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

                                    FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF
1934 [NO FEE REQUIRED] X

For the Fiscal Year Ended December 31, 1997

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]

For the transition period from           to
Commission file number 33-72646

                       USA MOBILE COMMUNICATIONS, INC. II
             (Exact name of Registrant as specified in its Charter)

         DELAWARE                                      31-1236804
 (State of incorporation)                   (I.R.S.Employer Identification No.)

   1800 WEST PARK DRIVE, SUITE 250
    WESTBOROUGH,MASSACHUSETTS                             01581
(address of principal executive offices)                (Zip Code)

                                 (508) 870-6700
              (Registrant's telephone number, including area code)

             SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
                      SECURITIES EXCHANGE ACT OF 1934: None

             SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
                      SECURITIES EXCHANGE ACT OF 1934: None

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL  INSTRUCTION  (I)(1)(A)
AND (B) OF FORM 10-K AND IS FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

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: Not applicable

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant: Not applicable

The number of shares of Registrant's  Common Stock outstanding on March 27, 1998
was 748.7501.

                    DOCUMENTS INCORPORATED BY REFERENCE: None


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                                     PART I

ITEM 1.     BUSINESS

General

     On  September  7,  1995,  Arch  Communications  Group,  Inc.  ("Old  Arch")
completed its  acquisition  of USA Mobile  Communications  Holdings,  Inc. ("USA
Mobile") through the merger (the "Merger") of Old Arch with and into USA Mobile,
which  simultaneously  changed  its  name to  Arch  Communications  Group,  Inc.
("Arch"). USA Mobile Communications, Inc. II ("USA Mobile II"), which had been a
wholly-owned  subsidiary of USA Mobile, became a wholly-owned subsidiary of Arch
after the Merger.

     USA Mobile II is a  provider  of  wireless  messaging  services,  primarily
paging services. USA Mobile II provides paging services in 10 states.

     For the year ended  December 31, 1997,  USA Mobile II's total revenues were
$161.1  million,  representing an increase of 13.9% over the year ended December
31, 1996, and its earnings before interest, taxes, depreciation and amortization
("EBITDA")  was $62.1 million,  representing  an increase of 19.4% over the year
ended December 31, 1996.

     EBITDA  is a  standard  measure  of  financial  performance  in the  paging
industry and is also one of the financial measures used to calculate whether USA
Mobile II is in compliance with the covenants under its indebtedness, but should
not be  construed  as an  alternative  to  operating  income or cash  flows from
operating  activities  as  determined  in  accordance  with  generally  accepted
accounting  principles.  EBITDA does not  reflect  non-operating  expenses.  USA
Mobile II's financial  objective is to increase its EBITDA, as such earnings are
a significant  source of funds for servicing  indebtedness and for investment in
continued  growth,  including  purchase of pagers and paging  system  equipment,
construction and expansion of paging systems, and possible acquisitions.

Paging Operations

     USA  Mobile II  currently  provides  four basic  types of paging  services:
digital display,  alphanumeric  display,  tone-only and tone-plus-voice.  Paging
services are provided to subscribers for a fixed monthly fee. Subscribers either
lease the pager from USA Mobile II for an  additional  fixed monthly fee or they
own the pager,  having  purchased it from USA Mobile II or another  vendor.  The
monthly  service fee is  generally  based on the type of service  provided,  the
geographic  area covered,  the number of pagers provided to the customer and the
period of the subscriber's  commitment.  Subscriber-owned  pagers provide a more
rapid  recovery  of USA Mobile II's  capital  investment  than pagers  owned and
maintained by USA Mobile II, but may generate less recurring revenue. USA Mobile
II also sells  pagers to  third-party  resellers  who lease or resell  pagers to
their own subscribers and resell USA Mobile II's paging services under marketing
agreements.

     USA Mobile II also provides  enhancements  and  ancillary  services such as
voice mail,  personalized greetings,  message storage and retrieval,  pager loss
protection  (which  protects the customer  against the risk of losing the pager)
and pager  maintenance  services  (under which USA Mobile will repair or replace
pagers  with  no  charge  to the  customer  other  than  payment  of  applicable
deductibles).  Voice mail  allows a caller to leave a recorded  message  that is
stored in USA Mobile II's computerized  message retrieval center. When a message
is left, the subscriber can be  automatically  alerted through the  subscriber's
pager and can  retrieve  the stored  message by calling  USA Mobile  II's paging
terminal.  Personalized  greetings  allow the  subscriber to record a message to
greet  callers  who  reach the  subscriber's  pager or voice  mail box.  Message
storage and  retrieval  allows a  subscriber  who leaves USA Mobile II's service
area to retrieve  calls that arrived  during the  subscriber's  absence from the
service area. Pager loss protection allows subscribers who lease pagers to limit
their  costs  of  replacement  upon  loss or  destruction  of the  pager.  Pager
maintenance services are offered to subscribers who own their own equipment.


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Subscribers And Marketing

     USA Mobile II's paging accounts are generally businesses with employees who
travel  frequently  but  must be  immediately  accessible  to their  offices  or
customers.  USA Mobile II's subscribers include proprietors of small businesses,
professionals,  management  and medical  personnel,  field sales  personnel  and
service forces, members of the construction industry and trades, and real estate
brokers and developers. In addition, USA Mobile II believes that pager use among
consumers will increase  significantly in the future,  although consumers do not
currently account for a substantial portion of USA Mobile II's subscriber base.

     In addition to marketing its services  through a direct marketing and sales
organization,  USA Mobile II also markets its paging services indirectly through
independent  resellers,  agents and  retailers.  USA Mobile II typically  offers
resellers  paging services in large quantities at wholesale rates that are lower
than retail rates,  and resellers  offer the services to end-users at a mark-up.
USA Mobile II's costs of administering  and billing resellers are lower than the
costs of direct end-users on a per pager basis.

     In addition to marketing its own paging  services,  USA Mobile II acts as a
reseller of other paging  carriers'  services  when  existing or  potential  USA
Mobile  customers  have travel  patterns that require  paging service beyond the
coverage of USA Mobile II's own networks.  USA Mobile II believes that it is not
dependent on any other  carrier and can obtain  alternative  service for most or
all of its customers on other carriers' systems.

ITEM 2.  PROPERTIES

     At December 31, 1997, USA Mobile II owned the building in Cincinnati, Ohio,
in which Arch's Data Center is located, as well as several other parcels of real
property  which are used as  transmitter  sites,  and leased  office space in 72
localities in 7 states. In addition,  USA Mobile II leases  transmitter sites on
commercial   broadcast  towers,   buildings,   and  other  fixed  structures  in
approximately  1,260  locations  in 20 states.  USA Mobile  II's  leases are for
various terms and provide for monthly rental payments at various rates.

     USA Mobile II is  obligated  to make total lease  payments of $5.6  million
under its office facility and tower site leases for the year ending December 31,
1998. USA Mobile II believes that it will be able to obtain  additional space as
needed at an acceptable cost.

ITEM 3.    LEGAL PROCEEDINGS

     USA Mobile II, from time to time,  is  involved in lawsuits  arising in the
normal course of business.  USA Mobile II believes  that its  currently  pending
lawsuits will not have a material adverse effect on USA Mobile II.

                                     PART II

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

     All of the  common  stock  of USA  Mobile  II is held  by  Arch  and is not
publicly traded.

     USA Mobile II has never declared or paid cash dividends on the common stock
and does not intend to declare or pay cash  dividends on the common stock in the
foreseeable future. Certain covenants in USA Mobile II's credit facility and the
two  indentures,  pursuant to which senior debt securities of USA Mobile II were
issued will, in effect, prohibit the declaration or payment of cash dividends by
USA  Mobile  II for  the  foreseeable  future.  See  Note 3 to USA  Mobile  II's
Consolidated Financial Statements.


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

FORWARD-LOOKING STATEMENTS

     This Form 10-K contains forward-looking  statements.  For this purpose, any
statements  contained  herein that are not statements of historical  fact may be
deemed to be  forward-looking  statements.  Without limiting the foregoing,  the
words "believes",  "anticipates", "plans", "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors  that could cause USA Mobile II's  actual  results to differ  materially
from those indicated or suggested by such forwarding-looking  statements.  These
factors  include,  without  limitation,  those set forth below under the caption
"Factors Affecting Future Operating Results".

