UNEXERCISED IN-THE- 
                            SHARES                         Underlying Unexercised            MONEY OPTIONS AT
                           ACQUIRED ON      VALUE         Options at March 31, 1997          MARCH 31, 1997(1)        
 NAME                      EXERCISE (#)    REALIZED      EXERCISABLE   UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE

<S>                        <C>               <C>            <C>                <C>         <C>           <C>
Jared E. Abbruzzese            ---       $    ---             225,000          350,000     $   ---       $   ---
John J. Prisco                 ---            ---             100,000          150,000        ---           ---
James P. Ashman                ---            ---              57,000          120,000        ---           ---
George M. Williams             ---            ---              51,000           65,000        ---           ---
Timothy J. Santora             ---            ---              39,000           65,000        ---           ---
</TABLE>


(1)  The value of  unexercised  in-the-
   money  options  at March 31, 1997 is
   based on the difference  between the
   March  31,  1997  closing price  per
   share of CAI Common  Stock on NASDAQ
   NM of $1.72 and the exercise  prices
   of  the  in-the-money  options.  All
   unexercised options held  by  person
   identified   above  are  out-of-the-
   money.

EMPLOYMENT AGREEMENTS

      The Company  has entered into
employment agreements  with Messrs.
Abbruzzese,     Prisco,     Ashman,
Williams    and    Santora.    Such
agreements continue in effect until
March 21, 1998, in the  case of Mr.
Abbruzzese; until January  3,  1998
in  the  case  of  Mr.  Prisco; and
until February 28, 1999 in the case
of   Mr.  Ashman.   The  employment
agreements     are    automatically
renewed  for  successive  one  year
terms, unless otherwise terminated.
The initial term  of the employment
agreements for each  of Mr. Santora
and Mr. Williams expired on October
1, 1996.  Each agreement  has  been
renewed   for   a   one-year  term,
pursuant to the provisions  of each
such  agreement.   Pursuant to  his
employment      agreement,      Mr.
Abbruzzese serves  as  Chairman and
Chief  Executive  Officer   of  the
Company   and  is  entitled  to  an
annual  base  salary  of  $350,000.
Pursuant    to    his    employment
agreement,  Mr.  Prisco  serves  as
President   and   Chief   Operating
Officer  of  the  Company  and   is
entitled   to   a  base  salary  of
$200,000.     Pursuant    to    his
employment  agreement,  Mr.  Ashman
serves as Executive  Vice President
and Chief Financial Officer  of the
Company  and  is entitled to a base
salary  of $183,000.   Mr.  Santora
serves as  Executive Vice President
and is entitled  to  an annual base
salary  of $170,000.  Mr.  Williams
serves  as   Chief   Administrative
Officer   and  Corporate   Analyst,
Secretary  and   Treasurer  and  is
entitled to an annual  base  salary
of $165,000.  Each of the foregoing
executive officers will be entitled
to an annual bonus to be determined
by the Compensation Committee.

      Pursuant  to their respective
employment   agreements,    Messrs.
Abbruzzese, Prisco, Ashman, Santora
and   Williams   agree   to  devote
substantially all of their  working
time   to   the   business  of  the
Company.  Mr. Abbruzzese has agreed
to devote not less  than 75% of his
working  time to the Company.   Mr.
Williams,  however, may continue to
perform his  duties as Treasurer of
Hamilton County  Cable  TV, as long
as    such    activities   can   be
accomplished outside  of his normal
working time for the Company and do
not  otherwise interfere  with  his
duties    under    his   employment
agreement.


      If   their   employment    is
terminated  without  cause, Messrs.
Ashman,  Williams and Santora  will
be entitled  to  their  base salary
and certain benefits for  12 months
following       termination      of
employment.  Messrs. Abbruzzese and
Prisco  would  be  entitled   to  a
severance   amount   equal  to  the
greater  of such executive's  then-
current base  salary  or  the total
base  salary  that would have  been
payable for the balance of the term
of his employment in the event such
executive's      employment      is
terminated without cause.


