As filed with the Securities and Exchange Commission on November 14, 1997.
=============================================================================

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

                                    FORM 10-Q

                                   (Mark One)
          [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1997
                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
         For the transition period from       to 


                           Commission File No. 0-5890


                                    GCI, INC.
             (Exact name of registrant as specified in its charter)


            STATE OF ALASKA                           91-1820757
      (State or other jurisdiction of             (I.R.S. Employer
      incorporation or organization)               Identification No.)

                2550 Denali Street
                Suite 1000
                Anchorage, Alaska                         99503
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: (907) 265-5600


Former name, former address and former fiscal year, if changed since last report

      Indicate by check mark  whether the  registrant  (l) 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 .

The number of shares outstanding of the registrant's classes of common stock, as
of November  14, 1997 was: 
                    100 shares of Class A common stock.
==============================================================================

                                       1
<PAGE>


                                      INDEX

                                    GCI, INC.
            A Wholly Owned Subsidiary of General Communication, Inc.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
                                                                                                    PAGE NO
<S>                                                                                                       <C>
PART I.  FINANCIAL INFORMATION

                  Item l.      Consolidated Financial Statements..........................................3

                               Consolidated Balance Sheets as of September 30, 1997 and
                                  December 31, 1996.......................................................3

                               Consolidated Statements of Operations for the three
                                  and nine months ended September 30, 1997 and 1996.......................5

                               Consolidated Statements of Stockholders' Equity
                                 for the nine months ended September 30, 1997 and 1996....................6

                               Consolidated Statements of Cash Flows for the nine
                                  months ended September 30, 1997 and 1996................................7

                               Notes to Interim Condensed Consolidated Financial
                                  Statements..............................................................8

                  Item 2.      Management's Discussion and Analysis of Financial
                                 Condition and Results of Operations......................................16


PART II.  OTHER INFORMATION

                  Item 1.      Legal Proceedings..........................................................27

                  Item 6.      Exhibits and Reports on Form 8-K...........................................27


SIGNATURES................................................................................................28
</TABLE>

                                       2
<PAGE>
<TABLE>


PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                                      GCI, INC. AND SUBSIDIARIES
                                      CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                          
                                                                            (Unaudited)
                                                                             Successor         Predecessor
                                                                           September 30,       December 31,
                            ASSETS                                             1997                1996
------------------------------------------------------------------       -----------------  -----------------
                                                                                 (Amounts in thousands)
<S>                                                                     <C>                     <C>
Current assets:
     Cash and cash equivalents                                          $       6,312            13,349
     Receivables, net of allowance for doubtful
         Receivables of $909 and $597                                          35,039            28,768
     Prepaid and other current assets                                           3,052             2,236
     Deferred income taxes, net                                                 1,093               835
     Inventories                                                                3,213             1,589
     Notes receivable                                                             615               325
                                                                              -------           -------    
                                                                     
         Total current assets                                                  49,324            47,102
                                                                              -------           -------

Restricted cash (note 4)                                                       40,253               ---
                                                                              -------           -------  

Property and equipment in service, net                                        144,273           115,981
Construction in progress                                                       20,144            20,770
                                                                              -------           -------
         Net property and equipment                                           164,417           136,751
                                                                              -------           -------

Other assets:
     Intangible assets, net                                                   247,140           250,920
     Deferred debt issuance costs, net                                          9,281               900
     Transponder deposit                                                        9,100             9,100
     Undersea fiber optic cable deposit (note 4)                                8,247               ---
     Notes receivable                                                           1,315             1,016
     Other assets, at cost, net                                                 1,362             1,546
                                                                              -------           -------
         Total other assets                                                   276,445           263,482
                                                                              -------           -------

         Total assets                                                   $     530,439           447,335
                                                                              =======           =======
</TABLE>

     See  accompanying  notes  to  interim  condensed   consolidated   financial
statements.


                                       3


<PAGE>
<TABLE>



                                        GCI, INC. AND SUBSIDIARIES
                                        CONSOLIDATED BALANCE SHEETS
                                                (Continued)
<CAPTION>

                                                                             (Unaudited)
                                                                              Successor       Predecessor
                                                                            September 30,     December 31,
             LIABILITIES AND STOCKHOLDERS' EQUITY                               1997              1996
-------------------------------------------------------------------       ----------------- ----------------
                                                                                 (Amounts in thousands)
   <S>                                                                   <C>                  <C>  
   Current liabilities:
      Current maturities of long-term debt (note 3)                      $       1,666         31,969
      Current maturities of obligations under capital leases                         1             71
      Accounts payable                                                          24,842         23,677
      Accrued payroll and payroll related obligations                            3,739          3,830
      Accrued liabilities                                                        6,473          4,173
      Accrued interest                                                           3,356          2,708
      Subscriber deposits and deferred revenues                                  3,877          3,449
                                                                               -------        -------
         Total current liabilities                                              43,954         69,877

      Senior notes (note 3)                                                    180,000            ---
      Long-term debt, excluding current maturities (note 3)                     61,872        191,273
      Obligations under capital leases, excluding current
         maturities                                                                523            ---
      Obligations under capital leases due to related parties,
         excluding current maturities                                              ---            675
      Deferred income taxes, net                                                37,737         33,720
      Other liabilities                                                          2,229          2,236
                                                                               -------        -------
         Total liabilities                                                     326,315        297,781
                                                                               -------        -------

   Stockholders' equity:
   Common stock (no par):
      Class A. Authorized 10,000 shares;  issued and 
         outstanding  100 shares at September 30, 1997                         205,870            ---
      Class A. Authorized  50,000,000 shares;  issued and 
         outstanding  36,586,973 shares at December 31, 1996, 
         respectively                                                              ---        112,411
      Class B. Authorized 10,000,000 shares; issued and 
         outstanding 4,074,028 shares at December 31, 
         1996, respectively; convertible on a share-per
         share basis into Class A common stock.                                    ---          3.432
   Paid-in capital                                                                 ---          4,229
   Retained earnings (deficit)                                                 (1,746)         29,482
                                                                               -------        -------
         Total stockholders' equity                                            204,124        149,554
                                                                               -------        -------
   Commitments and contingencies (note 4)
         Total liabilities and stockholders' equity                      $     530,439        447,335
                                                                               =======        =======
</TABLE>

See accompanying notes to interim condensed consolidated financial statements.


                                       4

<PAGE>
<TABLE>



                                       GCI, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>


                                                       (Unaudited)                    (Unaudited)
                                                 Successor    Predecessor        Successor   Predecessor
                                                   Three Months Ended              Nine Months Ended
                                                      September 30,                  September 30,
                                                   1997           1996             1997           1996
                                                   ----           ----             ----           ----              
                                                      (Amounts in thousands except per share amounts)
<S>                                           <C>                 <C>            <C>            <C>                               
Revenues:
  Telecommunication services                  $   44,662          38,664         126,018        115,832  
  Cable services                                  13,294            ---           41,005            ---
                                                  ------          ------         -------        -------
    Total revenues                                57,956          38,664         167,023        115,832

Cost of sales and services                        28,868          22,226          85,814         66,350
Selling, general and administrative
   expenses                                       19,313          10,609          53,148         31,930
Depreciation and amortization                      5,752           1,812          17,450          5,616
                                                  ------          ------         -------        -------    

      Operating income                             4,023           4,017          10,611         11,936
                                                                                   
Interest expense, net                              4,554             269          12,668            898
                                                  ------          ------         -------        -------
                                                                                  
      Net earnings (loss) before income
        taxes and extraordinary item               (531)           3,748         (2,057)         11,038

Income tax expense (benefit)                       (192)           1,608           (744)          4,610
                                                  ------          ------         -------        -------
                                                                                
      Net earnings (loss) before extraordinary
        loss on early extinguishment of debt       (339)           2,140         (1,313)          6,428


Loss on early extinguishment of debt,
net of income tax benefit of $268                    433             ---             433            ---
                                                  ------          ------         -------        -------

      Net earnings (loss)                     $    (772)           2,140         (1,746)          6,428
                                                  ======          ======         =======        =======

Earnings (loss) per common share:
      Net earnings (loss) before extraordinary
        loss on early extinguishment of debt  $  (3,390)            0.09        (13,130)           0.26
      Extraordinary loss                         (4,330)             ---         (4,330)            ---
                                                  ------          ------         -------        -------

      Net earnings (loss)                     $  (7,720)            0.09        (17,460)           0.26
                                                  ======          ======         =======        =======
                                                  
Weighted average number of shares
  of common stock and common
  stock equivalents outstanding                      100          25,090             100         24,847
                                                  ======          ======         =======        =======
</TABLE>

See accompanying notes to interim condensed consolidated financial statements.