SHIFT IN OPERATING FOCUS

     In April 1997,  Arch announced it was shifting its operating focus to put a
higher  priority on leverage  reduction  than  subscriber  unit  growth.  Arch's
deleveraging  efforts are focusing on, but are not limited to,  slowing  capital
expenditures,  implementing  across-the-board efficiencies and the possible sale
of non-strategic assets.

RESULTS OF OPERATIONS

     The  following   table   presents   certain  items  from  USA  Mobile  II's
Consolidated  Statements of  Operations  as a percentage of net revenues  (total
revenues  less cost of products  sold) and  certain  other  information  for the
periods indicated:

                                                Year Ended December 31,
                                                -----------------------
                                                     1997      1996
                                                     ----      ----
            Total revenues .....................     109.0%    107.4%
            Cost of products sold ..............      (9.0)     (7.4)
                                                     -----     -----
            Net revenues .......................     100.0     100.0
            Operating expenses:
              Service, rental and maintenance ..      21.0      21.6
              Selling ..........................      13.9      14.5
              General and administrative .......      23.0      24.4
            Depreciation and amortization ......      72.7      74.6
                                                     -----     -----
            Operating income (loss) ............     (30.6)%   (35.1)%
                                                     =====     =====

            Net income (loss) ..................     (37.7)%   (43.0)%
                                                     =====     =====

            EBITDA .............................      42.1%     39.5%
                                                     =====     =====

     Total revenues  increased to $161.1 million (a 13.9% increase) for the year
ended  December 31, 1997,  as compared to $141.5  million for the  corresponding
1996 period. Service,  rental and maintenance revenues,  which consist primarily
of recurring  revenues  associated  with the sale or lease of pagers,  increased
12.2% to $141.9  million  for the year ended  December  31,  1997,  from  $126.5
million for the year ended December 31, 1996.  These  increases in revenues were
primarily  due to the  increase  in the  number of pagers  in  service  in 1997.
Maintenance  revenues  represented  less than 10% of total  service,  rental and
maintenance  revenues in the years ended  December 31, 1997 and 1996. USA Mobile
II does not  differentiate  between service and rental revenues.  Product sales,
less cost of products sold,  increased to $5.8 million in 1997 from $5.2 million
in 1996 as a result of a greater number of pager unit sales.

     Service,  rental and  maintenance  expenses,  which  consist  primarily  of
telephone line and site rental expenses,  increased to $31.0 million in the year
ended December 31, 1997 from $28.4 million in 1996. The


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increase  was  due  primarily  to  increased  expenses  associated  with  system
expansions  and  the  provision  of  paging  services  to a  greater  number  of
subscribers.

     Selling  expenses  increased to $20.5 million in 1997 from $19.0 million in
1996.  The  increase  in  selling  expenses  was due to the  addition  of  sales
personnel to support  continued growth in the subscriber base.  Selling expenses
are directly related to the number of net new subscribers added. Therefore, such
expenses  may  increase  in the future if pagers in service  are added at a more
rapid rate than in the past.

     General and administrative expenses increased to $34.1 million in 1997 from
$32.2  million in 1996.  The  increase was due  primarily to increased  expenses
associated with supporting more pagers in service.

     Depreciation and amortization  expenses increased to $107.4 million in 1997
from $98.3 million in 1996.  These  expenses  reflect USA Mobile II's  continued
investment  in pagers and other system  expansion  capital to support  continued
growth.

     Operating  loss  decreased to $45.2 million in the year ended  December 31,
1997 from $46.3  million in the year ended  December 31, 1996 as a result of the
factors outlined above.

     Net interest expense  increased to $31.7 million in the year ended December
31, 1997 from $30.1 million in the corresponding 1996 period due primarily to an
increase in USA Mobile II's average outstanding debt.

     During the years ended December 31, 1997 and 1996, USA Mobile II recognized
an  income  tax  benefit  of $21.2  million  and  $19.8  million,  respectively,
representing  the tax benefit of operating losses which were available to offset
deferred tax liabilities arising from Arch's acquisition of USA Mobile.

     USA Mobile II's net loss was $55.7 million for the year ended  December 31,
1997 as compared  to $56.6  million  for the year ended  December  31, 1996 as a
result of factors outlined above.

     Earnings Before Interest, Taxes,  Depreciation and Amortization,  "EBITDA,"
increased  19.4% to $62.1 million (42.1% of revenues) in 1997 from $52.0 million
(39.5% of revenues) in 1996 as a result of the factors outlined above.

     FACTORS AFFECTING FUTURE OPERATING RESULTS

     The following important factors,  among others, could cause USA Mobile II's
actual operating  results to differ materially from those indicated or suggested
by forward-looking  statements made in this Form 10-K or presented  elsewhere by
USA Mobile II's management from time to time.

     Indebtedness And High Degree Of Leverage

     USA Mobile II is highly  leveraged.  USA Mobile II had total debt and total
assets of $288  million and $493  million,  respectively,  at December 31, 1997.
Many  factors,  some of which will be beyond USA Mobile  II's  control,  such as
prevailing economic conditions, will affect the performance of USA Mobile II. In
addition,  covenants  imposed by the current and future  credit  facilities  and
other  indebtedness  of USA Mobile II will restrict the ability of USA Mobile II
to incur additional  indebtedness and prohibit certain  activities and may limit
other aspects of USA Mobile II's operations.  There can be no assurance that USA
Mobile  II will be able to  generate  sufficient  cash  flow to  cover  required
interest and principal payments on its indebtedness.  If USA Mobile II is unable
to meet interest and principal  payments in the future,  it may,  depending upon
the  circumstances  which then exist,  seek additional equity or debt financing,
attempt  to  refinance  its  existing  indebtedness  or sell  all or part of its
business  or assets to raise  funds to repay its  indebtedness.  There can be no
assurance  that  sufficient  equity or debt  financing  will be available or, if
available, that it will be on terms acceptable to USA Mobile II, that USA Mobile
II will be able to refinance its existing  indebtedness or that sufficient funds
could be raised through asset sales. USA Mobile II's high degree of leverage may
have important consequences for USA Mobile II, including: (i) the ability of USA
Mobile to obtain additional financing for acquisitions, working capital, capital
expenditures or other purposes, if necessary,


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may be  impaired  or  such  financing  may  not be on  favorable  terms;  (ii) a
substantial  portion  of the  cash  flow  of USA  Mobile  II will be used to pay
interest expense, which will reduce the funds which would otherwise be available
for operations  and future  business  opportunities;  (iii) USA Mobile II may be
more highly  leveraged than its competitors  which may place it at a competitive
disadvantage; and (iv) USA Mobile II's high degree of leverage will make it more
vulnerable to a downturn in its business or the economy generally.

     Future Capital Needs

     USA Mobile II's business  strategy requires the availability of substantial
funds to service debt and finance the  continued  development  and future growth
and expansion of its operations. The amount of capital required by USA Mobile II
will depend upon a number of factors, including subscriber growth, technological
developments,  marketing and sales expenses, competitive conditions, acquisition
strategy  and  acquisition  opportunities.   No  assurance  can  be  given  that
additional  equity  or debt  financing  will be  available  to USA  Mobile II on
acceptable  terms, if at all. The  unavailability  of sufficient  financing when
needed would have a material adverse effect on USA Mobile II.

     History Of Losses

     USA Mobile II has not reported any net income since its  inception,  except
that USA  Mobile II  reported  net  income of $17.6  million  in the year  ended
December  31,  1991  resulting  from  an  extraordinary  gain of  $42.2  million
attributable  to the  restructuring  of its debt. USA Mobile II's historical net
losses  have  resulted   principally  from  (i)  substantial   depreciation  and
amortization  expenses,   primarily  related  to  intangible  assets  and  pager
depreciation,  and (ii) interest  expense on debt incurred  primarily to finance
acquisitions  of paging  operations and other costs of growth.  Substantial  and
increased  amounts of debt are expected to be  outstanding  for the  foreseeable
future, which will result in significant additional interest expense which could
have a  substantial  negative  impact on USA Mobile II. USA Mobile II expects to
continue to report net losses for the foreseeable future.