      Messrs.  Abbruzzese,  Prisco,
Ashman and Williams  are subject to
nondisclosure    agreements    with
respect    to    the   confidential
information of CAI  and are subject
to  a  noncompetition provision  in
each    of     their     employment
agreements.
<PAGE>

      Mr. Sonnenberg, President  of
CAI  from  September 29, 1995 until
February 23,  1996,  entered into a
three-year   Employment   Agreement
with  CAI  pursuant   to  which  he
became President of CAI  and  Chief
Executive  Officer  of the Wireless
Operating  Group  of CAI  effective
September 29, 1995.  Mr. Sonnenberg
also serves as a director  of  CAI.
He  served  as Vice Chairman of the
CAI   Board   of   Directors   from
September 29, 1995  until  February
23,  1996.   Under Mr. Sonnenberg's
employment      agreement,      Mr.
Sonnenberg was entitled  to receive
a base salary of $275,000 per year,
received    options   to   purchase
300,000 shares  of CAI Common Stock
at an exercise price  of $11.00 per
share and received a signing  bonus
of  $500,000 upon execution of such
agreement.  Upon the closing of the
transactions  contemplated  by  the
Participation     Agreement,    Mr.
Sonnenberg    entered     into    a
Termination   Agreement  with   the
Company  pursuant   to   which  his
employment       agreement      was
terminated, he surrendered  options
to  purchase 300,000 shares of  CAI
Common Stock, and agreed to certain
noncompetition  provisions  similar
to  those  imposed upon Mr. Prisco.
The Company  also  entered  into  a
Consulting   Agreement   with   Mr.
Sonnenberg  pursuant  to  which  he
agreed  to provide CAI with certain
consulting  services  for a thirty-
month period beginning  on February
23,  1996  for  an  annual  fee  of
$75,000.
<PAGE>



                
   ITEM 12. SECURITY OWNERSHIP OF
    CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT

      The   following   table  sets
forth as of May 21, 1997  (i)  each
stockholder  who  based  on  public
filings, is known to the Company to
be  the  beneficial  owner  of more
than  5%  of the outstanding shares
of  CAI  Common  Stock,  (ii)  each
Director and  Executive Officer and
(iii) all Directors  and  Executive
Officers of CAI as a group:

<TABLE>
<CAPTION>
                                                             NEFICIAL OWNERSHIP
                                                                      Percentage of Outstanding
                                                 NUMBER OF SHARES           SHARES
<S>                                              <C>                         <C>         <C>
BANX Partnership                                 36,751,085(1)               47.9%
  3900 Washington Street
  Wilmington, DE 19802
Jared E. Abbruzzese                              1,757,552(2)                 4.3%
John J. Prisco                                     255,000(3)                  *
James P. Ashman                                    281,094(4)                  *
George M. Williams                                 231,000(5)                  *
Timothy J. Santora                                 152,200(6)                  *
Craig J. Kessler                                    67,000(7)                  *
Arthur C. Belanger                                   6,875(8)                  *
Harold A. Bouton                                     3,789(9)                  *
Robert D. Happ                                      1,875(10)                  *
Alan Sonnenberg                                   599,227(11)                 1.5%
David M. Tallcott                                   8,042(12)                  *
All directors and officers as a group
(11 persons)                                    3,363,654                     8.0%
</TABLE>

