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, 1998

                                      OR

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from _______ to ________

                        Commission file number 0-22888

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

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

               Title of each class                                         Name of each exchange on which registered
<S>                                              <C>                 <C>
                      None
</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 23, 1998 was approximately $8,326,366.

      The number of shares of Registrant's Common Stock outstanding on June 23,
1998 was 40,543,039.
<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 COMPANY'S ABILITY  TO ATTRACT ONE OR MORE NEW
STRATEGIC PARTNERS, THEIR WILLINGNESS TO ENTER INTO ARRANGEMENTS  WITH CAI ON A
TIMELY  BASIS  AND  THE  TERMS  OF SUCH ARRANGEMENTS, 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  CONTEMPLATED  BY  THE  COMPANY'S  BUSINESS PLAN, CONSUMER
ACCEPTANCE  OF  ANY  NEW PRODUCTS OFFERED OR TO BE OFFERED BY  CAI,  SUBSCRIBER
EQUIPMENT AVAILABILITY, PRACTICAL SUCCESS OF CAI'S ENGINEERED TECHNOLOGY, TOWER
SPACE AVAILABILITY, ABSENCE  OF  INTERFERENCE AND THE ABILITY OF THE COMPANY TO
REDEPLOY OR SELL EXCESS EQUIPMENT, THE ASSUMPTIONS, RISKS AND UNCERTAINTIES SET
FORTH  BELOW  IN  THIS  "MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
CONDITION AND RESULTS OF  OPERATIONS"  AND  ELSEWHERE  HEREIN, AS WELL AS OTHER
FACTORS  CONTAINED  HEREIN  AND  IN  THE  COMPANY'S  OTHER SECURITIES  FILINGS.
FURTHERMORE, THE FINANCING OBTAINED BY THE COMPANY TO  DATE  WILL NOT ENABLE IT
TO MEET ITS FUTURE CASH NEEDS.

                               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 video 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.  Initially,  the  Company
focused on the  development  of analog MMDS subscription video systems in major
metropolitan markets, primarily  in  the  northeast and mid-Atlantic regions of
the  United  States.   The  Company then focused  on  developing  digital  MMDS
television  systems  under  a joint  venture  arrangement  with  Bell  Atlantic
Corporation ("Bell Atlantic")  and  NYNEX  Corporation ("NYNEX"), regional bell
operating companies with a combined operating territory substantially identical
to  the spectrum footprint of CAI.  Following  the  termination  of  the  joint
venture arrangement with Bell Atlantic and NYNEX, the Company has endeavored to
develop  alternative  uses  of its MMDS spectrum and has actively sought one or
more strategic partners interested  in  pursuing the development of other lines
of  business, including high speed data access  and  fixed  wireless  telephony
services.   CAI had approximately 50,000 analog video subscribers as of May 31,
1998.

      CAI's operating  strategy,  since  the  potential availability of digital
technology deployment on a commercial basis (approximately late-1994), has been
to  execute  a  business  plan with one or more strategic  users  of  its  most
valuable asset, a substantial amalgamation of MMDS spectrum concentrated in the
northeastern and mid-Atlantic  regions  of the United States.  Recognizing that
there are significant capital expenditures associated with the construction and
operation of a broad-based MMDS system capable  of  serving  a large segment of
its  markets,  CAI  formulated  a business plan that would result  in  a  large
portion of such expenditures being  borne  by  a strategic partner.  Under this
business plan, CAI would become a wholesale transport  services  provider, and,
over time, not engage directly in any retail business.

      In  March  1995,  CAI  sought  to implement this business plan with  Bell
Atlantic and NYNEX.  The joint venture,  which  was  memorialized in a Business
Relationship Agreement (the "BR Agreement") between CAI  and certain affiliates
of  Bell  Atlantic and NYNEX (the "BANX Affiliates") and coupled  with  a  $100
million investment  by  BANX  Partnership, a general partnership whose partners
were  certain  other  affiliates  of   Bell   Atlantic  and  NYNEX  (the  "BANX
Partnership"), was consummated by September 1995,  simultaneously  with (i) the
consummation  by  CAI  of  five  acquisitions,  including  the purchase of  ACS
Enterprises, Inc., a publicly-held MMDS operator based in Philadelphia, PA, and
(ii) the $275 million offering of the Company's 12 1/4 % Senior  Notes due 2002
(the  "Senior  Notes").  (Bell  Atlantic,  NYNEX, the BANX Affiliates and  BANX
Partnership, or combinations thereof (as the  context  warrants), are sometimes
referred to herein as "BANX".)

      The BR Agreement contemplated that the BANX Affiliates,  at their option,
could elect to become the provider of subscription video programming  in any of
CAI's  markets  utilizing  CAI's  MMDS  spectrum  in  such  markets.  The video
programming, which was to be assembled and packaged by Tele-TV, a joint venture
formed by Bell Atlantic, NYNEX and Pacific Telesis, would be delivered to CAI's
state-of-the-art digital MMDS transmission facilities, and transmitted  to Bell
Atlantic/NYNEX customers under the Bell Atlantic/NYNEX name.  In fulfillment of
its  obligations  under  the  BR  Agreement, CAI began the construction of such
digital transmission facilities in  Hampton Roads, VA and Boston, MA, the first
two markets identified by the BANX Affiliates as potential markets for this new
digital subscription video product.

      Notwithstanding the significant expenditure of resources by all involved,
neither BANX Affiliate ever exercised  an  election  to  utilize  CAI's digital
transport services in Hampton Roads, Boston or any other market subject  to the
BR  Agreement.  In December 1996, when it became apparent to CAI that the focus
of Bell Atlantic  and  NYNEX had shifted away from subscription video utilizing
CAI's transport system,  CAI  and  Bell Atlantic/NYNEX entered into a series of
agreements  that  resulted  in  a termination  of  the  BR  Agreement  and  the
disposition and eventual cancellation  or exchange of all of the CAI securities
originally issued to the BANX Partnership  in  connection with its $100 million
investment in CAI.

      During the period prior to December 1996, by Bell Atlantic/NYNEX, and due
in part to CAI's concerns over such inaction, CAI  embarked  upon a strategy of
preserving the value of its MMDS spectrum and expanding the authorized  uses of
such  spectrum to fully realize the spectrum's technical capabilities.  Through
a series  of  demonstrations and trials, CAI has been an industry leader in its
efforts to engineer and obtain regulatory authority for fixed, flexible two-way
use of the MMDS  spectrum for services such as data transmission and telephony.
In addition to a series of specific flexible use authorizations received by CAI
during the last two  years,  CAI has participated with the industry trade group
in  seeking  to  obtain  from the  Federal  Communications  Commission  ("FCC")
authority for fixed, flexible  two-way use of the MMDS spectrum on an industry-
wide basis.  CAI expects the FCC  to  issue such authority during the summer of
1998.

      CAI continues to believe that a strategic  partner  is  necessary for the
MMDS industry to fully realize the potential of this spectrum.   Believing that
a  national-level  strategic  partner  would  have the financial resources  and
infrastructure to fully utilize the MMDS spectrum  for  video,  voice  and data
transmission, CAI has aggressively sought one or more strategic partners  since
the  departure  of  Bell  Atlantic/NYNEX.  The  Company  has  demonstrated, and
continues  to  demonstrate, its technological capabilities for each  of  video,
voice and data to  several potential strategic partners and potential financial
partners.  In addition  to  a  variety  of demonstrations, the Company has been
conducting  an  on-site  trial  for  a  telecommunications   company  providing
transport  services for Internet access and such company's corporate  intranet,
which services recently have included two-way data transmission at transmission
speeds of up to 7 megabits per second ("Mbps") for downstream transmissions and
600 kilobits  per  second  ("Kbps")  return capacity.  The two-way transmission
services are provided using first generation  transverters  designed by a high-
technology  equipment  manufacturer,  in  conjunction  with Company  engineers,
specifically  for MMDS spectrum.  Business discussions between  CAI  and  these
entities have been  wide  ranging, and no definitive agreement has been reached
with any entity at this time.   CAI  also  has  invested  in TelQuest Satellite
Services LLC ("TSS") in order to access pre-digitized video  programming and to
provide a vehicle for a complementary Direct-to-Home ("DTH") video service that
could, eventually, free additional MMDS spectrum for these alternative uses.

      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
Pond's  Edge  Drive,  Suite  300,  Chadds Ford, PA 19317, where its operational
headquarters, including the president  and  chief  operating  officer  and  the
Company's  accounting  and human resources departments are located, and at 2101
Wilson  Boulevard,  Suite   100,  Arlington,  VA  22201,  where  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; ANTICIPATED REORGANIZATION

      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, 1999, the Company
is obligated to pay approximately $9.1 million  in  minimum  license  fees  and
operating   lease   payments,   approximately  $3.5  million  in  MMDS  license
obligations, in addition to funding  operating  losses.  On a short-term basis,
CAI has $45 million of 13% Senior Secured Notes (the  "Secured  Notes")  due on
June 30, 1998.  See " - Senior Secured Financing" below.  On a long-term basis,
CAI  has  substantial  indebtedness  which, beginning in the fiscal year ending
March 31, 1999, will include significant  debt  service  requirements.   As  of
March  31,  1998, CAI had outstanding consolidated debt of approximately $357.1
million and trade payables of approximately $4.9 million.

      On or about  the  date of the  filing of this Annual Report on Form 10-K,
the Company intends to commence  a  pre-petition  solicitation  of  votes  (the
"Solicitation")  with respect to a prepackaged reorganization plan (the "Plan")
from the holders of Senior Notes and certain other impaired creditors.  CAI has
not yet commenced a reorganization case under Chapter 11 of the U.S. Bankruptcy
Code  (11  U.S.C. <section><section>  101-1330)(the  "Bankruptcy  Code").   If,
however, CAI  receives  the  requisite votes indicating acceptance of the Plan,
CAI intends to file a voluntary  petition  (the "Petition") under Chapter 11 of
the  Bankruptcy  Code,  and  to seek, as promptly  thereafter  as  practicable,
confirmation of the Plan. Accordingly,  the  Company has provided approximately
$5.1  million of restructuring costs in the Statement  of  Operations  for  the
fiscal  year  ended March 31, 1998.  Costs include legal and financial advisory
fees.

      CAI  Wireless  Systems,  Inc.  and  one  of  its  wholly-owned  operating
subsidiaries,  Philadelphia  Choice  Television,  Inc.,  a Delaware corporation
("Philadelphia  Choice"),  are  expected  to  file the Petition  following  the
Solicitation.   None  of  CAI's  other  subsidiaries,   including  any  of  the
subsidiaries that are holders of MMDS licenses issued by the FCC or are lessees
under  MMDS  excess  capacity  leases,  will  be parties to the  Petition.   In
addition, the Company intends that only those claims  against  and interests in
CAI specifically identified in the Plan (I.E., the holders of the Senior Notes,
holders of certain subordinated indebtedness, holders of securities  claims and
holders  of  equity  securities  claims) will be impaired.  The Company intends
that  all  other  holders of claims against  CAI,  including  trade  creditors,
licensors and lessors, will be unimpaired claims against CAI.

      The Company intends  to continue to operate its business in Chapter 11 in
the  ordinary course and to seek  to  obtain  the  necessary  relief  from  the
Bankruptcy  Court  to  pay  its employees, trade and certain other creditors in
full and on time.  To fund its operations during the bankruptcy proceeding, the
Company has arranged for Debtor-in-Possession financing (the "DIP Facility") in
the principal amount of $60 million.   The  DIP  Facility  is  expected  to  be
provided by Merrill Lynch Global Allocation Fund, Inc. ("MLGAF"), the Company's
current secured lender.  See " - Senior Secured Financing" below.  A portion of
the  proceeds  of the DIP Facility will be used to repay all amounts owed under
the Company's current  senior  secured  facility  (approximately $47.8 million,
including  interest  and  fees as of May 31, 1998).  The  balance  of  the  DIP
Facility will be used to fund  operations  and  working  capital throughout the
bankruptcy proceeding.  The Company intends to repay the DIP  Facility  out  of
the  proceeds of a credit facility (the "Exit Facility") currently being sought
by the  Company.  The Company is seeking an Exit Facility, which is expected to
be a two-year, senior secured facility in the principal amount of approximately
$80 million.   A portion of the proceeds of the Exit Facility is expected to be
used to repay the  DIP  Facility in full, with the balance of the Exit Facility
to be used to fund operations  and  working capital for approximately 12 months
following the consummation of the Plan.   The  Company, in consultation with BT
Alex. Brown Incorporated, its financial advisor,  is  actively  seeking lending
sources  willing  to  participate  in  the  Exit  Facility.   There  can be  no
assurance,  however, that the Company will be able to obtain the Exit Facility,
or if able to obtain the Exit Facility, that the financing will be on terms and
conditions satisfactory to the Company.

      The Plan  contemplates  that  the  holders  of  securities  claims,  debt
securities  claims,  equity  securities claims and equity securities interests,
including the holders of CAI's common stock, without par value (the "CAI Common
Stock"), and any and all options,  warrants  or other rights to acquire the CAI
Common Stock will not receive or retain any property or interest in property on
account of such claims.

      The Company expects that the Solicitation  will  be completed on or about
July 27, 1998 and that the Company will file its Petition  in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy  Court") shortly
thereafter,  assuming that the Company receives the requisite acceptances  from
the Solicitation.   There can be no assurance that the Company will receive the
requisite acceptances  from  the  Solicitation, or, if the Company does receive
the requisite acceptances, that the  Plan  will  be confirmed by the Bankruptcy
Court and consummated.

RECENT DEVELOPMENTS

      CERTAIN ASSET SALES.  On March 18, 1998, the Company and its wholly-owned
subsidiaries,  Philadelphia  Choice,  Washington Choice  Television,  Inc.  and
Washington  License,  Inc. sold assets relating  to  Satellite  Master  Antenna
Television ("SMATV") operations  in  the Washington-Baltimore metropolitan area
to Mid-Atlantic Telcom Plus, LLC, d/b/a  OnePoint  Communications ("OnePoint").
The  net  proceeds  to  the  Company  from  the  sale  of  these   assets  were
approximately $1.6 million and were used to help fund working capital.

      The Company and Philadelphia Choice have entered into a letter  of intent
for  the  sale  of  assets relating to 64 SMATV and multi-dwelling unit ("MDU")
operations  in  the  Company's   Philadelphia  market  (the  "Philadelphia  MDU
Operation") to OnePoint.  Under the terms of the letter, OnePoint has agreed to
purchase assets used in connection  with the Philadelphia MDU Operation, and to
assume identified agreements for master  television  service, pursuant to which
the cable operator is granted access to the MDU as the  exclusive  provider  of
subscription  television services.  The purchase price for the Philadelphia MDU
Operation is $6  million,  subject  to  certain  post-closing adjustments.  The
parties anticipate consummating the sale and purchase  of  the Philadelphia MDU
Operation under the auspices of the Bankruptcy Court as part  of  the  Plan  or
pursuant to Section 363 of the Bankruptcy Code.

      NASDAQ DE-LISTING.  On January 8, 1998, trading of the CAI's Common Stock
was  removed from The Nasdaq National Market<reg-trade-mark> ("NNM") and listed
for trading  on  the Nasdaq SmallCap Market{SM}.  The removal was caused by the
Company's failure to meet the net tangible asset listing requirement imposed by
Nasdaq upon NNM-listed  companies.   As  a  condition  to listing on the Nasdaq
SmallCap  Market{SM}, the Company was required to maintain  compliance  with  a
$1.00 per share  bid  price for an interim period.  Effective January 13, 1998,
as a result of failing  to  maintain  the  $1.00  per  share bid price, the CAI
Common Stock was de-listed from the Nasdaq SmallCap Market{SM}.  The CAI Common
Stock currently trades on the Electronic Bulletin Board  system  under the CAWS
symbol.

SENIOR SECURED FINANCING

      13% SENIOR SECURED NOTES.  On November 25, 1997, the Company  issued  and
sold  $25  million  of  its  13%  Senior Secured Notes (the "Secured Notes") to
MLGAF.  CAI used approximately $17.3  million  of  the  proceeds  to  repay all
amounts  outstanding  under  the  F/C Credit Facility (defined below), and  the
remaining proceeds of approximately  $7.3  million,  net of expenses associated
with  this  transaction,  for  working capital purposes and  build-out  of  the
Company's wireless cable business.  On January 26, 1998, the Company issued and
sold an additional $2 million Secured  Note to MLGAF, and on February 17, 1998,
the Company issued and sold an additional  $18  million  of  Secured  Notes  in
connection  with  the  consummation of a series of transactions by the Company,
MLGAF and BANX.  See " -Termination of BANX Rights" below.

      The Secured Notes are short-term obligations of CAI, maturing on June 30,
1998, and were issued and  sold  pursuant  to  the  terms  of  a  Note Purchase
Agreement between CAI and certain of its wholly-owned subsidiaries  and  MLGAF,
as amended from time to time (the "Note Purchase Agreement").  Interest at  the
rate of 13% per annum on the Secured Notes is payable at maturity.  In addition
to  fees  and  expenses  associated  with  the issuance and sale of the Secured
Notes, CAI is required to pay a $730,000 commitment fee to MLGAF, which is also
due at maturity. All outstanding amounts under  the Note Purchase Agreement are
expected  to be converted into and deemed to be outstanding  obligations  under
the DIP Facility.

      As collateral  for  the  Notes,  CAI granted a blanket lien on all of its
assets,  including  the  stock  of  substantially   all   of  its  wholly-owned
subsidiaries, as well as a pledge of its 60% interest in CS  Wireless  Systems,
Inc.  ("CS Wireless") and its 25% interest in TSS.  The Note Purchase Agreement
contains  covenants that are usual and customary for transactions of this type,
including a  series of negative covenants intended to preserve the value of the
collateral pledged by CAI for the benefit of MLGAF.

      FOOTHILL CAPITAL CREDIT FACILITY.  On November 25, 1997, the Company used
a portion of the  proceeds  from the issuance of the Secured Notes to repay all
amounts outstanding and owing to Foothill Capital Corporation and affiliates of
Canyon Capital Management, L.P.  (the  "F/C Lenders") under that certain credit
facility provided by the F/C Lenders (the "F/C Credit Facility") to CAI in June
1997.   At  the  time  of  repayment,  there was  approximately  $17.3  million
outstanding under the F/C Credit Facility,  consisting  of  approximately $15.3
million  representing the principal amount of the loans outstanding  under  the
F/C Credit  Facility; a $1.6 million fee, and $350,000 representing interest on
the outstanding loans and fees.

      The repayment of the F/C Credit Facility in November 1997 represented the
early termination  of  the  F/C  Credit Facility.  Prior to its termination and
repayment  in  full,  the  Company  executed  a  series  of  continuing  waiver
agreements, which waived compliance by  the  Company  with certain post-closing
requirements,   increased  the  interest  rates  payable  on  the   obligations
outstanding under  the  F/C  Credit  Facility,  and  imposed  additional and/or
modified existing covenants relating to various items, including  sales of non-
core  assets,  certain  fundamental  changes  to  the Company and the Company's
ability  to  incur additional indebtedness.  All of the  waivers  executed  and
delivered by the  Company to the F/C Lenders contained a general release of the
F/C Lenders.  A final  general  release  was  required  of and delivered by the
Company  in connection with receipt of the pay-off letter  issued  by  the  F/C
Lenders in  connection  with the repayment of all Company obligations under the
F/C Credit Facility.  The early termination of the F/C Credit Facility resulted
in the Company recording  a third quarter extraordinary charge of approximately
$4.7 million, representing  the  costs  associated with the F/C Credit Facility
that the Company was originally amortizing  over  the  two-year term of the F/C
Credit Facility.

TERMINATION OF BANX RIGHTS

      On February 17, 1998, the Company consummated a series  of  transactions,
including  the  purchase by the Company of the remaining interest of  the  BANX
Affiliates under  the  BR Agreement (See -Background - BANX TRANSACTIONS below)
and  the  acquisition  of BANX's  approximately  9.9%  equity  interest  in  CS
Wireless.  Under the terms  of  the  Termination  and  Purchase  Agreement (the
"Termination  Agreement"),  the  Company issued $7 million aggregate  principal
amount of its Secured Notes to BANX  in consideration of the termination of the
BR Agreement, Modification Agreement (defined below) and Modification Agreement
Amendment (defined below), and the transfer  of 1,000,000 shares of CS Wireless
common stock held by BANX to CAI.  The parties  exchanged  general  releases in
connection with the transaction.  Prior to its termination, none of the markets
contemplated by the BR Agreement had been optioned by Bell Atlantic or NYNEX.

      As  part  of  these transactions, MLGAF advised CAI that it had completed
the purchase from BANX  of  all  of  the  CAI  securities  issued  to  BANX  in
connection  with  BANX's  initial  $100  million investment in CAI in September
1995, including $30 million of term notes,  $70  million  of  senior  preferred
stock and warrants to purchase voting preferred stock of CAI (collectively, the
"BANX  Securities"),  as  well  as  the Secured Notes issued by CAI to BANX  in
connection with the Termination Agreement.  On March 3, 1998, CAI exchanged the
BANX Securities then held by MLGAF for  a new $30 million 12% subordinated note
due October 1, 2005 (the "Subordinated Note").   As  a  result  of the exchange
transactions,  the  Company  eliminated  approximately  $117 million of  Senior
Preferred Stock, accumulated preferred stock dividends, and accrued interest on
the  Term Notes, of which approximately $102 million was reclassed  to  paid-in
capital,  and recorded an approximately $10 million extraordinary gain from the
early extinguishment of debt.

      The Subordinated Note issued to MLGAF accrues interest at the rate of 12%
per annum,  compounded  semi-annually, and is payable at maturity on October 1,
2005.  The Subordinated Note  is  expressly subordinate to the Senior Notes and
to  the  $45  million  aggregate  principal   amount  of  Secured  Notes.   The
Subordinated Note is a joint and several obligation  of  CAI and certain of its
wholly-owned  subsidiaries.  The obligation of the subsidiaries  to  repay  the
Subordinated Note,  however,  is limited by the terms of the Indenture dated as
of September 15, 1995 (the "Indenture") governing the Senior Notes.

      In conjunction with the transaction,  the  Company  also  exchanged 2,500
shares  of CAI Common Stock for all warrants to purchase CAI equity  that  were
held by BANX  and  acquired  by  MLGAF  on March 3, 1998.  The Common Stock was
issued in reliance upon an exemption from  the registration requirements of the
Securities  Act  of 1933, as amended, and contains  a  legend  restricting  its
transfer without such  registration or an exemption therefrom.  The issuance of
the CAI Common Stock to  MLGAF  increased  the number of issued and outstanding
shares of CAI Common Stock to 40,543,039 at March 31, 1998.

BUSINESS AND OPERATING STRATEGIES

      GENERAL.   The  Company,  since  its  formation,   has   focused  on  the
development  and  operation of MMDS subscription video 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 and the receipt of
regulatory approvals not previously  sought by MMDS operators or granted by the
FCC, the Company has endeavored to develop  the  full  capabilities of its MMDS
spectrum in addition to subscription video. 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 broadband network.
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 such systems can be deployed
in  a  reasonable  manner  to develop a commercially-viable means of delivering
video, voice and data transmission services.

      MMDS    subscription   video    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 require 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.  Certain of these LOS constraints may be overcome  by  the
placement  of  beambenders  and/or  signal boosters, or by properly designing a
cellular network within a service area.   The  use of beambenders and/or signal
boosters increases the cost per subscriber.