                                       5

<PAGE>
<TABLE>


                           GCI, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

<CAPTION>


                                                                                             Class A
  (Unaudited)                                      Shares of        Class A      Class B     Shares                Retained
(Amounts in thousands)                           Common Stock       Common       Common      Held in     Paid-in   Earnings
Predeccessor                                   Class A    Class B    Stock        Stock     Treasury     Capital   (Deficit)
------------                                   -------    -------    -----        -----     --------     -------   --------
<S>                                            <C>         <C>      <C>          <C>          <C>        <C>       <C>
Balances at December 31, 1995                  19,680      4,176    $ 13,912     3,432         (389)     4,041     22,020 
Net earnings                                      ---        ---         ---       ---          ---        ---      6,428
Tax effect of excess stock
  compensation expense for tax
  purposes over amounts recognized
  for financial reporting purposes                ---        ---         ---       ---           ---       187        ---
Class B shares converted to Class A                90       (90)
Shares acquired pursuant to officer
deferred compensation agreement                   ---        ---         ---       ---         (621)       ---        ---
Shares issued under stock option plan              82        ---         187       ---           ---       ---        ---
Shares issued and issuable under officer
  stock option agreements                         ---        ---         ---       ---           ---         1        ---
                                           ------------------------------------------------------------------------------

Balances at September 30, 1996                 19,852      4,086    $ 14,099     3,432       (1,010)     4,229     28,448      
                                           ==============================================================================

Successor
---------
Balances at December 31, 1996                     ---        ---    $    ---       ---           ---       ---        ---   
Net loss                                          ---        ---         ---       ---           ---       ---    (l,746)
Shares issued to predecessor General
   Communication, Inc.                            100        ---     205,870       ---           ---       ---        ---    
                                           ------------------------------------------------------------------------------
Balances at September 30, 1997                    100        ---    $205,870       ---           ---       ---    (1,746)         
                                           ==============================================================================

</TABLE>

See accompanying notes to interim condensed consolidated financial statements.


                                       6



<PAGE>
<TABLE>


                                          GCI, INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>


                                                                                   (Unaudited)
                                                                          Successor        Predecessor
                                                                                 Nine Months Ended
                                                                                  September 30,
                                                                           1997                 1996
                                                                      ----------------    ----------------
                                                                             (Amounts in thousands)
<S>                                                                     <C>                   <C>  
Cash flows from operating activities:
   Net earnings (loss)                                                  $  (1,746)              6,428
   Adjustments to reconcile net earnings (loss)
      to net cash provided by operating activities:
          Depreciation and amortization                                     17,450              5,616
          Deferred income tax expense                                        3,759              1,892
          Deferred compensation and compensatory 
            stock options                                                      (7)                240
          Bad debt expense, net of write-offs                                  312                  3
          Loss on early extinguishment of debt                                 701                ---
          Other noncash income and expense items                               ---                 28
          Change in operating assets and liabilities 
            (note 2)                                                       (4,601)            (5,460)
                                                                         ---------           --------   
   Net cash provided by operating activities                                15,868              8,747
                                                                         ---------           --------
   
Cash flows from investing activities:
      Purchases of property and equipment                                 (40,699)           (24,767)
      Restricted cash investment                                          (40,253)                ---
      Refunds of long-term deposits and purchases of 
          other assets                                                       (935)            (1,964)
      Payment of transponder deposit                                           ---            (7,800)
      Payment of undersea fiber optic cable deposit                        (8,247)                ---
      Notes receivable issued                                                (596)              (397)
      Payments received on notes receivable                                      7               249
                                                                         ---------           --------
Net cash used in investing activities                                     (90,723)           (34,679)
                                                                         ---------           --------

Cash flows from financing activities:
      Long-term borrowings- Senior notes                                   180,000                ---
      Long-term borrowings- bank debt and leases                            80,700             29,100
      Capital contribution from parent company                              46,256                --- 
      Repayments of long-term borrowings and capital 
          lease obligations                                              (229,887)            (1,496)
      Payments of deferred debt issuance cost                              (9,251)               ---
      Proceeds from common stock issuance                                      ---                187
      Purchase of treasury stock                                               ---              (621)
                                                                         ---------           --------             
Net cash provided by financing activities                                   67,818             27,170
                                                                         ---------           --------                    

Net (decrease) increase in cash and cash equivalents                       (7,037)              1,238

    Cash and cash equivalents at beginning of period                        13,349              4,017
                                                                         ---------           --------                
                                                                          
    Cash and cash equivalents at end of period                          $    6,312              5,255
                                                                         =========           ========
</TABLE>


       See  accompanying  notes  to  interim  condensed  consolidated  financial
statements.


                                       7

<PAGE>



                           GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)
                           
 (l)       (a)    Basis of Presentation
                  ---------------------

           GCI, Inc. ("GCI" or "Successor")  was  incorporated in 1997 to effect
           the  issuance of Senior  Notes as further  described  in note 3. GCI,
           Inc.,  as a wholly owned  subsidiary of General  Communication,  Inc.
           ("Predecessor"),  received  through  its initial  capitalization  all
           ownership  interests  in  subsidiaries  previously  held  by  General
           Communication, Inc.

           The accompanying  financial statements for the quarter and nine-month
           periods ended September 30, 1997 and as of September 30, 1997 include
           the  operating   activities   and  balances  of  GCI,  Inc.  and  its
           subsidiaries and exclude the 1997 operating  activities and remaining
           balances of its parent company General Communication, Inc.

           The accompanying  financial statements for the quarter and nine-month
           periods ended  September 30, 1996 and as of December 31, 1996 include
           the  operating   activities  and  balances  of  predecessor   General
           Communication,  Inc. and subsidiaries as reported in previous filings
           with the Securities and Exchange  Commission.  The Predecessor's 1996
           operating  activities and balances not conducted or owned through its
           subsidiaries were not material to GCI, Inc.

           (b)      General
                    -------

           GCI is an Alaska  corporation and was  incorporated May 13, 1997. GCI
           Holdings,  Inc.  ("Holdings") is a wholly owned subsidiary of GCI and
           was incorporated May 13, 1997. GCI Communication  Corp.  ("GCC"),  an
           Alaska corporation,  is a wholly owned subsidiary of Holdings and was
           incorporated   in   1990.   GCI    Communication    Services,    Inc.
           ("Communication  Services"), an Alaska corporation, is a wholly owned
           subsidiary of Holdings and was incorporated in 1992. GCI Leasing Co.,
           Inc. ("Leasing  Company"),  an Alaska corporation,  is a wholly owned
           subsidiary of  Communication  Services and was  incorporated in 1992.
           GCI,  Holdings and GCC are engaged in the  transmission of interstate
           and  intrastate  private  line and  switched  message  long  distance
           telephone service between  Anchorage,  Fairbanks,  Juneau,  and other
           communities  in Alaska and the  remaining  United  States and foreign
           countries.  GCC also provides  northbound  services to certain common
           carriers  terminating  traffic  in  Alaska  and  sells  and  services
           dedicated communications systems and related equipment. Communication
           Services  provides  private  network  point-to-point  data and  voice
           transmission   services  between  Alaska,   Hawaii  and  the  western
           contiguous United States. Leasing Company owns and leases capacity on
           an undersea fiber optic cable used in the  transmission of interstate
           private line and  switched  message long  distance  services  between
           Alaska and the remaining United States and foreign countries.

           Cable television  services are provided  through GCI Cable,  Inc. and
           through its  ownership in Prime Cable of Alaska L.P.  ("Prime"),  and
           through   GCI   Cable,   Inc.'s    wholly-owned    subsidiaries   GCI
           Cable/Fairbanks,  Inc., and GCI Cable/Juneau, Inc. (collectively "GCI
           Cable" or "Cable  Companies").  GCI Cable,  Inc. and its subsidiaries
           are Alaska  corporations  and were  incorporated  in 1996. GCI Cable,
           Inc. is a wholly owned  subsidiary  of  Holdings.  Prime is a limited
           partnership  organized  under the laws of the state of Delaware whose
           partnership interests are wholly owned by GCI Cable, Inc.

           GCI Transport  Co.,  Inc.,  Fiber Hold Company,  Inc., GCI Fiber Co.,
           Inc.,  and GCI Satellite Co.,  Inc.,  all Alaska  corporations,  were
           incorporated   in  1997  to  finance  the  acquisition  of  satellite


                                       8

<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)

           transponders and to construct and deploy the fiber optic cable system
           further  described  in note 4. GCI  Transport  Co.,  Inc. is a wholly
           owned  subsidiary of Holdings.  Fiber Hold Company,  Inc.,  GCI Fiber
           Co., Inc., and GCI Satellite Co., Inc. are wholly owned  subsidiaries
           of GCI  Transport  Co., Inc.  Alaska United Fiber System  Partnership
           ("Alaska United") was organized in 1997 to construct, own and operate
           the fiber optic cable  system  described  above and in note 4. Alaska
           United is a partnership wholly owned by the Company through GCI Fiber
           Co., Inc. and Fiber Hold Co., Inc.

           (c)   Principles of Consolidation
                  ---------------------------
   
           The consolidated  financial  statements  include the accounts of GCI,
           its  wholly  owned   subsidiary   Holdings,   and  its  wholly  owned
           subsidiaries GCC,  Communication  Services,  GCI Cable, GCI Transport
           Co., Inc.,  Communication  Services' wholly owned subsidiary  Leasing
           Company,  and GCI Transport  Co.,  Inc.'s  wholly owned  subsidiaries
           Fiber Hold Company,  Inc.,  GCI Fiber Co.,  Inc.,  GCI Satellite Co.,
           Inc. and Alaska United (collectively "the Company").  All significant
           intercompany  balances  and  transactions  have  been  eliminated  in
           consolidation.