     Growth And Acquisition Strategy

     USA Mobile II has pursued and intends to continue to pursue acquisitions of
paging  businesses as well as the continued  internal  growth of USA Mobile II's
paging  business.  The process of  integrating  acquired  paging  businesses may
involve unforeseen difficulties and may require a disproportionate amount of the
time and  attention of USA Mobile II's  management  and the  financial and other
resources of USA Mobile II. No assurance can be given that  suitable  additional
acquisitions can be identified,  financed and completed on acceptable  terms, or
that USA Mobile II's future  acquisitions will be successful.  Implementation of
USA  Mobile  II's  growth   strategies   will  be  subject  to  numerous   other
contingencies  beyond  the  control  of USA Mobile  II,  including  general  and
regional economic conditions, interest rates, competition, changes in regulation
or  technology  and  the  ability  to  attract  and  retain  skilled  employees.
Accordingly,  no assurance  can be given that USA Mobile II's growth  strategies
will prove effective or that the goals of USA Mobile II will be achieved.

     Dependence On Key Personnel

     The success of USA Mobile II will be dependent,  to a  significant  extent,
upon the continued services of a relatively small group of executive  personnel.
USA  Mobile  II does  not have  employment  agreements  with any of its  current
executive  officers,  although all current executive  officers have entered into
non-competition  and retention  agreements with Arch. The loss or unavailability
of one or more of its  executive  officers or the inability to attract or retain
key  employees in the future  could have an adverse  effect upon USA Mobile II's
operations.

     Competition And Technological Change

     USA Mobile II faces  competition from other paging service providers in all
markets  in which  it  operates  as well as from  certain  competitors  who hold
nationwide  licenses.  USA  Mobile  II  believes  that  competition  for  paging
subscribers  is based on quality of service,  geographic  coverage and price and
that USA  Mobile  II  generally  competes  effectively  based on these  factors.
Monthly fees for basic paging services have, in general, declined since


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USA Mobile II commenced operations,  due in part to competitive conditions,  and
USA Mobile II may face significant  price-based  competition in the future which
could  adversely  affect  USA Mobile II.  Some of USA  Mobile  II's  competitors
possess greater  financial,  technical and other resources than USA Mobile II. A
trend towards increasing  consolidation in the paging industry in particular and
the  wireless  communications  industry  in general  in recent  years has led to
competition from increasingly larger and better capitalized competitors.  If any
of such competitors were to devote  additional  resources to the paging business
or focus its  strategy on USA Mobile II's  markets,  USA Mobile II's  results of
operations  could  be  adversely   affected.   A  variety  of  wireless  two-way
communication  technologies currently are in use or under development.  Although
such technologies generally are higher priced than paging services or not widely
available,  technological  improvements  could result in increased  capacity and
efficiency for wireless two-way communication and, accordingly,  could result in
increased  competition for USA Mobile II. Two-way  service  providers also could
elect to provide paging service as an adjunct to their primary services.  Future
technological  advances in the  telecommunications  industry  could increase new
services or products competitive with the paging services provided by USA Mobile
II or could require USA Mobile II to reduce the price of its paging  services or
incur additional capital expenditures to meet competitive  requirements.  Recent
and  proposed  regulatory  changes  by the FCC are  aimed  at  encouraging  such
technological  advances and new services. For example, the FCC created potential
sources of  competition  by opening up a new spectrum  for such  services as the
General Wireless  Communications Services (GWCS) and the Wireless Communications
Service  (WCS)  as well as  speeding  up  licensing  of other  services  through
auctions,  including the Local Multipoint  Distribution Service (LMDS),  220-222
MHz and broadband PCS services.  Entities  offering  service on wireless two-way
communications technology,  including cellular telephones and specialized mobile
radio  services,  also  compete  with the  paging  services  that USA  Mobile II
provides.  There can be no assurance  that USA Mobile II will be able to compete
successfully  with its current and future  competitors in the paging business or
with competitors offering alternative communication technologies.

     Subscriber Turnover

     The results of operations of wireless messaging service providers,  such as
USA Mobile II, can be significantly  affected by subscriber  cancellations.  The
sales and  marketing  costs  associated  with  attracting  new  subscribers  are
substantial  relative to the costs of providing  service to existing  customers.
Because the paging business is characterized by high fixed costs, disconnections
directly and adversely affect operating cash flow. An increase in its subscriber
cancellation rate may adversely affect USA Mobile II's results of operations.

     Dependence On Suppliers

     USA Mobile II does not  manufacture  any of the  pagers  used in its paging
operations. USA Mobile II buys pagers primarily from Motorola, Inc. ("Motorola")
and NEC America,  Inc. ("NEC") and therefore is dependent on such  manufacturers
to obtain  sufficient pager inventory for new subscriber and replacement  needs.
In addition,  USA Mobile II purchases terminals and transmitters  primarily from
Glenayre  Technologies,  Inc. ("Glenayre") and Motorola and thus is dependent on
such  manufacturers  for  sufficient  terminals  and  transmitters  to meet  its
expansion  and  replacement  requirements.  To  date,  USA  Mobile  II  has  not
experienced  significant delays in obtaining pagers,  terminals or transmitters,
but there can be no assurance that USA Mobile II will not experience such delays
in the future. USA Mobile II has never had a purchase agreement with Glenayre or
NEC.  USA Mobile II's most recent  one-year  purchase  agreement  with  Motorola
expired in December 1997, with a provision for automatic  renewal for a one-year
term.  Although USA Mobile II believes that  sufficient  alternative  sources of
pagers,  terminals and  transmitters  exist,  there can be no assurance that USA
Mobile II would not be  adversely  affected  if it were  unable to obtain  these
items from current supply sources or on terms comparable to existing terms.

     Government Regulation, Foreign Ownership And Possible Redemption Of Capital
     Stock

     The paging operations of USA Mobile II are subject to regulation by the FCC
and various  state  regulatory  agencies.  There can be no assurance  that those
agencies will not propose or adopt regulations or take actions that would have a
material  adverse effect on USA Mobile II's  business.  Changes in regulation of
USA Mobile II's paging business or the allocation of radio spectrum for services
that compete with USA Mobile II's business could


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adversely  affect USA Mobile II's  results of  operations.  Indeed,  the FCC has
created  potential  sources of  competition  by opening up new spectrum for such
services  as GWCS and WCS as well as  speeding up  licensing  of other  services
through auctions,  including LMDS,  220-222 MHz and broadband PCS. Further,  the
FCC has recently adopted rules  implementing a market area licensing  scheme. In
addition,  some aspects of the recently enacted  Telecommunications  Act of 1996
could have a beneficial effect on USA Mobile II's business, but other provisions
may place  additional  burdens  upon USA Mobile II or  subject  USA Mobile II to
increased competition.

     Impact Of The Year 2000 Issue

     USA Mobile II is currently  working to resolve the potential  impact of the
year 2000 on the  processing of  date-sensitive  information  by USA Mobile II's
computerized  systems and transmission  equipment.  The year 2000 problem is the
result of computer programs being written using two digits (rather than four) to
define  the  applicable  year.  Any  of  USA  Mobile  II's  programs  that  have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This could  result in a system  failure or  miscalculations
causing  disruptions of operations,  including,  among other things, a temporary
inability to process  transactions,  send  invoices or engage in similar  normal
business  activities.  Based on  preliminary  information,  costs of  addressing
potential  problems are not currently expected to have a material adverse impact
on USA Mobile II's  financial  position,  results of operations or cash flows in
future periods.  However,  if USA Mobile II, its customers or vendors are unable
to resolve  such  processing  issues in a timely  manner,  it could  result in a
material  financial  risk.  Accordingly,  USA  Mobile  II  plans to  devote  the
necessary  resources  to resolve  all  significant  year 2000 issues in a timely
manner.