      MMDS spectrum is regulated by the 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, (iv) permanent authorization for fixed two-way
flexible use of two channels for unlimited customer sites within ten  miles  of
seven  hub  sites  (four of which require further FCC authorization) located in
and around Boston, MA,  and  (v) 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, CT market;  however,  the Company
does not have any plans to conduct any testing in this market at this time.

      The  Company  has  assembled significant spectrum rights in the northeast
and mid-Atlantic regions of  the  United  States.   The  Company  is focused on
preserving  these  substantial  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  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.  With the termination of the BANX
rights, the Company has continued  to  implement  a  preservation strategy that
will allow CAI to utilize its significant spectrum capacity for the delivery of
video,  voice and data services, or various combinations  thereof,  subject  to
regulatory  approval,  as  necessary  for one or more strategic partners.  This
preservation  strategy includes the continued  build-out  of  the  transmission
facilities in conformity  with  the FCC license perfection regulations, as well
as the re-negotiation of spectrum leases when and as such leases mature.

      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 of the MMDS spectrum is obtained  for  such  market,  the allocation of
channels among the various services is expected to be driven by  the needs of a
strategic  partner, whose needs, presumably, will be driven by consumer  demand
for such services in the Company's markets.  Not all services may be offered in
all markets,  and  there  can  be no assurance that the Company will be able to
locate one or more strategic partners  interested  in  utilizing  the Company's
spectrum for such services.  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 and greater New York City markets and have been
limited to the conduct of tests.

      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 and MMDS/MDS  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 MMDS/MDS channels each.  Under the rules of the FCC,  the
term of leases for ITFS channels, which generally 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 non-renewal or
termination  of   a  channel lease (due to a breach  by  CAI,  or  its  lessor,
cancellation of the license  held by a third party lessor for failure to comply
with the FCC's rules, including  construction  deadlines,  or otherwise) or the
failure  to obtain an extension of time to construct an authorized  station  or
renewal of  the  licenses  for an authorized station, would result in CAI being
unable  to deliver programming  on  such  channel(s),  unless,  in  the  latter
instances, CAI were able to lease capacity from a third party successor license
holder, if  any.   Such  a termination or failure in a market that CAI actively
serves could have a material adverse effect on CAI's operations.

      ANALOG-BASED SUBSCRIPTION VIDEO.  CAI currently operates six analog-based
subscription  video 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  May 31,
1998,  CAI  provided analog subscription video services to approximately 50,000
subscribers.  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, 1998 (except as indicated in the
footnotes) the characteristics of the markets in which the Company has an
operational subscription video 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          Number of
    MARKET                          RANK(1)        HOUSEHOLDS(2)      AVAILABLE(3)      APPLIED FOR       SUBSCRIBERS(4)
    ------                          ----           ----------         ---------         -----------       ----------- 
<S>                                 <C>            <C>                 <C>                  <C>             <C>
New York City                        1              4,996,976          40                   0                6,100
Long Island(5)                      N/A             1,083,780          20                   8                    0
Philadelphia                         4              2,154,389          41                   2               30,900
Boston                               6              1,007,198          31                   2                    0
Washington, DC                       7              1,479,278          28                   0                  700
Pittsburgh                          19              1,011,310          32                   1                    0
Baltimore                           23              1,053,959          32                   1                    0
Hartford                            26                471,532          22                   0                    0
Buffalo                             39                501,314          33                   0                    0
Norfolk                             40                531,833          32                   1                1,900
Providence                          46                842,658          24                   9                  500
Albany                              52                320,742          32                   0                7,700
Syracuse                            69                278,630          22                   3                    0
Rochester                           73                401,575          27                   6                1,800
                                                   ----------                                               ------
SUB TOTAL                                          16,135,174                                               49,600
                                                                                                            ======
BTA MARKETS (SEE TABLE II BELOW)                    3,022,138
                                                   ----------
GRAND TOTAL                                        19,157,312
                                                   ==========
</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 market (see
   Table II).  This information is based on  estimates  of the Company 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  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.  Certain of these LOS constraints  may  be overcome by the placement
   of beambenders and/or signal boosters or by properly  designing  a  cellular
   network within a service area.

(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 5 channels  in  Hartford, 8 channels in New York City,
   17 channels in Providence, 3 channels in  Buffalo, 15 channels in Norfolk, 5
   channels in Boston and 6 channels in Long Island.   The  Number  of Channels
   Available  includes  ITFS  channels that may not be available for commercial
   programming by CAI.  CAI also has rights, either through licenses or leases,
   to the following channels:   (1)  in  Greensboro, NC, 1 available channel, 4
   channels applied for; (2) in Memphis, TN,  8  available channels; and (3) in
   Winston-Salem, NC, 2 available channels.

(4) The Number of Subscribers represents the number of analog subscription
   video subscribers as of May 31, 1998.

(5) The Long Island market includes Nassau and Suffolk counties in New York
   State.





   The  table below outlines as of March 31, 1998 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 Table I 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
Worcester, MA                      N/A               352,646            9                     0
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               127,655            8                     0
                                                   ---------
TOTAL                                              3,022,138
                                                   =========
</TABLE>

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

      The Company has not actively sought to increase its video 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  video subscribers to the appropriate
BANX Affiliate 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
continues to explore the full capabilities of its MMDS spectrum, including uses
for  such spectrum other than subscription video delivery.   Consequently,  the
Company  has  maintained  its  strategy  of  not pursuing television subscriber
growth while it evaluates its business opportunities  other  than  subscription
video  services.   The  policy  of  not  pursuing  subscriber growth has had  a
negative impact on the 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.

      In each of the principal analog-based subscription  video  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 owns 60% of CS Wireless,
a  joint  venture  formed on February 23, 1996 by  the  Company  and  Heartland
Wireless Communications,  Inc.,  an  MMDS subscription video 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 21 markets, encompassing approximately 7.7
million  television  households,  approximately 6.4 million of  which  are  LOS
households.    As  of  December  31, 1997,  CS  Wireless  provided  service  to
approximately 67,125 subscribers.



      DIGITAL SUBSCRIPTION VIDEO.  The  Company has committed significant funds
and substantial engineering and regulatory  efforts  to  the  build-out  of its
digital  MMDS system in Boston, Massachusetts.  Initially, construction of  the
Boston system  was undertaken in fulfillment of the Company's obligations under
the BR Agreement  with  the  BANX  Affiliates for the provision of subscription
video services by BANX using CAI's MMDS  spectrum.   When  BANX  abandoned  its
digital  video  plans,  CAI  continued  to construct the Boston system.  In its
continuation of the construction, however, the Company has sought to build into
the system the flexibility it believes necessary  to  offer one-way, high-speed
data  services,  as  well as two-way MMDS services, such as  two-way  data  and
telephony services.  The  Company's  Boston system is currently testing digital
video, voice and data transmission services,  which  have  been demonstrated to
certain  third  parties  that  have  expressed  an  interest  in the  Company's
technical capabilities.

      In  connection  with the build-out of the digital system in  Boston,  the
Company has converted nearly  100% of the ITFS receive sites in Boston enabling
the receive sites to receive CAI's digital MMDS signal, as transmitted from its
digital head-end and several repeater  sites located in the Boston metropolitan
area.

      The  technology and equipment deployed  and  being  used  in  Boston  for
digital video  and other uses was devised primarily by CAI's engineering staff,
working in conjunction  with  various  equipment vendors.  Since the technology
and equipment is relatively new, the Company and its principal vendors have had
to reconfigure certain aspects of the technology  and  equipment.   The Company
has  substantially  eliminated many of the minor technical flaws it experienced
in the incipient stages  of  developing  and  testing  the Boston digital video
technology, and is working with vendors to improve the technology and prototype
equipment  deployed in Boston for video and alternative uses  such  as  two-way
data and telephony.

      The  Company   originally  indicated  that  it  would  launch  a  digital
subscription video product in Boston during the second half of 1997.  The video
launch was not only viewed by the Company as important as a means of attracting
a strategic partner, but also was required to meet certain covenants imposed by
the F/C Credit Facility  prior  to its early termination in November 1997.  The
covenants imposed upon the Company  in  connection  with  the  issuance  of the
Secured  Notes   do  not  include  a digital video requirement in Boston or any
other  CAI  market.   The  launch of a commercial  digital  subscription  video
product in Boston has been delayed   due to three principal factors: unexpected
delays  associated with equipment, including  customer  premises  equipment  of
sufficient  quality  to  support  a commercial launch of a digital subscription
video product; the Company's limited  financial resources, and the absence of a
strategic partner willing to utilize the  digital  MMDS  system  to the fullest
capacity.

      The   Company,   in  conjunction  with  its  primary  vendors,  has  made
significant progress in  improving  the  quality  of  the digital video product
being  tested in Boston.  The customer premises and other  equipment  has  been
reconfigured  in some instances in an effort to eliminate many of the technical
flaws that were  associated  with the early versions of this equipment. At this
time, however, the Company has  no  definitive  plans  to  launch  a full-scale
commercial  digital  subscription  video service in its Boston market,  and  is
instead contemplating limited roll-out  of a digital subscription video product
once all of the technical flaws experienced  by  the Company with the equipment
have  been  eliminated to the Company's satisfaction.   The  Company  is  fully
committed to  ensuring  that  its ITFS licenseholders in Boston can serve their
respective receive sites with such licenseholders' digital video programming, a
project that the Company believes  is  substantially  completed in Boston.  The
Company   believes,  however,  that  its  best  position  in  connection   with
discussions  it  is  having  or  contemplates  having  with potential strategic
partners,  and in light of its limited financial resources,  is  to  delay  the
full-scale launch of a commercial video service for the immediate future.   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 video 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  must  be  secured  in  connection with any such
service launch.

      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, except for
limited circumstances in which two-way use is authorized, 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.
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.  During the
Fall of 1997, CAI conducted  commercial  trials  of its one-way Internet access
service  in  its  New  York, Rochester, NY and Boston  markets.   This  service
transmitted data at speeds of up to 27 Mbps downstream and utilized a telephony
return path.  Approximately 200 recipients participated in the trials.

      In connection with  the  development  of  CAI's  Internet  strategy,  the
Company engaged a national Internet consulting firm, Maloff Group International
("MGI"),  and  appointed  MGI's  principal, Joel Maloff, as CAI's acting Senior
Vice President and General Manager  of Internet Services.  In consultation with
MGI,  CAI  developed  a  wholesale Internet  access  strategy.   This  strategy
includes the Company providing  retransmission  services  to  Internet  Service
Providers  ("ISPs")  on  a  market-by-market basis.  Pursuant to CAI's standard
form of retransmission agreement,  an  ISP  can purchase MMDS spectrum capacity
from CAI in 1.544 Mbps bandwidth segments (each  a "T1 Equivalent") for a fixed
monthly rate.  The ISP can serve as many subscribers  from the T1 Equivalent as
it chooses, however, CAI recommends serving not more than  300  subscribers per
T1  Equivalent  to  fully  maximize  download  transmission  speeds.   The  ISP
maintains the subscriber relationship, although in most instances, CAI provides
the  installation  services to the ISP for a fee.  CAI has currently contracted
with four ISPs, which  provide  Internet access services in Rochester, New York
City and Boston.

      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, Boston  or any other  market  in
which it may seek to initiate such a service.

      TWO-WAY,  FIXED  FLEXIBLE USE OF MMDS SPECTRUM. The Company believes that
two-way, fixed flexible  use  of  the  MMDS  spectrum  offers  a  significantly
enhanced  service  capability and would present new opportunities for  CAI  and
other MMDS operators.  On October 10, 1997, the FCC issued a Notice of Proposed
Rulemaking ("NPRM")  with  respect to two-way, fixed wireless transmissions for
MMDS/MDS  and  ITFS  licensees.    The   Company  believes  that  the  FCC  has
acknowledged that two-way use of MMDS spectrum is permitted, and that the focus
of the NPRM is on the technical and engineering  parameters that must be met in
order  for  MMDS  operators  to  use their spectrum in  a  coordinated  two-way
environment.  Comments on the NPRM  were  due at the FCC by January 8, 1998 and
reply comments were submitted by February 9, 1998.

      The NPRM is consistent with CAI's strategy  of  expanding the use of MMDS
spectrum   beyond   analog   video   services   to   a   full   complement   of
telecommunications  services including two-way data transmission and  telephony
services.  CAI believes  that  the proposed rules, if adopted, would streamline
the  process  by which CAI could apply  for  two-way  authority  for  its  MMDS
spectrum and increase its opportunities to implement this strategy, and in turn
help CAI to 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.

      Prior to and during  the  pendency  of the NPRM process, CAI has received
from the FCC authorizations permitting it to  develop  two-way,  fixed flexible
uses  of  its  MMDS  spectrum  in  specified CAI markets for specific  customer
locations. The Company has applied for,  and received from the FCC, a permanent
authorization for fixed, flexible two-way  use of five of its MMDS/MDS channels
for  16  customer  sites  located  in and around  CAI's  Boston  market.   This
authority represented the first of its  kind  awarded  to an MMDS operator.  In
response to another application, CAI received FCC authorization  to  use 10 MHz
of  MMDS  spectrum  for  two-way  transmissions  to and from customer locations
located  throughout  the greater Boston metropolitan  area.   The  applications
contemplated that the customer locations would be served by seven strategically
located hub sites, three of which were previously authorized, and four of which
need further FCC authorization,  that would transmit and collect information to
and from the customer locations.   CAI  is  actively seeking strategic partners
interested in developing two-way, fixed flexible  uses for its MMDS spectrum in
Boston, and potentially, other CAI markets.

      There  can  be  no  assurance  that  the  authorized  customer  locations
permitted  under  the  above-described  authorizations   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.  If the proposed  rules
contemplated by  the  NPRM are adopted by the FCC, the Company will not have to
file such applications  for  specific  customer  locations.    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.

      The  Company  also believes that two-way, fixed flexible use of its  MMDS
spectrum should include telephony delivery services.  The Company believes that
the combination of digital  compression,  fiber  loop and cellular technologies
can be integrated into the MMDS network architecture,  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 Broadband 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 approvals  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.

      WIRELESS  BROADBAND  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 broadband network (the
"WBN").  The Company believes that this network would  be able to provide quick
and relatively inexpensive household coverage on a broad  scale.   CAI believes
that the concept of a WBN will enhance the Company's ability to attract  one or
more  strategic  partners  by  giving  such  partners  the  ability  to provide
competitive  access  products  over  CAI's  MMDS  spectrum.   The  Company also
believes that its network design 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 a strategic partner and consumer demand,
thereby increasing the potential  to  derive multiple revenue streams from each
system.

      The Company has not yet implemented  a  WBN 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 broadband, large-scale system in any of its markets.  The
Company has not,  however,  tested  a  broadband  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 broadband
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  broadband system in any of its markets, or that if a WBN 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  video  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 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  apply  for  and be awarded a local franchise, or 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  pre-empt  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 subscribers 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's rules
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, tower relocations
and other changes to their stations.   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 offset by
amounts  previously  paid)  within  five business 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, the FCC will release a public  notice
to that effect.   Within  5 business 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, 1998,
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,  1999,  and  payment,  in the aggregate amount of $1.1
million for such remaining Auction Markets, will be due upon such issuance.

      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.  The  Company
supported a number of new  ITFS and major modification applications.  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.    More   recently,  the  FCC  commenced  a  rule-making
proceeding  that  contemplates conducting  auctions  where  two  or  more  ITFS
applicants file competing  applications.   That  rulemaking  proceeding remains
pending, and it is uncertain whether the FCC will adopt a series  of  auctions,
or continue the existing comparative selection process.  If the FCC adopts  the
auctions,  there  can  be no assurance that the Company and/or its ITFS lessors
will  be  the  successful  bidders  for  new  ITFS  facilities,  or  for  major
modifications of facilities.   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.

      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, including reducing  available
capacity, 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 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  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 has continued to result in comprehensive
changes to the regulatory environment  for the telecommunications industry as a
whole.  The legislation, among other things,  substantially  reduced regulatory
authority over cable rates.  Another provision of the 1996 Act  afforded  hard-
wire cable operators greater flexibility to offer lower rates to certain of its
subscribers, thereby permitting cable operators to offer discounts on hard-wire
cable  service  to  the  Company's subscribers or prospective subscribers.  The
legislation  permits  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 afforded  relief
to  direct broadcast satellite 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  future  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.  For the year ended  March  31,  1998,  the  Company  paid
approximately $180,000 in copyright fees.

      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.

      Certain states have legislated  that each resident of a 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 video 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.
A more detailed discussion follows:

      HARD-WIRE CABLE. CAI's principal  subscription  video 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  significantly
increased channel line-ups to their subscribers, compared to between  22  to 43
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.  According to a report issued by the FCC in September 1995, of the
approximately 96  million total television households nationwide, approximately
85 million are passed  by  hard-wire cable systems, and of those homes that are
passed by cable, approximately 62 million are hard-wire cable subscribers.

      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  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,  for  technical  and  legal
reasons, cannot  generally  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.   According  to DBS Digest, there are approximately
8.5 million subscribers using DBS services.

      PRIVATE  CABLE.  Private  cable  is  a multi-channel  subscription  video
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. The 1996 Act removed many of the restrictions on the
ability  of local exchange carriers ("LECs"), including Regional Bell Operating
companies  ("RBOCs"),  to  provide video programming directly to subscribers in
their  respective  telephone  service  areas.   Thus,  while  there  remains  a
prohibition against an LEC acquiring  a  hard-wire  cable  operator  within its
telephone  service area, LECs can build their own hard-wire cable systems.   In
addition to having the opportunity to install traditional hard-wire cable, LECs
also have the  option  of installing high capacity fiber optic facilities.  CAI
believes that it will continue  to  maintain  a  cost advantage over installing
hard-wire, fiber optic or open video distribution  platforms  due  to  the high
capital expenditures associated with such technologies.  Bell South Corporation
has acquired wireless cable channel rights in Atlanta, GA, New Orleans, LA, and
Miami,  FL  and  begun  to  offer services in New Orleans and Atlanta.  Pacific
Telesis Group launched a 150  channel  digital video system in Los Angeles, CA.
The  competitive  effect  of  the  entry  of  telephone   companies   into  the
subscription video 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 video 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 video  operators  obtain their consent before retransmitting local
television  broadcasts.   The  Company  has  obtained  such  consents  for  its
operating systems. 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").  In  1993,  the  FCC
initially  proposed  to  redesignate  the  28  GHz  band  to create a new video
programming  delivery  service  referred  to as LMDS.  In July  1995,  the  FCC
proposed  to award licenses in each of 493 BTAs  pursuant  to  auctions.  Final
rules were  issued  by the FCC, and the auction for LMDS spectrum was conducted
in February 1998. Bidders bid on an A-block license, consisting of 1,150 MHz of
spectrum, and a B-block  license,  consisting  of  150 MHz of spectrum, in each
BTA<copyright>.   A total of 864 licenses were sold to  104  bidders  for  bids
totaling $578.6 million.   122  licenses  were  not sold, including 109 A-block
licenses.  The FCC intends to re-auction the unsold licenses at an undetermined
date.  The LMDS licensees will share the 28 GHz frequency  band with the Mobile
Satellite Service and the 31 GHz band with state and local governments. The FCC
contemplates allowing the LMDS licensees to use the spectrum  for  a variety of
services,  including  telephony,  interactive  video, video distribution,  data
transmission, teleconferencing, and other application.   Depending  on the type
and  number  of  services  offered, the cost of the customer-premises equipment
could range from $300 (for a  video  receive antenna) to $1,000 (for telephony,
video, and data capabilities).

      In addition, within each market,  CAI  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.  CAI has lost  video
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,  CAI  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 video service
could have a material  adverse  effect  on  CAI's  results  of  operations  and
financial condition.

      New  and  advanced technologies for the subscription video industry, such
as digital compression,  fiber optic networks, DBS transmission, video dialtone
and LMDS, are in various stages of development or 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  video
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 video 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,  recent transactions involving DBS providers,
software companies and media conglomerates  will  impact the competitive nature
of  the video, voice and data markets, including an  increased  difficulty  for
wireless cable providers to obtain access to attractive video programming.

      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 video 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 bids
totaling $36.2 million for the Auction Markets for its existing markets as well
as for new contiguous markets.

      The Company completed 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, 1998, the Company
had 40,543,039 shares of 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  strategic  business
relationships  with  the  BANX  Affiliate   and   the  BANX  Partnership.  This
relationship consisted of (i) the signing of 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 together with the BANX Term Notes and BANX
Warrants,  the  "BANX  Securities").   Upon  issuance of the BANX Securities in
September 1995, the full conversion or exercise  of  the  BANX 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  video  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.

      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 BANX
Securities.   In  connection  with the Modification Agreement, the average  per
share exercise/conversion price  of  the BANX 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  represented  the renegotiation of an option granted to CAI
to repurchase the $100 million face  amount of BANX securities held by the BANX
Partnership.  The repurchase consideration  contemplated  by  the Amendment was
$40  million in cash and 100,000 shares of convertible junior preferred  stock,
having  a  liquidation  preference  of  $30  million  in  the  aggregate.   The
repurchase option was 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 was to have
lapsed 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 were
consummated  in  accordance  with  the terms of the Amendment, the CS  Wireless
shares would have been 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.

      On February  17,  1998, the Company consummated a series of transactions,
including the purchase by  the  Company of the remaining interest of BANX under
the  BR  Agreement and the acquisition  of  BANX's  approximately  9.9%  equity
interest in  CS  Wireless.   Under  the  terms  of the Termination and Purchase
Agreement  (the  "Termination  Agreement"),  the  Company   issued  $7  million
aggregate principal amount of its Secured Notes to BANX in consideration of the
termination  of  the  BR  Agreement,  Modification  Agreement  and Modification
Agreement Amendment, and the transfer of 1,000,000 shares of CS Wireless common
stock held by BANX.  The parties exchanged general releases in connection  with
the transaction.

      Simultaneously with the closing of the Termination Agreement, the Company
and  MLGAF amended the Note Purchase Agreement to increase the aggregate amount
of Secured Notes issued and outstanding thereunder by an additional $18 million
to $45  million,  which amount includes $25 million of Secured Notes issued and
sold to MLGAF on November  25,  1997, a $2 million Secured Note issued and sold
to MLGAF on January 26, 1998, $7 million of Secured Notes issued by the Company
to BANX in connection with the Termination  Agreement  and  an  additional  $11
million  Secured  Note  issued by the Company and sold to MLGAF on February 17,
1998. The proceeds of the  additional  Secured  Note are being used for working
capital  and to meet certain other obligations of  the  Company.   All  of  the
Secured Notes mature on June 30, 1998.

      As part  of  these  transactions, MLGAF advised CAI that it had completed
the  purchase from BANX of all  of  the  BANX  Securities  representing  BANX's
initial  $100  million  investment in CAI in 1995, as well as the Secured Notes
issued by CAI to BANX in connection with the Termination Agreement.

      CAI and MLGAF also entered into an agreement in principle on February 17,
1998, pursuant to which MLGAF  agreed  to  exchange all of the BANX Securities,
together with accrued but unpaid interest and  dividends  thereon,  for  a  $30
million  12%  subordinated  note  due  2003,  which  agreement in principal was
consummated on March 3, 1998.  Prior to the consummation of the exchange, MLGAF
waived all conversion features contained in the BANX Securities.

      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  7.7  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
owned 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
11-3/8%  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.

      As part of the series of transactions consummated by the Company and BANX
during the fourth quarter, CAI received BANX's approximately 10% interest in CS
Wireless, thereby increasing CAI's ownership interest in CS Wireless to 60%.