           (d)    Other
                  -----
           The accompanying  unaudited Interim Condensed  Consolidated Financial
           Statements have been prepared in accordance  with generally  accepted
           accounting  principles for interim financial information and with the
           instructions   to  Form  10-Q  and  Article  10  of  Regulation  S-X.
           Accordingly, they do not include all of the information and footnotes
           required by generally  accepted  accounting  principles  for complete
           financial statements.  The Interim Condensed  Consolidated  Financial
           Statements  include the  consolidated  accounts of GCI,  Inc. and its
           wholly owned  subsidiaries  (collectively,  the  "Company")  with all
           significant intercompany  transactions eliminated.  In the opinion of
           management, all adjustments (consisting of normal recurring accruals)
           considered  necessary  for a fair  presentation  have been  included.
           Operating  results for the quarter  ended  September 30, 1997 are not
           necessarily  indicative  of the results  that may be expected for the
           year ended December 31, 1997. For further  information,  refer to the
           financial  statements and footnotes  thereto  included in predecessor
           General Communication, Inc.'s annual report on Form 10-K for the year
           ended December 31, 1996.

           Reclassifications  have been made to the 1996 financial statements to
           make them comparable with the 1997 presentation.

                                       9
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)


(2)        Consolidated Statements of Cash Flows Supplemental Disclosures
           --------------------------------------------------------------

           Changes in operating assets and liabilities consist of (unaudited):

<TABLE>
<CAPTION>

                                                                        Successor     Predecessor 
               Nine-month periods ended September 30,                     1997            1996
               --------------------------------------                  -----------    ----------
                                                                         (Amounts in thousands)
                <S>                                                 <C>                 <C>

                Increase in trade and other receivables             $    (6,583)        (3,823)
                Increase in prepaid and other current 
                  assets                                                   (866)          (857)
                (Increase) decrease in inventory                         (1,624)            100
                Increase (decrease) in accounts payable                    1,165        (1,729)
                Increase in accrued liabilities                            2,301            288
                Increase (decrease) in accrued payroll and
                   payroll related obligations                              (70)          1,008
                Decrease in accrued income taxes                             ---          (547) 
                Increase (decrease) in accrued interest                      648            283
                Increase (decrease) in deferred revenues                     428          (183)
                                                                         -------        -------      
                                                                    $    (4,601)        (5,460)
                                                                         =======        =======
</TABLE>




           The  holders  of  $10  million  of  convertible   subordinated  notes
           exercised  their  conversion  rights in January 1997 resulting in the
           exchange  of such  notes  for  1,538,457  shares  of the  predecessor
           General Communication, Inc.'s Class A common stock.

           Net income taxes  received  totaled  $158,000  during the  nine-month
           period  ended  September  30,  1997 and  income  taxes  paid  totaled
           $3,856,000 during the nine-month period ended September 30, 1996.

           Interest  paid  totaled   $15,324,000   and  $1,572,000   during  the
           nine-month periods ended September 30, 1997 and 1996, respectively.

           Predecessor General Communication,  Inc. recorded $187,000 during the
           nine  months  ended   September  30,  1996  as  paid-in   capital  in
           recognition  of the income tax  effect of excess  stock  compensation
           expense  for tax  purposes  over  amounts  recognized  for  financial
           reporting purposes.

(3)        Long-term Debt and Senior Notes
           -------------------------------

           Long-term Debt
           ------------- 
           The Company,  through its subsidiary GCI Holdings,  Inc. entered into
           new  $200,000,000  and $50,000,000  credit  facilities  ("Senior Loan
           facilities")  effective  August 1, 1997 that  mature on June 30, 2005
           and bear  interest at either  Libor plus 0.75% to 2.5%,  depending on
           the leverage ratio of Holdings and certain of its subsidiaries, or at
           the greater of the prime rate or the federal funds effective rate (as
           defined) plus 0.05%,  in each case plus an additional 0.0% to 1.375%,
           depending  on the  leverage  ratio of  Holdings  and  certain  of its
           subsidiaries. $57,700,000 was borrowed under the credit agreements at
           September 30, 1997.  The Company is required to pay a commitment  fee
           equal to 0.375% per annum on the unused portion of the commitment.

                                       10
<PAGE>
                          GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)

           While  Holdings  may  elect at any  time to  reduce  amounts  due and
           available  under Senior Loan  facilities,  a mandatory  prepayment is
           required each quarter, beginning September 30, 2000 as follows:

                                                     Percentage of
                                                     Reduction of
                                                      Outstanding
                      Date of Payment                 Facilities
                      ---------------                ------------
                        
                    September 30, 2000                  3.750%
                    December 31, 2000                   3.750%

                    March 31, 2001                      3.750%
                    June 30, 2001                       3.750%
                    September 30, 2001                  3.750%
                    December 31, 2001                   3.750%

                    March 31, 2002                      5.000%
                    June 30, 2002                       5.000%
                    September 30, 2002                  5.000%
                    December 31, 2002                   5.000%

                    March 31, 2003                      5.000%
                    June 30, 2003                       5.000%
                    September 30, 2003                  5.000%
                    December 31, 2003                   5.000%

                    March 31, 2004                      5.625%
                    June 30, 2004                       5.625%
                    September 30, 2004                  5.625%
                    December 31, 2004                   5.625%

                    September 30, 2005                  7.500%
                    December 31, 2005                   7.500% and all remaining
                                                        outstanding balances

           The Senior Loan facilities contain, among others, covenants requiring
           maintenance of specific levels of operating cash flow to indebtedness
           and  to  interest  expense.   The  Senior  Loan  facilities   include
           limitations  on  acquisitions   and  additional   indebtedness,   and
           prohibits any direct or indirect distribution,  dividend,  redemption
           or other  payment to any person on account of any  general or limited
           partnership  interest  in,  or  shares  of  capital  stock  or  other
           securities  of Holdings or any of its  subsidiaries.  Holdings was in
           compliance  with all  Senior  Loan  facilities  covenants  during the
           period  commencing  August  1,  1997  (date  of  the  loans)  through
           September 30, 1997.

           The Senior Loan facilities are  collateralized  by essentially all of
           Holding's assets as well as a pledge of Holdings' stock by GCI, Inc.

           $3.4 million of the Senior Loan  facilities have been used to provide
           a letter of  credit  to secure  payment  of  certain  access  charges
           associated  with  the  Company's   provision  of   telecommunications
           services within the state of Alaska.

                                       11
<PAGE>
                          GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)

           In  connection  with  the  funding  of the  Senior  Loan  facilities,
           Holdings  paid  bank  fees  and  other   expenses  of   approximately
           $2,880,000, which will be amortized to interest expense over the life
           of the agreement.

           Senior Notes
           ------------
           On August 1, 1997 GCI, Inc. issued $180,000,000 of 9.75% senior notes
           due 2007.  The notes were issued at face value.  Net proceeds to GCI,
           Inc. after deducting  underwriting  discounts and commissions totaled
           $174,600,000.  Issuance  costs will be amortized to interest  expense
           over the term of the Senior Notes.

           The notes are not redeemable prior to August 1, 2002. After August 1,
           2002 the notes  are  redeemable  at the  option  of GCI,  Inc.  under
           certain conditions and at stated redemption prices. The notes include
           limitations  on  additional  indebtedness  and  prohibit  payment  of
           dividends,  payments for the  purchase,  redemption,  acquisition  or
           retirement  of GCI,  Inc.'s stock,  payments for early  retirement of
           debt  subordinate  to the note,  liens on property,  and asset sales.
           Holdings was in compliance with all credit agreement covenants during
           the  period  commencing  August  1, 1997  (date of the loan)  through
           September 30, 1997.

           Net proceeds from General Communication,  Inc.'s August 1, 1997 stock
           offering,  proceeds  from the  Company's  senior note  offerings  and
           initial  draws  on its new  credit  facilities  were  used  to  repay
           borrowings  outstanding under its then existing credit facilities and
           to provide  initial  funding for  construction  of the undersea fiber
           optic cable (see note 4). The Company  expects to borrow  funds under
           its new credit facilities in the future to fund capital  expenditures
           and for other general corporate purposes.

           The interim telephony  agreement that was outstanding at December 31,
           1997 matured on April 25,  1997.  Since the entire  facility  matured
           within  the  twelve-month   period  ending  December  31,  1997,  the
           outstanding  balance at  December  31,  1996 was  included in current
           maturities of long-term debt.

(4)        Commitments and Contingencies
           -----------------------------

           Satellite Transponders
           ----------------------

           The Company's  Predecessor entered into a purchase and lease-purchase
           option  agreement  in August 1995 for the  acquisition  of  satellite
           transponders to meet its long-term  satellite capacity  requirements.
           The balance  payable upon expected  delivery of the  transponders  in
           1998 is  dependent  upon a number of factors.  The  Company  does not
           expect  the  remaining  balance  payable  at  delivery  to exceed $41
           million.

           Litigation
           ----------

           The  Company is involved in various  lawsuits  and legal  proceedings
           that have arisen in the normal course of business. While the ultimate
           results  of  these  matters  cannot  be  predicted  with   certainty,

                                       12

<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)

           management does not expect them to have a material  adverse effect on
           the  financial  position,  results of  operations or liquidity of the
           Company.