_______________________________
* less than 1%

(1)   Consists of 36,751,083 shares
      issuable upon the exercise of
      warrants  to purchase  Common
      Stock, the  conversion of the
      Company's  senior   preferred
      stock,    the   exercise   of
      warrants to  purchase  voting
      preferred   stock   and  upon
      conversion   of  such  voting
      preferred  stock   to  Common
      Stock.  The general  partners
      of BANX Partnership are  MMDS
      Holdings, Inc. and NYNEX MMDS
      Holding  Company,  which  are
      subsidiaries of Bell Atlantic
      Corporation     and     NYNEX
      Corporation,    respectively.
      The address of MMDS  Holdings
      and Bell Atlantic Corporation
      is    1717    Arch    Street,
      Philadelphia,  PA 19103,  and
      the  address  of  NYNEX  MMDS
      Holding and NYNEX Corporation
      is  1113 Westchester  Avenue,
      White Plains, NY 10604.
(2)   Includes  176,000 shares held
      by   relatives   over   which
      shares  Jared  E.  Abbruzzese
      retains    voting    control,
      575,000 shares issuable  upon
      exercise      of      options
      exercisable    currently   or
      within  60  days of  May  21,
      1997, and 20,000  shares held
      by  The Corotoman Foundation,
      Inc.,   of   which  Jared  E.
      Abbruzzese is  a director and
      over which shares  he retains
      voting control.
(3)   Includes    250,000    shares
      issuable upon the exercise of
      options exercisable currently
      or within 60 days of May  21,
      1997.
(4)   Includes    157,000    shares
      issuable upon the exercise of
      options exercisable currently
      or within 60 days of May  21,
      1997.
(5)   Includes    116,000    shares
      issuable upon the exercise of
      options exercisable currently
      or within 60 days of May  21,
      1997.
(6)   Includes    104,000    shares
      issuable upon the exercise of
      options exercisable currently
      or within 60 days of May  21,
      1997,  and 1,500 shares given
      to   relatives   over   which
      shares  Mr.  Santora  retains
      voting control.
(7)   Shares are issuable upon  the
      exercise      of      options
      exercisable    currently   or
      within  60  days of  May  21,
      1997.
(8)   Shares are issuable  upon the
      exercise      of      options
      exercisable    currently   or
      within  60  days of  May  21,
      1997.
(9)   Includes 127  shares  held by
      an  immediate  family  member
      and   3,542  shares  issuable
      upon the  exercise of options
      exercisable    currently   or
      within  60  days of  May  21,
      1997.
      (10) Shares are issuable upon
      the   exercise   of   options
      exercisable    currently   or
      within  60  days of  May  21,
      1997.
      (11) Includes  33,000  shares
      held    by   the   Sonnenberg
      Foundation  over which shares
      Mr. Sonnenberg retains voting
      control and 98 shares held by
      an immediate family member.
      (12)  Includes  1,000  shares
      held by  Lortech  Corporation
      over    which    shares   Mr.
      Tallcott    retains    voting
      control   and   3,542  shares
      issuable  upon  exercise   of
      options exercisable currently
      or  within 60 days of May 21,
      1997.
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND
       RELATED TRANSACTIONS

THE BANX TRANSACTIONS.

      Reference  is  hereby made to
Item    1.   Business   -   Current
Relationship with Bell Atlantic and
NYNEX;  and  -  Background  -  BANX
TRANSACTIONS  for  a description of
the relationship among the Company,
and affiliates of Bell Atlantic and
NYNEX.

OTHER.

      On  May  8,  1995  CAI  sold,
subject to an option  to repurchase
exercisable  at any time  prior  to
January 1, 1996,  all of the issued
and outstanding stock  of TelQuest,
Inc. ("TelQuest") (with  a negative
net  book  value  of  approximately
$70,000) to Wave Holdings,  L.L.C.,
a    Delaware   limited   liability
company   controlled  by  Jared  E.
Abbruzzese,   CAI's   Chairman  and
Chief   Executive   Officer,    for
$25,000.   The gain on this sale of
approximately  $23,000 was deferred
and  was  not included  in  income.
TelQuest's  involvement  in certain
operations  could  have,  at   that
time,  violated  the Modified Final
Judgment, if engaged  in by an RBOC
or  an  affiliated enterprise.   In
May  1996,   CAI  relinquished  its
option to repurchase TelQuest for a
2%  equity  interest   in  TelQuest
Systems,    Inc.,   the   operating
successor of TelQuest's business.

      In   consideration    of   Mr.
Abbruzzese      guaranteeing     the
obligation of CAI  to MMDS Holdings,
an affiliate of Bell Atlantic, which
permitted   CAI   to  complete   the
Microband  acquisition   in  January
1995,  the  CAI  Board  of Directors
awarded  options to acquire  150,000
shares of CAI Common Stock at $11.00
per share to Mr. Abbruzzese.

In  October   1996,   two  of  CAI's
officers  formed a company,  Telecom
Service  Support   LLC  ("TSS"),  to
provide   subscriber   installation,
service calls, and warehouse service
to   the   subscription   television
industry.         CAI       incurred
approximately  $348,000   for   such
services during the year ended March
31,  1997.   Additionally,  CAI  has
advanced  $80,000,  provided  leased
vehicles,   and   provided   certain
facility space to TSS.

Additionally,   CAI    periodically
charters an airplane owned  by Wave
Air, Inc., which is primarily owned
by  Mr.  Abbruzzese,  in  order  to
carry  out  business  when  airline
schedules   are   not   compatible.
Transactions  with  Wave Air,  Inc.
amounted to approximately  $278,000
for the year ended March 31, 1997.