      Pursuant to the terms of  the Participation Agreement each of the Company
and  Heartland,  as  the case may be,  is  subject  to  a  true-up  adjustment,
calculated in accordance with the provisions of the Participation Agreement, in
the event that the number  of  channels  available to CS Wireless in any market
contributed by a party is less than 16.  The  true-up  adjustment  for any such
channel deficiency may be satisfied by the deficient party by delivering  to CS
Wireless  either  (i)  cash,  (ii) a 5-year promissory note, (iii) shares of CS
Wireless stock, or (iv) any combination of the foregoing.  The Company has been
notified by Heartland that Heartland  believes  there  is  a  potential channel
deficiency  arising out of the number of channels delivered by the  Company  in
connection with  its  contribution  of  MMDS  assets relating to the Charlotte,
North Carolina market.  The Company believes that it has delivered 13 of the 16
required channels, and expects to be able to deliver  at least three additional
channels  in  Charlotte,  NC from applications currently pending  at  the  FCC.
Heartland  has advised the Company  that  it  believes  that  the  Company  has
delivered only  6  channels  relating to the Charlotte market.  The Company has
disputed Heartland's position,  and  is  in  discussions with Heartland on this
issue.

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- 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 Kagan Associates, Inc., 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  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.

      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  3, 1998, CAI had a total of 128 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;  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.

                          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,  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.  The
defendants' motion to dismiss was heard by the Northern District of New York on
October 17, 1997 and is still pending.  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.

      The Company is also a defendant in JOE HAND PROMOTIONS, INC. V. 601 L&P,
INC. V. CAI WIRELESS SYSTEMS, INC. and JOE HAND PROMOTIONS, INC. V. CAI
WIRELESS SYSTEMS, INC. D/B/A POPVISION WIRELESS CABLE pending in the U.S.
District Court for the Eastern District of Pennsylvania.  These actions arise
out of the alleged improper broadcasts of certain sporting events in commercial
establishments in violation of Federal statutes.  The plaintiff is the
exclusive distributor of such sporting events in the greater Philadelphia area
for commercial establishments, and has alleged the improper broadcast by CAI in
approximately five instances.  The lawsuits are in preliminary stages and are
being vigorously defended by CAI.

         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, 1998.




                                    PART II


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

      On January 8, 1998, trading of  the CAI Common Stock was removed from The
Nasdaq National Market<reg-trade-mark>  ("NNM")  and  listed for trading on the
Nasdaq SmallCap Market{ SM}.  The removal was caused by  the  Company's failure
to meet the net tangible asset listing requirement imposed by Nasdaq  upon NNM-
listed  companies.   As  a  condition to listing on the Nasdaq SmallCap Market{
SM}, the Company was required to maintain compliance with a $1.00 per share bid
price for an interim period.   Effective  January  13,  1998,  as  a  result of
failing to maintain the $1.00 per share bid price, the CAI Common Stock was de-
listed  from  the  Nasdaq SmallCap Market{ SM}.  The CAI Common Stock currently
trades on the Electronic  Bulletin  Board  system  under  the CAWS symbol.  The
approximate number of stockholders of record on June 23, 1998 was 699.  The high
and low sales prices for the CAI Common Stock on the NNM, the  Nasdaq  SmallCap
Market or the Electronic Bulletin Board system, as applicable, are as follows:

<TABLE>
<CAPTION>
HIGH                   LOW
                                                              ----                   ---
<S>                                                        <C>                     <C>
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 ENDED MARCH 31, 1998:
    First Quarter                                             2.00                   1.03
    Second Quarter                                            1.94                   0.94
    Third Quarter                                             2.50                   0.88
    Fourth Quarter                                            1.41                   0.38
FISCAL YEAR ENDING MARCH 31, 1999:
    First Quarter  (through June 18, 1998)                    0.50                   0.25
</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.

      Pursuant  to  certain  restrictive covenants contained in the instruments
governing the Company's indebtedness,  including  the  indenture  governing the
Senior Notes and the Note Purchase Agreement governing the terms of the Secured
Notes,   the   Company  cannot  declare  or  pay  any  dividends  or  make  any
distributions on  shares of the Company.  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 Ended    Year Ended     Year Ended     Year Ended        Ended           Ended
                                March 31,     March 31,      March 31,      March 31,       March 31,      August 31,
                                  1998          1997           1996(2)        1995(3)        1994            1993   
                                  ----          ----           ----           ----           ----            ----
<S>                             <C>          <C>            <C>            <C>              <C>            <C>
Summary of Operations:
  Revenues                      $  28,622    $ 36,327       $ 30,682       $  5,148         $   918        $     -
  Write-down of goodwill          (73,500)          -              -              -               -              -
  Restructuring costs              (5,033)          -              -              -               -              -
  Interest expense                (47,227)    (40,806)       (24,608)        (1,734)         (3,371)        (1,050)
  Write-down equity
   investment                     (23,570)          -              -              -               -              -
  Extraordinary gain from
   early extinguishment of
   debt                             5,346           -              -              -               -              -
  Net loss                       (230,073)    (82,298)       (40,986)       (14,107)         (7,521)        (1,378)
  Preferred stock dividends        13,891      13,011          5,879            328               -              -
  Ratio of earnings to
   fixed charges(1)                     -           -              -              -               -              -
Per Share Data:
  Loss per common share:
   Before extraordinary
    gain                            (6.15)      (2.38)         (1.73)          (.93)           (.61)          (.12)
   Extraordinary gain                 .13           -              -              -               -              -
   Net loss per common share        (6.02)      (2.38)         (1.73)          (.93)           (.61)          (.12)
Weighted average common
  shares outstanding               40,541      40,069         27,076         15,457          12,278         11,777
</TABLE>


<TABLE>
<CAPTION>
                                 March 31,    March 31,    March 31,       March 31,        March 31,     August 31,
                                   1998         1997         1996            1995             1994          1993
                                   ----         ----         ----            ----             ----          ----
<S>                             <C>          <C>           <C>             <C>             <C>             <C>
Financial Condition:
   Wireless channel rights      $ 194,051    $ 207,681     $ 205,974       $ 46,192        $ 10,791        $ 1,350
   Investment in CS Wireless       43,338       88,535       113,054              -               -              -
   Property and equipment          49,898       69,767        52,569         21,840           2,434            763
   Total assets                   351,466      542,340       698,795         78,461          41,047          2,499
   Debt                           357,089      311,787       318,435         29,532           3,130          3,511
   Redeemable preferred
    stock                               -       87,821        92,883         18,378               -              -
   Shareholders' equity
    (deficit)                     (27,561)     114,690       192,611         22,115          34,346         (1,597)

</TABLE>

(1) In calculating  the ratio of earnings to fixed charges, earnings consists
   of losses prior to income  tax benefit, minority interest in loss, 
   extraordinary items and fixed charges.  Fixed charges consist 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 $235,419,  $97,298,  $53,307,  $15,004,
   $7,552,  and $1,378 for the periods ended in 1998, 1997, 1996, 1995, 1994,
   and 1993, 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.

{(3)} The Company acquired the New York System on January 9, 1995.
<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 Company's ability  to attract one or more new
strategic partners, their willingness to enter into arrangements  with CAI on a
timely  basis  and  the  terms  of such arrangements, the receipt of regulatory
approvals  for  alternative uses of  its  MMDS  spectrum  contemplated  by  the
Company's business plan, 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, practical success of CAI's engineered technology, tower
space availability,  absence  of interference and the ability of the Company to
redeploy or sell excess equipment, the assumptions, risks and uncertainties set
forth  below  in  this  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of  Operations"  and  elsewhere  herein, as well as other
factors  contained  herein  and  in  the  Company's  other securities  filings.
Furthermore, the financing obtained by the Company to  date  will not enable it
to meet its future cash needs.

RECENT FINANCIAL DEVELOPMENTS:  ANTICIPATED REORGANIZATION

      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, 1999, the Company
is  obligated  to  pay  approximately $9 million in minimum  license  fees  and
operating  lease  payments,   approximately   $3.5   million  in  MMDS  license
obligations,  in addition to funding operating losses.   The  Company  projects
that operating  cash  requirements  will  be approximately $20 million  for the
year ended March 31, 1999. On a short-term  basis,  CAI  has $45 million of its
Secured Notes due on June 30, 1998.  See " - Senior Secured  Financing"  below.
On a long-term basis, CAI has substantial indebtedness which, beginning in  the
fiscal  year  ending  March  31,  1999,  will  include significant debt service
requirements.  As of March 31, 1998, CAI had outstanding  consolidated  debt of
approximately $357 million, and the Company had trade payables of approximately
$4.9 million.

      On  or  about  the date of the filing of this Annual Report on Form 10-K,
the Company intends to commence the Solicitation  with respect to the Plan from
the holders of Senior  Notes and certain other impaired creditors.  CAI has not
yet commenced a reorganization  case  under  Chapter 11 of the Bankruptcy Code.
If,  however, CAI receives the requisite votes  indicating  acceptance  of  the
Plan, CAI intends to file the Petition under Chapter 11 of the Bankruptcy Code,
and to  seek,  as promptly thereafter as practicable, confirmation of the Plan.
Accordingly,  the   Company   has   provided   approximately  $5.1  million  of
restructuring costs in the Statement of Operations  for  the  fiscal year ended
March 31, 1998.  Costs include legal and financial advisory fees.

      CAI Wireless Systems, Inc. (the parent holding company) and  one  of  its
wholly-owned  operating subsidiaries, Philadelphia Choice, are expected to file
the Petition following  the  solicitation  of  certain  CAI creditors.  None of
CAI's other subsidiaries, including any of the subsidiaries that are holders of
MMDS  licenses  issued  by  the FCC or are lessees under MMDS  excess  capacity
leases, will be parties to the Petition.  In addition, the Company intends that
only those claims against and  interests  in CAI specifically identified in the
Plan (I.E., the holders of the Senior Notes,  holders  of  certain subordinated
indebtedness,  holders  of  securities claims and holders of equity  securities
claims) will be impaired.  The Company intends that all other holders of claims
against  CAI,  including  trade  creditors,  licensors  and  lessors,  will  be
unimpaired claims against CAI.

      The Company intends to  continue to operate its business in Chapter 11 in
the  ordinary course and to seek  to  obtain  the  necessary  relief  from  the
Bankruptcy  Court  to  pay  its employees, trade and certain other creditors in
full and on time.  To fund its operations during the bankruptcy proceeding, the
Company has arranged for the DIP Facility financing (the "DIP Facility") in the
principal amount of $60 million  .  The DIP Facility is expected to be provided
by  MLGAF,  the Company's current secured  lender.   See  "  -  Senior  Secured
Financing" below.   A  portion of the proceeds of the DIP Facility will be used
to repay all amounts owed  under  the Company's current senior secured facility
(approximately $47.8 million, including  interest and fees as of May 31, 1998).
The balance of the DIP Facility will be used  to  fund  operations  and working
capital throughout the bankruptcy proceeding.  The Company intends to repay the
DIP Facility out of the proceeds of the Exit Facility currently being sought by
the  Company.   The Exit Facility is expected to be a two-year, senior  secured
facility in the principal  amount  of approximately $80 million .  A portion of
the proceeds of the Exit Facility is  intended  to  be  used  to  repay the DIP
Facility  in  full,  with the balance of the Exit Facility to be used  to  fund
operations and working  capital for the 12 months following the consummation of
the Plan. The Company, in  consultation  with  BT Alex. Brown Incorporated, its
financial advisor, is actively seeking additional  lending  sources  willing to
participate in the Exit Facility.  There can be no assurance, however, that the
Company will be able to obtain the Exit Facility, or if able to obtain the Exit
Facility,  that  the financing will be on terms and conditions satisfactory  to
the Company.

      The Plan contemplates  that  the  holders of equity securities claims and
equity securities interests, including the holders of CAI Common Stock, and any
and all options, warrants or other rights  to acquire the CAI Common Stock will
not receive or retain any property or interest  in  property on account of such
claims.

      The Company expects that the Solicitation will  be  completed on or about
July 27, 1998 and that the Company will file its Petition in  the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy  Court") shortly
thereafter,  assuming that the Company receives the requisite acceptances  from
the Solicitation.   There can be no assurance that the Company will receive the
requisite acceptances  from  the  Solicitation, or, if the Company does receive
the requisite acceptances, that the  Plan  will  be confirmed by the Bankruptcy
Court and consummated.

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
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 $377
million through March 31, 1998 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, 1998,
CAI had total liabilities in excess  of  total assets of $28 million, including
outstanding consolidated long-term debt of approximately $357 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), paying dividends, disposing of assets,  entering  into any merger,
consolidation,  reorganization,  or  recapitalization plan, retiring  long-term
debt, or making any acquisitions without the prior consent of the lenders.

RECENT DEVELOPMENTS

      CERTAIN ASSET SALES.  On March 18, 1998, the Company and its wholly-owned
subsidiaries,  Philadelphia  Choice, Washington  Choice  Television,  Inc.  and
Washington License, Inc. sold  assets  relating  to  SMATV  operations  in  the
Washington-Baltimore  metropolitan area to Mid-Atlantic Telcom Plus, LLC, d/b/a
OnePoint Communications ("OnePoint").  The net proceeds to the Company from the
sale of these assets of  $1.6  million  were  used to help fund working capital
requirements.

      The Company and Philadelphia Choice have  entered into a letter of intent
for  the  sale of assets relating to Philadelphia MDU  Operation  to  OnePoint.
Under the terms  of  the agreement, OnePoint has agreed to purchase assets used
in connection with the  Philadelphia  MDU  Operation,  and to assume identified
agreements for master television service, pursuant to which  the cable operator
is  granted  access  to  the  MDU  as  the  exclusive  provider of subscription
television services.  The purchase price for the Philadelphia  MDU Operation is
$6   million,   subject  to  certain  post-closing  adjustments.   The  parties
anticipate consummating the sale and purchase of the Philadelphia MDU Operation
under the auspices  of  the Bankruptcy Court as part of the Plan or pursuant to
Section 363 of the Bankruptcy Code.

      NASDAQ DE-LISTING.   On  January 8, 1998, trading of the CAI Common Stock
was removed from The Nasdaq National  Market<reg-trade-mark> ("NNM") and listed
for trading on the Nasdaq SmallCap Market{  SM}.  The removal was caused by the
Company's failure to meet the net tangible asset listing requirement imposed by
Nasdaq upon NNM-listed companies.  As a condition  to  listing  on  the  Nasdaq
SmallCap  Market{  SM}, the Company was required to maintain compliance with  a
$1.00 per share bid  price  for an interim period.  Effective January 13, 1998,
as a result of failing to maintain  the  $1.00  per  share  bid  price, the CAI
Common  Stock  was  de-listed  from the Nasdaq SmallCap Market{ SM}.   The  CAI
Common Stock currently trades on the Electronic Bulletin Board system under the
CAWS symbol.
<PAGE>
SENIOR SECURED FINANCING

      13% SENIOR SECURED NOTES.   On  November 25, 1997, the Company issued and
sold $25 million of its Secured Notes to  MLGAF.   CAI used approximately $17.3
million of the proceeds to repay all amounts outstanding  under  the F/C Credit
Facility,  and  the  remaining proceeds of approximately $7.3 million,  net  of
expenses associated with  this  transaction,  for  working capital purposes and
build-out of the Company's wireless cable business.   On  January 26, 1998, the
Company issued and sold an additional $2 million Secured Note  to MLGAF, and on
February  17,  1998, the Company issued and sold an additional $18  million  of
Secured Notes in  connection  with the consummation of a series of transactions
by the Company, MLGAF and BANX.  See " - Termination of BANX Rights" below.

      The Secured Notes are short-term obligations of CAI, maturing on June 30,
1998, and were issued and sold pursuant to the terms of the Note Purchase
Agreement between CAI.  Interest at the rate of 13% per annum on the Secured
Notes is payable at maturity.  In addition to fees and expenses associated with
the issuance and sale of the Secured Notes, CAI is required to pay a $730,000
commitment fee to MLGAF, which is also due at maturity. All outstanding amounts
under the Note Purchase Agreement are expected to be converted into and deemed
to be outstanding obligations under the DIP Facility.

      As collateral for the Notes,  CAI  granted  a  blanket lien on all of its
assets,   including  the  stock  of  substantially  all  of  its   wholly-owned
subsidiaries, as well as a pledge of its interests in CS Wireless and TSS.  The
Note Purchase  Agreement  contains  covenants  that are usual and customary for
transactions of this type, including a series of negative covenants intended to
preserve the value of the collateral pledged by CAI for the benefit of MLGAF.

      FOOTHILL CAPITAL CREDIT FACILITY.  On November 25, 1997, the Company used
a portion of the proceeds from the issuance of the  Secured  Notes to repay all
amounts outstanding and owing to F/C Lenders under the F/C Credit  Facility  to
CAI  in  June  1997.   At  the time of repayment, there was approximately $17.3
million outstanding under the  F/C Credit Facility, consisting of $15.3 million
representing the principal amount of the loans outstanding under the F/C Credit
Facility;  a  $1.6  million fee, and  $350,000  representing  interest  on  the
outstanding loans and fees.

      The repayment of the F/C Credit Facility in November 1997 represented the
early termination of  the  F/C  Credit  Facility.  Prior to its termination and
repayment  in  full,  the  Company  executed  a  series  of  continuing  waiver
agreements, which waived compliance by the Company  with  certain  post-closing
requirements,   increased   the  interest  rates  payable  on  the  obligations
outstanding  under  the F/C Credit  Facility,  and  imposed  additional  and/or
modified existing covenants  relating to various items, including sales of non-
core assets, certain fundamental  changes  to  the  Company  and  the Company's
ability  to  incur  additional  indebtedness.  All of the waivers executed  and
delivered by the Company to the F/C  Lenders contained a general release of the
F/C Lenders.  A final general release  was  required  of  and  delivered by the
Company  in  connection with receipt of the pay-off letter issued  by  the  F/C
Lenders in connection  with  the repayment of all Company obligations under the
F/C Credit Facility.  The early termination of the F/C Credit Facility resulted
in the Company recording a third  quarter extraordinary charge of approximately
$4.7 million, representing the costs  associated  with  the F/C Credit Facility
that the Company was originally amortizing over the two-year  term  of  the F/C
Credit Facility.

TERMINATION OF BANX RIGHTS

      On  February  17, 1998, the Company consummated a series of transactions,
including the purchase  by  the Company of the remaining interest of BANX under
the  BR  Agreement and the acquisition  of  BANX's  approximately  9.9%  equity
interest in  CS  Wireless.   Under  the terms of the Termination Agreement, the
Company issued $7 million aggregate principal  amount  of  its Secured Notes to
BANX  in  consideration  of  the termination of the BR Agreement,  Modification
Agreement, and Modification Agreement  Amendment, and the transfer of 1 million
shares of CS Wireless common stock held  by BANX to CAI.  The parties exchanged
general releases in connection with the transaction.

      As part of these transactions, MLGAF  advised  CAI  that it had completed
the  purchase from BANX of all of the Securities issued to BANX  in  connection
with BANX's  initial  $100 million investment in CAI in September 1995, as well
as the Secured Notes issued  by  CAI to BANX in connection with the Termination
Agreement.  On March 3, 1998, CAI  exchanged  the  BANX Securities then held by
MLGAF for the Subordinated Note.  As a result of the exchange transactions, the
Company  eliminated  approximately  $117  million  of Senior  Preferred  Stock,
accumulated preferred stock dividends, and accrued interest  on the Term Notes,
of  which  approximately  $102  million  was  reclassed to paid-in capital  and
recorded  an  approximately  $10  million extraordinary  gain  from  the  early
extinguishment of debt.

      The Subordinated Note issued to MLGAF accrues interest at the rate of 12%
per annum, compounded semi-annually,  and  is payable at maturity on October 1,
2005.  The Subordinated Note is expressly subordinate  to  the Senior Notes and
to  the  $45  million  aggregate  principal  amount  of  Secured  Notes.    The
Subordinated  Note  is a joint and several obligation of CAI and certain of its
wholly-owned subsidiaries.   The  obligation  of  the subsidiaries to repay the
Subordinated Note, however, is limited by the terms  of the Indenture governing
the terms of the Senior Notes.

      In  conjunction with the transaction, the Company  also  exchanged  2,500
shares of CAI  Common  Stock  for all warrants to purchase CAI equity that were
held by BANX and acquired by MLGAF  on March 3, 1998.  The CAI Common Stock was
issued in reliance upon an exemption  from the registration requirements of the
Securities  Act of 1933, as amended, and  contains  a  legend  restricting  its
transfer without  such registration or an exemption therefrom.  The issuance of
the CAI Common Stock  to  MLGAF  increased the number of issued and outstanding
shares of CAI Common Stock to 40,543,039 at March 31, 1998.

      With the termination of the  BANX rights, the Company has embarked upon a
preservation strategy that will allow  CAI  to utilize its significant spectrum
capacity for the delivery of video, voice and  data,  or  various  combinations
thereof, subject to regulatory approval, as necessary for one or more strategic
partners.  This preservation strategy includes the continued build-out  of  the
transmission   facilities   in  conformity  with  the  FCC  license  perfection
regulations, as well as the re-negotiation  of spectrum leases when and as such
leases mature.

      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 broadband network.  The  Company believes that its
system  would  be  able  to provide quick and relatively inexpensive  household
coverage on a broad scale.   CAI  believes  that  the  concept  of  a  wireless
broadband  network  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
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 system.

      CAI continues to believe that  a  strategic  partner is necessary for the
MMDS industry to fully realize the potential of this  spectrum.  Believing that
a   national-level   strategic   partner   has  the  financial  resources   and
infrastructure to fully utilize the MMDS spectrum  for  video,  voice  and data
transmission, CAI has aggressively sought one or more strategic partners  since
the  departure  of  Bell  Atlantic/NYNEX.   To  date,  CAI has demonstrated its
technological  capabilities  to several potential strategic  partners,  and  is
currently  conducting  an  on-site  trial  for  a  telecommunications  company,
providing  wireless  Internet   and   corporate   intranet   access  for  trial
participants at various locations in the greater New York City area.  Recently,
this  trial  has  been expanded to include two-way data transmission  with  the
deployment of first  generation  transverters  developed  by  a high-technology
equipment  manufacturer  in  conjunction  with  CAI  engineers.  CAI  also  has
invested  in  TSS  in order to access pre-digitized video  programming  and  to
provide a vehicle for a complementary DTH video service that could, eventually,
free additional MMDS spectrum for these alternative uses.

      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 of the MMDS spectrum  is  obtained  for  such market, the allocation of
channels among the various services is expected to  be driven by the needs of a
strategic partner, whose needs, presumably, will be driven  by  consumer demand
for such services in the Company's markets.  Not all services may be offered in
all  markets, and there can be no assurance that the Company will  be  able  to
locate  one  or  more  strategic partners interested in utilizing the Company's
spectrum for such services.   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 and greater New York City markets and have been
limited to the conduct of tests.

CASH FLOW INFORMATION

      During  the  year ended March 31, 1998, CAI expended approximately  $47.9
million to fund operating  activities,  $7.2  million  for equipment purchases,
$4.4 million to invest in TelQuest, $4.7 million to obtain  interim  financing,
$3.1  million  to  pay wireless channel rights obligations and other debt,  and
$2.0 million to acquire wireless channel rights.  During this period CAI funded
its cash requirements  out  of  existing  cash  balances, net proceeds from the
issuance  of senior secured notes of $33.7 million,   and  the  disposition  of
equipment generating  net proceeds of approximately $1.8 million.  At March 31,
1998, CAI had available funds of approximately $1.3 million and restricted cash
of approximately $9.1 million  which will be used to fund the operations of the
Company.