           Cable Service Rate Deregulation
           -------------------------------

           Beginning  in  April  1993,  the  Federal  Communications  Commission
           ("FCC")  adopted   regulations   implementing  the  Cable  Television
           Consumer  Protection and Competition Act of 1992.  Included are rules
           governing  rates  charged by cable  operators  for the basic  service
           tier, the  installation,  lease and maintenance of equipment (such as
           converter  boxes and remote  control  units) used by  subscribers  to
           receive  this  tier and for cable  programming  services  other  than
           programming  offered  on a  per-channel  or  per-program  basis  (the
           "regulated  services").  Generally,  the regulations require affected
           cable systems to charge rates for  regulated  services that have been
           reduced to prescribed benchmark levels, or alternatively,  to support
           rates using costs-of-service methodology.

           The regulated  services  rates charged by the Company may be reviewed
           by the State of Alaska, operating through the Alaska Public Utilities
           Commission  ("APUC")  for  basic  service,  or by the FCC  for  cable
           programming  service.  Refund  liability  for basic  service rates is
           limited to a one-year period.  Refund liability for cable programming
           service  rates may be  calculated  from the date a complaint is filed
           with the FCC until the rate reduction is implemented.

           In  order  for the  State  of  Alaska  to  exercise  rate  regulation
           authority over the Company's  basic service rates,  25% of a systems'
           subscribers  must request such  regulation  by filing a petition with
           the APUC.  At  September  30,  1997,  the  State of  Alaska  has rate
           regulation  authority  over the Juneau  system's basic service rates.
           (The Juneau system  serves  approximately  9% of the Company's  total
           basic service  subscribers at September 30, 1997.)  Juneau's  current
           rates have been  approved by the APUC and there are no other  pending
           filings with the APUC,  therefore,  there is no refund  liability for
           basic service at this time.

           Complaints by subscribers relating to cable programming service rates
           were filed  with,  and  accepted  by, the FCC for  certain  franchise
           areas; however,  filings made in response to those complaints related
           to the  period  prior  to July 15,  1994  were  approved  by the FCC.
           Therefore,  the  potential  liability for cable  programming  service
           refunds  would be limited to the period  subsequent  to July 15, 1994
           for these  areas.  Management  of the  Company  believes  that it has
           complied in all  material  respects  with the  provisions  of the FCC
           rules and regulations and that the Company is, therefore,  not liable
           for any  refunds.  Accordingly,  no  provision  has been  made in the
           financial  statements  for any potential  refunds.  The FCC rules and
           regulations are, however, subject to judgmental interpretations,  and
           the impact of potential  rate  changes or refunds  ordered by the FCC
           could  cause the Company to make  refunds  and/or to be in default of
           certain debt covenants.

           In February 1996, the  Telecommunications Act of 1996 was signed into
           federal law that impacts the cable industry.  Most notably,  the bill
           allows cable system operators to provide telephony  services,  allows
           telephone  companies  to  offer  video  services,  and  provides  for
           deregulation of cable programming  service rates by 1999.  Management
           of the Company believes the bill will not have a significant  adverse
           impact on the  financial  position  or results of  operations  of the
           Company.


                                       13
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)

           Undersea Fiber Optic Cable Contract Commitment
           ----------------------------------------------

           The Company  signed a contract in July 1997 for  construction  of the
           undersea  portion of a $115 to $125 million  fiber optic cable system
           connecting  the cities of Anchorage,  Juneau and Seattle via a subsea
           route. Subsea and terrestrial connections will extend the fiber optic
           cable to Fairbanks via Whittier and Valdez. Construction efforts will
           begin  during  the  late  summer  of 1998  with  commercial  services
           expected to commence in December 1998. Pursuant to the contract,  the
           Company paid $8.2 million  August 1, 1997 and will pay the  remaining
           balance in installments  through December 1998 based on completion of
           certain key milestones.  Approximately $40.3 million of proceeds from
           the public  offerings,  net of the $8.2  million  paid in August (see
           note 3) were  contributed to Alaska United Fiber System  Partnership.
           The use of such proceeds is  restricted  to funding the  construction
           and  deployment  of the fiber optic  cable  system and is reported as
           Restricted Cash in the accompanying  Interim  Condensed  Consolidated
           Financial  Statements.  The Company has received  commitments for $75
           million in bank financing to fund the remaining cost of  construction
           and deployment.


                                       14
<PAGE>


                           GCI, INC. AND SUBSIDIARIES

          Notes to Interim Condensed Consolidated Financial Statements

                                   (Unaudited)
<TABLE>


(5)        Supplemental financial information
           ----------------------------------
           (Amounts in thousands)

<CAPTION>

(Unaudited)                                              
------------------------------------------------------------------------------------------------ ------------
                                                                  Successor                       Predecessor
Nine-month periods ended September 30,                              1997                             1996
------------------------------------------------------------------------------------------------ ------------
                                                 Long-                                               Long-
                                                Distance       Cable       Local     Combined       Distance
                                              ------------ ----------- ---------- -------------- ------------
<S>                                           <C>               <C>       <C>        <C>            <C>
Revenues:
   Telecommunication revenues                 $   125,763          ---       255     126,018        115,832
   Cable revenues                                     ---       41,005       ---      41,005            ---
------------------------------------------------------------------------------------------------ ------------
Total revenues                                    125,763       41,005       255     167,023        115,832
------------------------------------------------------------------------------------------------ ------------

Cost of sales and services:
   Distribution costs and costs of
     services                                      75,999          ---       404      76,403         66,350
   Programming and copyright 
     costs                                            ---        9,411       ---       9,411            ---
------------------------------------------------------------------------------------------------ ------------
Total cost of sales and services                   75,999        9,411       404      85,814         66,350
------------------------------------------------------------------------------------------------ ------------

Selling, general and administrative 
   expenses:
   Operating and engineering                        8,275          ---       294       8,569          7,550
   Cable television, including
       management fees of $822                        ---       13,717       ---      13,717            ---
   Sales and communications                        10,375          ---       264      10,639          8,920
   General and administrative                      16,775          ---     1,281      18,056         14,047
   Bad debts                                        1,865          302       ---       2,167          1,413
----------------------------------------------------------------------------------------------- -------------
Total selling, general and 
     administrative expenses                       37,290       14,019     1,839      53,148         31,930
------------------------------------------------------------------------------------------------ ------------
Depreciation and amortization                       7,498        9,903        49      17,450          5,616
------------------------------------------------------------------------------------------------ ------------

     Operating income (loss)                  $     4,976        7,672   (2,037)      10,611         11,936
================================================================================================ ============

</TABLE>

                                       15
<PAGE>




PART I.
ITEM 2.



                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

The following  discussion and analysis  should be read in  conjunction  with the
Company's  Interim  Condensed  Consolidated  Financial  Statements and the notes
thereto.  As used herein,  EBITDA  consists of earnings  before  interest (net),
income taxes, depreciation, amortization and other income (expense). EBITDA is a
measure commonly used in the  telecommunications and cable television industries
to analyze companies on the basis of operating performance.  It is not a measure
of financial  performance  under generally  accepted  accounting  principles and
should  not be  considered  as an  alternative  to net  income as a  measure  of
performance nor as an alternative to cash flow as a measure of liquidity.

                                    OVERVIEW

GCI,  Inc.  ("Successor")  was  incorporated  in 1997 to effect the  issuance of
Senior  Notes  as  further  described  in  note  3 to the  accompanying  Interim
Condensed  Consolidated   Financial  Statements.   GCI,  Inc.,  a  wholly  owned
subsidiary of General  Communication,  Inc. ("GCI" or  "Predecessor"),  received
through its initial  capitalization  all  ownership  interests  in  subsidiaries
previously  held by GCI.  Shares of GCI's Class A common stock are traded on the
Nasdaq  National  Market tier of the Nasdaq Stock Market under the symbol GNCMA.
Shares  of  the   Predecessor's   Class  B  common   stock  are  traded  on  the
Over-the-Counter  market. Proceeds from the Predecessor's August 1, 1997 class A
common stock  offering were used in part to  capitalize  GCI, Inc. The following
discussion  and  analysis  of  financial  condition  and  results of  operations
includes the 1996 operating activities and balances of GCI and its subsidiaries,
which  operating  activities  and  balances not  conducted or owned  through its
subsidiaries  were not material to GCI, Inc. The discussion and analysis of 1997
results of operations and balances  exclude all Predecessor  operating  activity
and balances.  "The  Company" as used herein for 1996 results of operations  and
balances  refers to GCI,  GCI, Inc. and GCI,  Inc.'s wholly owned  subsidiaries.
"The Company" as used herein for 1997 results of operations and balances  refers
to GCI,  Inc. and GCI,  Inc.'s  wholly owned  subsidiaries  and excludes  parent
company GCI.

Long Distance Telecommunications Services
-----------------------------------------
The Company has historically reported revenues principally from the provision of
interstate  and  intrastate   long  distance   telecommunications   services  to
residential,  commercial and governmental customers and to other common carriers
(principally MCI  Telecommunications,  Inc. ("MCI") and U.S. Sprint ("Sprint")).
These   services   accounted   for   approximately   93.0%   of  the   Company's
telecommunications  services  revenues during the first nine months of 1997. The
balance  of  telecommunications  services  revenues  have been  attributable  to
corporate network management contracts,  telecommunications  equipment sales and
service and other  miscellaneous  revenues  (including revenues from prepaid and
debit calling cards,  the  installation and leasing of customers' VSAT equipment
and fees charged to MCI and Sprint for certain billing  services).  Factors that
have the greatest impact on year-to-year changes in telecommunications  services
revenues  include the rate per minute  charged to customers  and usage  volumes,
usually  expressed as minutes of use.  These factors in turn depend in part upon
economic  conditions  in Alaska.  The  economy of Alaska is  dependent  upon the
natural resource industries,  in particular oil production,  as well as tourism,
government and United States military spending.