      During the year ended March 31,
1997,  CAI  loaned  $800,000 to  Haig
Capital LLC and $200,000  to TelQuest
Communications,  Inc.,  entities   in
which  Mr.  Abbruzzese is a principal
member and stockholder, respectively,
of which approximately  $175,000  was
repaid  by  Haig  Capital.   In March
1997,   Mr.  Abbruzzese  combined   a
$19,000 February  1997 loan from CAI,
the  remaining  obligation   of  Haig
Capital,  accrued  interest  on  both
loans,  and  an  additional  $100,000
advance in April 1997 (subsequent  to
year-end)     into    one    personal
unsecured, demand  obligation  in the
amount  of $780,054, bearing interest
at 14% per annum.  In March 1997, CAI
separately   purchased  certain  used
equipment for the Boston Project from
Haig Capital L.L.C. for $107,000.

      The    loan     to     TelQuest
Communications, Inc. is evidenced  by
a  promissory  note  in the principal
amount of $200,000, bears interest at
14%, and matures in March  2000.  The
note  is  convertible  into  TelQuest
Communications, Inc. common stock  at
the  election of CAI.  The Company is
currently  negotiating the terms of a
joint    venture     with    TelQuest
Communications   and   CS   Wireless,
pursuant to which the Company will be
obligated to invest $2.5  million  in
cash  and  purchase  $2.5  million of
equipment in exchange for an  initial
equity  interest in the joint venture
of 25%.   The  original $200,000 loan
to  TelQuest Communications  will  be
contributed to the joint venture, and
CAI will  receive  a  credit  for the
principal  and  accrued  interest  on
such amount against the cash  portion
of   its   joint  venture  investment
obligation.    Interest   earned   on
related   party   loans  approximated
$63,400 for the year  ended March 31,
1997.

      During  April 1997,  CAI  sold
approximately     $2,112,000      of
equipment  at  book  value  from the
Boston  Project  that was not needed
to CS Wireless for  20% down and the
balance   due   in  30  days   after
delivery.    Additionally,    during
April   1997,  CAI  placed  purchase
orders approximating $1,612,000 with
CS Wireless for equipment needed for
the Boston Project, taking advantage
of  CS Wireless'  favorable  pricing
arrangements with its vendor.


<PAGE>




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

(a)   Financial    Statements   and
Schedules
      The    financial    statements
      listed  in   the  accompanying
      index to financial  statements
      and  schedules  are  filed  as
      part of this Annual Report  on
      Form 10-K.

(b)   Reports on Form 8-K
      The  Company  filed  a Current
      Report   on   Form  8-K  dated
      November   25,   1996   (filed
      January    3,   1997),    that
      reported the  following events
      under  Item  5:    (A)   "CAI"
      entered  into  a  Modification
      Agreement  dated December  12,
      1996 with affiliates  of  Bell
      Atlantic Corporation and NYNEX
      Corporation.  The Modification
      Agreement     suspends     the
      Business          Relationship
      Agreement  among  the  parties
      for one year and gives  CAI or
      its   designee  an  option  to
      purchase the $100 million RBOC
      investment in CAI; (B) CAI has
      recently announced that it has
      retained      J.P.      Morgan
      Securities   Inc.   and  Smith
      Barney    Inc.   to   act   as
      financial advisors  to  CAI in
      connection    with   exploring
      strategic alternatives for the
      Company;  (C)  The   following
      news  releases were issued  by
      the Company:  (i) CAI WIRELESS
      SYSTEMS,   INC.   RESPONDS  TO
      CLASS  ACTION LAWSUIT,  issued
      on  November   25,  1996  (See
      Exhibit   99.1),   (ii)    CAI
      WIRELESS     SYSTEMS,     INC.
      RESPONDS   TO   RECENT   NEWS,
      issued  on  December  6,  1996
      (See  Exhibit 99.2), (iii) CAI
      WIRELESS     SYSTEMS,     INC.
      RECEIVES   FIRST   FCC  MARKET
      TRIAL APPROVAL TO USE WIRELESS
      CABLE   SPECTRUM  FOR  TWO-WAY
      SERVICES,  issued  on December
      16,  1996 (See Exhibit  99.3);
      and (D)  CAI has been named in
      a    class   action    lawsuit
      alleging various violations of
      the  federal  securities  laws
      filed   in  the  United  State
      District    Court    for   the
      Northern District of New York.