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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  financial  statements  and  schedules  listed in Item  14(a)(1) and (2) are
included in this Report beginning on Page F-1.

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

           None.

                                     PART IV

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

(a)(1)  Financial Statements

        Consolidated Balance Sheets as of December 31, 1997 and 1996

        Consolidated  Statement of Operations  for the Years Ended  December 31,
          1997 and 1996 and the Period from  September  8, 1995 to December  31,
          1995

        Predecessor  Consolidated  Statements of Operations  for the Period from
          January 1, 1995 to September 7, 1995

        Consolidated  Statements of Stockholder's Equity (Deficit) for the Years
          Ended  December 31, 1997 and 1996 and for the Period from September 8,
          1995 to December 31, 1995

        Predecessor  Consolidated  Statements of Stockholder's  Equity (Deficit)
          for the Period from January 1, 1995 to September 7, 1995

        Consolidated  Statements of Cash Flows for the Years Ended  December 31,
          1997 and 1996 and for the Period  from  September  8, 1995 to December
          31, 1995

        Predecessor  Consolidated  Statements  of Cash Flows for the Period from
          January 1, 1995 to September 7, 1995

        Notes to Consolidated Financial Statements

(a)(2)  Financial Statement Schedule

        Schedule II - Valuation and Qualifying Accounts

(b)     Reports on Form 8-K

        None.

(c)     Exhibits

        The exhibits listed on the  accompanying  index to exhibits are filed as
        part of this Annual Report on Form 10-K.


                                       9
<PAGE> 10

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        USA MOBILE COMMUNICATIONS, INC. II

                                        By:     /S/ C. EDWARD BAKER, JR.
                                             ---------------------------
                                             C. Edward Baker, Jr.
                                             Chairman of the Board and Chief
                                             Executive Officer

March 27, 1998

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

 /S/ C. EDWARD BAKER, JR.    Chairman of the Board and          March 27, 1998
--------------------------   Chief Executive Officer
                             (principal executive officer)


 /S/ JOHN B. SAYNOR          Executive Vice President,          March 27, 1998
-------------------------    Director


 /S/ J. ROY POTTLE           Executive Vice President           March 27, 1998
-------------------------    and Chief Financial Officer
                             (principal financial officer and
                             principal accounting officer)


 /S/ R. SCHORR BERMAN        Director                           March 27, 1998
-------------------------


 /S/ JAMES S. HUGHES         Director                           March 27, 1998
-------------------------


 /S/ ALLAN L. RAYFIELD       Director                           March 27, 1998
-------------------------


 /S/ JOHN A. SHANE           Director                           March 27, 1998
-------------------------



                                       10
<PAGE> 11

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Public Accountants...........................      F-2

Consolidated Balance Sheets as of December 31, 1997 and 1996........      F-3

Consolidated Statements of Operations for the Years Ended
  December 31, 1997 and 1996 and for the Period from
  September 8, 1995 to December 31, 1995  ..........................      F-4

Predecessor Consolidated Statement of Operations for the
  Period from January 1, 1995 to September 7, 1995 .................      F-5

Consolidated Statements of Stockholder's Equity (Deficit) for
  the Years Ended December 31, 1997 and 1996 and for the Period
  from September 8, 1995 to December 31, 1995.......................      F-6

Predecessor Consolidated Statement of Stockholder's Equity (Deficit)
 for the Period from January 1, 1995 to September 7, 1995 ..........      F-7

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1997 and 1996 and for the Period from September 8,
  1995 to December 31, 1995.........................................      F-8

Predecessor Consolidated Statement of Cash Flows for the Period
  from January 1, 1995 to September 7, 1995 ........................      F-9

Notes to Consolidated Financial Statements..........................      F-10



                                      F-1
<PAGE> 12

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To USA Mobile Communications, Inc. II:

     We have audited the accompanying  consolidated balance sheets of USA Mobile
Communications, Inc. II (a Delaware Corporation and a wholly-owned subsidiary of
Arch  Communications  Group,  Inc.) and subsidiaries as of December 31, 1997 and
1996,  and the related  consolidated  statements  of  operations,  stockholder's
equity  (deficit) and cash flows for the years ended December 31, 1997 and 1996,
for the period from  September  8, 1995 to December  31, 1995 and for the period
from January 1, 1995 to September 7, 1995 (predecessor  basis).  These financial
statements  and the  schedule  referred to below are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and the schedule based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of USA Mobile  Communications,
Inc. II and  subsidiaries  as of December 31, 1997 and 1996,  and the results of
their  operations and their cash flows for the years ended December 31, 1997 and
1996,  for the period from  September  8, 1995 to December  31, 1995 and for the
period  from  January  1, 1995 to  September  7, 1995  (predecessor  basis),  in
conformity with generally accepted accounting principles.

     Our  audits  were made for the  purpose  of forming an opinion on the basic
financial  statements  taken as a whole. The schedule listed under Part IV, Item
14(a)(2) is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This  schedule  has been  subjected to the  auditing  procedures  applied in our
audits of the basic financial  statements and, in our opinion,  fairly states in
all material  respects the  financial  data  required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                                             ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 9, 1998




                                      F-2
<PAGE> 13

                       USA MOBILE COMMUNICATIONS, INC. II
         (A WHOLLY-OWNED SUBSIDIARY OF ARCH COMMUNICATIONS GROUP, INC.)
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1997 and 1996
                      (in thousands, except share amounts)


                                     ASSETS

                                                          1997        1996
                                                          ----        ----
Current assets:
   Cash and cash equivalents .......................   $   1,291   $     891
   Accounts receivable (less reserves of $1,280 and
    $1,071 in 1997 and 1996, respectively) .........       8,353       8,034
   Inventories .....................................      10,591       8,807
   Prepaid expenses and other ......................         390         962
   Due from (to) Arch Communications Group, Inc. ...       5,232      (2,950)
                                                       ---------   ---------
      Total current assets .........................      25,857      15,744
                                                       ---------   ---------
Property and equipment, at cost:
   Land, buildings and improvements ................       3,409       3,196
   Paging and computer equipment ...................     139,338     137,803
   Furniture, fixtures and vehicles ................       7,499       3,449
                                                       ---------   ---------
                                                         150,246     144,448
   Less accumulated depreciation and amortization ..      51,569      33,127
                                                       ---------   ---------
   Property and equipment, net .....................      98,677     111,321
                                                       ---------   ---------
Intangible and other assets (less accumulated
 amortization of $141,513 and $82,273 in 1997
 and 1996, respectively) ...........................     368,912     428,839
                                                       ---------   ---------
                                                       $ 493,446   $ 555,904
                                                       =========   =========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
   Accounts payable ................................   $   9,882   $   4,850
   Accrued expenses ................................       4,537       7,497
   Accrued interest ................................       7,537       7,736
   Customer deposits ...............................       4,480       4,983
   Deferred revenue ................................       3,216       2,215
   Due to Arch Communications Enterprises, Inc. ....       2,079          27
                                                       ---------   ---------
      Total current liabilities ....................      31,731      27,308
                                                       ---------   ---------
Long-term debt .....................................     288,000     278,000
                                                       ---------   ---------
Deferred income taxes ..............................      19,559      40,731
                                                       ---------   ---------
Commitments and Contingencies
Stockholder's equity:
   Common stock - $.01 par value, authorized 1,000
    shares, issued and outstanding: 749 shares .....        --          --
   Additional paid-in capital ......................     283,353     283,353
   Accumulated deficit .............................    (129,197)    (73,488)
                                                       ---------   ---------
      Total stockholder's equity ...................     154,156     209,865
                                                       ---------   ---------
                                                       $ 493,446   $ 555,904
                                                       =========   =========