      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 funds from
financing activities.  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 BANX Warrants.  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.

OPERATIONS

      As of March 31,  1998,  the Company had approximately 52,000 analog video
subscribers compared to 70,800 subscribers as of March 31, 1997. The 18,800 net
decline in subscribers is due primarily  to the Philadelphia System decrease of
approximately 10,400 subscribers and New York  System  decline of approximately
4,700  subscribers for the comparable periods.  The Philadelphia  and  the  New
York Systems  are losing subscribers to hard-wire cable operators primarily due
to limited channel capacity and lack of marketing efforts. This trend is likely
to continue.  The  decrease in subscribers experienced in the other systems was
primarily  attributable  to  the  sale  of  certain  Washington  System  SMATVs
including approximately  1,500  subscribers  and  a  curtailment  of  marketing
efforts.  The overall decline in subscribers has continued through May 31, 1998
at which time the Company's total subscribers were approximately 50,000.

      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, 1998   was  4.1%  overall  with  individual
operating systems  ranging  from 2.7% to 5.0%. 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%.  The  improvement  in  the  churn  rate  is
indicative  of  the  prior  year's  retention  strategy  of  charging increased
installation  fees  which  translated  into increased commitment and  therefore
retention.  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  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.   Since  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  of  valuations
completed for  the  year ended March 31, 1998, the Company reduced the carrying
value of goodwill by  $73.5  million,  net of accumulated amortization of $14.7
million, which was associated with the Philadelphia  and  Washington  companies
purchased by CAI in September 1995.

COMPARISON OF OPERATING RESULTS

      YEAR ENDED MARCH 31, 1998 COMPARED TO YEAR ENDED MARCH 31, 1997

      CAI's  revenue  decreased  $7.7  million  ($28.6  million  FY 1998; $36.3
million FY 1997) in the year ended March 31, 1998 compared to the  prior  year.
The  decrease  resulted  primarily  from  the  Company's strategy not to pursue
analog-based  television  subscriber growth while  it  evaluates  its  business
opportunities in addition to  subscription  television.   As  anticipated,  the
policy  had  a  negative  impact on the Company's subscription revenues.  As of
March 31, 1998, the Company's  subscriber  base  had decreased by approximately
18,800 to 52,000 subscribers from approximately 70,800 at March 31, 1997.

      CAI's  television subscription revenue was $26.1  million  for  the  year
ended March 31,  1998  compared  to  $33.1 million for the year ended March 31,
1997 as generated by the following operating  systems:   Albany,  NY  ($3.0 vs.
$3.2  million), Rochester, NY ($0.7 vs. $0.7 million), New York City, NY  ($4.7
vs. $7.3  million), Hampton Roads, VA ($0.9 vs. $1.1 million), Philadelphia, PA
($15.6 vs.  $19.4  million), Washington, DC ($1.0 vs. $1.2 million), and by the
SMATV operations in Providence, RI ($0.2 vs. $0.2 million).

      Operating expenses  were  $166.0  million and $81.6 million for the years
ended March 31, 1998 and 1997, respectively.   The  $84.4  million  increase is
attributable  primarily  to  (a) the $73.5 million write-down of goodwill;  (b)
restructuring  costs  of  $5.0  million;   (c)   increased   depreciation   and
amortization of $2.4 million ($34.7 million FY 1998; $32.3 million FY 1997) due
to  the commencement of depreciation of the Boston project of $2.2 million; (d)
Boston operating costs of $4.0 million for the current year; and (e) the write-
off of  $7.1  million  of project costs in FY 1998 versus $2 million in FY 1997
reflecting the change in  business strategy given the Company's limited capital
resources.   License  fees did  not  decrease  commensurate  with  the  revenue
decrease due to minimum monthly payment requirements.

      CAI recorded equity  losses of $31.7 million for the year ended March 31,
1998 relating to its 60% investment  in  CS Wireless and 25% investment in TSS.
The decrease in CAI's investment in CS reflects the Company's pro rata share of
the $52.3 million net loss reported by CS  Wireless for its year ended December
31, 1997 along with $2.4 million of amortization  of  the  goodwill  associated
with  this  investment  compared to an aggregate loss of $17.6 million for  the
same period last year. In  addition,  based  on  the current depressed industry
conditions  of  the  wireless  industry  and CS Wireless's  continuing  losses,
management has re-evaluated the goodwill associated  with  its investment in CS
Wireless.  Accordingly, the goodwill portion of the CS Wireless  investment had
been written-down by $23.6 million during the year ended March 31,  1998.   The
decrease in CAI's investment in TSS of $1.8 million reflects the Company's pro-
rata share of the $7.0 million loss reported by TSS since its inception through
March 31, 1998, and amortization of goodwill.

      Other income, primarily interest income on the debt escrow funds, for the
year  ended  March  31, 1998 was $4.4 million compared to $6.4 million for last
year.  Interest income on investments continues to decline as funds are used to
make the  semi-annual  interest  payments  on  the  Senior Notes (totaled $33.7
million during the year ended March 31, 1998).  The debt service escrow account
has  funds available for the September 1998  semi-annual  interest  payment  as
required by the Indenture for the Senior Notes.  The decline in interest income
was partially offset by a $1.2 million gain from the sale of certain assets.

      Interest  expense  increased  $6.5 million ($47.3 million FY 1998; $40.8
million FY 1997) for the year ended March  31,  1998.  The increase in interest
expense for the year consists of interest incurred on the  F/C  Credit Facility
and Secured Notes, and amortization of the financing fees associated with those
facilities.

      The Company recorded an  income tax benefit of $15.0 million for the year
ended March 31, 1997 to offset existing  deferred tax liabilities.  There is no
tax benefit for the current year since there  were  no  available  deferred tax
liabilities  and  it is more likely than not that any benefit recorded  on  the
Company's current losses would not be realized in the foreseeable future.

      Additionally, the Company realized a net extraordinary gain of $5.3 
million for the year ended March 31, 1998, consisting of a $10 million gain as 
a result of the Termination Agreement, the exchange of BANX Securities, and the
forgiveness of accrued interest related to the BANX Term Notes,offset, in part,
by the $4.7 million non-recurring charge related to the write off of the 
unamortized costs arising from the early termination of the F/C Credit Facility.

      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 1997 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 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 1997; 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  1/4  %  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.

INFLATION

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

THE YEAR 2000 ISSUE

      The Company is in the  process  of  assessing  issues relating to what is
generally   referred  to  as  the  Year  2000  Issue.   Based  on   preliminary
information,  as  of the date of this report, the Company believes that it will
be able to implement successfully the systems and programming changes necessary
to address the Year 2000 Issue, and does not expect the cost of such changes to
have  a  material impact  on  the  Company's  financial  position,  results  of
operation or cash flows in future periods.

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

      STATEMENT OF FINANCIAL  ACCOUNTING  STANDARDS  NO. 125 ("SFAS 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.  SFAS No. 125  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's adoption of this pronouncement in  the  4th  quarter  of  the fiscal year
ended March 31, 1998 did not have a material effect on CAI's financial position
or results of operations.

      STATEMENT  OF  FINANCIAL ACCOUNTING STANDARDS NO. 130 ("SFAS  No.  130"),
"Reporting Comprehensive  Income",  which  was issued in June 1997 is effective
for fiscal years beginning after December 15,  1997.   SFAS No. 130 establishes
standards  for  reporting  and  disclosure  of  comprehensive  income  and  its
components in a full set of general-purpose financial  statements.  The Company
believes  that  it  does not have a significant amount of comprehensive  income
(loss)  as defined, if  any.   Accordingly,  the  Company  believes  that  this
statement  will  not have a material effect on CAI's future financial statement
presentations.  Effective  April  1,  1998,  the  Company  will comply with the
requirements of SFAS No. 130 not already met.

      In June 1997, STATEMENT OF FINANCIAL ACCOUNTING STANDARDS  NO. 131 ("SFAS
No.   131"),   "Disclosures   About  Segments  of  an  Enterprise  and  Related
Information," was also issued.   This  pronouncement  is  effective  for fiscal
years  beginning  after  December  15,  1997  and  requires  disclosures  about
operating segments and enterprise-wide disclosures about products and services,
geographic  areas  and  major  customers.  Effective April 1, 1998, the Company
will comply with the requirements  of  SFAS  No.  131  and  make  the necessary
disclosures.

      In April 1998, AICPA STATEMENT OF POSITION 98-5 ("SOP 98-5"),  "Reporting
on  the  Costs of Start-Up Activities" was also issued.  This pronouncement  is
effective  for fiscal years beginning after December 31, 1998 and requires that
costs  of  start-up  activities,  including  organizational  costs,  should  be
expensed as  incurred.  CAI's adoption of this pronouncement in the 4th quarter
of the fiscal year ended March 31, 1998 did not have a material effect on CAI's
financial position or results of operations.

<PAGE>

             ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                         INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                  Page No.
                                                                                 IN FORM 10-K
<S>                                                                                  <C>
FINANCIAL STATEMENTS

Reports of Independent Accountants                                                   35

Consolidated Balance Sheets - March 31, 1998 and 1997                                37

Consolidated Statements of Operations - Years Ended March31, 1998, 1997, and 1996    38

Consolidated Statements of Shareholders' Equity (Deficit) - Years Ended
   March 31, 1998, 1997, and 1996                                                    39

Consolidated Statements of Cash Flows - Years Ended March31, 1998, 1997, and 1996    40

Notes to Consolidated Financial Statements                                           43

</TABLE>
<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, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for each of the three years in the period ended March 31, 1998.  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 $43,337,527 and $88,534,526 in CS Wireless
Systems, Inc. as of March 31, 1998 and 1997 and its share of losses of
$27,522,000 and $17,600,000 in CS Wireless Systems, Inc.'s operations for the
years ended March 31, 1998 and 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 audits 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, 1998 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1998 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 incurred substantial debt, of which $45,000,000 is
due on June 30, 1998.  The Company also has a capital deficiency.  The
Company's operating plans require additional funds which may take the form of
debt or equity security issuances, borrowings or asset sales.  In addition, the
Company intends to, if approved by its creditors, file a pre-packaged
reorganization plan under Chapter 11 of the U.S. Bankruptcy Code.  Recovery 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 financing will be available or that the Company will be able to
implement its operating plans.  The uncertainty over the Company's ability to
obtain such additional financing or that the Company can execute its operating
plans 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 2.  The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.


COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
June 15, 1998, except for Note 2,
as to which the date is June 24, 1998
<PAGE>






                         INDEPENDENT AUDITORS' REPORT



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

We have audited  the  consolidated  balance sheets of CS Wireless Systems, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders'  equity,  and  cash flows for the years
then  ended  (not  presented separately herein).  These consolidated  financial
statements  are  the  responsibility   of   the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects, the financial  position  of  CS  Wireless
Systems, Inc. and subsidiaries  as  of  December  31,  1997  and  1996, and the
results of their operations and their cash flows for the years{ }then  ended in
conformity with generally accepted accounting principles.



                                                KPMG Peat Marwick LLP




Dallas, Texas
March 13, 1998

<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                            MARCH 31, 1998 AND 1997



<TABLE>
<CAPTION>
                                                              1998                                        1997
                                                              ----                                        ----
<S>                                                     <C>                                        <C>
                        ASSETS
Cash and cash equivalents                                $  1,275,020                              $  10,471,918
Restricted cash                                             9,134,651                                          -
Debt service escrow                                        16,418,922                                 47,865,389
Subscriber receivables, net                                   387,144                                    695,707
Prepaid expenses                                              661,669                                  1,034,106
Property and equipment, net                                49,898,337                                 69,767,017
Wireless channel rights, net                              194,050,792                                207,680,551
Investment in CS Wireless Systems, Inc.                    43,337,527                                 88,534,526
Investment in TelQuest Satellite Services LLC               3,174,732                                          -
Goodwill, net                                              22,985,876                                104,204,716
Debt financing costs, net                                   7,079,424                                  9,249,934
Other assets                                                3,061,780                                  2,835,651
                                                         ------------                               ------------
     Total Assets                                        $351,465,874                               $542,339,515
                                                         ============                               ============
    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

LIABILITIES
 Accounts payable                                        $  4,852,091                               $  6,600,584
 Accrued expenses                                          12,253,286                                 16,138,811
 Wireless channel rights obligations                        4,832,971                                  5,302,600
 Interim debt financing                                    45,000,000                                          -
 Notes payable                                             37,088,506                                 36,786,596
 Senior notes                                             275,000,000                                275,000,000
                                                         ------------                               ------------
                                                          379,026,854                                339,828,591
                                                         ============                               ============

Mandatorily redeemable preferred stock
 14% Senior convertible preferred stock
   (liquidation value $70,000,000)                                  -                                 69,160,000
                                                           ----------                                -----------
 Accrued preferred stock dividends                                  -                                 18,660,734
                                                           ----------                                -----------
                                                                    -                                 87,820,734
                                                           ----------                                -----------

Commitments and contingencies

SHAREHOLDERS' EQUITY (DEFICIT)
 Preferred stock, none outstanding                                  -                                          -
 Common stock, 100,000,000 shares authorized, no par
   value; shares issued and outstanding:
    March 31, 1998 - 40,543,039
    March 31, 1997 - 40,540,539                           275,770,764                                275,769,414
 Additional paid-in capital                               101,711,759                                          -
 Accumulated deficit                                     (405,043,503)                              (161,079,224)
                                                          -----------                               ------------
                                                          (27,560,980)                               114,690,190
                                                          -----------                               ------------

     Total Liabilities and Shareholders' Equity
      (Deficit)                                          $351,465,874                               $542,339,515
                                                         ============                               ============
</TABLE>

                See notes to consolidated financial statements.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED MARCH 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>

                                                       1998                       1997                        1996
                                                       ----                       ----                        ----
<S>                                              <C>                         <C>                         <C>
Revenues                                         $  28,621,710               $  36,326,816                $ 30,682,486
                                                  ------------               -------------                ------------
Costs and expenses:
   Programming and license fees                     15,459,663                  16,051,094                  12,582,750
   Marketing                                         1,373,265                   2,033,107                   3,525,396
   General and administrative                       35,875,749                  31,196,446                  24,689,572
   Depreciation and amortization                    34,713,610                  32,345,327                  24,718,341
   Write-down of goodwill                           73,500,000                           -                           -
   Restructuring costs                               5,033,316                           -                           -
                                                  ------------                ------------                 -----------
                                                   165,955,603                  81,625,974                  65,516,059
                                                  ------------                ------------                 -----------
    Operating loss                                (137,333,893)                (45,299,158)                (34,833,573)
                                                  ------------                ------------                 -----------
Other income (expense):
   Interest expense                                (47,226,574)                (40,805,791)                (24,608,258)
   Equity in net losses of affiliates              (31,747,268)                (17,600,000)                          -
   Write-down of equity investment                 (23,570,000)                          -                           -
   Interest and other income                         4,458,782                   6,406,742                   6,134,349
                                                   -----------                 ------------                -----------
                                                   (98,085,060)                (51,999,049)                (18,473,909)
                                                   -----------                 -----------                 -----------
    Loss before income tax benefit,
      extraordinary items and minority interest   (235,418,953)                (97,298,207)                (53,307,482)

Income tax benefit                                           -                  15,000,000                  12,000,000
                                                   -----------                  -----------                -----------
    Loss before extraordinary items and
      minority interest                           (235,418,953)                (82,298,207)                (41,307,482)

Extraordinary net gain from early
 extinguishment of debt                              5,345,699                           -                           -

Minority interest                                            -                           -                     321,910
                                                   -----------                  ----------                  ----------

    Net loss                                      (230,073,254)                (82,298,207)                (40,985,572)

Preferred stock dividends                          (13,891,025)                (13,011,270)                 (5,878,960)
                                                  ------------                 -----------                 -----------

    Loss applicable to common shareholders       $(243,964,279)               $(95,309,477)              $ (46,864,532)
                                                 =============                ============                ============
Basic and diluted loss per common share:
  Loss before extraordinary items                 $     (6.15)                $     (2.38)                 $     (1.73)
  Extraordinary gain                                     0.13                           -                            -
                                                  -----------                 -----------                  -----------
  Net loss                                        $     (6.02)                $     (2.38)                 $     (1.73)
                                                  ===========                 ===========                  ===========

Weighted average number of common shares
  outstanding                                      40,540,731                  40,069,258                   27,075,578
                                                   ==========                  ==========                   ==========
</TABLE>
                See notes to consolidated financial statements.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES


           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

                  YEARS ENDED MARCH 31, 1998, 1997, AND 1996


<TABLE>
<CAPTION>
ADDITIONAL
                                                    COMMON STOCK               PAID-IN          ACCUMULATED
                                                SHARES         AMOUNT          CAPITAL            DEFICIT             TOTAL
<S>                                          <C>          <C>               <C>              <C>                 <C>
BALANCE AT APRIL 1, 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 costs                                 -        (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
Common stock issued in exchange for BANX
  warrants                                        2,500          1,350                 -                  -             1,350
Senior preferred stock and accumulated
  dividends contributed to capital pursuant
  to the BANX termination agreement on
  March 3, 1998                                       -              -       101,711,759                 -        101,711,753
Preferred stock dividends                             -              -                 -       (13,891,025)       (13,891,025)
Net loss for the year                                 -              -                 -      (230,073,254)      (230,073,254)
                                             ----------    -----------       -----------      ------------        -----------
BALANCE AT MARCH 31, 1998                    40,543,039   $275,770,764      $101,711,759     $(405,043,503)     $ (27,560,980)
                                             ==========    ===========       ===========      ============       ============
</TABLE>





                See notes to consolidated financial statements.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED MARCH 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
<S>                                                     <C>                      <C>                 <C>
                                                            1998                     1997                   1996
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                              $(230,073,254)         $(82,298,207)       $  (40,985,572)
   Adjustments to reconcile net loss to
    net cash used in operating activities:
     Depreciation and amortization                         34,713,610            32,345,327            24,718,341
     Goodwill write-down                                   73,500,000                     -                     -
     Equity in net losses of affiliates                    31,747,268            17,600,000                     -
   Write-down of equity investment                         23,570,000                     -                     -
   Extraordinary net gain on early extinguishment of debt  (5,345,699)                    -                     -
   Deferred income tax benefit                                      -           (15,000,000)          (12,000,000)
   Debt financing costs and discount amortization           4,915,160             3,336,483             1,778,893
   Write-off of projects and other costs                    7,136,940             2,087,144                     -
   Gain on the sale of assets                              (1,239,175)              (16,851)                    -
   Minority interest                                                -                     -              (321,910)
   Other                                                      180,230               277,820              (193,890)
   Changes in assets and liabilities:
     Subscriber receivables                                   273,604               690,092              (111,677)
     Other assets                                             638,880              (382,798)             (128,117)
     Accounts payable and accrued expenses                 12,040,324             6,608,567            (7,404,356)
                                                           ----------            ----------            ----------
       Net cash used in operating activities              (47,942,112)          (34,752,423)          (34,648,288)
                                                           ----------            ----------            ----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of businesses, net of cash acquired                   -                     -           (77,407,837)
  Purchase of wireless channel rights                      (2,024,526)           (3,686,989)          (24,489,840)
  Purchase of property and equipment                       (7,167,875)          (37,109,164)          (14,498,395)
  Purchase of investments                                           -           (15,087,990)             (250,000)
  Proceeds from sale of investments                        31,514,960            43,495,837            13,461,558
Proceeds from sale of assets                                1,841,057               486,307                     -
  Investment in affiliate                                  (4,388,433)                    -                     -
  Other                                                     2,146,551              (765,117)           (1,025,793)
                                                           ----------            ----------           -----------
       Net cash provided by (used in) investing
        activities                                         21,921,734           (12,667,116)         (104,210,307)
                                                           ----------            ----------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of senior notes,
   other debt and warrants                                 33,714,321                     -           308,062,500
  Proceeds from debt issuances held in
   restricted accounts                                     (9,134,651)                    -           (90,638,756)
  Repayment of senior and other debt                       (3,056,834)          (45,263,492)          (42,369,042)
  Debt financing costs paid                                (4,699,356)                    -            (2,581,183)
  Proceeds from issuance of senior
   preferred stock and warrants                                     -                     -            70,000,000
  Proceeds from issuance of common stock                            -                     -             1,545,979
  Registry and other stock issuance costs paid                      -                     -            (2,775,336)
  Other                                                             -              (108,145)             (324,405)
                                                           ----------            ----------           -----------
       Net cash provided by (used in) financing
        activities                                         16,823,480           (45,371,637)          240,919,757
                                                           ----------            ----------           -----------
       Net increase (decrease) in cash and cash
        equivalents                                        (9,196,898)          (92,791,176)          102,061,162
Cash and cash equivalents, beginning                       10,471,918           103,263,094             1,201,932
                                                           ----------           -----------           -----------
Cash and cash equivalents, ending                         $ 1,275,020          $ 10,471,918          $103,263,094
                                                          ===========           ===========           ===========
</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, 1998, 1997, and 1996, in connection
with purchases of property  and  equipment,  the Company accrued obligations of
$832,549, $1,213,335, and $3,673,925, respectively.

      2. During the years ended March 31, 1998,  1997,  and 1996, in connection
with  certain  wireless  channel  rights  acquisitions,  the  Company   accrued
obligations of  $2,143,855, $2,380,234, and $47,256,113, respectively.

      3. During  the  years  ended March 31, 1998, 1997 and 1996, dividends  on
preferred stock were accrued totaling  $13,761,561, $12,848,172 and $5,812,562,
respectively.  Accumulated preferred stock  dividends totaling $32,422,295 were
contributed to capital in March 1998 in connection  with  the  BANX termination
agreement (see items 5 and 6 below).

      4. On  November  25,  1997, all amounts outstanding and owing  under  the
Foothill Capital Credit Facility,  totaling  $17.3  million,  were  repaid with
proceeds  from  the  sale by CAI of $25 million principal amount of 13%  Senior
Secured Notes (the "Secured  Notes")  to  Merrill Lynch Global Allocation Fund,
Inc. ("MLGAF").

      5. On  February  17,  1998,  the  Company   consummated   a   series   of
transactions,  including  the purchase by the Company of the remaining interest
of BANX under the Business  Relationship  Agreement  ("BR  Agreement")  and the
acquisition of BANX's approximately 9.9% equity interest in CS Wireless.  Under
the   terms  of  the  Termination  and  Purchase  Agreement  (the  "Termination
Agreement"),  the  Company  issued $7 million aggregate principal amount of its
Secured Notes to BANX in consideration  of the termination of the BR Agreement,
Modification Agreement and Modification Agreement  Amendment,  and the transfer
to CAI of 1,000,000 shares of CS Wireless common stock held by BANX.

      6. In  conjunction  with  the BANX termination transactions on  March  3,
1998, MLGAF exchanged the BANX Term  Notes and the BANX Senior Preferred Stock,
together  with  accrued  but  unpaid  interest   ($15,709,804)   and  dividends
($32,422,295)  thereon,  acquired  by  MLGAF  on February 17, 1998, for  a  $30
million  12% subordinated note due 2005 and exchanged  the  BANX  warrants  for
2,500 shares of CAI Common Stock valued at $1,350.

      7. 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.

      8. On January 12, 1996 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.

      9. The  underwriter's  discount  of  $8,937,500  was  deducted  from  the
proceeds of the Senior Notes issued on September 29, 1995.

     10. 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>
<PAGE>

                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     SUPPLEMENTAL INFORMATION ON NON-CASH
                      INVESTING AND FINANCING ACTIVITIES


         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 was 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.