The  Company's  telecommunications  cost of sales  and  services  has  consisted
principally of the direct costs of providing  services,  including  local access
charges  paid to  local  exchange  carriers  ("LECs")  for the  origination  and
termination of long distance  calls in Alaska,  fees paid to other long distance
carriers  to carry  

                                       16

<PAGE>

calls that terminate in areas not served by the Company's  network  (principally
the lower 49 states,  most of which calls are carried  over MCI's  network,  and
international  locations,  which calls are  carried  principally  over  Sprint's
network), and the cost of equipment sold to the Company's customers.  During the
first  nine  months  of  1997,  local  access  charges  accounted  for  46.7% of
telecommunications  cost of sales and services, fees paid to other long distance
carriers  represented  36.9%,  satellite  transponder  lease and undersea  fiber
maintenance costs represented  8.3%,  enterprise  services and outsourcing costs
represented  5.2%,  and  telecommunications  equipment  accounted  for  2.9%  of
telecommunications cost of sales and services.

The Company's  telecommunications  selling, general, and administrative expenses
have consisted of operating and engineering,  service, sales and communications,
management information systems, general and administrative, legal and regulatory
expenses.  Most of these  expenses  consist of  salaries,  wages and benefits of
personnel and certain other indirect costs (such as rent, travel,  utilities and
certain equipment costs). A significant portion of  telecommunications  selling,
general,  and  administrative  expenses,  27.8%  during  the nine  months  ended
September 30, 1997, represents the cost of the Company's advertising,  promotion
and market analysis programs.

Cable Services
--------------
Following the cable system acquisitions  effective October 31, 1996, the Company
now reports a  significant  level of revenues  and EBITDA from the  provision of
cable services.  During the first nine months of 1997, cable revenues and EBITDA
represented 24.6% and 62.6%, respectively,  of consolidated revenues and EBITDA.
The cable  systems  serve 21  communities  and areas in  Alaska,  including  the
state's three largest population centers, Anchorage, Fairbanks and Juneau.

The Company  generates cable services  revenues from three primary sources:  (1)
programming  services,  including  monthly  basic or premium  subscriptions  and
pay-per-view  movies or other  one-time  events,  such as sporting  events;  (2)
equipment rentals or installation;  and (3) advertising  sales.  During the nine
months ended September 30, 1997  programming  services  generated 86.0% of total
cable services  revenues,  equipment rental and installation  fees accounted for
7.8% of such revenues,  advertising  sales  accounted for 3.9% of such revenues,
and other  services  accounted  for the remaining  2.3% of total cable  services
revenues.  The primary factors that contribute to year-to-year  changes in cable
services revenues are average monthly  subscription and pay-per-view  rates, the
mix among basic,  premium and pay-per-view  services,  and the average number of
subscribers during a given reporting period.

The cable systems' operating,  selling, general and administrative expenses have
consisted principally of programming and copyright expenses,  labor, maintenance
and repairs,  marketing and  advertising,  rental  expense,  property  taxes and
depreciation and amortization.  In the first nine months of 1997 programming and
copyright  expenses  represented  approximately  28.2% of total cable  operating
expenses. Marketing and advertising costs represented approximately 1.7% of such
total  expenses and  depreciation  and  amortization  represented  29.7% of such
expenses.

Local Services
--------------
The Company began offering local exchange services initially in Anchorage during
late September  1997,  and expects that local  exchange  services will represent
less than 1.0% of revenues  in 1997 and less than 7.0% of  revenues in 1998.  In
the first nine months of 1997  operating and  engineering  expenses  represented
approximately  15.6% of total local services operating  expenses.  Marketing and
advertising  costs  represented  approximately  14.0%  of such  total  expenses,
customer service,  general and  administrative  costs represented  approximately
67.8% of such total expenses, and depreciation and amortization represented 2.6%
of such total  expenses.  The Company  expects that it will generate  moderately
negative EBITDA from local exchange services during this time period.

                                       17
<PAGE>

PCS Services
------------
In 1995 the  Company  began  developing  plans for PCS  wireless  communications
service  deployment and is currently  evaluating  various vendors for a proposed
PCS network.  In 1997 the Company  conducted a technical  trial of its candidate
technology.  Outside plant  communications  infrastructure  work was  undertaken
during  the 1996 and 1997  construction  seasons.  Switching  and other  central
office  installation  was undertaken in 1997. The Company  currently  expects to
launch PCS service in Anchorage as early as 1999.

The Company  anticipates that depreciation and amortization and interest expense
on a consolidated basis will be substantially higher in 1997 as compared to 1996
resulting  primarily  from the cable  company  acquisitions.  As a  result,  the
Company anticipates recording a net loss in 1997.

RESULTS OF OPERATIONS

The  following  table sets forth  selected  financial  data of the  Company as a
percentage  of total  revenues  for the  periods  indicated  and the  percentage
changes in such data as compared to the corresponding prior year period:

(Underlying data rounded to the nearest thousands)
<TABLE>
<CAPTION>

                                                                                            Percentage Change
                                                                                            -----------------     
                                                                                        Nine Months    Three Months
                                           Nine Months Ended      Three Months Ended     1997 vs.        1997 vs.
                                             September 30,           September 30,      Nine Months    Three Months
                                           1996        1997        1996        1997         1996          1996
                                           ----        ----        ----        ----         ----          ----
<S>                                       <C>         <C>         <C>         <C>           <C>           <C>
Statement of Operations Data:
Revenues
     Telecommunications 
        services                          100.0%       75.3%      100.0%       76.7%          8.6%         14.9%
     Cable services                         0.0%       24.6%        0.0%       22.9%           ---           ---
     Local services                         0.0%        0.1%        0.0%        0.4%           ---           ---
-----------------------------------------------------------------------------------------------------------------
Total revenues                            100.0%      100.0%      100.0%      100.0%         44.2%         49.9%
     Cost of sales and services            57.3%       51.4%       57.5%       49.8%         29.3%         29.9%
     Selling, general and                  27.6%       31.8%       27.4%       33.3%         66.5%         82.0%
        administrative expenses
      Depreciation and 
        amortization                        4.8%       10.4%        4.7%        9.9%        210.7%        217.4%
-----------------------------------------------------------------------------------------------------------------
Operating income                           10.3%        6.4%       10.4%        7.0%        -11.1%          0.1%
Net earnings (loss) before 
     income taxes and 
     extraordinary loss                     9.5%       -1.2%        9.7%       -0.9%       -118.6%       -114.2%
Loss on early extinguishment of
     debt, net                              0.0%        0.3%        0.0%        0.7%            NA            NA
Net earnings (loss)                         5.5%       -1.0%        5.5%       -0.3%       -127.2%       -109.0%

Other Operating Data:
Cable operating income (1)                    NA       18.7%          NA       19.5%            NA            NA
Cable EBITDA (1)                              NA       42.9%          NA       42.8%            NA            NA
Local operating loss (2)                      NA     -798.8%          NA     -231.0%            NA            NA
Local EBITDA (2)                              NA     -779.6%          NA     -211.8%            NA            NA
Consolidated EBITDA                        15.2%       16.8%       15.1%       16.9%         59.9%         67.7%

<FN>
--------------------------------------
(1) Computed as a percentage of total cable services revenues.
(2) Computed as a percentage of total local services revenues.
</FN>
</TABLE>

                                       18
<PAGE>

THREE MONTHS ENDED  SEPTEMBER 30, 1997  ("1997")  COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996 ("1996")

REVENUES.  Total  revenues  increased  49.9% from $38.7 million in 1996 to $58.0
million  in  1997.  Long  distance   transmission   revenues  from   commercial,
residential,  governmental,  and other common carrier customers  increased 14.7%
from $36.0 in 1996 to $41.3 million in 1997. This increase in revenues  resulted
in part from a 9.4% increase in minutes of interstate and international  traffic
carried,  which traffic totaled 160.9 million minutes during the quarter,  and a
9.7%  increase in minutes of  intrastate  traffic,  which  traffic  totaled 34.2
million minutes during the quarter.  The increases in traffic  resulted from (1)
an increase in services  provided to other common carriers  (principally MCI and
Sprint),  which other common carrier revenues increased 23.3% from $12.9 million
in 1996 to $15.9  million in 1997,  (2) growth in the  underlying  economy,  (3)
usage  stimulation  resulting from reductions in rates,  and (4) an expansion of
the  Company's  service  area  resulting  from the  turn-up  of a number  of new
satellite  earth station  facilities  located in rural Alaska.  Private line and
private network transmission  revenues increased 24.2% from $3.3 million in 1996
to $4.1  million in 1997.  The Company  reported  nine months of cable  services
revenues  in 1997  following  its  acquisition  of the cable  systems  effective
October 31, 1996. The number of subscribers  increased  approximately  1,100 and
the number of homes  passed by the cable  systems  increased  approximately  571
during the  three-month  period  ended  September  30,  1997.  The  increase  in
subscribers is largely attributed to the seasonal return of customers during the
fall and winter  months as  customers  come back inside from summer  activities.
Anchorage  area basic rates were increased  approximately  4.4% in April 1997 to
reduce margin compression resulting from increasing programming costs.