      The  Company  filed  a Current
      Report   on   Form  8-K  dated
      January   31,   1997    (filed
      February    7,   1997),   that
      reported under Item 5 that the
      following news  releases  were
      issued:   CAI WIRELESS SYSTEMS
      AND   ADC   TELECOMMUNICATIONS
      ANNOUNCE  PLANS   TO   JOINTLY
      DESIGN  AND  IMPLEMENT TWO-WAY
      WIRELESS SERVICES  on February
      3,  1997  (see Exhibit  99.1);
      CAI  WIRELESS   RECEIVES   THE
      FIRST  PERMANENT APPROVAL FROM
      THE FCC  TO USE WIRELESS CABLE
      SPECTRUM FOR  TWO-WAY SERVICES
      on  January  31,   1997   (see
      Exhibit  99.2);  CAI  WIRELESS
      SYSTEMS   TO   RELOCATE   FROM
      ALBANY   TO   PHILADELPHIA  on
      January 31, 1997.

      The  Company filed  a  Current
      Report on Form 8-K dated March
      6, 1997 (filed March 12, 1997)
      that reported under Item 5 the
      following  news  release:  CAI
      WIRELESS SYSTEMS,  INC.  SIGNS
      LETTER  OF  INTENT FOR INTERIM
      FINANCING  (see Exhibit 99.1).

      The  Company filed  a  Current
      Report on Form 8-K dated March
      17, 1997 (filed June 27, 1997)
      that  reported  the  following
      events  under Item 5:  (A) CAI
      Entered Into  Amendement No. 1
      To  The  Affiliates   Of  Bell
      Atlantic Corporation And NYNEX
      Corporation on April 29,  1997;
      (B)  CAI  Closed A $30 Million
      Interim    Credit     Facility
      Provided By The "Interim  Debt
      Lenders"  on June 6, 1997; (C)
      the  following  news  releases
      were issued:  (1) CAI WIRELESS
      FILES FOR FCC APPROVAL TO TEST
      TWO-WAY  WIRELESS  SERVICES IN
      PITTSBURGH on March  17,  1997
      (see  Exhibit  99.1);  (2) CAI
      WIRELESS  FILES  FOR AUTHORITY
      TO  PROVIDE TELEPHONE  SERVICE
      IN NEW  YORK  STATE   on March
      19,  1997  (see Exhibit 99.2);
      (3) CAI WIRELESS  RECEIVES FCC
      APPROVAL TO TEST FIXED TWO-WAY
      WIRELESS      SERVICES      IN
      PITTSBURGH  on  April  2, 1997
      (see  Exhibit  99.3); (4)  CAI
      RENEGOTIATES TERMS  WITH RBOCS
      ON    SECURITIES    REPURCHASE
      OPTION on April 30, 1997  (see
      exhibit  99.4);  and  (5)  CAI
      WIRELESS     CLOSES    INTERIM
      FINANCING   on  June  6,  1997
      (see Exhibit 99.5).
(c)   Exhibits
      See index to exhibits filed as
part of this Annual  Report  on Form
10-K.

(d)   Schedules
      Schedules,   specified   under
      Regulation  S-X,  are  omitted
      because   of  the  absence  of
      conditions  under  which  they
      are  required  or  because the
      required    information     is
      included   in   the  financial
      statements   submitted.     In
      accordance  with Rule 3-09(a),
      separate financial  statements
      of   CS   Wireless   are   not
      required to be filed.
<PAGE>



INDEX TO FINANCIAL STATEMENTS AND
             SCHEDULES

                                                          Page No.
                                                         IN FORM 10-K


      FINANCIAL STATEMENTS

Reports of Independent
Accountants                                                       33

Consolidated Balance Sheets -
March 31, 1997 and 1996                                           35

Consolidated Statements of Operations - Years 
Ended March 31, 1997, 1996, and 1995                              36

Consolidated Statements of Shareholders' Equity - Years
Ended March 31, 1997, 1996, and 1995                              37

Consolidated Statements of Cash Flows - Years Ended March 31,
1997, 1996, and 1995                                              38

Notes to Consolidated Financial Statements                        41

<PAGE>


             SIGNATURES

      Pursuant  to  the requirements
of  Section  13  or  15(d)   of  the
Securities Exchange Act of 1934, CAI
Wireless   Systems,  Inc.  has  duly
caused this  annual  report  on Form
10-K  to be signed on its behalf  by
the   undersigned   thereunto   duly
authorized.