      11. On July 13, 1995, the Company purchased the 49%  minority interest in
Hampton Roads Wireless, Inc. for $8 million in CAI Common Stock.



               SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION


<TABLE>
<CAPTION>

                                    1998                   1997                   1996
<S>                                 <C>                    <C>                    <C>
Cash payments for interest
                                    $34,944,126            $34,341,025            $18,541,227
</TABLE>





<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-point  distribution  services  ("MDS")  licenses  and
instructional  television fixed services ("ITFS") licenses, collectively multi-
channel, multi-point distribution services ("MMDS"), and develop wireless cable
systems. The Company operates six analog-based wireless cable systems providing
service to approximately  52,000  subscribers  as of March 31, 1998 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 (built-out  with limited
Internet  operations); Baltimore, MD; and Pittsburgh, PA.  For the fiscal  year
ended March  31,  1998,  approximately  60%, 18% and 11% of total revenues were
derived from the Philadelphia, New York City  and Albany systems, respectively,
as compared to 59%, 22% and 9% last year.

PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include the
accounts  of  the  Company and its wholly-owned subsidiaries.  All  significant
intercompany accounts  and  transactions have been eliminated in consolidation.
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.

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.  Estimates are adjusted and write-downs  are  made when events and
circumstances occur that warrant such action.

CASH  EQUIVALENTS AND RESTRICTED CASH.  For purposes of reporting  cash  flows,
the Company  considers  all  highly  liquid  debt instruments purchased with an
initial  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 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.  The
net proceeds from  the  issuance  to  MLGAF of the Secured Notes are held in an
account controlled by MLGAF.  The release  of  funds  is  limited  by  MLGAF to
expenditures  that  are  in  accordance  with  the  Company's operating plan as
submitted to MLGAF.

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.   The  Company provides an allowance for doubtful accounts,  which
amounted to $221,000 and $751,000 at March 31, 1998 and 1997, respectively.

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.









<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 AFFILIATES

      CS WIRELESS SYSTEMS,  INC.   The  investment in CS Wireless Systems, Inc.
("CS Wireless") is recorded at cost and the  difference  between CAI's cost and
the  pro-rata  ownership  of the underlying equity 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's net loss, adjusted for the amortization of its investment, under the
equity  method  because  the Company does not control day to day operations and
due to the significant participation  rights  of  the minority shareholder.  CS
Wireless  was a wholly-owned subsidiary until February  23,  1996  when,  as  a
result  of  the   CAI-Heartland  closing,  it  became  52%  owned.   Subsequent
transactions have changed  the  Company's interest to 60%.  CS Wireless reports
on  a December fiscal year basis 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.

      TELQUEST SATELLITE SERVICES  LLC.   The  investment in TelQuest Satellite
Services LLC ("TSS") is recorded at cost and the  difference between CAI's cost
and the pro-rata ownership of the underlying equity is amortized over 15 years,
commensurate with the affiliation agreement between  CAI  and  TSS. The Company
records its share of TSS' net loss, adjusted for the amortization of its excess
investment, under the equity method.

INTANGIBLES

      WIRELESS CHANNEL RIGHTS.Wireless channel rights are carried  at  cost and
amortized  over  their  estimated  useful lives, generally 15 years, commencing
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 $4,597,136 as of March
31, 1998 and $11,578,300 as of March 31, 1997.

      DEBT FINANCING Costs.  Costs incurred to obtain  financing  are amortized
over the respective terms of the debt, primarily seven years.

LONG-LIVED  ASSETS.   The  Company  adopted  the  provisions  of  Statement  of
Financial  Accounting Standards No. 121 ("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 estimated 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  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.   Since  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. Based on
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

the results of its valuation as of March 31, 1998, the Company recorded a $73.5
million write-down (net  of  an  accumulated  amortization  adjustment of $14.7
million) of the goodwill associated with the wireless channel  rights  acquired
from companies purchased by CAI in September 1995.

INVESTMENTS  IN  DEBT  SERVICE ESCROW.  Investments in the debt service escrow,
consisting of debt instruments  maturing at September 1998 to coincide with the
final escrow interest payment on  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.  Subscriber  installation  fees  are  recognized as
revenue to the extent of costs to obtain subscribers.

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.  The Company has adopted  Statement  of  Financial  Accounting
Standards  No.  128  ("SFAS No. 128") - "Earnings Per Share" for the year ended
March  31,  1998.   Accordingly,   the   Company  replaced  the  "primary"  EPS
requirements with a "basic" EPS computation  based  upon  the  weighted-average
common  shares  outstanding.  Due to the Company's net losses, only  the  basic
loss  per  share amounts  are  reflected  in  the  accompanying  Statements  of
Operations.   Outstanding  options,  warrants, and other convertible securities
were not considered for the purposes of calculating the weighted average common
shares 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.







<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

RECENT ACCOUNTING PRONOUNCEMENTS.

      STATEMENT OF FINANCIAL  ACCOUNTING  STANDARDS  NO. 125 ("SFAS 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.  SFAS No. 125  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's adoption of this pronouncement in  the 4{th} quarter of fiscal year ended
March 31, 1998 did not have a material effect  on  CAI's  financial position or
results of operations.

      STATEMENT  OF  FINANCIAL ACCOUNTING STANDARDS NO. 130 ("SFAS  No.  130"),
"Reporting Comprehensive  Income",  which  was issued in June 1997 is effective
for fiscal years beginning after December 15,  1997.   SFAS No. 130 establishes
standards  for  reporting  and  disclosure  of  comprehensive  income  and  its
components in a full set of general-purpose financial  statements.  The Company
believes  that  it  does not have a significant amount of comprehensive  income
(loss)  as defined, if  any.   Accordingly,  the  Company  believes  that  this
statement  will  not have a material effect on CAI's future financial statement
presentations.  Effective  April  1,  1998,  the  Company  will comply with the
requirements of SFAS No. 130 not already met.

      In June 1997, STATEMENT OF FINANCIAL ACCOUNTING STANDARDS  NO. 131 ("SFAS
No.   131"),   "Disclosures   About  Segments  of  an  Enterprise  and  Related
Information," was also issued.   This  pronouncement  is  effective  for fiscal
years  beginning  after  December  15,  1997  and  requires  disclosures  about
operating segments and enterprise-wide disclosures about products and services,
geographic  areas  and  major  customers.  Effective April 1, 1998, the Company
will comply with the requirements  of  SFAS  No.  131  and  make  the necessary
disclosures.

      In April 1998, AICPA STATEMENT OF POSITION 98-5 ("SOP 98-5"),  "Reporting
on  the  Costs of Start-Up Activities" was also issued.  This pronouncement  is
effective  for fiscal years beginning after December 31, 1998 and requires that
costs  of  start-up  activities,  including  organizational  costs,  should  be
expensed as  incurred.  CAI's adoption of this pronouncement in the 4th quarter
of fiscal year  ended  March  31,  1998 did not have a material effect on CAI's
financial position or results of operations.


<PAGE>

                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - GOING CONCERN AND FINANCIAL RESTRUCTURING

GOING CONCERN

      CAI's recurring losses, restrictions  on its ability to obtain additional
financing,  and  substantial  commitments raise  significant  doubt  about  the
continuation of CAI as a going  concern.   For  the year ending March 31, 1999,
the Company is obligated to pay approximately $5.5  million for minimum license
fees  and  channel  lease  payments, approximately $3.7 million  for  operating
leases,  approximately $3.5 million  in  wireless  channel  rights  obligations
including  MMDS  license auction fees, and to fund current operating costs. The
Company projects that  operating  cash  requirements  will be approximately $20
million  for the year ending March 31, 1999.  Additionally,  as  of  March  31,
1998, the Company had outstanding trade payables of approximately $4.9 million.

      The  Company's  business  strategy  has  been to explore digital wireless
cable  services for its MMDS subscription television  systems  and  alternative
uses of  its  MMDS  spectrum  for a variety of applications, including data and
voice transmission such as Internet  access and telephony delivery services and
to petition the Federal Communications Commission ("FCC") for the establishment
of  rules  governing  full two-way flexible  use  of  the  MMDS  spectrum.   In
management's opinion, this  strategy, if successful, will help meet 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 these objectives,  CAI  is  committed
through additional  open  purchase  orders  as  of  March  31,  1998  to  spend
approximately  $1.8 million, primarily for capital expenditures associated with
additional development of the Boston digital transmission facilities.

FINANCIAL RESTRUCTURING

      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 as mentioned above. On a short-term basis, CAI
has $45 million of 13%  Senior  Secured Notes (the "Secured Notes") due on June
30, 1998.  See Note 8.  On a long-term  basis, CAI has substantial indebtedness
which,  beginning  in  the  fiscal year ended  March  31,  1999,  will  include
significant  debt  service  requirements.   As  of  March  31,  1998,  CAI  had
outstanding consolidated debt of $357,089,000.

      On or about the date of  the  filing  of this Annual Report on Form 10-K,
the   Company   intends   to   commence   a  pre-petition   solicitation   (the
"Solicitation") of votes with respect to a prepackaged reorganization plan (the
"Plan") from the holders of CAI's 12 1/4 %  Senior  Notes due 2002 (the "Senior
Notes")  and certain other impaired creditors.  CAI has  not  yet  commenced  a
reorganization  case  under  Chapter  11 of the U.S. Bankruptcy Code (11 U.S.C.
<section><section>  101-  1330)(the  "Bankruptcy   Code").   If,  however,  CAI
receives the requisite votes indicating acceptance of  the Plan, CAI intends to
file a voluntary petition (the "Petition") under Chapter  11  of the Bankruptcy
Code, and to seek, as promptly thereafter as practicable, confirmation  of  the
Plan.

      CAI  Wireless  Systems,  Inc.  and  one  of  its  wholly-owned  operating
subsidiaries,  Philadelphia  Choice  Television,  Inc.,  a Delaware corporation
("Philadelphia  Choice")  are  expected  to  file  the Petition  following  the
solicitation  of  certain  CAI  creditors.  None of CAI's  other  subsidiaries,
including any of the subsidiaries  that  are holders of MMDS licenses issued by
the FCC or are lessees under MMDS excess capacity  leases,  will  be parties to
the Petition.  In addition,  the Company intends that only those claims against
and interests in CAI specifically identified in the Plan (I.E., the  holders of
the  Senior  Notes,  holders  of certain subordinated indebtedness, holders  of
securities claims and holders of  equity  securities  claims) will be impaired.
The  Company  intends that all other holders of claims against  CAI,  including
trade creditors, licensors and lessors, will be unimpaired claims against CAI.


<PAGE>

                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - RESTRUCTURING (CONTINUED)

      The Company  intends to continue to operate its business in Chapter 11 in
the ordinary course  and  to  seek  to  obtain  the  necessary  relief from the
Bankruptcy  Court  to  pay its employees, trade and certain other creditors  in
full and on time.  To fund its operations during the bankruptcy proceeding, the
Company has arranged for Debtor-in-Possession financing (the "DIP Facility") in
the principal amount of  $60  million.   The  DIP  Facility  is  expected to be
provided by MLGAF, the Company's current senior lender.  See Note  8  below.  A
portion  of the proceeds of the DIP Facility will be used to repay all  amounts
owed under the Company's current senior facility (approximately $47.8 million ,
including  interest  and  fees  as  of  May  31, 1998).  The balance of the DIP
Facility  will be used to fund operations and working  capital  throughout  the
bankruptcy  proceeding.   The  Company intends to repay the DIP Facility out of
the proceeds of a credit facility  (the "Exit Facility") currently being sought
by  the  Company.  The Exit Facility is  expected  to  be  a  two-year,  senior
facility in  the  principal amount of approximately $80 million, collateralized
by all of the assets  of  the  Company.   A portion of the proceeds of the Exit
Facility will be used to repay the DIP Facility  in  full,  with the balance of
the Exit Facility to be used to fund operations and working capital  for the 12
months  following  the  consummation  of the Plan. The Company, in consultation
with BT Alex. Brown Incorporated, its financial  advisor,  is  actively seeking
additional lending sources willing to participate in the Exit Facility.   There
can  be no assurance, however, that the Company will be able to obtain the Exit
Facility, or if able to obtain the Exit Facility, that the financing will be on
terms and conditions satisfactory to the Company.

      The  Plan  contemplates  that  the  holders  of  securities  claims, debt
securities  claims,  equity  securities claims and equity securities interests,
including the holders of CAI's common stock, without par value (the "CAI Common
Stock"), and any and all options,  warrants  or other rights to acquire the CAI
Common Stock will not receive or retain any property or interest in property on
account of such claims.

      The Company expects that the Solicitation  will  be completed on or about
July 27, 1998 and that the Company will file its Petition  in the United States
Bankruptcy Court for the District of Delaware shortly thereafter, assuming that
the Company receives the requisite acceptances from the Solicitation.

NOTE 3 - PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

<TABLE>
<CAPTION>
Useful
                                                      LIFE               1998                      1997
<S>                                                <C>                <C>                       <C>
Transmission equipment                             3-7 years          $26,729,489               $10,529,180
Subscriber equipment                               2-5 years           45,971,855                46,982,451
Leasehold improvements                             5-20 years           7,102,765                 1,124,354
Furniture and equipment                            3-7 years            4,339,192                 4,038,617
                                                                       ----------                ----------
                                                                       84,143,301                62,674,602
Less accumulated depreciation and amortization                         42,027,561                28,767,392
                                                                       ----------                ----------
                                                                       42,115,740                33,907,210
 Projects in process                                                    7,782,597                35,859,807
                                                                       ----------                ----------
                                                                      $49,898,337               $69,767,017
                                                                       ==========                ==========
</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 which are capitalized).   The  Company  generally  does  not
capitalize the cost of disconnecting or reconnecting subscribers.


<PAGE>

                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - PROPERTY AND EQUIPMENT (CONTINUED)

      The  projects  in  process  primarily  represent  costs  incurred to date
relative  to  establishing  digital systems in Norfolk/Virginia Beach,  VA  and
Boston, MA.  The Boston project costs, net of write-downs, were reclassified to
depreciable property and equipment,  primarily  transmission  equipment, during
the year ended March 31, 1998.  In connection with building the  Boston digital
system in accordance with the Business Relationship Agreement with  BANX  which
was  later terminated, CAI abandoned certain improvements and wrote-off certain
project  costs of approximately $4 million for the year ended March 31, 1998 in
addition to  other  project  write-offs  of  approximately  $2.6 million and $2
million for the years ended March 31, 1998 and 1997, respectively.

      Depreciation  and amortization of property and equipment  for  the  years
ended March 31, 1998,  1997,  and  1996  was  $14.8 million, $14.9 million, and
$12.9 million, respectively.

NOTE 4 - WIRELESS CHANNEL RIGHTS

      The  Company  has  acquired  wireless  channel   rights   through  direct
negotiation  with  licenseholders  and with sublessors 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  sublease  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 sublease 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.

      The Company is  obligated  as  of  March  31, 1998 to pay minimum fees to
licenseholders or sublessors in future years as follows:

<TABLE>
<CAPTION>
        Years ending
        MARCH 31,
<S>                                         <C>    
           1999                             $  5,455,000
           2000                                5,670,000
           2001                                5,813,000
           2002                                5,678,000
           2003                                5,529,000
           Thereafter                          6,960,000
                                              ----------
             Total                           $35,105,000
                                              ==========
</TABLE>
<PAGE>

                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - WIRELESS CHANNEL RIGHTS (CONTINUED)

      Lease expense for the years ended March 31,  1998,  1997,  and  1996  was
approximately  $4.3 million, $3.7 million, and $1.7 million, respectively.  The
Company capitalizes  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 $45
million as of March 31, 1998, and $52  million  as  of  March 31, 1997, will be
amortized when the related market is either available for  service or placed in
service, whichever occurs first.  Amortization of the wireless  channel  rights
for  the  years  ended  March  31,  1998,  1997, and 1996 was $12 million, $9.9
million,  and  $6.5  million, respectively.  The  following  is  a  summary  of
wireless channel rights:

<TABLE>
<CAPTION>
                                                          1998                                1997
<S>                                                  <C>                                 <C>
Cost of wireless channel rights                       $222,666,188                        $224,259,175
Less accumulated amortization                           28,615,396                          16,578,624
                                                       -----------                         -----------
                                                      $194,050,792                        $207,680,551
                                                       ===========                         ===========
</TABLE>

      Wireless channel  rights  obligations  are  generally due within one year
without interest.  Wireless channel rights obligations  of  approximately  $3.5
million,  including  FCC  Auction obligations, are anticipated to become due in
the fiscal year ending March 31, 1999.

NOTE 5 - EQUITY INVESTMENTS

CS  WIRELESS SYSTEMS, INC.   The  Company's  equity  interest  in  CS  Wireless
increased  from 50.7% to 60.0% on February 17, 1998 pursuant to the Termination
and Purchase  Agreement  between  CAI  and  BANX  under  which  CAI  reacquired
1,000,000  shares  of  CS  Wireless  from  BANX  valued  at  $2.4 million.  The
Company's equity interest in CS Wireless had increased from 47.7%  to  50.7% as
of September 30, 1997 due to the recission of a previously recorded transaction
wherein  CAI  was  to  purchase the Portsmouth, NH wireless channel rights from
Heartland  Wireless  Communications,   Inc.   ("Heartland")   in  exchange  for
approximately  314,000  shares  of CS Wireless held by CAI.  Additionally,  the
Company's investment in CS Wireless  reflects  an  equity loss of $27.5 million
and $17.6 million (based on CAI's pro-rata share of  CS  Wireless'  net loss of
$52.6 million and $28.5 million for the years ended December 31, 1997 and 1996,
respectively)  along  with  $2.4  million  of  amortization  of  the associated
goodwill each year.

      Based on the depressed market condition of the wireless industry  and  CS
Wireless'   continuing   losses,   management  has  re-evaluated  the  goodwill
associated with its investment in CS Wireless.  During the year ended March 31,
1998, the goodwill portion of the CS Wireless investment was written off in the
amount of $23.6 million.

      Pursuant to the terms of the Participation Agreement dated as of December
12, 1995, as amended by Amendment No. 1 to the Participation Agreement dated as
of February 22, 1996, among the Company, CS Wireless and Heartland, each of the
Company and Heartland, as the case may  be, is subject to a true-up adjustment,
calculated in accordance with the provisions of the Participation Agreement, in
the event that the number of channels available  to  CS  Wireless in any market
contributed by such party is less than 16.  The true-up adjustment for any such
channel deficiency may be satisfied by the deficient party  by delivering to CS
Wireless  either (i) cash, (ii) a 5-year promissory note, (iii)  shares  of  CS
Wireless stock, or (iv) any combination of the foregoing.  The Company has been
notified by  Heartland that it believes there is a potential channel deficiency
arising out of  the  number  of channels delivered by the Company in connection
with its contribution of MMDS  assets relating to the Charlotte, North Carolina
market.  The Company believes that  it  has  delivered  13  of  the 16 required
channels, and expects to be able to deliver at least three additional  channels
in Charlotte, NC from applications currently pending at the FCC.  Heartland has
advised  the  Company  that  it believes that the Company has delivered only  6
channels  relating  to  the  Charlotte   market.    The  Company  has  disputed
Heartland's position and is in discussion with Heartland on this issue.  In the
opinion of management of the Company, any settlement   with Heartland would not
have a material adverse effect on the Company's financial condition, liquidity,
or results of operations.



                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - EQUITY INVESTMENTS (CONTINUED)

      The following are condensed versions of the Consolidated  Balance  Sheets
of CS Wireless Systems, Inc. and subsidiaries as of December 31, 1997 and  1996
as presented in its Form 10-K for the year ended December 31, 1997:


<TABLE>
<CAPTION>
1997                         1996
<S>                                              <C>                          <C>
    ASSETS
Cash and cash equivalents                       $  74,564,000                 $113,072,000
Restricted cash                                     5,030,000                            -
Other current assets                                1,965,000                    3,278,000
Property and equipment, net                        50,519,000                   42,955,000
Wireless channel rights, net                      170,689,000                  172,953,000
Goodwill, net                                      48,243,000                   52,011,000
Assets held for sale                                        -                   19,366,000
Investment in and loans to equity affiliates        8,503,000                            -
Debt issuance costs, net                            8,260,000                    9,016,000
Other assets, net                                   2,930,000                    1,586,000
                                                  -----------                  -----------
                                                 $370,703,000                 $414,237,000
                                                  ===========                  ===========
     LIABILITIES AND EQUITY
Accounts payable and accrued expenses            $  8,652,000               $    6,655,000
Other current liabilities                           1,523,000                    1,043,000
FCC auction payable                                 4,396,000                    4,902,000
Long-term debt                                    283,903,000                  271,374,000
Deferred Income Tax                                         -                    5,429,000
Equity                                             72,229,000                  124,834,000
                                                  -----------                  -----------
                                                 $370,703,000                 $414,237,000
                                                  ===========                  ===========
</TABLE>

      The  following  are  condensed versions of the Consolidated Statements of
Operations for CS Wireless Systems,  Inc.  and subsidiaries for the years ended
December 31, 1997 and 1996 as presented in its  Form  10-K  for  the year ended
December 31, 1997:

<TABLE>
<CAPTION>
<S>                                              <C>                          <C>
Total revenues                                   $ 26,920,000                $ 22,738,000
                                                  -----------                 -----------
Operating expenses:
  Systems operations                               14,976,000                  13,258,000
  Selling, general and administrative              15,849,000                  13,934,000
  Depreciation and amortization                    26,858,000                  20,345,000
                                                  -----------                 -----------
   Total operating expenses                        57,683,000                  47,537,000
                                                  -----------                 -----------

     Operating loss                               (30,763,000)                (24,799,000)

Interest expense                                  (31,995,000)                (24,959,000)
Interest income                                     5,469,000                   6,600,000
Other                                                (705,000)                          -
                                                  -----------                 -----------
     Loss before income tax benefit               (57,994,000)                (43,158,000)
Income tax benefit                                  5,429,000                  14,631,000
                                                  -----------                 -----------
     Net loss                                    $(52,565,000)              $ (28,527,000)
                                                  ===========                 ===========
Loss per common share                                $  (4.94)                   $  (3.06)
                                                     ========                    ========
</TABLE>
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - EQUITY INVESTMENTS (CONTINUED)

      TELQUEST SATELLITE SERVICES LLC.  The Company's investment in TelQuest
Satellite Services LLC ("TSS") reflects an equity loss of approximately $1.8
million based on CAI's pro-rata share of TSS' net loss of $7.1 million from
inception to March 1998 (see Note 15).  TSS has negative net worth of
approximately $2.5 million at March 31, 1998, inclusive of a $411,567
receivable due from CAI in connection with the Company's initial investment in
TSS (see Note 8).