The  Company's  average  revenue per minute on long distance  traffic  increased
approximately  2.0% for the third quarter of 1997 as compared to the same period
of 1996.  Average rate per minute  increases  resulted  primarily from increased
calling card rates  commencing  May 1997 and a change in the  Company's  traffic
mix.  Such  increases  were offset in part by the  Company's  promotion  of, and
customers'  acceptance of new calling plans offering discounted rates and length
of service rebates.

COST OF SALES AND SERVICES.  Cost of sales and services totaled $22.2 million in
1996 and $28.9 million in 1997.  Of this  increase,  $3.1 million  resulted from
cable  services   programming  and  copyright   charges  incurred  during  1997.
Transmission  access and distribution  costs,  which represent cost of sales for
transmission  services,  increased  13.7%  from  $20.5  million in 1996 to $23.3
million in 1997 and amounted to  approximately  57.0 percent and 56.5 percent of
transmission  revenues  in  1996  and  1997,   respectively.   The  decrease  in
distribution  costs as a percentage of transmission  revenues results  primarily
from (1)  reductions in access charges paid by the Company to other carriers for
distribution of its traffic,  and (2) avoidance of access charges resulting from
the Company's  distribution  and  termination  of its traffic on its own network
instead of paying  other  carriers to  distribute  and  terminate  its  traffic.
Changes in distribution costs as a percentage of revenues will also occur as the
Company's traffic mix changes.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  increased  82.1% from  $10.6  million in 1996 to $19.3
million in 1997, and, as a percentage of total revenues, increased from 27.4% in
1996 to 33.3% in 1997. Selling, general and administrative expenses increased as
a result of (1)  increased  sales,  advertising  and  telemarketing  costs which
totaled $3.0  million in 1996 as compared to $3.8 million in 1997;  (2) bad debt
expense  totaling  $556,000 in 1996  compared to $1.0 million in 1997  (directly
associated  with  increased  revenues);  and (3) increased  costs  totaling $2.4
million  in  engineering,   operations,   customer  service,  accounting,  human
resources, legal and regulatory, and management information services. Such costs
were associated with the development and introduction,  or planned introduction,
of new products and services  including local exchange  services,  PCS services,
and Internet services.  Cable services selling, general and administrative costs
totaled $4.4 million in 1997. Local services selling, general and administrative
costs totaled $627,000 in 1997.

                                       19
<PAGE>

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  expense increased
$3.9  million  from  $1.8  million  in 1996 to $5.7  million  in  1997.  Of this
increase,  $3.1 million  resulted  from the Company's  acquisition  of the cable
systems   effective   October  31,  1996,  with  the  balance  of  the  increase
attributable to the Company's $38.6 million investment in facilities during 1996
for which a full year of  depreciation  will be recorded  during the year ending
December 31, 1997 and the  investment  of $40.7  million in  facilities  through
September 30, 1997 for which a partial year of  depreciation  is being  recorded
during 1997.

INTEREST EXPENSE, NET. Interest expense, net of interest income,  increased from
$269,000 in 1996 to $4.5 million in 1997. This increase resulted  primarily from
increases  in  the  Company's  average  outstanding   indebtedness  incurred  in
connection  with its  acquisition  of the cable  systems and  investment  in new
facilities  during  1997,  offset in part by increases in the amount of interest
capitalized during 1997.

INCOME TAX EXPENSE.  Income tax expense decreased from $1.6 million in 1996 to a
benefit of  $192,000  in 1997 due to the  Company  incurring  a net loss  before
income taxes and extraordinary item in 1997 as compared to net earnings in 1996.

LOSS  ON   EXTINGUISHMENT   OF  DEBT.  The  Company   recorded  a  net  loss  on
extinguishment  of debt of  $433,000  in 1997  resulting  from  refinancing  the
previously outstanding Senior Credit Facility effective August 1, 1997. The loss
resulted from the write-off of  unamortized  deferred debt issuance  costs.  The
loss is reported in the accompanying  interim condensed  consolidated  financial
statements net of an income tax benefit of $268,000.

NINE MONTHS  ENDED  SEPTEMBER  30, 1997  ("1997")  COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996 ("1996")

REVENUES. Total revenues increased 44.2% from $115.8 million in 1996 as compared
to $167.0 million in 1997. Long distance  transmission revenues from commercial,
residential,  other common carriers and governmental  customers  increased 10.4%
from $106.0 million in 1996 to $117.0 million in 1997. This increase reflected a
9.8%  increase in  interstate  and  international  minutes of use to 463 million
minutes and a 9.9% increase in intrastate minutes of use to 100 million minutes.
Approximately $7.7 million of the long distance  transmission  revenue growth in
1997  was due to a  21.6%  increase  in  revenues  from  other  common  carriers
(principally  MCI and Sprint),  from $35.7  million in 1996 to $43.4  million in
1997.  Revenue  growth in 1997 was also due to (1) a 11.3%  increase  in private
line and private network transmission  services revenues,  from $10.6 million in
1996 to $11.8 million in 1997;  and (2) reporting  nine months of cable services
revenues in 1997 totaling $41.0 million  following the Company's  acquisition of
the cable systems effective October 31, 1996.

The above  increases in revenues were offset in part by a 2.8%  reduction in the
Company's  average  revenue per minute on long distance  traffic from $0.182 per
minute in 1996 to $0.177 per minute in 1997. The decrease in revenues per minute
resulted  from the  Company's  promotion  of and  customers'  enrollment  in new
calling plans offering  discounted rates and length of service rebates.  Systems
sales and  services  revenues  increased  2.7% from $7.3 million in 1996 to $7.5
million in 1997.

COST OF SALES AND SERVICES. Cost of sales and services was $66.4 million in 1996
and $85.8 million in 1997. As a percentage of total revenues,  cost of sales and
services  decreased from 57.3% in 1996 to 51.4% in 1997. The decrease in cost of
sales and services as a percentage  of revenues  during 1997 as compared to 1996
resulted primarily from the addition of cable television  operations  commencing
October 31, 1996 which has proportionately lower cost of sales and services as a
percentage of revenues than does telecommunication operations.

                                       20
<PAGE>

Transmission access and distribution costs increased 14.4% from $60.4 million in
1996 to $69.1 million in 1997 and amounted to  approximately  57.0% and 59.1% of
transmission  revenues  in  1996  and  1997,   respectively.   The  increase  in
distribution  costs as a percentage of transmission  revenues results  primarily
from reduced  average rate per minute billed to customers in 1997 as compared to
1996  without  an  offsetting  reduction  in the rate per  minute  billed to the
Company  for  access and  termination  services.  Additionally,  1996 costs were
reduced  by  refunds  received  in  the  first  and  second  quarters   totaling
approximately  $960,000 from a local exchange carrier and the National  Exchange
Carriers  Association in respect of earnings by them which  exceeded  regulatory
requirements.  1996 transmission  access and distribution  costs excluding these
refunds were 57.9% of transmission  services  revenues.  Changes in distribution
costs as a percentage of revenues  will also occur as the Company's  traffic mix
changes.  Increases in cost of products sold and network  services cost of sales
as a proportion of the associated  revenues also  contributed to the increase in
1997 costs as compared to 1996.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  increased  66.5% from  $31.9  million in 1996 to $53.1
million  in 1997.  As a  percentage  of total  revenues,  selling,  general  and
administrative  expenses increased from 27.6% in 1996 to 31.8% in 1997. Selling,
general and administrative expenses increased as a result of increased sales and
customer service  volumes,  additional bad debt expense totaling $2.2 million in
1997  compared  to $1.4  million in 1996  (directly  associated  with  increased
revenues),  and increased sales,  advertising and  telemarketing  costs totaling
$10.6 million in 1997 compared to $8.9 million in 1996, due to the  introduction
of new  services,  various  marketing  plans and other  proprietary  rate plans.
Additionally, selling, general and administrative expenses increased in 1997 due
to an  increase  of  approximately  $2.6  million  in  engineering,  operations,
accounting,  human resources,  legal and regulatory,  and management information
services  expenses.   Such  costs  were  associated  with  the  development  and
introduction,  or planned  introduction,  of new products and services including
local  services,  cable  television  services,  rural message and data telephone
services, PCS services, and Internet services.  Cable services selling,  general
and administrative  costs totaled $13.7 million in 1997. Local services selling,
general and administrative costs totaled $1.8 million in 1997.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  expense increased
210.7% from $5.6  million in 1996 to $17.4  million in 1997.  Of this  increase,
$9.9  million  resulted  from the  Company's  acquisition  of the cable  systems
effective October 31, 1996, with the balance of the increase attributable to the
Company's  $38.6 million  investment in facilities  during 1996 for which a full
year of  depreciation  will be recorded during the year ending December 31, 1997
and the investment of $40.7 million in facilities through September 30, 1997 for
which a partial year of depreciation is being recorded during 1997.