        CAI WIRELESS SYSTEMS, INC.
        (Registrant)


                            BY:
                            /S/ JARED E. ABBRUZZESE

                            Jared E. Abbruzzese,Chairman,
Date: JUNE 30, 1997         Chief Executive Officer and Director


      Pursuant  to  the requirements
of  the Securities Exchange  Act  of
1934,  this  report  has been signed
below  by the following  persons  on
behalf of CAI Wireless Systems, Inc.
and in the  capacities  and  on  the
dates indicated.


<TABLE>
<CAPTION>
            SIGNATURE                        TITLE                         DATE



/S/     JARED E. ABBRUZZESE          Chairman, Chief Executive Officer    June 30, 1997
       Jared E. Abbruzzese           and Director
                                    (Principal Executive Officer)


/S/    JOHN J. PRISCO                President, Chief Operating Officer   June 30, 1997
       John J. Prisco                and Director



/S/   JAMES P. ASHMAN                Executive Vice President, Chief      June 30, 1997
      James P. Ashman                Financial Officer and Director
                                     (Principal Financial Officer)


/S/  GEORGE M. WILLIAMS              Chief Administrative Officer,        June 30, 1997
     George M. Williams              Secretary, Treasurer and Director



/S/   CRAIG J. KESSLER               Vice President and Controller       June 30, 1997
      Craig J. Kessler              (Principal Accounting Officer)



/S/  ARTHUR C. BELANGER              Director                             June 30,1997
     Arthur C. Belanger
<S><C><C>
</TABLE>
<PAGE>


       SIGNATURES (continued)


<TABLE>
<CAPTION>
            SIGNATURE                        TITLE                           DATE


/S/     HAROLD A. BOUTON                 Director                        June 30, 1997
        Harold A. Bouton



/S/     DAVID M. TALLCOTT                Director                        June 30, 1997
        David M. Tallcott



/S/     ROBERT D. HAPP                   Director                        June 30, 1997
        Robert D. Happ


<S><C><C>
</TABLE>
<TABLE>
<CAPTION>
                                         Director                         June    , 1997
        Alan Sonnenberg