NOTE 6 - DEBT SERVICE ESCROW

      The  debt  service escrow account was established to pay the first  three
years of interest  on  the  Senior  Notes.   Reference  is made to Note 8.  The
escrow is held in trust and consists of marketable government  debt instruments
that will mature by the next semiannual interest payment due in September 1998.
At March 31, 1998, the debt service escrow account balance consisted of:

<TABLE>
<CAPTION>
                                                        Gross Unrealized
                                    AMORTIZED COST            GAINS                 MARKET VALUE
<S>                                  <C>                     <C>                    <C>
Investments                          $16,360,503             $ 21,576               $16,382,079
                                                             ========
Cash balance                              20,575                                         20,575
Accrued interest                          37,844                                         37,844
                                      ----------                                     ----------
   Total escrow balance              $16,418,922                                    $16,440,498
                                     ===========                                    ===========
</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>
                                                            1998                      1997
<S>                                                     <C>                       <C>
Related party receivables                                $  954,223                $1,028,169
Deposits                                                  1,314,226                   637,143
Other                                                       793,331                 1,170,339
                                                         ----------                 ---------
                                                         $3,061,780                $2,835,651
                                                         ==========                ==========
</TABLE>


NOTE 8 - DEBT

      Debt consists of the following:
<TABLE>
<CAPTION>
                                                                        1998                          1997
<S>                                                                <C>                            <C>

SENIOR DEBT
 12 1/4 % Senior Notes due September 15, 2002(a)                   $275,000,000                   $275,000,000
NOTES PAYABLE
 Term notes due May 9, 2005(b)                                                -                     29,813,550
 Subordinated Note due October 1, 2005(b)                            30,000,000                              -
 Senior Secured Notes due June 30, 1998(c)                           45,000,000                              -
 Acquisition-related notes(d)                                         6,634,349                      6,799,029
 Due to TSS(e)                                                          411,567                              -
 Other                                                                   42,590                        174,017
                                                                    -----------                    -----------
                                                                   $357,088,506                   $311,786,596
                                                                    ===========                    ===========
</TABLE>
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - DEBT (CONTINUED)

Scheduled maturities of debt at March 31, 1998 are as follows:

<TABLE>
<CAPTION>
                   YEARS ENDING MARCH 31,
                            <S>                                     <C>
                            1999                                    $  45,729,755
                            2000                                          228,560
                            2001                                        5,485,120
                            2002                                          645,071
                            2003                                      275,000,000
                            Thereafter                                 30,000,000
                                                                      -----------
                                                                     $357,088,506
                                                                      ===========
</TABLE>

(a)  CAI  completed an offering of $275 million of 12 1/4  %  Senior  Notes  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")
   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.

(b) Two $15 million term  notes  at  14% issued to affiliates of NYNEX and Bell
   Atlantic ("BANX") were due on May 9,  2005.   Interest accrued semi-annually
   on both principal and unpaid accrued interest.   The  term  notes  contained
   maintenance  and compliance covenants including compliance with the Business
   Relationship Agreement  and  the  covenants  mentioned  in  (a)  above.  The
   original  discount  of $300,000 represented the value of the warrants issued
   with the term notes and  was amortized over the term note period as interest
   expense. The interest rate  increased  to 16% from 14% per annum pursuant to
   an adjunct agreement with certain other  BANX affiliates regarding licensing
   issues.  For the years ended March 31, 1998  and  1997,  interest expense on
   the term notes approximated $6.1 million and $5.7 million, respectively.

   Pursuant to the final termination of the business arrangement  with  BANX on
   February  17,  1998,  the  term notes (including accumulated interest) along
   with preferred equity securities  held  by  BANX  were acquired by MLGAF and
   exchanged on March 3, 1998 with CAI for a new $30 million  12%  subordinated
   note  (the  "Subordinated  Note")  due  October  1, 2005.  The Statement  of
   Operations for the year ended March 31, 1998 reflects an  extraordinary  net 
   gain on debt restructuring, including a gain of approximately $10 million
   related to the accrued interest forgiven, net of the  BANX  payment and 
   related closing costs.  Interest on the Subordinated Note compounds semi-
   annually and is payable at maturity.  The Subordinated Note is subordinate to
   the $45 million of 13% Senior Secured Notes currently held by MLGAF (see (c) 
   below) and the Senior Notes. The Subordinated Note is a joint and severable 
   obligation of CAI and certain of its wholly owned subsidiaries.  The 
   obligation of the subsidiaries  to repay the Subordinated Note, however,  is
   limited  by  the terms of the Indenture governing the Senior Notes.

(c) INTERIM DEBT FINANCING
   13% SENIOR SECURED NOTES.  On November 25, 1997, the Company issued and sold
   $25 million of  Secured  Notes to MLGAF.  CAI used approximately $17 million
   of  the proceeds to repay all  amounts  outstanding  under  the  F/C  Credit
   Facility  (defined  below), and the remaining proceeds of approximately $7.3
   million, net of expenses  associated  with  this  transaction,  for  working
   capital purposes and build-out of the Company's wireless cable business.  On
   January  26,  1998,  the  Company  issued  and sold an additional $2 million
   Secured Note to MLGAF, and on February 17, 1998, the Company issued and sold
   an  additional  $18  million  of  Secured  Notes  in   connection  with  the
   consummation of the BANX termination agreement.


                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - DEBT (CONTINUED)

   The Secured Notes are short-term obligations of CAI, maturing  on  June  30,
   1998,  and  were  issued  and  sold pursuant to the terms of a Note Purchase
   Agreement  between CAI and certain  of  its  wholly-owned  subsidiaries  and
   MLGAF, as amended  from  time  to  time  (the  "Note  Purchase  Agreement").
   Interest  at  the  rate of 13% per annum on the Secured Notes is payable  at
   maturity.  In addition to fees and expenses associated with the issuance and
   sale of the Secured  Notes, CAI is required to pay a $730,000 commitment fee
   to MLGAF, which is also  due at maturity.  All outstanding amounts under the
   Note Purchase Agreement are  expected  to be converted into and deemed to be
   outstanding obligations under the DIP Facility.

   As collateral for the Secured Notes, CAI  granted  a  blanket lien on all of
   its  assets,  including the stock of substantially all of  its  wholly-owned
   subsidiaries, as  well  as a pledge of its interests in CS Wireless and TSS.
   The Note Purchase Agreement  contains covenants that are usual and customary
   for transactions of this type,  including  a  series  of  negative covenants
   intended  to  preserve the value of the collateral pledged by  CAI  for  the
   benefit of MLGAF.

   FOOTHILL CAPITAL  CREDIT FACILITY.  On November 25, 1997, the Company used a
   portion of the proceeds  from the issuance of the Secured Notes to repay all
   amounts outstanding and owing to Foothill Capital Corporation and affiliates
   of Canyon Capital Management,  L.P.  (the  "F/C  Lenders")  under the credit
   facility provided by the F/C Lenders (the "F/C Credit Facility")  to  CAI in
   June  1997.  At the time of repayment, there was approximately $17.3 million
   outstanding  under  the  F/C  Credit  Facility,  consisting of $15.3 million
   representing  the principal amount of the loans outstanding  under  the  F/C
   Credit Facility;  a  $1.6 million fee, and $350,000 representing interest on
   the outstanding loans and fees.

   The repayment of the F/C  Credit  Facility  in November 1997 represented the
   early termination of the F/C Credit Facility.   Prior to its termination and
   repayment  in  full,  the  Company executed a series  of  continuing  waiver
   agreements, which waived compliance by the Company with certain post-closing
   requirements,  increased the  interest  rates  payable  on  the  obligations
   outstanding under  the  F/C  Credit  Facility, and imposed additional and/or
   modified existing covenants relating to  various  items,  including sales of
   non-core  assets,  certain  fundamental  changes  to  the  Company  and  the
   Company's  ability  to  incur additional indebtedness.  All of  the  waivers
   executed and delivered by the Company to the F/C Lenders contained a general
   release of the F/C Lenders.   A  final  general  release was required of and
   delivered by the Company in connection with receipt  of  the  pay-off letter
   issued  by  the F/C Lenders in connection with the repayment of all  Company
   obligations under  the F/C Credit Facility. The early termination of the F/C
   Credit  Facility  resulted   in   the  Company  recording  a  third  quarter
   extraordinary charge of approximately  $4.7  million, representing the costs
   associated  with  the F/C Credit Facility that the  Company  was  originally
   amortizing over the two-year term of the F/C Credit Facility.

 (d) The notes payable for acquisitions consist of (1) a series of notes in the
   aggregate amount of  $2.8  million  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  $3.8  million, discounted to $2.9 million  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  $1.4
   million,  discounted  to  $757,000 based on  an  imputed  interest  rate  of
   12 1/4 %.  Each of the Bott  notes  is collateralized by the common stock of
   the company acquired and mature through January 2002.

(e) The  $411,567  payment to TSS reflects  the  final  cash  portion  of  the
   Company's initial  investment in TSS which was scheduled for payment on June
   1,1998; paid early on April 1, 1998.


<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - DEBT (CONTINUED)

      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), paying  dividends,  disposing of assets, entering into any merger,
consolidation, reorganization, or  recapitalization  plan,  retiring  long-term
debt, or making any acquisitions without the prior consent of the lenders.

NOTE 9 - INCOME TAXES

      The components of the consolidated income tax benefit for the years ended
March 31, 1998, 1997, and 1996 are as follows:

<TABLE>
<CAPTION>
                       1998                     1997                      1996
<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, 1998 and 1997.

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

<TABLE>
<CAPTION>
                                        1998                     1997                     1996
<S>                                <C>                      <C>                      <C>
Net operating loss carryovers       $103,213,000            $ 72,100,000             $ 24,915,000
Intangibles                          (31,911,000)            (32,635,000)             (34,841,000)
Investment in CS Wireless             (6,305,000)            (18,726,000)             (24,000,000)
Property and equipment                  (908,000)             (2,352,000)              (1,434,000)
Other, net                               306,000                 513,000                  (50,000)
                                     -----------              ----------               ----------
  Total net deferred tax asset
  (liability)                         64,395,000              18,900,000              (35,410,000)
Less: Valuation allowance            (64,395,000)            (18,900,000)                       -
                                      ----------              ----------               ----------
Net deferred tax liability          $          -             $         -             $(35,410,000)
                                    ============             ===========             ============
</TABLE>

A valuation allowance is provided to reduce deferred  tax  assets  to  a  level
which,  more  likely  than not, will be realized.  Accordingly, the Company has
recorded a full valuation allowance.  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, 1997, the
valuation allowance established in the amount of $18.9 million was increased by
approximately $45.5 million during the year ended March 31, 1998.

      The Company had available as of March  31, 1998 approximately $258 milion
of net operating loss carryforwards that expire  during  the  period from March
31,  1999  to March 31, 2013, of which $115,000 will expire during  the  fiscal
year ending  March  31, 1999.  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:


<PAGE>

                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

DEBT.  The fair value  of  the  Company's debt is based on quoted market prices
for its publicly traded Senior Notes.   The  remaining  debt is valued 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
                                -----------------------------             --------------------------------
                                    1998              1997                   1998                 1997
<S>                             <C>               <C>                     <C>                <C>
Cash and cash equivalents       $ 1,275,020       $ 10,471,918            $ 1,275,020        $  10,471,918
Restricted cash                   9,134,651                  -              9,134,651                    -
Debt service escrow              16,418,922         47,865,389             16,440,498           47,719,140
Debt
 Senior Notes                   275,000,000        275,000,000             77,000,000          129,250,000
 Term notes and other            82,088,506         36,786,596             57,493,506           21,073,046
</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 2011.
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.

Purchase Commitments.  As of March 31, 1998, the Company had approximately $1.8
million 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
$114,700  and  $114,000  for  the  years  ended  March   31,   1998  and  1997,
respectively.

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, formerly
the president of the Company, 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).

<PAGE>


                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

      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.  The
defendants' motion to dismiss was heard by the Northern District of New York on
October 17, 1997 and is still pending. 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.

      The Company is also a defendant in JOE HAND  PROMOTIONS, INC. V. 601 L&P,
INC.  V.  CAI  WIRELESS  SYSTEMS,  INC. and JOE HAND PROMOTIONS,  INC.  V.  CAI
WIRELESS SYSTEMS, INC. D/B/A POPVISION  WIRELESS  CABLE  pending  in  the  U.S.
District  Court  for the Eastern District of Pennsylvania.  These actions arise
out of the alleged improper broadcasts of certain sporting events in commercial
establishments  in  violation  of  Federal  statutes.   The  plaintiff  is  the
exclusive distributor  of such sporting events in the greater Philadelphia area
for commercial establishments, and has alleged the improper broadcast by CAI in
approximately five instances.   The  lawsuits are in preliminary stages and are
being vigorously defended by CAI.

NOTE 12 - SHAREHOLDERS' EQUITY (DEFICIT)

      On February 17, 1998, the Company  consummated  a series of transactions,
including the purchase by the Company of the remaining  interest  of BANX under
the BR Agreement in which $15.7 million of interest on the BANX Term  Notes was
forgiven  along  with  $32.4  million  of  accrued dividends.  In addition, the
preferred stock MLGAF acquired from BANX in  the  amount  of  $69.3 million was
given  to  CAI  and  contributed  to  capital.   In  conjunction with the  BANX
termination transactions on March 3, 1998, MLGAF exchanged  the BANX Securities
acquired together with accrued but unpaid interest and dividends thereon, for a
$30 million 12% subordinated note due 2005 and exchanged the  BANX warrants for
2,500 shares of CAI common stock valued at $1,350.

      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.

      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 12 - SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)

      The stock capitalization of the Company is as follows:

<TABLE>
<CAPTION>
                                                      Shares Authorized                    Shares Issued and Outstanding
     CLASS OF  STOCK                                AS OF MARCH 31, 1998              MARCH 31, 1998              MARCH 31, 1997
<S>                                                   <C>                              <C>                         <C>
Preferred stock
  14% Senior convertible preferred stock,
   par value $10,000 per share                             15,000                               -                       7,000
                                                       ----------                       ---------                   ---------
  Series preferred stock, no par value
   Series A 8% redeemable convertible
    preferred stock, no par value                         350,000                               -                           -
   Undesignated                                         4,650,000                               -                           -
                                                       ----------                       ---------                   ---------
    Total series preferred stock                        5,000,000                               -                           -
                                                       ----------                       ---------                   ---------
  Voting preferred stock, no par value                  2,000,000                               -                           -
                                                       ----------                       ---------                   ---------
    Total preferred stock                               7,015,000                               -                       7,000
                                                       ==========                       =========                   =========
Common stock, no par value                            100,000,000                      40,543,039                  40,540,539
                                                      ===========                      ==========                  ==========
</TABLE>

      A summary description of the Company's equity instruments follows:

      14% SENIOR CONVERTIBLE PREFERRED STOCK.  The Senior Preferred Stock has a
14% cumulative dividend, payable  quarterly  and  is  convertible  into  Voting
Preferred  Stock  based  on  a  formula  prescribed  in the terms of the Senior
Preferred Stock for a period of five years commencing  on  September  29, 1995.
The  terms  of  the Senior Preferred Stock require mandatory redemption at  par
plus any accrued dividends on September 29, 2005, absent any conversion.  As of
March 31, 1998, there  were  no  shares  of  Senior  Preferred Stock issued and
outstanding.

      VOTING PREFERRED STOCK.  The Voting Preferred Stock  is  convertible into
CAI Common Stock, initially at the rate of 100 shares of CAI Common  Stock  for
one  share  of  Voting Preferred Stock.  The terms include a conversion feature
wherein each outstanding share of Voting Preferred Stock shall automatically be
converted into shares of CAI Common Stock based on enumerated conditions and/or
events.  Voting rights  are  based on the underlying shares of Common Stock per
share of Voting Preferred Stock.  Additionally, holders of the Voting Preferred
Stock are entitled to receive  dividends if, as, or when a dividend is declared
on shares of CAI Common Stock and  in  an amount based on the underlying shares
of CAI Common Stock per share of Voting  Preferred  Stock.   In  the  event  of
liquidation  or  dissolution,  Voting  Preferred  Stock is subject to the prior
rights of the Senior Preferred Stock but ahead of the  CAI  Common  Stock in an
amount  equal to the underlying shares of CAI Common Stock per share of  Voting
Preferred  Stock.   As  of      March  31, 1998, there were no shares of Voting
Preferred Stock issued and outstanding.

      WARRANTS.  Warrants entitle the holder  thereof  to purchase Common Stock
pursuant to the terms and conditions contained in the warrant agreements.

      OPTIONS.   Options  entitle the holder thereof to purchase  Common  Stock
pursuant to terms and conditions  contained  in the Option Agreements or Option
Plans.

      COMMON  STOCK.   The Company's Common Stock  is  without  par  value  and
carries one vote per share.   Holders  of  CAI  Common  Stock  are  entitled to
dividends  if,  as,  or  when  declared  out  of  funds legally available which
consists  of  current or accumulated earnings.  The Company  currently  has  an
accumulated deficit.   In  liquidation  or  dissolution,  all  preferred  stock
including  accumulated  dividends  thereon  must be satisfied before holders of
Common  Stock  receive any distribution.  As of  March  31,  1998,  there  were
40,543,039 shares of Common Stock issued and outstanding.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - 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 1.2 million 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.  As of March 31, 1998, the
Company  had granted options under this  plan  to  purchase  approximately  1.2
million shares of common stock at a weighted average price of $1.58 per share.

      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 million 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 ISO's or NQSO's. Options granted to
independent  consultants  and  other  nonemployees  may  only be designated  as
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. As of March 31, 1998, the Company had granted options under this plan to
purchase 996,500 shares of common stock at a weighted average  price  of  $1.74
per share.

      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 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, 1998, the  Company had granted options under this plan
to purchase 30,000 shares of common stock at a weighted average price of $1 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, 
1998, the Company had granted outstanding options under this plan to purchase 
8,334 shares of  common  stock  at  $1 per share.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - OPTIONS AND WARRANTS (CONTINUED)

      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,
                                   -----------------------------------------------------------
                                        1998                   1997                   1996
<S>                                <C>                    <C>                    <C>
Net loss:
       As reported                 $ (230,073,254)        $ (82,298,207)         $(40,985,572)
         Pro forma                   (236,615,254)          (88,839,207)          (42,942,572)
Loss per common share:
       As reported                       (6.02)                 (2.38)                (1.73)
         Pro forma                       (6.18)                 (2.54)                (1.80)
</TABLE>

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>

                                      1998                   1997                   1996
<S>                                   <C>                    <C>                    <C>
Dividend yield                        0.0%                   0.0%                   0.0%
Risk free interest rate               5.8%                   6.0%                   6.0%
Expected life (years)                 2.6                    3.6                    9.2
Volatility                            1.0                    0.99                   0.72

</TABLE>


      OPTION  ACTIVITY.   A summary of the status of the Company's stock option
plans as of March 31, 1998,  1997 and 1996, and changes during the years ending
on those dates is presented below:
<TABLE>
<CAPTION>
                                   1998                                1997                              1996
                         -------------------------        -----------------------------     -----------------------------
                                          Weighted-                         Weighted-                           Weighted-
                                          Average                           Average                             Average
                                          Exercise                          Exercise                            Exercise
                            SHARES         PRICE            SHARES           PRICE              SHARES           PRICE
<S>                       <C>              <C>            <C>                <C>              <C>                <C>
Outstanding, beginning    2,195,937        $4.91          1,274,134          $7.74               941,834         $12.29

Granted                   1,986,062        $1.01          1,071,803          $2.20             1,756,800          $8.52

Forfeited                (1,961,062)       $4.82           (150,000)         $7.75            (1,424,500)        $11.69
                         ----------                       ---------                           ----------   

Outstanding, ending(a)    2,220,937        $1.64          2,195,937          $4.91             1,274,134          $7.74
                         ==========                       =========                           ==========

Fair value of options
- granted                                  $0.72                             $1.57                                $6.43

</TABLE>

(a) Reflects the repricing of  all  outstanding  options  granted  to optionees
   employed by the Company as of March 9, 1998 to $1 per share.  The  repricing
   was  recorded  as  a  forfeiture  of  the  original  options granted and the
   simultaneous  grant  of  new options on the same terms but  at  the  revised
   exercise price $1 per share.

The total number of shares of common stock reserved for options is 2,275,000 as
of March 31, 1998.
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - OPTIONS AND WARRANTS (CONTINUED)

      The  following  table  summarizes   information   about   stock   options
outstanding at March 31, 1998:

<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>
 $1.00 to $2.13           2,015,337             8.13 years               $1.02             1,764,137          $1.03

 $6.63 to $8.00             205,600             8.09 years               $7.72               205,600          $7.72
                          ---------                                                        ---------         
                          2,220,937                                                        1,969,737
                          =========                                                        =========

</TABLE>

WARRANTS

      THE BANX WARRANTS.  The BANX Warrants to purchase Voting Preferred  Stock
were canceled in the March 3, 1998 BANX termination transactions (reference  is
made to Note 12).

      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, March 31, 1995                     $9.40                     2,020,578
   Issued(1)                                        -                       289,963
                                                                          ---------
Outstanding, March 31, 1996                     $7.72                     2,310,541
   Issued(1)                                        -                       616,912
   Exercised                                    $0.25                       (75,000)
                                                                          ---------
Outstanding, March 31, 1997 and 1998            $6.24                     2,852,453
                                                                          =========

</TABLE>

      (1) 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, 1998, 1997 and 1996 was $6.24, $6.24, and  $7.72  per  share,  based  on an
aggregate   purchase   price  of  $17,811,114,  $17,811,114,  and  $17,829,083,
respectively.  Outstanding  warrants  will expire over a period ending no later
than January 2000.

NOTE 14 - 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.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - OPERATING LEASES (CONTINUED)

      The Company leases vehicles for customer service and other corporate use.
The  agreements  are non-cancelable, expire through October  2001  and  require
various monthly payments. The Company is responsible for normal maintenance and
insurance.

      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, 1998 due in future years are as follows:

<TABLE>
<CAPTION>
                    YEARS ENDING MARCH 31,
<S>                                                            <C>
                1999                                          $  3,674,000
                2000                                             2,980,000
                2001                                             2,604,000
                2002                                             1,573,000
                2003                                             1,180,000
                Thereafter                                       5,749,000
                                                                ----------
                    Total                                      $17,760,000
                                                                ==========
</TABLE>

      Total rent expense for the years ended March 31, 1998, 1997, and 1996 was
approximately $3.8 million, $3.3 million, and $2.5 million, respectively.

NOTE 15 - RELATED PARTY TRANSACTIONS

      INSTALLATION SERVICES.  In October 1996, two of  CAI's  employees  formed
Telecom  Service  Support  LLC ("Telecom"), to provide subscriber installation,
service calls, and warehouse  service  to the subscription television industry.
CAI incurred approximately $452,000 and  $348,000  for such services during the
years  ended  March  31, 1998 and 1997, respectively.   Additionally,  CAI  has
advanced $20,000 and $80,000,  provided  leased  vehicles, and provided certain
facility  space  to  Telecom  for  the years ended March  31,  1998  and  1997,
respectively.

      FLIGHT SERVICES.  CAI periodically  charters  an  airplane from Wave Air,
Inc.,  which  is  primarily  owned by Jared E. Abbruzzese, chairman  and  chief
executive officer of the Company,  in  order to carry out business when airline
schedules are not compatible. Wave Air charges  CAI  for  this  service  on  an
hourly  basis  at  or  below  market  rates.   Transactions with Wave Air, Inc.
amounted to approximately $154,000, $278,000, and  $103,000 for the years ended
March 31, 1998, 1997, and 1996, respectively.

      RELATED PARTY LOANS.  During the year ended March  31,  1997,  CAI loaned
$800,000  to  Haig  Capital  L.L.C.  ("Haig  Capital") 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 into one personal
demand obligation, collateralized by equity in Haig  Capital,  bearing interest
at  14%  per  annum.  The  balance was $695,009 as of March 31, 1998  after  an
October  1,  1997  repayment  of  $85,045.   Additionally  in  June  1998,  Mr.
Abbruzzese made a $45,000 payment  on  the  obligation,  reducing the principal
balance to $650,009.