INTEREST EXPENSE, NET. Interest expense, net of interest income,  increased from
$898,000 in 1996 to $12.7 million in 1997. This increase resulted primarily from
increases in the Company's average outstanding  indebtedness resulting primarily
from its acquisition of the cable systems and  construction of new facilities in
rural Alaska,  offset in part by increases in the amount of interest capitalized
during 1997.

INCOME TAX EXPENSE.  Income tax expense decreased from $4.6 million in 1996 to a
benefit of  $744,000  in 1997 due to the  Company  incurring  a net loss  before
income taxes and extraordinary item in 1997 as compared to net earnings in 1996.
The Company's effective income tax rate decreased from 41.8% in 1996 to 36.2% in
1997  due to the  net  loss  and the  proportional  amount  of  items  that  are
nondeductible for income tax purposes.

GCI, Inc. and its wholly owned subsidiaries file corporate income tax returns as
part of the General  Communication,  Inc. consolidated group of companies.  As a
result of its  acquisition of the cable  systems,  General  Communication,  Inc.
acquired net operating loss carryforwards  ("NOL  carryforwards") for income tax
purposes  totaling $58.5 million which are available to offset taxable income of
the  Company  and which 

                                       21

<PAGE>

begin to expire in 2004 if not utilized.  However,  the utilization of these NOL
carryforwards is subject to certain  limitations  pursuant to Section 382 of the
Internal Revenue Code. Because of the limitation on the NOL  carryforwards,  the
Company  established  an $8.1  million  valuation  allowance to offset the gross
amount of the  deferred tax asset.  The amount of the  valuation  allowance  was
based on an  estimate  of the amount of the NOL  carryforwards  that will not be
utilized,  and the effective  income tax rate.  The amount of deferred tax asset
considered realizable,  however, could be reduced if estimates of future taxable
income during the carryforward periods are reduced.

LOSS  ON   EXTINGUISHMENT   OF  DEBT.  The  Company   recorded  a  net  loss  on
extinguishment  of debt of  $433,000  in 1997  resulting  from  refinancing  its
previously outstanding Senior Credit Facility effective August 1, 1997. The loss
resulted from the write-off of  unamortized  deferred debt issuance  costs.  The
loss is reported in the accompanying  financial  statements net of an income tax
benefit of $268,000.

SEASONALITY; FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS

The following  chart provides  selected  unaudited  statement of operations data
from the Company's quarterly results of operations during 1996 and 1997:

<TABLE>
<CAPTION>

                                          (Dollars in thousands, except per share amounts)
                                         First       Second     Third       Fourth      Total 
                                        Quarter      Quarter    Quarter     Quarter      Year
                                     ----------------------------------------------------------
     Predeccessor 1996
     -----------------
<S>                                  <C>              <C>        <C>         <C>        <C>                
Revenues           
   Telecommunications services       $    37,969      39,199     38,664      39,587     155,419
   Cable services                            ---         ---        ---       9,475       9,475
                                     ----------------------------------------------------------
Total revenues                            37,969      39,199     38,664      49,062     164,894

Operating income                           3,947       3,970      4,017       4,475      16,409

Net earnings                         $     2,137       2,150      2,140       1,035       7,462
                                     ==========================================================

Net earnings per share               $      0.09        0.09       0.09        0.02        0.27    
                                     ==========================================================

Cable EBITDA                         $       ---         ---        ---       4,416       4,416   
                                     ==========================================================

Consolidated EBITDA                  $     5,834       5,888      5,829       8,267      25,818
                                     ==========================================================

                                       22
<PAGE>
                                          (Dollars in thousands, except per share amounts)
                                         First       Second     Third       Fourth      Total 
                                        Quarter      Quarter    Quarter     Quarter      Year
                                     ----------------------------------------------------------

      Successor 1997
      --------------
Revenues
   Telecommunications services       $    39,225      42,131     44,407                 125,763
   Cable services                         13,656      14,055     13,294                  41,005
   Local services                            ---         ---        255                     255
                                     ----------------------------------            ------------
Total revenues                            52,881      56,186     57,956                 167,023
                                                      

Operating income                           3,555       3,033      4,023                  10,611
Loss on early extinguishment 
of debt                                      ---         ---        433                     433

Net loss                             $     (287)       (687)      (772)                 (1,746)
                                     ==================================            ============

Net loss per share                   $   (2,870)     (6,870)    (7,720)                (17,460)
                                     ==================================            ============

Cable EBITDA                         $     6,025       5,863      5,687                  17,575      
                                     ==================================            ============

Consolidated EBITDA                  $     9,660       8,626      9,775                  28,061     
                                     ==================================            ============
</TABLE>
 
Total  revenues  in the quarter  ended  September  30, 1997 were $58.0  million,
representing  a 3.2% increase over total  revenues in the second quarter of 1997
of $56.2 million.  This increase in revenues resulted in part from (1) by a 5.5%
increase in  telecommunications  services revenues to $44.4 million in the third
quarter of 1997 from $42.1  million  during  the  second  quarter of 1997.  This
increase is  attributable  in part to the increase in minutes of traffic carried
during  the third  quarter  of 1997 of  approximately  9.0  million  minutes  as
compared to the second quarter of 1997 (a 4.8% increase), and (2) an increase in
the  average  rate  per  minute  billed  during  the  third  quarter  of 1997 of
approximately  $0.001  as  compared  to the  second  quarter  of  1997  (a  0.6%
increase).  Partially  offsetting this increase was a decrease in cable services
revenues to $13.3 million in the third quarter of 1997 from $14.1 million in the
second quarter of 1997. As further described below, cable revenues are generally
lower during the summer months as compared to the winter months.

Operating expenses increased during the third quarter of 1997 as compared to the
second  quarter of 1997  principally  as a result of (1)  operating  and turn-up
costs,  including rent and utilities,  of the Company's new rural DAMA satellite
earth-station facilities,  and (2) personnel,  sales,  engineering,  operations,
customer service, management information systems,  accounting,  human resources,
legal and regulatory  expenses associated with the development and introduction,
or planned introduction,  of new products and services including local services,
PCS services and Internet services.

The Company  expects that its EBITDA and EBITDA  margins during the remainder of
1997 may improve due to (1) cable  service  rate  increases  beginning  in April
1997, and (2) increased  revenue  generation  from the Company's rural telephony
expansion and new service and product offerings to offset expenses  generated by
these  endeavors.  The  Company  reported a net loss of  $772,000  for the third
quarter of 1997 as compared to a net loss of $687,000  during the second quarter
of 1997. The net loss was  attributable  to (1) increased  selling,  general and
administrative  costs  incurred  during the third quarter of 1997 as compared to
the  second  quarter  of  1997,  (2)  increased  interest  expense,  and (3) the
write-off of $701,000 in deferred debt issuance costs.

Long distance  revenues have historically been highest in the summer months as a
result of temporary population  increases  attributable to tourism and increased
seasonal economic activity such as construction, commercial fishing, and oil and
gas activities.  Cable television revenues, on the other hand, are higher in the

                                       23

<PAGE>

winter months because  consumers  spend more time at home and tend to watch more
television during these months. The Company's ability to implement  construction
projects is also reduced during the winter months because of cold  temperatures,
snow and short daylight hours.

ACCOUNTING PRONOUNCEMENTS

Financial  Accounting  Standards  No. 128,  Earnings Per Share,  supersedes  APB
Opinion No. 15, Earnings Per Share, and specifies the computation, presentation,
and  disclosure  requirements  for earnings per share  ("EPS") for entities with
publicly held common stock or common stock  equivalents.  The statement replaces
Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS,  respectively.
Basic EPS,  unlike  Primary EPS,  excludes all dilution  while Diluted EPS, like
Fully  Diluted  EPS,  reflects  the  potential  dilution  that  could  occur  if
securities or other  contracts to issue common stock were exercised or converted
into common  stock or resulted in the  issuance of common stock that then shared
in the earnings of the entity.

Due to an  immaterial  difference  between  Primary and Fully  Diluted  EPS, the
Company has historically  only presented a single EPS. The Company in the future
will  present  both Basic and  Diluted  EPS for income  (loss)  from  continuing
operations  and net income  (loss).  The  statement is effective  for  financial
statements  for both interim and annual  periods ending after December 15, 1997.
After adoption,  all prior period EPS data will be restated. The adoption of the
new statement will have minimal effect on the Company's EPS.

In February 1997, the Accounting Standards Board issued SFAS No. 129, Disclosure
Of Information About Capital  Structure.  SFAS No. 129 consolidates the existing
guidance in authoritative  literature relating to a company's capital structure.
SFAS No. 129 is effective  for  financial  statements  for periods  ending after
December 15,  1997.  Capital  structure  disclosures  required by this  standard
include  liquidation  preferences  of  preferred  stock,  information  about the
pertinent rights and privileges of the outstanding  equity  securities,  and the
redemption  amounts for all issues of capital stock that are redeemable at fixed
or determinable prices on fixed or determinable dates. Management of the Company
does not expect that adoption of SFAS No. 129 will have a material impact on the
Company's financial statement disclosures.