              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-3
<PAGE> 14

                       USA MOBILE COMMUNICATIONS, INC. II
         (A WHOLLY-OWNED SUBSIDIARY OF ARCH COMMUNICATIONS GROUP, INC.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                            Period From
                                            Year Ended      Year Ended      September 8,
                                           December 31,    December 31,  1995 to December
                                               1997            1996          31, 1995
                                           ------------    ------------    ------------
<S>                                          <C>             <C>             <C>
Service, rental and maintenance revenues ..  $ 141,854       $ 126,480       $  36,171
Product sales .............................     19,212          14,980           5,353
                                             ---------       ---------       ---------
     Total revenues .......................    161,066         141,460          41,524
Cost of products sold .....................    (13,365)         (9,755)         (4,683)
                                             ---------       ---------       ---------
                                               147,701         131,705          36,841
                                             ---------       ---------       ---------
Operating expenses:
  Service, rental and maintenance .........     30,981          28,443           7,744
  Selling .................................     20,522          19,040           6,200
  General and administrative ..............     34,053          32,174           7,942
  Depreciation and amortization ...........    107,361          98,299          25,137
                                             ---------       ---------       ---------
     Total operating expenses .............    192,917         177,956          47,023
                                             ---------       ---------       ---------
Operating income (loss) ...................    (45,216)        (46,251)        (10,182)
Interest expense ..........................    (31,665)        (30,135)         (9,589)
                                             ---------       ---------       ---------
Income (loss) before income tax benefit ...    (76,881)        (76,386)        (19,771)
Benefit from income taxes .................     21,172          19,791           2,878
                                             ---------       ---------       ---------
Net income (loss) .........................  $ (55,709)      $ (56,595)      $ (16,893)
                                             =========       =========       =========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-4
<PAGE> 15

                       USA MOBILE COMMUNICATIONS, INC. II
                PREDECESSOR CONSOLIDATED STATEMENT OF OPERATIONS
                Period from January 1, 1995 to September 7, 1995
                                 (in thousands)


            Service, rental and maintenance revenues ...     $ 72,185
            Product sales ..............................        9,996
                                                             --------
                 Total revenues ........................       82,181
            Cost of products sold ......................       (6,726)
                                                             --------
                                                               75,455
                                                             --------
            Operating expenses:
              Service, rental and maintenance ..........       13,875
              Selling ..................................       11,916
              General and administrative ...............       19,267
              Depreciation and amortization ............       29,239
                                                             --------
                 Total operating expenses ..............       74,297
                                                             --------
            Operating income ...........................        1,158
            Interest expense, net ......................      (18,522)
            Non-operating expenses .....................       (7,844)
                                                             --------
            Income (loss) before income tax benefit ....      (25,208)
            Benefit from income taxes ..................        2,675
                                                             --------
            Net income (loss) ..........................     $(22,533)
                                                             ========


              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-5
<PAGE> 16

                       USA MOBILE COMMUNICATIONS, INC. II
         (A WHOLLY-OWNED SUBSIDIARY OF ARCH COMMUNICATIONS GROUP, INC.)
            CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                          ADDITIONAL         ACCUMULATED
                                        COMMON STOCK    PAID-IN CAPITAL        DEFICIT             TOTAL
                                        ------------    ---------------        -------             -----

<S>                                     <C>               <C>               <C>               <C>
Balance, September 8, 1995 ........     $       --        $    268,353      $       --        $    268,353

Net loss ..........................             --                --             (16,893)          (16,893)
                                        ------------      ------------      ------------      ------------

Balance, December 31, 1995 ........             --             268,353           (16,893)          251,460

Capital Contribution from Arch
  Communications Group, Inc .......             --              15,000              --              15,000

Net loss ..........................             --                --             (56,595)          (56,595)
                                        ------------      ------------      ------------      ------------

Balance, December 31, 1996 ........             --             283,353           (73,488)          209,865

Net loss ..........................             --                --             (55,709)          (55,709)
                                        ------------      ------------      ------------      ------------

Balance, December 31, 1997 ........     $       --        $    283,353      $   (129,197)     $    154,156
                                        ============      ============      ============      ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-6
<PAGE> 17

                       USA MOBILE COMMUNICATIONS, INC. II
      PREDECESSOR CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                           ADDITIONAL        ACCUMULATED
                                        COMMON STOCK    PAID-IN CAPITAL        DEFICIT             TOTAL
                                        ------------    ---------------        -------             -----
<S>                                     <C>               <C>               <C>               <C>
Balance, December 31, 1994 ........     $       --        $    112,328      $   (116,379)     $     (4,051)
  Net loss ........................             --                --             (22,533)          (22,533)
  Capital contributions from USA
     Mobile Communications
     Holdings, Inc.:
       Acquisition of Premiere
        Page, Inc. ................             --               1,332              --               1,332
       Other ......................             --                  54              --                  54
                                        ------------      ------------      ------------      ------------
Balance, September 7, 1995 ........     $       --        $    113,714      $   (138,912)     $    (25,198)
                                        ============      ============      ============      ============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-7
<PAGE> 18

                       USA MOBILE COMMUNICATIONS, INC. II
         (A WHOLLY-OWNED SUBSIDIARY OF ARCH COMMUNICATIONS GROUP, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                             PERIOD FROM
                                                                                             SEPTEMBER 8,
                                                                 YEAR ENDED     YEAR ENDED      1995 TO
                                                                 DECEMBER 31,  DECEMBER 31,   DECEMBER 31,
                                                                    1997           1996           1995
                                                                ------------   ------------   ------------
<S>                                                              <C>            <C>            <C>
Cash flows from operating activities:
  Net income (loss) ...........................................  $ (55,709)     $ (56,595)     $ (16,893)
  Adjustments to reconcile net income(loss) to net
   cash provided by (used for) operating activities:
  Depreciation and amortization ...............................    107,361         98,299         25,137
  Deferred tax benefit ........................................    (21,172)       (19,791)        (2,878)
  Accounts receivable loss provision ..........................      2,784          2,906            587
  Changes in assets and liabilities, net of effect of merger:
     Accounts receivable ......................................     (3,103)        (5,512)        (2,923)
     Inventories ..............................................     (1,784)         2,644         (2,956)
     Prepaid expenses and other ...............................        572            833            511
     Accounts payable and accrued expenses ....................      1,873         (6,867)        (3,534)
     Customer deposits and deferred revenue ...................        498          2,035           (231)
Due from (to) Arch Communications Group, Inc. .................     (8,182)         2,625           --
Due to Arch Communications Enterprises, Inc. ..................      2,052           (145)          --
                                                                 ---------      ---------      ---------
Net cash provided by (used for) operating activities ..........     25,190         20,432         (3,180)
                                                                 ---------      ---------      ---------
Cash flows from investing activities:
  Additions to property and equipment, net ....................    (33,041)       (58,939)       (10,146)
  Additions to intangible and other assets ....................     (1,749)        (1,045)        (2,231)
  Sale of paging assets to Arch Communications
   Enterprises, Inc. ..........................................       --           10,400           --
  Merger-related costs ........................................       --             --          (10,383)
                                                                 ---------      ---------      ---------
Net cash used for investing activities ........................    (34,790)       (49,584)       (22,760)
                                                                 ---------      ---------      ---------
Cash flows from financing activities:
  Issuance of long-term debt ..................................     66,000         61,000         39,500
  Repayment of long-term debt .................................    (56,000)       (47,500)       (16,214)
  Proceeds from Arch Communications Enterprises, Inc.
    demand loan ...............................................       --           32,500           --
  Repayment of demand loan to Arch Communications
    Enterprises, Inc. .........................................       --          (32,500)          --
  Capital contribution from Arch Communications Group, Inc. ...       --           15,000           --
                                                                 ---------      ---------      ---------
Net cash provided by financing activities .....................     10,000         28,500         23,286
                                                                 ---------      ---------      ---------
Net increase (decrease) in cash and cash equivalents ..........        400           (652)        (2,654)
Cash and cash equivalents, beginning of period ................        891          1,543          4,197
                                                                 ---------      ---------      ---------
Cash and cash equivalents, end of period ......................  $   1,291      $     891      $   1,543
                                                                 =========      =========      =========

Supplemental disclosure:
  Interest paid ...............................................  $  31,470      $  28,947      $   8,373
                                                                 =========      =========      =========
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-8
<PAGE> 19

                       USA MOBILE COMMUNICATIONS, INC. II
                PREDECESSOR CONSOLIDATED STATEMENT OF CASH FLOWS
                Period from January 1, 1995 to September 7, 1995
                                 (in thousands)