<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - RELATED PARTY TRANSACTIONS (CONTINUED)

      TELQUEST SATELLITE SERVICES.  TSS is a joint venture between the Company,
CS  Wireless  and  TelQuest Communications, Inc., a company controlled  by  Mr.
Abbruzzese, formed on  August  4,  1997  for  the  purpose  of  developing  and
operating satellite systems providing digital services.  In connection with the
Company's  $5 million investment in TSS, the Company made four cash payments to
satisfy the  $2.5  million  cash  portion of its investment in TSS.  A $200,000
loan to TelQuest Communications was contributed to TSS for which CAI received a
credit (including accrued interest)  against the cash portion of its investment
obligation.  The Company has also contributed  a combination of equipment (made
available to TSS under the terms of a five-year  renewable  lease) and cash (in
lieu of equipment) in an amount equal to approximately $2.1 million  as part of
the  $2.5  million equipment portion of the Company's $5 million investment  in
TSS.  A final  payment  of  $411,567  was made on April 1, 1998.  In return for
CAI's $5 million investment in TSS, CAI  received  a 25% interest in TSS, which
interest is subject to dilution upon the occurrence of certain events.

      INTEREST INCOME.  Interest earned on all related party loans approximated
$112,700 and $63,400 for the years ended March 31, 1998 and 1997, respectively.

      EQUIPMENT SALES AND PURCHASES.  During the year ended March 31, 1998, CAI
sold to CS Wireless approximately $3,706,000 of excess  equipment  at a gain of
$116,000  primarily from the Boston Project that was not needed for the  Boston
operation.   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.  In March 1997, CAI purchased  certain  used equipment for $107,000
for the Boston Project from Haig Capital.  All equipment purchased from Haig by
CAI was sold by Haig to CAI at or below fair market value for such items.

      SATELLITE PROJECTS.  The Company has pursued three  satellite ventures in
addition to its investment in TelQuest Satellite Services LLC  (described  more
fully  below).   These  ventures  have  been pursued by the Company through the
following    wholly-owned    subsidiaries   (collectively,    the    "Satellite
Subsidiaries"): (i) MMDS Satellite  Ventures,  Inc.,  which  was formed for the
purpose  of  pursuing Ku-band satellite opportunities; (ii) CAI  Data  Systems,
Inc.,  an  entity   formed  for  the  purpose  of  pursuing  Ka-band  satellite
opportunities, and (iii)  CAI  Satellite Communications, Inc., an entity formed
for the purpose of pursuing V-band satellite opportunities.

      MMDS Satellite Ventures, Inc.  has been inactive since the summer of 1997
as a result of a lack of interest on the  part  of  any potential joint venture
partner  in  pursuing  a  Ku-band satellite strategy. CAI  Data  Systems,  Inc.
announced on July 23, 1997  that  it  had  filed an application with the FCC to
construct, launch and operate a Ka-band satellite.   The  application, which is
currently pending before the FCC, contemplates a July 1999  launch date for the
satellite.  The estimated cost of constructing and launching  the  satellite is
approximately  $292.5 million, which Data Systems plans to finance through  the
issuance of its  own  debt and/or equity securities.  There can be no assurance
that Data Systems' application  will be granted by the FCC or, if granted, that
Data Systems will be able to secure financing necessary to construct and launch
a satellite.  CAI Satellite Communications,  Inc.  filed  a  V-band application
with  the  FCC  on  September  25,  1997 for the same orbital slots  that  were
identified in CAI Data's Ka-band application.   The  application  is  currently
pending FCC review.  The identical orbital slots were applied for in the V-band
application  in  an  effort  to  permit CAI to co-locate satellites in the same
orbit, possibly saving enormous launch  costs  at the appropriate time.  Before
the FCC can grant any orbital position in the V-band,  it  must  first  file  a
request  with  the World Radio Conference for the United States to be allocated
the particular V-band  frequency.  CAI  has  expended approximately $344,000 on
these entities to date, including approximately $87,500 for FCC filing fees.

      The Satellite Projects Committee (the "Satellite Committee") of the Board
of Directors of the Company has authorized the  sale  of  up to one-half of the
equity  interests in these entities to Haig Capital, LLC ("Haig  Capital"),  an
entity in  which  Jared  E. Abbruzzese, chairman and chief executive officer of
the Company, is a majority member.  Under the terms of the transaction approved
by the Satellite Committee,  the  Company would transfer one-half of the equity
in the Satellite Subsidiaries to Haig  Capital  in  exchange for Haig Capital's
agreement to fund the future capital and other expenditures, including salaries
and  benefits  of certain employees, of the Satellite Subsidiaries  up  to  the
amount expended  to  the date of transfer of such equity interest by CAI.  From
and after the date that Haig Capital has matched the capital investment made by
the Company, Haig Capital  and  the  Company would bear the on-going costs on a
pro rata basis.  The consummation of this  transfer  is  subject to approval by
MLGAF, the Company senior secured lender.
<PAGE>
                  CAI WIRELESS SYSTEMS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - RELATED PARTY TRANSACTIONS (CONTINUED)

      ENGINEERING   AND   SPECTRUM   MANAGEMENT  SERVICES.   The  Company   has
arrangements with CS Wireless for the  provision  of  engineering  and spectrum
management  services by CAI personnel to CS Wireless.  CAI provides engineering
consulting services  to  CS Wireless in connection with digital build-out by CS
Wireless  of its Dallas market.   CAI  is  paid  $10,000  per  month  for  such
consulting  services,  and  is  to  be  reimbursed  for all reasonable expenses
incurred by CAI personnel in the performance of the consulting services.

      CAI also provides spectrum management services and subleases office space
in  CAI's  Arlington,  Virginia  office  to CS Wireless.   Up  to  20%  of  the
professional time of Mr. Gerald Stevens-Kittner,  CAI's Senior Vice President -
Spectrum  Management,  is devoted to CS Wireless spectrum  management  matters,
including regulatory issues  before  the  FCC,  for  which CS Wireless pays Mr.
Stevens-Kittner directly.  CAI charges CS Wireless a pro  rata  portion  of the
monthly  rent  payment  for CAI's Arlington office space, reflecting the office
space used by one full-time  CS  Wireless  employee  resident  in the Arlington
office.





<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>
<CAPTION>
      NAME                         Age                     Position with Company
<S>                                <C>            <C>
Jared E. Abbruzzese                43         Chairman, Chief Executive Officer and Director (1)
John J. Prisco                     42         President, Chief Operating Officer and Director (1)
James P. Ashman                    44         Executive Vice President, Chief Financial Officer and Director(1)
Gerald Stevens-Kittner             45         Senior Vice President - Spectrum Management
Bruce W. Kostreski                 47         Senior Vice President - Engineering; Chief Technical Officer
Arthur J. Miller                   39         Vice President and Controller
George M. Williams                 57         Secretary, Treasurer and Director
Arthur C. Belanger                 72         Director(2)(4)
Harold A. Bouton                   54         Director(3)(4)
David M. Tallcott                  52         Director(2)(3)
Robert D. Happ                     57         Director(2)(3)(4)
</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, the 1996  Outside  Directors'  Option Plan and the Executive Severance
   Pay Plan.
(4)  Member  of  the  Satellite  Projects Committee.   The  Satellite  Projects
   Committee  evaluates  the participation  by  the  Company  in  any  and  all
   satellite projects presented to the Company.

      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.   One  vacancy  currently
exists  on  the Board, arising out of the resignation in November 1997 of  Alan
Sonnenberg.  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  since March 1, 1996.  Mr. Prisco came to CAI from Bell Atlantic Network
Services,  Inc.,  where  he  spent  the  last  three years there 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.

      GERALD STEVENS-KITTNER  joined  the  Company  as  Senior Vice President -
Regulatory  and  Governmental  Affairs in March 1996, and currently  serves  as
Senior Vice President - Spectrum  Management overseeing the Company's portfolio
of owned and leased MMDS and ITFS spectrum.   Prior to joining the Company, Mr.
Stevens-Kittner was a partner in the national law firm of Arter & Hadden, where
he practiced extensively in the area of telecommunications  law.   He  holds  a
JURIS DOCTOR from George Washington University National Law Center.

      BRUCE  W.  KOSTRESKI   joined  the  Company  as  Senior  Vice President -
Engineering in March 1996, and became the Company's Chief Technical  Officer in
March  11,  1997.   Prior  to  joining  CAI, Mr. Kostreski was employed by Bell
Atlantic Corporation in a variety of capacities  since  1980.   Mr. Kostreski's
last  position  with  Bell  Atlantic  was  that of Executive Director-Corporate
Development.   Mr. Kostreski is the primary or  sole  inventor  of  13  patents
relating to fiber  optics,  digital  subscriber  line (DSL), video and wireless
networks.

      ARTHUR J. MILLER has been Vice President, Controller and Chief Accounting
Officer since May 1997.  Prior to joining CAI, Mr.  Miller was employed by Tyco
Toys, Inc., an international toy manufacturer, since  June  1986, most recently
as Vice President of Finance.  Mr. Miller is a certified public  accountant and
a  member  of  the American Institute of Certified Public Accountants  and  the
Pennsylvania Institute of Certified Public Accountants.

                            GEORGE M. WILLIAMS has been Treasurer and Secretary
of the Company since December 1995.  Mr. Williams served as the Company's Chief
Administrative Officer  from  December  1995 until January 1998, when he became
general manager of the Company's Albany and  Rochester,  NY  operating systems.
Mr. Williams previously 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 joining the Company in
August 1993.  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.

      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.

      ROBERT D. HAPP has been a director of CAI since September 1995.  Mr. Happ
served  as Senior Managing Partner of the Boston, Massachusetts office of  KPMG
Peat Marwick  LLP  from  1985 until his retirement in 1994.  Mr. Happ is also a
director of Galileo Corporation  and  Cambridgeport Bank.  Since February 1996,
Mr. Happ has served as a director of CS Wireless.

      SECTION  16(A)  BENEFICIAL  OWNERSHIP   REPORTING   COMPLIANCE.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 CAI 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. Annual reports for each  of  Messrs.
Belanger, Bouton, Happ and  Tallcott were not timely filed with respect to each
outside directors' ownership of CAI Common Stock and options to purchase shares
thereof.  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.


                        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, 1998.

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                             ANNUAL                 LONG-TERM COMPENSATION 
                                                         COMPENSATION(1)
                                           Fiscal                                    Number of Securities
 NAME AND PRINCIPAL POSITION               PERIOD       SALARY         BONUS         UNDERLYING OPTIONS(2)
<S>                                         <C>        <C>            <C>                  <C>
Jared E. Abbruzzese                         1998       $350,000       $154,575             575,000
Chief Executive Officer                     1997        350,000              -             350,000
                                            1996        277,300        150,000                   -

John J. Prisco(3)                           1998        200,000         64,575             350,000
President and Chief Operating Officer       1997        200,000         40,000             150,000
                                            1996         12,308              -             200,000

James P. Ashman                             1998        183,000         61,763             177,000
Chief Financial Officer                     1997        183,000              -             100,000
                                            1996        140,100              -              40,000

Gerald Stevens-Kittner(4)                   1998        180,000         53,775             140,000
Senior Vice President - Spectrum            1997        170,343              -              20,000
Management                                  1996          3,558              -             120,000

Bruce Kostreski(5)                          1998        144,399         70,281              45,000
Senior Vice President - Engineering         1997        125,000              -              15,000
                                            1996          4,808              -              30,000
</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)   On March 9, 1998, the Compensation  Committee  approved  the repricing of
      outstanding stock options granted under the Company's plans  and  held by
      those employees that were still employed by the Company on such date.  In
      accordance with the instructions to Item 402(b)(2)(iv) of Regulation  S-K
      (17  CFR <section> 229.402(b)(2)(iv)), the Company is required to include
      the number  of  options  so  repriced  in  this  table.   There  were  no
      additional  options  granted  to  the named executive officers during the
      fiscal year ended March 31, 1998.
(3)   Mr. Prisco became President and Chief Operating Officer on March 1, 1996.
(4)   Mr. Stevens-Kittner became a Senior Vice President on March 18, 1996.
(5)   Mr. Kostreski became a Senior Vice President on March 8, 1996.

<PAGE>

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, $375 for each telephonic Board meeting
attended,  and  $250 for each telephonic committee meeting attended,  plus,  in
each such case, 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.

      In connection with David Tallcott's  election  to  the Company's Board of
Directors,  CAI  entered  into  a  deferred compensation agreement  with  David
Tallcott providing that all compensation paid by the Company to Mr. Tallcott as
a director would be set aside in an account to be invested in such mutual funds
offered by Smith Barney Inc. as Mr.
Tallcott shall direct.  On January 2,  1998, by mutual agreement of the Company
and Mr. Tallcott, this deferred compensation arrangement was terminated and all
assets contained in the investment account  were  distributed  to Mr. Tallcott.
Such  distribution  will  cause  Mr. Tallcott to recognize the amount  paid  as
taxable income in calendar 1998, and  entitle  CAI to 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 CAI Common Stock  on  the grant date. On March 9, 1998, all
options  granted under the 1996 Directors' Plan  were  repriced  to  $1.00  per
share.  As  of  March 31, 1998, the Company has granted options under this plan
to purchase 30,000  shares of common stock at a weighted average price of $1.00
per share, based upon the March 9, 1998 repricing event.

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. On March 9,
1998, all options granted under the 1993 Directors' Plan were repriced to $1.00
per share.  As of March 31, 1998, the Company has granted  outstanding  options
under  this  plan  to  purchase  8,334  shares  of common stock with a weighted
average price of $1.00 per share, based upon the March 9, 1998 repricing event.

      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.
<PAGE>

OPTION GRANTS IN LATEST FISCAL YEAR

      The following table provides information on options to purchase shares of
CAI Common Stock which were granted in prior fiscal  years, but repriced during
the  fiscal  year  ended  March 31, 1998 to the persons named  in  the  Summary
Compensation Table above.   No  additional  options were granted to the persons
named in the Summary Compensation Table during  the fiscal year ended March 31,
1998.

<TABLE>
<CAPTION>
                                                 % of Total                                     Potential realizable value at
                                  Number of      Options                                          assumed annual rates of
                                 Securities      Granted to          EXERCISE                     stock price appreciation
                                 Underlying     Employees in         PRICE PER    Expiration           FOR OPTION TERM
           NAME                   OPTIONS       FISCAL YEAR(1)         SHARE          DATE           5%             10%
<S>                          <C>                   <C>              <C>           <C>               <C>             <C>
Jared E. Abbruzzese          350,000               18.0%            $1.00         12/17/06          $ -             $ -
                             225,000               11.5%            $1.00         03/07/06          $ -             $ -

John J. Prisco               150,000                7.7%            $1.00         12/17/06          $ -             $ -
                             200,000               10.3%            $1.00         03/07/06          $ -             $ -

James P. Ashman              100,000                5.1%            $1.00         12/17/06          $ -             $ -
                              77,000                4.0%            $1.00         03/07/06          $ -             $ -

Gerald Stevens-Kittner        20,000                1.0%            $1.00         12/17/06          $ -             $ -
                             120,000                6.2%            $1.00         03/17/06          $ -             $ -

Bruce Kostreski               15,000                0.8%            $1.00         12/17/06          $ -             $ -
                              30,000                1.5%            $1.00         03/08/06          $ -             $ -
</TABLE>

    (1) Represents the percentage of those options  that  were  repriced during
    the fiscal  year  ended  March  31,  1998,  as  approved  by  the  
    Compensation Committee.

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,  1998  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, 1998               MARCH 31, 1998(1)
           NAME          EXERCISE (#)      REALIZED         EXERCISABLE     UNEXERCISABLE         EXERCISABLE   UNEXERCISABLE
<S>                         <C>            <C>                <C>                <C>                <C>           <C>
Jared E. Abbruzzese         ---            $  ---             575,000                -              $  ---        $  ---
John J. Prisco              ---               ---             311,300           38,700                 ---           ---
James P. Ashman             ---               ---             177,000                -                 ---           ---
Gerald Stevens-Kittner      ---               ---             120,000           20,000                 ---           ---
Bruce Kostreski             ---               ---              45,000                -                 ---           ---
</TABLE>

(1)  All unexercised options held by persons identified  above  are out-of-the-
  money.

EMPLOYMENT AGREEMENTS

      The   Company   has  entered  into  employment  agreements  with  Messrs.
Abbruzzese, Prisco, Ashman,  Stevens-Kittner  and  Kostreski.   Such agreements
continue  in effect until March 21, 1999, in the case of Mr. Abbruzzese;  until
January 3,  1999 in the case of Mr. Prisco; until February 28, 1999 in the case
of Mr. Ashman;  until  March  18,  1999 in the case of Mr. Stevens-Kittner; and
until March 8, 1999 in the case of Mr.  Kostreski.   The  employment agreements
are  automatically  renewed  for  successive  one-year terms, unless  otherwise
terminated.

      Under the terms of their respective employment agreements: Mr. Abbruzzese
serves as Chairman and Chief Executive Officer  of  the Company and is entitled
to an annual base salary of $350,000; Mr. Prisco serves  as President and Chief
Operating Officer of the Company and is entitled to a base  salary of $200,000;
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. Stevens-Kittner
serves as Senior Vice President - Spectrum Management and is entitled to a base
salary of $180,000,  and  Mr.  Kostreski  serves  as  Senior  Vice  President -
Engineering  and  is  entitled  to  a  base  salary  of  $143,750.  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.  Prisco,
Ashman, Stevens-Kittner and Kostreski 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. Stevens-
Kittner, however, may devote  up  to 20% of his working time to the business of
CS Wireless.  Each of the employment  agreements  entitles the executive to his
base salary and certain benefits for 12 months following  termination  of  such
executive's  employment without cause (as defined in the employment agreement).
All of the named  executives  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.

      In February  1998,  the  Company  implemented  a  deferred bonus plan for
certain employees.  Under the terms of the plan, bonuses  in amounts determined
by  the  Compensation  Committee  would be paid to plan participants  upon  the
earlier  of  (a)  the  completion  by  the   Company   of   a  major  financial
restructuring,  or  (b)  the  completion of investments by, and/or  contractual
relationships with, one or more strategic investors valued at not less than $75
million in the aggregate (each  a  "Bonus  Event").  Under the plan, a total of
approximately $1.2 million would be paid within  60  days of a Bonus Event.  In
approving   the   deferred  bonus  plan,  the  Compensation  Committee,   while
recognizing the Company's  financial  status,  was  concerned  that the Company
honor its contractual obligations to those individual employees  with  whom the
Company  employment  agreements that made such employees eligible for an annual
bonus.  The Compensation  Committee  was  also  guided  by  the need to provide
certain  employees  with  an  appropriate  incentive as the Company  sought  to
implement its long-term plans.

      In recognition of the consummation of a series of transactions during the
Company's fourth quarter that resulted in a  complete termination of all rights
and interests in the Company's principal assets  previously  held  by BANX, the
March  3,  1998 exchange of the BANX Securities for the Subordinated Note,  and
the importance of the termination of such rights and interests in the Company's
search  for one  or  more  strategic  partners  (see  "Item  1.  -  Business  -
Termination  of  BANX  Rights"  and  "  - Background - BANX TRANSACTIONS"), the
Compensation  Committee waived the Bonus Event  requirement  and  approved  the
payment of 45%  of  the  bonus  amount  to  members  of   the  Company's senior
management and 90% of the bonus amount to other plan participants at the end of
February 1998.  Simultaneously, the Compensation Committee approved the payment
of  an  additional  45%  of  the  bonus  amount on June 15, 1998 to those  plan
participants that received 45% of the bonus  amount at the end of February 1998
in  the  form  of  a  retention  bonus,  subject  to the  condition  that  such
participant continue to be an active employee of the  Company  through June 15,
1998.   This  portion  of the bonus was paid to plan participants on  June  15,
1998, except for bonuses  payable  to  Messrs.  Abbruzzese,  Prisco and Ashman,
which were paid to such individuals on June 22, 1998.  The remaining 10% of the
bonus amount is still subject to the originally-approved Bonus Events.

EXECUTIVE SEVERANCE PAY PLAN

      The  Company  maintains  an Executive Severance Pay Plan (the  "Severance
Plan") pursuant to which executive  employees  of  the  Company  identified and
designated by the Compensation Committee as eligible participants  are entitled
to  certain  severance benefits upon a Qualifying Termination of Employment  in
the event of a  change  in  control  (as  defined  under  the  Severance Plan).
Individuals  designated  by  the  Compensation Committee as Tier I or  Tier  II
participants are eligible for a lump  sum  payment  equal  to  30  months or 18
months,  respectively,  of  such  individual's  base  salary,  as  well  as the
maintenance of certain other benefits (or a reasonable equivalent thereof)  for
a  prescribed  period  following the Qualifying Termination of Employment.  The
Compensation Committee has  reserved  the right, in its sole discretion, to add
or remove participants from the Severance  Plan  from  time  to time prior to a
Change in Control of the Company.  The executive officers named  in the summary
compensation  table  above  are currently Tier I participants in the  Severance
Plan.

      Under the Severance Plan, a "Qualifying Termination of Employment" occurs
if, within two years of a change  in  control of the Company, (a) a participant
terminates his or her employment as a result  of  (i)  the  assignment  to such
participant  of  any  duties  inconsistent  in  any  respect with participant's
position  (including  status,  offices,  titles,  and reporting  requirements),
authority, duties or responsibilities immediately before the change in control,
or any other action by the Company that results in  a significant diminution in
such  position,  authority,  duties  or responsibilities,  excluding  for  this
purpose an isolated, insubstantial and  inadvertent  action  not  taken  in bad
faith  and  which  is  remedied by the Company promptly after receipt of notice
thereof given by participant; (ii) any material reduction in participant's base
pay, opportunity to earn  annual  bonuses  or  other  compensation  or employee
benefits,  other  than  as  a result of an isolated and inadvertent action  not
taken in bad faith and that is  remedied  by the Company promptly after receipt
of  notice  thereof  given  by participant; (iii)  the  Company's  requiring  a
participant to relocate his or her principal place of business to a place which
is more than thirty-five miles  from  his  or  her  previous principal place of
business;  (iv)  any  purported  termination  of  the Plan  otherwise  than  as
expressly  permitted  by  the  Severance  Plan;  or  (v)  termination   of  the
participant's  employment  as  a  result  of  participant's death or disability
within 24 months following a change in control, or (b) the Company terminates a
participant's employment.  A participant is not entitled to separation benefits
under  the Severance Plan in the event that such  participant's  employment  is
terminated for cause or the participant voluntarily resigns from the Company.