In June 1997,  the  Accounting  Standards  Board issued SFAS No. 130,  Reporting
Comprehensive  Income.  SFAS No. 130  establishes  standards  for  reporting and
display  of   comprehensive   income  and  its  components  in  a  full  set  of
general-purpose  financial  statements.  Statement  130  is  applicable  to  all
entities  that  provide  a full  set of  financial  statements  consisting  of a
statement of financial position,  results of operations and cash flows. SFAS No.
130 is effective for interim and annual  periods  beginning  after  December 15,
1997.  Management  of the Company does not expect that  adoption of SFAS No. 130
will have a material impact on the Company's financial statement disclosures.

In June 1997,  the  Accounting  Standards  Board issued SFAS No. 131,  Financial
Reporting  for  Segments of a Business  Enterprise  which  applies to all public
business enterprises. SFAS No. 131 specifies the computation,  presentation, and
disclosure   requirements  for  business  segment  information.   SFAS  No.  131
supersedes  SFAS  No.  14,  Financial  Reporting  for  Segments  of  a  Business
Enterprise,  but  retains  the  requirement  to report  information  about major
customers.   It  amends  SFAS  No.  94,   Consolidation  of  All  Majority-Owned
Subsidiaries,  to remove the  special  disclosure  requirements  for  previously
unconsolidated subsidiaries. Statement 131 is effective for financial statements
for periods  beginning  after December 15, 1997.  Management of the Company does
not expect  that  adoption  of SFAS No.  131 will have a material  impact on the
Company's financial statement disclosures.

                                       24


<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company reported cash flows from operating activities during the nine months
ended  September 30, 1997 of $15.9 million,  net of changes in the components of
working  capital.  Additional  sources  of cash  during  the nine  months  ended
September  30, 1997  included  long-term  borrowings  of $260.7  million and net
proceeds  from  General  Communication,  Inc.'s  class A common  stock  offering
totaling $46.3 million as further  described below.  The Company's  expenditures
for property and equipment,  including  construction in progress,  totaled $24.8
million and $40.7  million  during the nine months ended  September 30, 1996 and
1997,  respectively.  Uses of cash  during  the  first  three  quarters  of 1997
included  repayment of $229.9 million of long-term  borrowings and capital lease
obligations,  payment of deferred debt  issuance  costs,  underwriting  fees and
commissions  totaling  $9.3  million,  investment of $40.3 million in restricted
cash, payment of a undersea fiber optic cable deposit totaling $8.2 million, and
an increase in notes receivable of $596,000.

Net  receivables  increased $6.3 million from December 31, 1996 to September 30,
1997 resulting from: (1) increases in refundable  income taxes attributed to the
Company's  1997 net losses;  (2)  increased  MTS revenues in 1997 as compared to
1996; (3) increased amounts due from other common carriers  attributed to growth
in their traffic  carried by the Company;  and (4) increased  private line sales
activity in 1997 as compared to 1996.

The Company's Predecessor reported a working capital deficit of $22.8 million as
of December 31, 1996.  It's then existing  credit  facility  matured  within the
following  twelve-month  period  resulting  in  the  outstanding  balance  as of
December 31, 1996 being included in current maturities of long-term debt. Except
for the  classification  of senior  indebtedness as current,  working capital at
December 31, 1996 totaled $4.6  million.  Working  capital at September 30, 1997
totaled $5.4 million,  an $800,000  increase from working capital  recomputed at
December 31, 1996.

General  Communication,  Inc.  issued 7.0  million  shares of its class A common
stock on  August 1, 1997 for $7.25  per  share,  before  deducting  underwriting
discounts and commissions. Net proceeds to General Communication,  Inc. totaling
$47,959,100 were paid to GCI, Inc. as a capital contribution.  Concurrently with
the stock offering, $180.0 million of 9.75% senior notes due 2007 were issued to
the public by GCI, Inc. Net proceeds to GCI, Inc. after  deducting  underwriting
discounts and commissions totaled $174,600,000.

Concurrently  with the public  offerings  described  above,  GCI Holdings,  Inc.
("Holdings",  a newly created wholly-owned subsidiary of GCI, Inc.) entered into
new $200,000,000 and $50,000,000 credit facilities effective August 1, 1997. The
new facilities mature June 30, 2005 and bear interest at either Libor plus 0.75%
to  2.5%,  depending  on the  leverage  ratio of  Holdings  and  certain  of its
subsidiaries, or at the greater of the prime rate or the federal funds effective
rate (as defined) plus 0.05%,  in each case plus an  additional  0.0% to 1.375%,
depending  on the leverage  ratio of Holdings  and certain of its  subsidiaries.
$57,700,000 was drawn on the credit facilities as of September 30, 1997.

The new  credit  facilities  and the public  notes  impose  restrictions  on the
operations  and  activities  of the  Company,  including  requirements  that the
Company comply with certain financial covenants and financial ratios.  Under the
credit facility,  Holdings may not permit the ratio of senior debt to annualized
operating cash flow of Holdings and certain of its subsidiaries to exceed 3.5 to
1.0,  total debt to  annualized  operating  cash flow to exceed 7.0 to 1.0,  and
annualized operating cash flow to interest expense to exceed 1.5 to 1.0. Each of
the foregoing  ratios decreases in specified  increments  during the life of the
credit  facility.  The credit facility will also require  Holdings to maintain a
ratio of annualized  operating cash flow to debt service of Holdings and certain
of its subsidiaries of at least 1.25 to 1.0, and annualized  operating cash flow
to fixed charges of at least 1.0 to 1.0 (which  adjusts to 1.05 to 1.0 in April,
2003 and thereafter).  The credit facility will also limit capital  expenditures
of  Holdings  and  certain of its  subsidiaries  to no more than  $55.0  million
(post-closing),  $90.0  million,  and  $65.0  million  in 1997,  1998 and  1999,
respectively.  The public notes 

                                       25

<PAGE>

impose a  requirement  that the leverage  ratio of GCI,  Inc. and certain of its
subsidiaries  will not exceed 7.5 to 1.0 prior to  December  31, 1999 and 6.0 to
1.0  thereafter,  subject  to the  ability  of  GCI,  Inc.  and  certain  of its
subsidiaries to incur specified  permitted  indebtedness  without regard to such
ratios.

Net proceeds from the Predecessor's public offerings that were contributed to
GCI, Inc. and new credit  facility  were used to retire  amounts owing under the
existing credit agreements,  fund $50 million in capital for use in constructing
an undersea fiber optic cable, and for working capital requirements.

The Company anticipates that its capital  expenditures in 1997 may total as much
as $75.0 million.  Planned capital expenditures over the next five years include
$240.0 million to $260.0 million to fund expansion of long distance  facilities,
(including   approximately   $40.0  million  for  satellite   transponders   and
approximately  $115.0 to $125.0  million  for new  undersea  fiber  optic  cable
facilities  which will be financed by GCI Transport  Co.,  Inc., a newly created
subsidiary of GCI Holdings,  Inc.) between  $140.0 million and $160.0 million to
fund development, construction and operating costs of its local exchange and PCS
networks and businesses;  and between $65.0 million and $85.0 million to upgrade
its cable  television  plant and to purchase  equipment for new cable television
services.  Sources of funds for these planned capital  expenditures  include net
proceeds of the public  offerings  described  above,  internally  generated cash
flows and borrowings under the Company's new credit  facilities  described above
and its separate  committed  financing for GCI Transport Co., Inc., all of which
funds will be necessary to complete the Company's planned capital expenditures.

Management  expects that cash flow generated by the Company and borrowings under
its  credit   facilities   will  be  sufficient  to  meet  its  planned  capital
expenditures and working capital  requirements.  The Company's ability to invest
in  discretionary  capital and other  projects  will depend upon its future cash
flows and access to borrowings under its credit facilities.

INFLATION

The Company  does not believe that  inflation  has a  significant  effect on its
operations.

                                       26
<PAGE>


PART II.   OTHER INFORMATION

ITEM 1.    Legal Proceedings

           Information  regarding pending legal proceedings to which the Company
           is a party  is  included  in Note 4 of  Notes  to  Interim  Condensed
           Consolidated  Financial  Statements  and is  incorporated  herein  by
           reference.

ITEM 6.    Exhibits and Reports on Form 8-K

           (a)  Exhibits:
                Exhibit 27 - Financial Data Schedule

           (b)  Reports on Form 8-K filed during the quarter ended September 30,
                1997 (filed by General  Communication,  Inc. as  predecessor  to
                GCI, Inc.): Report dated August 1, 1997 describing Alaska United
                Fiber   System   Partnership's   down  payment  on  a  financial
                commitment  to proceed with the  construction  of a $115 to $125
                million fiber optic  submarine cable system linking the state of
                Alaska,  with landings in Juneau,  Whittier and Valdez,  Alaska,
                with the state of  Washington,  with a landing in Richmond Beach
                at Puget Sound near Seattle, Washington.

                                       27
<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  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.



                                    GCI, INC.



      November 14, 1997          By:   /s/ Ronald A. Duncan
----------------------------           ----------------------
           (Date)                      Ronald A. Duncan, President and Director
                                       (Principal Executive Officer)



      November 14, 1997          By:   /s/ John M. Lowber
----------------------------           --------------------
           (Date)                      John M. Lowber, Senior Vice President and
                                       Chief Financial Officer
                                       (Principal Financial Officer)



      November 14, 1997          By:  /s/ Alfred J. Walker
----------------------------          ----------------------
           (Date)                     Alfred J. Walker, Vice President and
                                      Chief Accounting Officer
                                      (Principal Accounting Officer)



                                       28