   Cash flows from operating activities:
     Net income (loss) .........................................   $(22,533)
     Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
     Depreciation and amortization .............................     29,239
     Amortization of debt issuance costs .......................        720
     Deferred tax benefit ......................................     (2,675)
     Accounts receivable loss provision ........................      2,149
     Changes in assets and liabilities, net of effect from
      acquisitions of paging companies:
        Accounts receivable ....................................     (3,122)
        Inventories ............................................        418
        Prepaid expenses and other .............................       (198)
        Accounts payable .......................................     (3,969)
        Accrued expenses .......................................        972
        Accrued acquisition costs ..............................      2,553
        Accrued interest .......................................      1,375
        Customer deposits ......................................        950
        Deferred revenue .......................................        (39)
                                                                   --------
   Net cash provided by operating activities ...................      5,840
                                                                   --------
   Cash flows from investing activities:
     (Investment) sale of investment in repurchase agreements ..     37,000
     Acquisitions of paging companies, net of cash acquired ....    (28,684)
     (Payment) release of pending acquisition escrow deposits ..     14,234
     Additions to property and equipment, net ..................    (34,044)
     Additions to intangible and other assets ..................     (2,812)
                                                                   --------
   Net cash used for investing activities ......................    (14,306)
                                                                   --------
   Cash flows from financing activities:
     Issuance of long-term debt ................................     12,840
     Repayment of long-term debt ...............................       (651)
     Capital contributions .....................................         54
                                                                   --------
   Net cash provided by financing activities ...................     12,243
                                                                   --------
   Net increase in cash ........................................      3,777
   Cash, beginning of period ...................................        420
                                                                   --------
   Cash, end of period .........................................   $  4,197
                                                                   ========



              The accompanying notes are an integral part of these
                       consolidated financial statements


                                      F-9
<PAGE> 20

                       USA MOBILE COMMUNICATIONS, INC. II
         (A WHOLLY-OWNED SUBSIDIARY OF ARCH COMMUNICATIONS GROUP, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

     Organization  -- USA Mobile  Communications,  Inc.  II (USA Mobile II) is a
provider of wireless messaging services, primarily paging services, in 9 states.

     On September 7, 1995, Arch Communications  Group, Inc. (Arch) completed its
acquisition  of USA Mobile  Communications  Holdings,  Inc. (USA Mobile) and its
wholly-owned  subsidiary  USA Mobile II. The  acquisition  was  completed in two
steps. First, in May 1995, Arch acquired approximately 37%, or 5,450,000 shares,
of USA Mobile's then outstanding  common stock for $83.9 million in cash, funded
by borrowings under Arch's credit agreements.  Second, on September 7, 1995, the
acquisition  was  completed  through the merger of Arch with and into USA Mobile
(the  Merger).  Upon  consummation  of the Merger,  USA Mobile was renamed  Arch
Communications Group, Inc. In the Merger, each share of USA Mobile's outstanding
common stock was  exchanged for Arch common stock on a  .8020-for-one  basis (an
aggregate of  7,599,493  shares of Arch common  stock),  and the  5,450,000  USA
Mobile shares purchased by Arch in May 1995 were retired.

     The Merger has been accounted for using the purchase  method of accounting.
Arch is treated as the  acquirer  in the Merger  for  accounting  and  financial
reporting purposes. The fair values of USA Mobile II's assets and liabilities at
the effective time of the Merger represent a new cost basis for those assets and
liabilities  that have been pushed down to the accompanying  separate  financial
statements of USA Mobile II dated subsequent to September 7, 1995. The principal
effect of push down accounting was to increase the carrying values of intangible
assets by $374.1  million and to decrease  the  carrying  values of property and
equipment by $9.2 million. Substantially all USA Mobile's assets and liabilities
were composed of the assets and liabilities of USA Mobile II on the Merger date.
Pro forma information is included in Note 2.

     The  aggregate  consideration  paid or  exchanged  in the Merger was $582.2
million,  consisting of cash paid of $88.9 million (including direct transaction
costs),  7,599,493  shares of Arch common stock valued at $209.0 million and the
assumption  of  liabilities  of $284.3  million,  including  $241.2  million  of
long-term  debt.  Resulting  goodwill is being  amortized over a ten-year period
using the  straight-line  method.  The accompanying  consolidated  statements of
operations, stockholder's equity (deficit) and cash flows for the period January
1, 1995 to September 7, 1995 are collectively referred to herein as "Predecessor
Financial  Statements".  Application of the purchase method of accounting at the
Merger date primarily  resulted in higher values  assigned to intangible  assets
which will have the effect of increased  amortization  expense charged in future
periods. Accordingly, Predecessor Financial Statements are not comparable to the
financial  statements of USA Mobile II  subsequent  to the Merger date.  Certain
amounts in the Predecessor Financial  Statements,  however, were reclassified to
conform with the current period presentation.

   Principles  of  Consolidation  --  The  accompanying  consolidated  financial
statements   include  the  accounts  of  USA  Mobile  II  and  its  wholly-owned
subsidiaries.  All significant  intercompany accounts and transactions have been
eliminated.

     Revenue  Recognition  -- USA Mobile II recognizes  revenue under rental and
service  agreements  with  customers  as the  related  services  are  performed.
Maintenance   revenues  and  related  costs  are  recognized  ratably  over  the
respective  terms of the  agreements.  Sales of equipment  are  recognized  upon
delivery. Commissions are recognized as an expense when incurred.

     Use of Estimates -- The  preparation of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.


                                      F-10
<PAGE> 21

     Cash Equivalents - Cash equivalents  include  short-term,  interest-bearing
instruments  purchased  with  remaining  maturities of three months or less. The
carrying amount  approximates  fair value due to the relatively  short period to
maturity of these instruments.

     Inventories   --   Inventories   consist  of  new  pagers  which  are  held
specifically for resale.  Inventories are stated at the lower of cost or market,
with cost determined on a first-in, first-out basis.

     Property and Equipment -- Pagers sold or otherwise retired are removed from
the accounts at their net book value using the first-in,  first-out method.  USA
Mobile II provides for  depreciation and  amortization  using the  straight-line
method over the following estimated useful lives:

                                                          Estimated
                      Asset Classification               Useful Life
                      --------------------               -----------
             Buildings and improvements............        20 Years
             Leasehold improvements................       Lease Term
             Pagers................................        3 Years
             Paging and computer equipment.........       5-8 Years
             Furniture and fixtures................       5-8 Years
             Vehicles..............................        3 Years


     Depreciation  and  amortization  expense  related to property and equipment
totaled $45,685,000, $34,972,000, $5,421,000 and $17,297,000 for the years ended
December  31, 1997 and 1996,  the period from  September 8, 1995 to December 31,
1995 and the period from January 1, 1995 to September 7, 1995.

     Intangible  and  Other  Assets  --  Intangible  and  other  assets,  net of
accumulated amortization, are composed of the following at December 31, 1997 and
1996 (in thousands):

                                                         1997         1996
                                                         ----         ----
          Goodwill ................................   $214,286     $242,769
          Purchased FCC licenses ..................    103,580      117,183
          Purchased subscriber lists ..............     47,552       65,256
          Non-competition agreements ..............      2,133        2,615
          Deferred financing costs.................        525          248
          Other ...................................        836          768
                                                      --------     --------
                                                      $368,912     $428,839
                                                      ========     ========

     Amortization  expense  related  to  intangible  and  other  assets  totaled
$61,676,000,  $63,327,000,  $19,716,000  and  $11,942,000  for the  years  ended
December  31, 1997 and 1996,  the period from  September 7, 1995 to December 31,
1995 and the period from January 1, 1995 to September 7, 1995.

     Subscriber  lists,  Federal  Communications  Commission  (FCC) licenses and
goodwill are amortized over their estimated  useful lives,  ranging from five to
ten  years  using  the  straight-line  method.  Non-competition  agreements  are
amortized over the terms of the agreements using the straight-line method. Other
assets consist of organizational and FCC application and development costs which
are amortized using the  straight-line  method over their estimated useful lives
not exceeding ten years.  Development costs include  nonrecurring,  direct costs
incurred in the development  and expansion of paging systems,  and are amortized
over a two-year period. Deferred financing costs incurred in connection with USA
Mobile II's credit  agreements (see Note 3) are being amortized over periods not
to exceed the terms of the related agreements.