<S><C><C>
</TABLE>
<PAGE>

                              INDEX TO  EXHIBITS

<TABLE>
<CAPTION>
                                                                               Incorporation by
                                                                               Reference (SEE       PAGE
 EXHIBIT NO.                                  DESCRIPTION                      LEGEND)                NO.
<S>                  <C>                                                        <C>                     <C>
   2.1              Asset Purchase Agreement-New York System                     5-Exhibit 2   
   2.2              Bott Acquisition Agreement                                   2-Exhibit 2
   2.3              Agreement  and  Plan of Merger, as amended, by and among     7-Exhibit 2.1
                      CAI, CAI Merger Sub and ACS
   2.4              Agreement  and Plan of Merger by and among CAI, ECN          7-Exhibit 2.2
                      and ECNW dated as of March 28, 1995
   2.5              Asset Purchase  Agreement by and among CAI, ECN and          7-Exhibit 2.3
                      ECNMII dated as of March 28, 1995
   2.6              Option Agreement dated March 28, 1996                        7-Exhibit 2.4
   2.7              Purchase Agreement  by  and  between  CAI  and WCTV          7-Exhibit 2.5
                      dated as of March 28, 1995
   2.8              Purchase Agreement by and between CAI and AWS dated          7-Exhibit 2.6
                      as of March 28, 1995
   2.9              Agreement  and Plan of Merger by and among CAI, HRW          7-Exhibit 2.7
                      and the Minority Shareholders named therein, dated as of
                      March 28, 1995
   2.10             Participation  Agreement  among  Heartland Wireless          9-Exhibit 2.1
                      Communications, Inc., CAI Wireless Systems,  Inc. and CS
                      Wireless Systems, Inc. dated as of December 12, 1995.
   2.11             Amendment No. 1 to Participation Agreement among            12-Exhibit 2.2
                      Heartland Wireless Communications, Inc., CAI Wireless
                      Systems, Inc., and CS Wireless Systems, Inc. dated as of
                      December 12, 1995.
   3.1              Amended  and  Restated Certificate of Incorporation          9-Exhibit 3.1
                     of CAI
   3.2              Amended and Restated Bylaws of CAI                           9-Exhibit 3.2
   4.1              Form of Indenture for Senior Notes                           6-Exhibit 4.1
   4.2              First Supplemental Indenture                                11-Exhibit 4.1
   4.3              Form  of  Escrow  Agreement  among CAI and Chemical Bank     6-Exhibit 4.30
   4.4              Subordinated Unsecured Promissory Note dated August          1-Exhibit 4.7
                      31, 1993 by and between CAI and Hope E. Carter
   4.5              Promissory Note-Bott Family Trust                            2-Exhibit 4.1
   4.6              Guaranty and Security Agreement-Bott Family Trust            2-Exhibit 4.2
   4.7              Promissory Note-Bott                                         2-Exhibit 4.3
   4.8              Guaranty and Security Agreement-Bott                         2-Exhibit 4.4
   4.9              Term Note due May 9, 2005 in the principal amount           16-Exhibit 4.9
                      of $15.0 million issued to MMDS Holdings II, Inc.
   4.10             Term Note due May 9, 2005 in the principal amount           16-Exhibit 4.10
                      of $15.0 million issued to NYNEX Holding Company
  10.1              1993 Stock Option and Incentive Plan                         1-Exhibit 10.1, 3
  10.2              Form of 1993 Incentive Stock Option Agreement                1-Exhibit 10.2, 3
  10.3              Form of 1993 Non-Qualified Stock Option Agreement            1-Exhibit 10.3, 3
  10.4              Outside Director's Stock Option Plan                         1-Exhibit 10.4, 3
  10.5              Form of Outside Director's Stock Option Agreement            1-Exhibit 10.5, 3
  10.6              Employment Agreement dated March 21, 1996 by and            16-Exhibit 10.6
                      between Jared E. Abbruzzese and CAI
  10.7              Letter Agreement dated October 13, 1993 by and               1-Exhibit 10.10
                      between Hampton Roads Wireless, Inc. and CAI
  10.8              Employment Agreement dated October 1, 1993 by and            1-Exhibit 10.9, 3
                      between George M. Williams and CAI and Amendment to
                    Employment Agreement dated December 15, 1993
  10.9              Master Sublease dated June 19, 1993 by and between           1-Exhibit 10.11
                    Tri-Mark Communications, Ltd. and George Bott
  10.10             Agreement between CAI and SNET                               1-Exhibit 10.14
  10.11             Consulting Agreement dated May 15, 1993 between              1-Exhibit 10.7
                      Jared E. Abbruzzese and CAI
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                            INDEX TO  EXHIBITS (CONTINUED)