      For  purposes  of  the  Severance  Plan,  each  of  the  following events
constitutes a "Change in Control": (i) a report on Schedule 13D  shall be filed
with  the Securities and Exchange Commission pursuant to Section 13(d)  of  the
Securities  Exchange  Act  of 1934 (the "Act") disclosing that any person other
than the Company, or any employee benefit plan sponsored by the Company, is the
beneficial owner (as the term is defined in Rule 13d-3 under the Act), directly
or indirectly, of thirty-five  percent  or  more  of  the  total  voting  power
represented by the Company's then outstanding Voting Securities (calculated  as
provided  in paragraph (d) of Rule 13d-3 under the Act in the case of rights to
acquire Voting  Securities);  or (ii) any person, other than the Company or any
employee benefit plan sponsored  by the Company, shall purchase shares pursuant
to a tender offer or exchange offer  to  acquire  any  Voting Securities of the
Company  (or  securities  convertible  into such Voting Securities)  for  cash,
securities or any other consideration, provided  that after consummation of the
offer, the person in question is the beneficial owner,  directly or indirectly,
of  thirty-five percent or more of the total voting power  represented  by  the
Company's  then  outstanding  Voting Securities (all as calculated under clause
(i));  or  (iii)  the  stockholders  of  the  Company  shall  approve  (A)  any
consolidation or merger  of  the  Company  in  which  the  Company  is  not the
continuing  or  surviving  corporation  (other  than a merger of the Company in
which holders of Common Shares of the Company immediately  prior  to the merger
have  the  same  proportionate  ownership  of  Common  Shares  of the surviving
corporation immediately after the merger as immediately before), or pursuant to
which Common Shares of the Company would be converted into cash,  securities or
other  property,  or  (B) any sale, lease, exchange or other transfer  (in  one
transaction or a series  of  related  transactions) of all or substantially all
the  assets  of  the Company; or (iv) the  Company  shall  have  filed,  or  an
involuntary filing  shall  have  been  made  in  respect  of   the Company, for
protection from creditors under the Federal Bankruptcy Code, or (v) there shall
have been a change in the composition of the Board of Directors  of the Company
at   any  time  during  any  consecutive  twenty-four-month  period  such  that
"continuing  directors"  cease  for  any  reason to constitute at least a fifty
percent  majority  of  the Board.  For purposes  of  this  clause,  "continuing
directors" means those members  of  the  Board who either were directors at the
beginning of such consecutive twenty-four-month period or were elected by or on
the nomination or recommendation of at least  a  fifty  percent majority of the
then  existing  "continuing  directors",  and  "Voting  Securities"  means  any
securities of the Company that vote generally in the election of directors.  So
long as there has not been a "change of control" within the  meaning  of clause
(iv),  the  Board of Directors may adopt by a seventy percent majority vote  of
the "continuing  directors"  a resolution to the effect that an event described
in clauses (i) or (ii) shall not constitute a "change of control."

<PAGE>

    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets  forth  as  of May 26, 1998 (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>
<CAPTION>
                                                             BENEFICIAL OWNERSHIP
                                                                       Percentage of Outstanding
                                                  NUMBER OF SHARES               SHARES
<S>                                                  <C>                         <C> 
Jared E. Abbruzzese                                  1,687,552(1)                4.1%
John J. Prisco                                         316,300(2)                 *
James P. Ashman                                        269,990(3)                 *
Gerald Stevens-Kittner                                 120,000(4)                 *
Bruce W. Kostreski                                      45,000(5)                 *
George M. Williams                                     231,000(6)                 *
Arthur J. Miller                                         2,500(7)                 *
Arthur C. Belanger                                       8,750(8)                 *
Harold A. Bouton                                         5,664(9)                 *
Robert D. Happ                                           3,750(10)                *
David M. Tallcott                                        5,417(11)                *
All directors and officers as a group (9 persons)    2,695,923                   6.4%
</TABLE>

* less than 1%

(1)   Includes 186,000 shares held by relatives of Mr. Abbruzzese and a limited
      liability company in  which  Mr. Abbruzzese is a member over which shares
      Jared E. Abbruzzese retains voting  control, 575,000 shares issuable upon
      exercise of options exercisable currently  or  within  60 days of June 1,
      1998.
(2)   Includes 311,300 shares issuable upon the exercise of options exercisable
      currently or within 60 days of June 1, 1998.
(3)   Includes 177,000 shares issuable upon the exercise of options exercisable
      currently or within 60 days of June 1, 1998.
(4)   Shares are issuable upon the exercise of options exercisable currently or
      within 60 days of June 1, 1998.
(5)   Shares are issuable upon the exercise of options exercisable currently or
      within 60 days of June 1, 1998.
(6)   Includes 116,000 shares issuable upon the exercise of options exercisable
      currently or within 60 days of June 1, 1998.
(7)   Shares are issuable upon the exercise of options exercisable currently or
      within 60 days of June 1, 1998.
(8)   Shares are issuable upon the exercise of options exercisable currently or
      within 60 days of June 1, 1998.
(9)   Includes 127 shares held by an immediate family member and  5,417  shares
      issuable upon the exercise of options exercisable currently or within  60
      days of June 1, 1998.
(10)  Shares  are  issuable  upon  the  exercise  of  options exercisable
      currently or within 60 days of June 1, 1998.
(11)  Shares  are  issuable  upon  the  exercise  of  options exercisable
      currently or within 60 days of June 1, 1998.

            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

THE BANX TRANSACTIONS.

      Reference  is  hereby  made  to  Item 1. Business - Termination  of  BANX
Rights;  and  -  Background  -  BANX TRANSACTIONS  for  a  description  of  the
relationship among the Company, and  affiliates  of  Bell  Atlantic  and NYNEX,
including  the  termination of all rights formerly held by BANX in a series  of
transactions effected by the Company during its last fiscal quarter.

OTHER.
      SATELLITE SERVICES.   The Company has pursued three satellite ventures in
addition to its investment in  TelQuest  Satellite Services LLC (described more
fully below).  These ventures have been pursued  by  the  Company  through  the
following    wholly-owned    subsidiaries    (collectively,    the   "Satellite
Subsidiaries"):  (i)  MMDS Satellite Ventures, Inc., which was formed  for  the
purpose of pursuing Ku-band  satellite  opportunities;  (ii)  CAI Data Systems,
Inc.,   an  entity  formed  for  the  purpose  of  pursuing  Ka-band  satellite
opportunities,  and  (iii) CAI Satellite Communications, Inc., an entity formed
for the purpose of pursuing V-band satellite opportunities.

      MMDS Satellite Ventures,  Inc. has been inactive since the summer of 1997
as a result of a lack of interest  on  the  part of any potential joint venture
partner  in  pursuing  a Ku-band satellite strategy.  CAI  Data  Systems,  Inc.
announced on July 23, 1997  that  it  had  filed an application with the FCC to
construct, launch and operate a Ka-band satellite.   The  application, which is
currently pending before the FCC, contemplates a July 1999  launch date for the
satellite.  The estimated cost of constructing and launching  the  satellite is
approximately  $292.5 million, which Data Systems plans to finance through  the
issuance of its  own  debt and/or equity securities.  There can be no assurance
that Data Systems' application  will be granted by the FCC or, if granted, that
Data Systems will be able to secure financing necessary to construct and launch
a satellite.  CAI Satellite Communications,  Inc.  filed  a  V-band application
with  the  FCC  on  September  25,  1997 for the same orbital slots  that  were
identified in CAI Data's Ka-band application.   The  application  is  currently
pending FCC review.  The identical orbital slots were applied for in the V-band
application  in  an  effort  to  permit CAI to co-locate satellites in the same
orbit, possibly saving enormous launch  costs  at the appropriate time.  Before
the FCC can grant any orbital position in the V-band,  it  must  first  file  a
request  with  the World Radio Conference for the United States to be allocated
the particular V-band  frequency.  CAI  has  expended approximately $344,000 on
these entities to date, including approximately $87,500 for FCC filing fees.

      The Satellite Projects Committee (the "Satellite Committee") of the Board
of Directors of the Company has authorized the  sale  of  up to one-half of the
equity  interests in these entities to Haig Capital, LLC ("Haig  Capital"),  an
entity in  which  Jared  E. Abbruzzese, chairman and chief executive officer of
the Company, is a majority member.  Under the terms of the transaction approved
by the Satellite Committee,  the  Company would transfer one-half of the equity
in the Satellite Subsidiaries to Haig  Capital  in  exchange for Haig Capital's
agreement to fund the future capital and other expenditures, including salaries
and  benefits  of certain employees, of the Satellite Subsidiaries  up  to  the
amount expended  to  the date of transfer of such equity interest by CAI.  From
and after the date that Haig Capital has matched the capital investment made by
the Company, Haig Capital  and  the  Company would bear the on-going costs on a
pro rata basis.  The consummation of this  transfer  is  subject to approval by
MLGAF, the Company senior secured lender.

      TELQUEST SATELLITE SERVICES. TelQuest Satellite Services LLC ("TSS") is a
joint  venture  between  the Company, CS Wireless and TelQuest  Communications,
Inc., a company controlled  by Mr. Abbruzzese, formed on August 4, 1997 for the
purpose  of  developing  and  operating  satellite  systems  providing  digital
services.  In connection with the  Company's  $5 million investment in TSS, the
Company made four cash payments to satisfy the $2.5 million cash portion of its
investment in TSS.  The Company has also contributed a combination of equipment
(made available to TSS under the terms of a five-year renewable lease) and cash
(in lieu of equipment) in an amount equal to approximately $2.1 million as part
of the $2.5 million equipment portion of the Company's $5 million investment in
TSS.  The final installment payment for the investment  was  made  on  April 1,
1998.   In  return for CAI's $5 million investment  in TSS, CAI received a  25%
interest in TSS,  which  interest is subject to dilution upon the occurrence of
certain events.

      CAI has designated its Boston market as the first of the Company's market
to  receive  TSS digital video  programming.   TSS  is  currently  broadcasting
approximately 40 channels of pre-digitized video programming, which programming
is being received  at the Company's head-end located in downtown Boston without
significant  technical   flaws.    The  Company  is  currently  using  the  TSS
programming  in  Boston to test the digital  MMDS  delivery  platform  and  the
customer premises  equipment  to  be  used  for a commercial subscription video
product.  In conjunction with its investment  in  TSS,  the  Company  has  also
entered into an affiliation agreement with TSS that will enable the Company  to
purchase pre-digitized video programming from TSS for those markets, if any, in
which  the  Company  launches  a commercial digital subscription video product.
The Company continues to believe that the affiliation agreement with TSS is the
most cost-efficient means of accessing  pre-digitized video programming for use
at its transmission facilities.  A migration from the C-band satellite capacity
that  TSS  currently  is  transmitting to the  contemplated  Ku-band  satellite
capacity will provide the Company  with  the  opportunity  to  expand its video
offerings to include a direct-to-home product as a supplement to any MMDS-based
video delivery system for those potential subscribers that are not  capable  of
receiving  the MMDS signal.  There can be no assurance, however, that  TSS will
be  able  to migrate  from  C-band  satellite  capacity  to  Ku-band  satellite
capacity, that  the  Company  will be able to expand its video offerings beyond
its current subscription video  product,  or  that  the  Company  will launch a
digital  subscription  video  product  in  a  commercial  manner in any of  its
markets.

      WAVE AIR, INC.  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.   Wave  Air charges CAI for
this  service  on an hourly basis at or below market rates.  Transactions  with
Wave Air, Inc. amounted  to approximately $154,000 for the year ended March 31,
1998.

      LOANS TO OFFICERS.   On  March  31,  1997,  Mr.  Abbruzzese  executed and
delivered a demand promissory note in the principal amount of $780,054 in favor
of the Company.  The note evidences various indebtedness owed by Mr. Abbruzzese
and  affiliated entities, which Mr. Abbruzzese has agreed to assume,  including
the outstanding  balance  on  an  $800,000  loan  made  by  the Company to Haig
Capital.  The obligation bears interest at 14% per annum and  is  secured  by a
pledge  of  Mr.  Abbruzzese's  interest in Haig Capital.  Mr. Abbruzzese repaid
$86,045 of such obligation during  the  fiscal  year  ended March 31, 1998.  In
addition,  in  June  1998,  Mr.  Abbruzzese  made  a  $45,000  payment  on  the
obligation,   reducing  the  principal  outstanding  balance  to  approximately
$650,000.

      INSTALLATION SERVICES.  In October 1996, two CAI employees formed Telecom
Service Support  LLC  ("Telecom  Support")  to provide subscriber installation,
service calls and warehouse services to the subscription  television  industry.
CAI  incurred $452,000 for such services during the year ended March 31,  1998.
Services provided by Telecom Support to CAI were on terms at least as favorable
to those  available  to CAI from unrelated parties.  Additionally, CAI advanced
$20,000, provided leased vehicles and certain facilities to Telecom Support for
the year ended March 31, 1998.

      EQUIPMENT SALES AND PURCHASES.  During the year ended March 31, 1998, CAI
sold to CS Wireless approximately  $3.7  million  of equipment at $116,000 over
book value primarily from the Boston Project that was not needed for the Boston
project  for  20%  down  and  the  balance  due  in  30  days  after  delivery.
Additionally, during April 1997, CAI placed purchase orders  approximating $1.6
million  with  CS Wireless for equipment needed for the Boston Project,  taking
advantage of CS  Wireless'  favorable pricing arrangements with its vendor.  In
March 1997, CAI purchased certain  used  equipment  for $107,000 for the Boston
Project from Haig Capital.  All equipment purchased from  Haig  by CAI was sold
by Haig to CAI at or below fair market value for such items.

      CONSULTING  ARRANGEMENT.   The  Company  was  a  party  to  a  consulting
agreement  with  Alan  Sonnenberg,  pursuant to which Mr. Sonnenberg agreed  to
provide CAI with certain consulting services  for  an  annual  fee  of $75,000.
Under  the  agreement,  Mr.  Sonnenberg received $62,500 during the year  ended
March 31, 1998.  The agreement was terminated in February 1998.  Mr. Sonnenberg
served as president and vice chairman  of  CAI  from  September  29, 1995 until
February 23, 1996, when he became president and chief executive officer  of  CS
Wireless.

      ENGINEERING   AND   SPECTRUM   MANAGEMENT   SERVICES.   The  Company  has
arrangements  with CS Wireless for the provision of  engineering  and  spectrum
management services  by CAI personnel to CS Wireless.  CAI provides engineering
consulting services to  CS  Wireless in connection with digital build-out by CS
Wireless  of its Dallas market.   CAI  is  paid  $10,000  per  month  for  such
consulting  services,  and  is  to  be  reimbursed  for all reasonable expenses
incurred by CAI personnel in the performance of the consulting services.

      CAI also provides spectrum management services and subleases office space
in  CAI's  Arlington,  Virginia  office  to CS Wireless.   Up  to  20%  of  the
professional time of Mr. Gerald Stevens-Kittner,  CAI's Senior Vice President -
Spectrum  Management,  is devoted to CS Wireless spectrum  management  matters,
including regulatory issues  before  the  FCC,  for  which CS Wireless pays Mr.
Stevens-Kittner directly.  CAI charges CS Wireless a pro  rata  portion  of the
monthly  rent  payment  for CAI's Arlington office space, reflecting the office
space used by one full-time  CS  Wireless  employee  resident  in the Arlington
office.
<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

      (1) Current Report  on  Form  8-K  dated  March  5,  1998,  reporting the
following events under Item 5:  On March 3, 1998, CAI exchanged all  securities
previously held by BANX and  acquired by Merrill Lynch Global Allocation  Fund,
Inc. on February 17, 1998 for a $30 million subordinated note of CAI, and filed
pro  forma  consolidated  financial  statements  under  Item  7 to reflect such
exchange.

      (2)  Current  Report  on  Form 8-K dated January 22, 1998, reporting  the
following event under Item 5:  On  January 14, 1998, management representatives
of CAI held a conference call for financial analysts concerning public comments
received by the FCC on the Notice of  Proposed  Rulemaking for 2-way use of MDS
and ITFS frequencies.  Excerpts from the conference call were filed on the Form
8-K.

(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>
<TABLE>
<CAPTION>

                        INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

                                                                                    Page No.
                                                                                    IN FORM 10-K
                          FINANCIAL STATEMENTS
<S>                                                                                   <C>
Reports of Independent Accountants                                                    35

Consolidated Balance Sheets - March 31, 1998 and 1997                                 39

Consolidated Statements of Operations - Years Ended March 31, 1998, 1997, and 1996    40

Consolidated Statements of Shareholders' Equity(Deficit) - Years Ended
 March 31, 1998, 1997, and 1996.......................                                41

Consolidated Statements of Cash Flows - Years Ended March 31, 1998, 1997, and 1996    42

Notes to Consolidated Financial Statements                                            45


</TABLE)
<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.


</TABLE>
<TABLE>
<CAPTION>
                                             CAI WIRELESS SYSTEMS, INC.
                                             (Registrant)

<S>                                          <C>
                                             BY:  /s/
                                                 Jared E. Abbruzzese, Chairman,
Date:  June 29, 1998                             Chief Executive Officer and Director
</TABLE>

      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>                                      <C>                                  <C>

/s/                                      Chairman, Chief Executive Officer    June 29, 1998
       Jared E. Abbruzzese                and Director
                                          (Principal Executive Officer)


/s/                                      President, Chief Operating Officer   June 29, 1998
         John J. Prisco                   and Director



/s/                                      Executive Vice President, Chief     June 29, 1998
         James P. Ashman                  Financial Officer and Director
                                          (Principal Financial Officer)


/s/                                      Vice President and Controller       June 29, 1998
         Arthur J. Miller                 (Principal Accounting Officer)



/s/                                      Director                            June 29, 1998
       Arthur C. Belanger



/s/                                      Director, Secretary and Treasurer   June 29, 1998
       George M. Williams



<PAGE>
                            SIGNATURES (continued)



</TABLE>
<TABLE>
<CAPTION>
            SIGNATURE                        TITLE                              DATE
<S>                                      <C>                                 <C>

/s/                                      Director                            June 29,1998
       Harold A. Bouton



/s/                                      Director                            June 29, 1998
        David M. Tallcott



/s/                                      Director                           June 29, 1998
         Robert D. Happ
</TABLE>
























<PAGE>

                              INDEX TO  EXHIBITS

<TABLE>
<CAPTION>
                                                                                      Incorporation by 
                                                                                       Reference (SEE           PAGE
 EXHIBIT NO.                                      DESCRIPTION                           LEGEND)                 NO.

<S>                    <C>                                                                   <C>                     <C>
      2.1              Participation Agreement among Heartland Wireless                       6-Exhibit 2.1   
                        Communications,  Inc.,  CAI  Wireless  Systems,  Inc.  and CS
                        Wireless Systems, Inc. dated as of December 12, 1995.
      2.2              Amendment No. 1 to Participation Agreement among                        8-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 of CAI                6-Exhibit 3.1
      3.2              Amended and Restated Bylaws of CAI                                     6-Exhibit 3.2
      4.1              Form of Indenture for Senior Notes                                     4-Exhibit 4.1
      4.2              First Supplemental Indenture                                           7-Exhibit 4.1
      4.3              Form of Escrow Agreement among CAI and Chemical Bank                   4-Exhibit 4.30
      4.4              Subordinated Unsecured Promissory Note dated August 31,                1-Exhibit 4.7  
                        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              Note Purchase Agreement dated as of November 24, 1997 by              16-Exhibit 4.1
                        and among CAI, certain of its subsidiaries and the purchaser
                        named therein
<dagger>4.10           Amendment No. 1 to the Note Purchase Agreement, together              16-Exhibit 4.1
                        with a schedule identifying subsequent amendments omitted and
                        setting forth material changes
     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 between              12-Exhibit 10.6
                        Jared E. Abbruzzese and CAI
     10.7              Letter Agreement dated October 13, 1993 by and between                 1-Exhibit 10.10
                        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 Tri-                1-Exhibit 10.11
                        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 Jared E.               1-Exhibit 10.7
                        Abbruzzese and CAI
     10.12             Business Relationship Agreement among CAI, its                         5-Exhibit 10.13
                        Subsidiaries 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               3-Exhibit 2
                        among CAI, its Subsidiaries and BANX Partnership, including
                        forms of Stage I and Stage II Warrants
     10.14             1995 Incentive Stock Plan                                             12-Exhibit 10.16
     10.15             Consulting and Employment Agreement dated as of January 1, 1996       12-Exhibit 10.17
                        between the Company and John Prisco
     10.16             Termination Agreement dated February 23, 1996 between CAI             12-Exhibit 10.18
                        and Alan Sonnenberg
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                  INDEX TO  EXHIBITS (CONTINUED)
                                                                                             INCORPORATION
 .                                                                                            by Reference (SEE            PAGE
 Exhibit NO                          DESCRIPTION                                             LEGEND)                      NO.
<S>                   <C>                                                                    <C>                          <C>
     10.17            Consulting  Agreement dated February 23, 1996 between the              12-Exhibit 10.19
                       Company and Alan Sonnenberg
     10.18            Form of Representative's Warrant Agreement with Form of                 1-Exhibit 4.3
                       Warrant Certificate attached thereto
     10.19            Warrant Agreement dated August 30, 1993 between CAI and                 1-Exhibit 4.13
                       Richard McKenzie
     10.20            Warrant Agreement dated August 30, 1993 between CAI and                 1-Exhibit 4.14
                       Phil Hempleman 
     10.21            Warrant Agreement dated September 10, 1993 between CAI                  1-Exhibit 4.15
                       and John Oppenheimer 
     10.22            Warrant Agreement dated August 30, 1993 between CAI and                 1-Exhibit 4.16
                       Marc Howard 
     10.23            Warrant Agreement dated September 10, 1993 between CAI                  1-Exhibit 4.17
                       and Les Alexander 
     10.24            Warrant Agreement dated November 9, 1993 between CAI and                1-Exhibit 4.26
                       Phil Hempleman
     10.25            Warrant Agreement dated November 9, 1993 between CAI and                1-Exhibit 4.27
                       Marc Howard
     10.26            Warrant Agreement dated November 9, 1993 between CAI and                1-Exhibit 4.28
                       Richard McKenzie
     10.27            Warrant Agreement dated November 9, 1993 between CAI and                1-Exhibit 4.29
                       John Oppenheimer
     10.28            Warrant Agreement dated November 9, 1993 between CAI and                1-Exhibit 4.30
                       Les Alexander
     10.29            Modification Agreement dated December 12, 1996, among the              10-Exhibit 10.
                       registrant and various affiliates of Bell Atlantic Corporation
                       and NYNEX Corporation
     10.30            1996 Outside Directors' Stock Option Plan                              11-Appendix A
     10.31            Amendment No.1 to the Modification Agreement dated April               13-Exhibit 99.7
                       29, 1997 among the registrant and various affiliates of Bell
                       Atlantic Corporation and NYNEX Corporation
     10.32            Employment Agreement dated as of February 29, 1997                     13-Exhibit 99.6
                       between the registrant and James P. Ashman
     10.33            Loan and Security Agreement dated as of May 16, 1997 by                13-Exhibit 99.9
                       and 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)
     10.34            Release and Agreement dated as of April 29, 1997 among                13-Exhibit 99.8
                       registrant and various affiliates of Bell Atlantic Corporation
                       and NYNEX Corporation
     10.35            MMDS Affiliation Agreement dated as of August 4, 1997                 14-Exhibit 99.1
                       between TelQuest Satellite Services LLC and CAI (confidential
                       treatment of certain portions of this exhibit has been
                       requested)
     12.              Statements re Computation of Ratios                                    9
     21.              Subsidiaries of the Registrant                                        15-Exhibit 21
<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                      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.
      4                      Incorporated by reference to the exhibits to the Registration Statement on Form S-1 (No. 33-
                              93062).
      5                      Incorporated by reference to the exhibits to the Registration Statement on Form S-4 (No. 33-
                              94222).
      6                      Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for September
                              30, 1995.
      7                      Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for December
                              31, 1995 (No. 0-22888).
      8                      Incorporated by reference to the exhibits to the Current Report on Form 8-K dated February
                              23, 1996 (No. 0-22888).
      9                      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.
     10                      Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for December
                              31, 1996.
     11                      Incorporated by reference to the registrant's Proxy Statement dated September 18, 1996.
     12                      Incorporated by reference to the exhibits to the Annual Report on Form 10-K for March 31,
                              1996.
     13                      Incorporated by reference to the exhibits to the Current Report on Form 8-K dated June 27,
                              1997.
     14                      Incorporated by reference to the exhibits to the Current Report on Form 8-K dated August 4, 1997
                              (No. 0-22888).
     15                      Incorporated by reference to the exhibits to the Current Report on Form 8-K dated December 29,
                              1997 (No. 0-22888).
     16                      Incorporated by reference to the exhibits to the Quarterly Report on Form 10-Q for December 31,
                              1997.
     <dagger>                Filed herewith.
</TABLE>