                                      F-11
<PAGE> 22

     In accordance with Statement of Financial  Accounting  Standards (SFAS) No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of" USA Mobile II evaluates the recoverability of its carrying value
of the  Company's  long-lived  assets and  certain  intangible  assets  based on
estimated  undiscounted  cash flows to be generated  from each of such assets as
compared to the original  estimates used in measuring the assets.  To the extent
impairment  is  identified,  USA Mobile II reduces  the  carrying  value of such
impaired assets. To date, USA Mobile II has not had any such impairments.

     Fair  Value  of  Financial   Instruments   --  USA  Mobile  II's  financial
instruments, as defined under Statement of Financial Accounting Standards (SFAS)
No. 107 "Discounted above Fair Value of Financial Instruments", include its cash
and its debt financing. The fair value of cash is equal to the carrying value at
December 31, 1997 and 1996.

     As  discussed  in Note 3, USA Mobile  II's debt  financing  consists of (1)
senior bank debt and (2) fixed rate Senior  Notes.  USA Mobile II considers  the
fair value of the senior bank debt to be equal to the carrying  value since this
facility bears a current market rate of interest.

     USA Mobile II's fixed rate Senior Notes are traded publicly.  The following
table depicts the fair value of this debt based on the current  market quotes as
of December 31, 1997 and 1996 (in thousands):

                                       December 31, 1997     December 31, 1996
                                     --------------------   -------------------
                                      Carrying     Fair     Carrying     Fair
             Description                Value      Value      Value      Value
             -----------                -----      -----      -----      -----
    91/2% Senior Notes due 2004 ...   $125,000   $122,488   $125,000   $117,000
    14% Senior Notes due 2004 .....    100,000    112,540    100,000    115,000

     Reclassifications  -- Certain amounts of prior periods were reclassified to
conform to the 1997 presentation.

2.  ACQUISITIONS

     The Merger has been  accounted  for as a  purchase,  and the results of the
operations have been included in the consolidated  financial statements from the
dates of the Merger.  The following  unaudited  pro forma  summary  presents the
consolidated  results of operations as if the push-down accounting effect of the
Merger  had  occurred  on  January  1,  1995,  after  giving  effect to  certain
adjustments,  including  depreciation  and  amortization  of acquired assets and
interest expense on acquisition debt. These pro forma results have been prepared
for comparative  purposes only and do not purport to be indicative of what would
have  occurred  had the Merger  been  completed  on  January 1, 1995,  or of the
results  that may  occur in the  future.  Net  income  (loss)  per  share is not
presented because it is not considered meaningful.

                                                Year Ended December 31, 1995
                                                ----------------------------
                                                (Unaudited and in thousands)

         Total Revenues .....................           $ 125,014
         Net income (loss) ..................             (57,158)

     On May 23, 1995,  USA Mobile II  concluded a  settlement  of a class action
suit brought  against it by certain  investors in Premiere  Page. The settlement
released  USA Mobile  from  certain  claims by certain  former  shareholders  of
Premiere Page in return for the issuance of an additional  139,300 shares of USA
Mobile's  common stock valued at $1,332,000  and payment of  plaintiffs  counsel
fees and expenses.


                                      F-12
<PAGE> 23

3.   LONG-TERM DEBT

     Long-term debt consisted of the following at December 31, 1997 and 1996
(in thousands):

                                                       1997       1996
                                                       ----       ----
        Senior bank debt .......................    $ 63,000    $ 53,000
        91/2% Senior Notes due 2004 ............     125,000     125,000
        14% Senior Notes due 2004 ..............     100,000     100,000
                                                    --------    --------
        Long-term debt .........................    $288,000    $278,000
                                                    ========    ========

     Senior Bank Debt - USA Mobile II and the direct  subsidiaries of USA Mobile
II (the "USA Mobile II  Borrowing  Subsidiaries)  are parties to a $110  million
reducing  revolving  credit  facility  dated March 19, 1997, as amended,  with a
group of banks  pursuant  to which the banks have  agreed to make  advances  for
working capital and other purposes (the "USA Mobile II Credit Facility").

     Upon the  closing of the USA Mobile II Credit  Facility,  the banks did not
require the  contemporaneous  grant of a security  interest in the assets of USA
Mobile II and its  subsidiaries but they have reserved the right to require such
a security interest upon the occurrence of certain triggering  events.  Arch and
USA Mobile II have  guaranteed  the  obligations  of the USA Mobile II Borrowing
Subsidiaries  under the USA  Mobile  II Credit  Facility.  Arch's  guarantee  is
secured  by the  pledge of the stock of Arch  Communications  Enterprises,  Inc.
("Arch Enterprises"), a wholly-owned subsidiary of Arch, and USA Mobile II.

     Obligations  under the USA Mobile II Credit Facility bear interest based on
a reference  rate equal to either (i) the agent  bank's  Alternate  Base Rate or
(ii) the agent bank's  LIBOR rate,  in each case plus a margin which is based on
the ratio of USA Mobile II's total  indebtedness  to annualized  operating  cash
flow. A commitment  fee of .375% per annum is also payable on the average  daily
unused portion of the USA Mobile II Credit Facility.

     The USA  Mobile II  Credit  Facility  contains  restrictive  and  financial
covenants  which,  among  other  things,  limit the ability of USA Mobile II to:
incur additional indebtedness,  pay dividends, grant liens on its assets, merge,
sell or acquire  assets;  repurchase  or redeem  capital  stock;  incur  capital
expenditures;  and prepay  indebtedness  other than  indebtedness  under the USA
Mobile II Credit  Facility.  As of December 31, 1997,  USA Mobile II and the USA
Mobile Borrowing  Subsidiaries  were in compliance with the covenants of the USA
Mobile II Credit Facility.

     As of December 31, 1997, $63.0 million was outstanding and $4.6 million was
available  under the USA Mobile II Credit  Facility.  At December 31, 1997, such
advances bore interest at an average annual rate of 8.55%.

     Senior  Notes -- The USA  Mobile II 9 1/2%  Notes and the USA Mobile II 14%
Notes (collectively, the Senior Notes) contain certain restrictive and financial
covenants  which,  among  other  things,  limit the ability of USA Mobile II to:
incur additional  indebtedness;  pay dividends;  grant liens on its assets; sell
assets;  enter into  transactions  with related parties;  merge,  consolidate or
transfer  substantially all of its assets;  redeem capital stock or subordinated
debt;  and make  certain  investments.  Interest on the Senior  Notes is payable
semi-annually.

     Maturities of Debt -- Scheduled  long-term debt  maturities at December 31,
1997, are as follows (in thousands):

                 Year Ending December 31,
                 ------------------------
                 2001....................     $  13,000
                 2002....................        50,000
                 Thereafter..............       225,000
                                              ---------
                                              $ 288,000
                                              =========


                                      F-13
<PAGE> 24

4.   INCOME TAXES

     USA Mobile II accounts  for income taxes under the  provisions  of SFAS No.
109  "Accounting  for Income  Taxes".  Deferred tax assets and  liabilities  are
determined based on the difference between the financial statement and tax bases
of assets and liabilities given the provisions of enacted tax laws.