                                                                                            INCORPORATION
     Exhibit NO.                                                                            by Reference (SEE      PAGE
                                                        DESCRIPTION                           LEGEND)              NO.
<S>                   <C>                                                                   <C>                    <C>
  10.12               Business  Relationship Agreement among CAI, its Subsidiaries           7-Exhibit 10.13
                        and BANX Affiliate  dated  as  of  March  28, 1995, as amended by
                        Amendment Agreement No. 1
  10.13               Securities Purchase Agreement dated as of March 28, 1995               4-Exhibit 2
                        among CAI, its Subsidiaries and BANX Partnership, including forms
                        of Stage I and Stage II Warrants
  10.14               Stage I Warrant                                                        8-Exhibit 4.19
  10.15               Stage II Warrant                                                      16-Exhibit 10.15
  10.16               1995 Incentive Stock Plan                                             16-Exhibit 10.16
  10.17               Consulting and Employment Agreement dated as of January 1,            16-Exhibit 10.17
                        1996 between the Company and John Prisco
  10.18               Termination  Agreement  dated  February 23, 1996 between CAI          16-Exhibit 10.18
                        and Alan Sonnenberg
  10.19               Consulting  Agreement  dated  February  23, 1996 between the          16-Exhibit 10.19
                        Company and Alan Sonnenberg
  10.21               Form of Representative's Warrant Agreement with Form of                1-Exhibit 4.3
                        Warrant Certificate attached thereto
  10.22               Warrant Agreement dated August 30, 1993 between CAI and                1-Exhibit 4.13
                        Richard McKenzie
  10.23               Warrant Agreement dated August 30, 1993 between CAI and Phil           1-Exhibit 4.14
                        Hempleman
  10.24               Warrant Agreement dated September 10, 1993 between CAI and             1-Exhibit 4.15
                        John Oppenheimer
  10.25               Warrant Agreement dated August 30, 1993 between CAI and Marc           1-Exhibit 4.16
                        Howard
  10.26               Warrant Agreement dated September 10, 1993 between CAI and             1-Exhibit 4.17
                        Les Alexander
  10.27               Warrant Agreement dated November 9, 1993 between CAI and               1-Exhibit 4.26
                        Phil Hempleman
  10.28               Warrant Agreement dated November 9, 1993 between CAI and               1-Exhibit 4.27
                        Marc Howard
  10.29               Warrant Agreement dated November 9, 1993 between CAI and               1-Exhibit 4.28
                        Richard
                               McKenzie
  10.30               Warrant Agreement dated November 9, 1993 between CAI and               1-Exhibit 4.29
                        John Oppenheimer
  10.31               Warrant Agreement dated November 9, 1993 between CAI and Les           1-Exhibit 4.30
                        Alexander
  10.32               Modification Agreement dated December 12, 1996, among the             14-Exhibit 10.
                        registrant and various affiliates of Bell Atlantic 
                        Corporation and NYNEX Corporation
  10.33               1996 Outside Directors' Stock Option Plan                             15-Appendix A
  10.34               Amendment No.1 to the Modification Agreement dated April              17-Exhibit 99.7
                        29, 1997 among the registrant and various affiliates of
                        Bell Atlantic Corporation and NYNEX Corporation
  10.35               Employment Agreement dated as of February 29, 1997 between            17-Exhibit 99.6
                        the registrant and James P. Ashman
  10.36               Loan and Security Agreement dated as of May 16, 1997 by and           17-Exhibit 99.9
                        among registrant and certain of its subsidiaries, 
                        Foothill Capital Corporation, as agent, and the 
                        financial institutions listed therein (confidential 
                        treatment of certain portions of this exhibit has been requested)
   10.37              Release and Agreement dated as of April 29, 1997 among                17-Exhibit 99.8
                        registrant and various affiliates of Bell Atlantic Corporation
                        and NYNEX Corporation
<dagger>11.1          Schedule Regarding Computation of Loss Per Common Share
<dagger>11.2          Schedule Regarding Computation of Fully Diluted Loss Per
                      Common Share
   12.                Statements re Computation of Ratios                                   13
<dagger>21.           Subsidiaries of the Registrant
<dagger>23.1          Consent of Coopers & Lybrand L.L.P.
<dagger>23.2          Consent of KPMG Peat Marwick, LLP
  27.                 Financial Data Schedule
</TABLE>
<PAGE>
              INDEX TO  EXHIBITS (CONTINUED)

<TABLE>
<CAPTION>
LEGEND
<S>                          <C>
              1              Incorporated by reference to the exhibits to the Registration Statement on  Form S-
                               1 (No. 33-71662).
              2              Incorporated by reference to exhibits to the Current Report on Form 8-K dated
                               March 23, 1994 (No. 0-22888).
              3              Management contract or compensation plan or arrangement.
              4              Incorporated by reference to the exhibits to the Schedule 13D of BANX Partnership
                               dated March 29, 1995, filed with the Commission on April 10, 1995.
              5              Incorporated by reference to the exhibit to the Current Report on Form 8-K dated
                               January 9, 1995 (No. 0-22888).
              6              Incorporated by reference to the exhibits to the Registration Statement on Form S-
                               1 (No. 33-93062).
              7              Incorporated by reference to the exhibits to the Registration Statement on Form S-
                               4 (No. 33-94222).
              8              Incorporated by reference to the exhibits to the Annual Report on Form 10-K for
                               March 31, 1995
              9              Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for
                               September 30, 1995.
             10              Incorporated by reference to the exhibits to the Current Report on Form 8-K dated
                               December 12, 1995.
             11              Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for
                               December 31, 1995 (No. 0-22888).
             12              Incorporated by reference to the exhibits to the Current Report on Form 8-K dated
                               February 23, 1996 (No. 0-22888).
             13              The information is not included because the ratio is less than 1 and the earnings
                               deficiency is included in the Selected Financial Data of CAI.
             14              Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for
                               December 31, 1996.
             15              Incorporated by reference to the registrant's Proxy Statement dated September 18,
                               1996.
             16              Incorporated by reference to the exhibits to the Annual Report on Form 10-K for
                               March 31, 1996.
             17              Incorporated by reference to the exhibits to the Current Report on Form 8-K dated
                               June 27, 1997.
              <dagger>       Filed herewith.
</TABLE>
<PAGE>