     The components of the net deferred tax asset (liability)  recognized in the
accompanying  consolidated  balance  sheets at December 31, 1997 and 1996 are as
follows (in thousands):

                                                 1997         1996
                                                 ----         ----
         Deferred tax assets...............   $ 36,062      $ 29,496
         Deferred tax liabilities..........    (55,621)      (70,227)
                                              --------      --------
                                              $(19,559)     $(40,731)
                                              ========      ========

     The   approximate   effect  of  each  type  of  temporary   difference  and
carryforward  at  December  31,  1997  and 1996 is  summarized  as  follows  (in
thousands):

                                                  1997          1996
                                                  ----          ----
         Net operating losses................  $ 30,828      $ 29,199
         Intangible and other assets.........   (55,234)      (67,508)
         Depreciation of property & equipment     2,983        (2,719)
         Accruals and reserves...............     1,864           297
                                               --------      --------
                                               $(19,559)     $(40,731)
                                               ========      ========

     The effective  income tax rate differs from the statutory  Federal tax rate
primarily  due  to  the  nondeductibility  of  goodwill  amortization.  The  net
operating  loss (NOL)  carryforwards  expire at various dates through 2012.  The
Internal Revenue Code contains  provisions that may limit the NOL  carryforwards
available  to be used in any  given  year if  certain  events  occur,  including
significant changes in ownership, as defined.

5.   COMMITMENTS

     USA Mobile II has operating leases for office and  transmitting  sites with
lease terms ranging from one month to  approximately  ten years.  In most cases,
USA Mobile II expects  that,  in the normal  course of business,  leases will be
renewed or replaced by other leases.

     Future  minimum lease  payments under  noncancellable  operating  leases at
December 31, 1997 are as follows (in thousands):

                        Year Ending December 31,
                        ------------------------
                        1998..................      $  5,570
                        1999..................         3,195
                        2000..................         1,889
                        2001..................           954
                        2002..................           419
                        Thereafter............         1,586
                                                    --------
                        Total.................      $ 13,613
                                                    ========

     Total rent expense under operating  leases for the years ended December 31,
1997 and 1996, for the period September 8, 1995 to December 31, 1995 and for the
period January 1, 1995 to September 7, 1995 approximated $6,258,000, $5,856,000,
$1,640,000, and $3,346,000 respectively.


                                      F-14
<PAGE> 25

6.   EMPLOYEE BENEFIT PLAN

     In 1994,  USA Mobile II established a retirement  savings plan,  qualifying
under Section 401(k) of the Internal Revenue Code covering  eligible  employees,
as defined. Under the plan, a participant may elect to defer receipt of a stated
percentage  of  the  compensation  which  would  otherwise  be  payable  to  the
participant for any plan year (the deferred amount) provided,  however, that the
deferred  amount shall not exceed the maximum  amount  permitted  under  Section
401(k)  of the  Internal  Revenue  Code.  The plan  provides  for USA  Mobile II
matching  contributions.  Matching contributions for the year ended December 31,
1996, the period from September 8, 1995 to December 31, 1995 and the period from
January 1, 1995 to September 7, 1995 approximated $106,000,  $27,000 and $58,000
respectively.

     On December 31, 1996, the USA Mobile II retirement  savings plan was merged
into the Arch retirement  savings plan. The Arch plan is qualified under section
401(k) of the Internal  Revenue Code and covers  eligible  employees of Arch and
its subsidiaries.

7.   RELATED PARTY TRANSACTIONS

     Intercompany   transactions  with  Arch  Communications   Group,  Inc.  and
Subsidiaries - In March 1996, Arch completed a public offering of 10 7/8% Senior
Discount Notes due March 2008  generating net proceeds of $266.1  million.  Arch
used $47.5  million of the net  proceeds  (of which $15.0  million was a capital
contribution  from Arch to USA Mobile II and $32.5  million was an  intercompany
demand  loan  from  Arch  Enterprises  to USA  Mobile  II) to repay all the then
outstanding  indebtedness  under USA Mobile  II's  credit  facility.  The demand
intercompany loan was repaid to Arch Enterprises in May 1996, through borrowings
under USA Mobile II's credit facility.

     In 1996, USA Mobile II sold certain paging assets to Arch  Enterprises  for
$10.4  million.  The fair  values of asset and  liabilities  transferred  ($10.7
million  and $0.3  million,  respectively)  approximated  the net book values of
those assets and liabilities; hence, no gain or loss was recognized.

8.   QUARTERLY FINANCIAL RESULTS (UNAUDITED)

     Quarterly  financial  information for the years ended December 31, 1997 and
1996 is summarized below (in thousands):

     Year Ended December 31, 1997:
                                    First      Second       Third     Fourth
                                   Quarter     Quarter     Quarter    Quarter
                                   -------     -------     -------    -------
     Revenues.................    $ 39,058    $ 40,220     $40,955    $40,833
     Operating income (loss)..     (12,837)    (13,130)    (11,933)    (7,316)
     Net income (loss) .......     (15,325)    (15,694)    (14,652)   (10,038)


     Year Ended December 31, 1996:
                                    First      Second       Third     Fourth
                                   Quarter     Quarter     Quarter    Quarter
                                   -------     -------     -------    -------
     Revenues.................    $ 32,864    $ 34,776     $36,299    $37,521
     Operating income (loss)..      (9,582)    (10,864)    (12,231)   (13,574)
     Net income (loss) .......     (12,832)    (13,765)    (14,604)   (15,394)





                                      F-15
<PAGE> 26

                                                                    SCHEDULE II

                       USA MOBILE COMMUNICATIONS, INC. II
                        VALUATION AND QUALIFYING ACCOUNTS
                     Years Ended December 31, 1997 And 1996
            Period From September 8, 1995 to December 31, 1995
         Period From January 1, 1995 to September 7, 1995 (Predecessor)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                      Balance at                             Balance
                                                      Beginning     Charged                   at End
Allowance For Doubtful Accounts                       of Period   to Expense   Write-offs   of Period
-------------------------------                       ---------   ----------   ----------   ---------

<S>                                                     <C>         <C>         <C>           <C>
Year ended December 31, 1997                            $1,071      $2,784      $(2,575)      $1,280
                                                        ======      ======      =======       ======

Year ended December 31, 1996                            $  798      $2,906      $(2,633)      $1,071
                                                        ======      ======      =======       ======

Period from September 8, 1995 to December 31, 1995      $  982      $  587      $  (771)      $  798
                                                        ======      ======      =======       ======

Period from January 1, 1995 to September 7, 1995        $  350      $2,149      $(1,517)      $  982
                                                        ======      ======      =======       ======
</TABLE>





                                      S-1
<PAGE> 27

                                      INDEX

 Exhibit                           Description

    3.1     -    Restated Certificate of Incorporation. (1)
    3.2     -    By-laws, as amended.(1)
    4.1     -    Indenture, dated February 1, 1994, between USA Mobile
                 Communications, Inc. II ("USA  Mobile II") and United States
                 Trust Company of New York, as Trustee, relating to the 91/2%
                 Senior Notes due 2004 of USA Mobile II. (1)
    4.2     -    Indenture, dated December 15, 1994, between USA Mobile II and
                 United States Trust Company of New York, as Trustee, relating
                 to the 14% Senior Notes due 2004 of USA Mobile II. (2)
   10.1     -    Credit Agreement, dated March 19, 1997 (the "USA Mobile II
                 Credit  Agreement"), by and among Premiere Page of Kansas,
                 Inc., Q Media Paging-Alabama, Inc., USA Mobile Communications,
                 Inc. III, Q Media Company-Paging, Inc., W.Q. Communications,
                 Inc., USA Mobile Communications, Inc. II, the Lenders Party
                 hereto and The Bank of New York, as Administrative Agent. (3)
   10.2     -    Amendment No. 3 to the USA Mobile II Credit Agreement. (4)
   10.3     -    Letter Agreement dated January 7, 1997 and Amendment 1 dated
                 May 1, 1997 between the Company and Motorola, Inc. (3)
   27.1     -    Financial data schedule

+    Identifies exhibits constituting a management contract or compensatory plan

(1)  Incorporated by reference from the Registration Statement on Form S-1 (File
     no. 33-72646) of USA Mobile II.

(2)  Incorporated by reference from the Registration Statement on Form S-1 (File
     no. 33-85580) of USA Mobile II.

(3)  Incorporated  by reference  from the Quarterly  Report on Form 10-Q of Arch
     for the quarter  ended March 31, 1997.  Confidential  treatment  previously
     granted with respect to portions of this exhibit.

(4)  Incorporated  by reference  from the Annual Report on Form 10-K of Arch for
     the Year ended  December 31, 1997.  Confidential  treatment  requested with
     respect to portions of this exhibit.