As filed with the Securities and Exchange Commission on November 16, 1998.

                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, 1998

                                       OR

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

         For the transition period from              to 

                           Commission File No. 0-15890

                                   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 .

        Securities registered pursuant to Section 12(b) of the Act: None

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

                 $180,000,000 9.75% Senior Notes due August 2007


                                       1
<PAGE>
<TABLE>
                                      INDEX

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

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998
<CAPTION>

                                                                                                    PAGE NO
                                                                                                    -------
<S>                                                                                                       <C> 
PART I.  FINANCIAL INFORMATION

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

                               Consolidated Balance Sheets as of September 30, 1998
                                  (unaudited) and December 31, 1997.......................................3

                               Consolidated Statements of Operations for the three
                                  and nine-month periods ended September 30, 1998
                                  (unaudited) and 1997 (unaudited)........................................5

                               Consolidated Statements of Stockholders' Equity
                                  for the nine months ended September 30, 1998
                                  (unaudited) and 1997 (unaudited)........................................6

                               Consolidated Statements of Cash Flows for the nine
                                  months ended September 30, 1998 (unaudited)
                                  and 1997 (unaudited)....................................................7

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

                  Item 2.      Management's Discussion and Analysis of Financial
                                 Condition and Results of Operations......................................15


PART II.  OTHER INFORMATION

                  Item 1.      Legal Proceedings..........................................................29

                  Item 6.      Exhibits and Reports on Form 8-K...........................................29


SIGNATURES................................................................................................30
</TABLE>


                                       2
<PAGE>
<TABLE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS


                                                    GCI, INC. AND SUBSIDIARIES
                                                    CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                             (Unaudited)
                                                                           September 30,     December 31,
                            ASSETS                                             1998              1997
---------------------------------------------------------------------    ----------------- -----------------
                                                                                 (Amounts in thousands)
<S>                                                                    <C>                        <C> 
Current assets:
     Cash and cash equivalents                                         $          7,499             3,048
                                                                         ----------------- -----------------
     Receivables:
         Trade                                                                   37,118            29,599
         Income taxes                                                             4,200             4,752
         Other                                                                      374               649
                                                                         ----------------- -----------------
                                                                                 41,692            35,000
     Less allowance for doubtful receivables                                      1,000             1,070
                                                                         ----------------- -----------------
         Net receivables                                                         40,692            33,930

     Prepaid and other current assets                                             2,814             2,520
     Deferred income taxes, net                                                   3,716             1,675
     Inventories                                                                  2,397             2,164
     Notes receivable                                                               509               897
                                                                         ----------------- -----------------

         Total current assets                                                    57,627            44,234

Restricted cash (note 4)                                                            ---            39,406
                                                                         ----------------- -----------------

Property and equipment in service, net                                          194,755           165,993
Construction in progress                                                        110,555            18,513
                                                                         ----------------- -----------------
         Net property and equipment                                             305,310           184,506
                                                                         ----------------- -----------------

Other assets:
     Cable franchise agreements, net of amortization                            196,600           200,470
     Other intangible assets, net of amortization                                45,677            46,064
     Deferred loan and Senior Notes costs, net of amortization                   10,128             9,379
     Transponder deposit (note 4)                                                 9,100             9,100
     Undersea fiber optic cable deposit (note 4)                                    ---             9,094
     Notes receivable                                                             1,436             1,331
     Other assets, at cost, net of amortization                                   4,136             1,718
                                                                         ----------------- -----------------
         Total other assets                                                     267,077           277,156
                                                                         ----------------- -----------------

         Total assets                                                  $        630,014           545,302
                                                                         ================= =================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.


                                       3                            (Continued)
<PAGE>
<TABLE>

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

                                                                                      (Unaudited)
                                                                                     September 30,      December 31,
                       LIABILITIES AND STOCKHOLDERS' EQUITY                              1998               1997
          --------------------------------------------------------------------     ----------------- -----------------
                                                                                          (Amounts in thousands)
             <S>                                                                 <C>                      <C>  
             Current liabilities:
                Current maturities of long-term debt (note 3)                    $          1,744           1,634
                Current maturities of obligations under capital leases                        411             198
                Accounts payable                                                           26,238          26,015
                Accrued interest                                                            4,016           7,649
                Accrued payroll and payroll related obligations                             5,687           4,344
                Accrued liabilities                                                         5,154           5,397
                Subscriber deposits and deferred revenues                                   4,868           3,898
                Accrued income taxes                                                          ---             111
                                                                                   ----------------- -----------------
                   Total current liabilities                                               48,118          49,246

             Long-term debt, excluding current maturities (note 3)                        337,332         248,450
             Obligations under capital leases, including related party
                obligations, excluding current maturities                                   1,361             990
             Deferred income taxes, net of deferred income tax benefit                     40,905          38,904
             Other liabilities                                                              3,327           3,273
                                                                                   ----------------- -----------------
                   Total liabilities                                                      431,043         340,863
                                                                                   ----------------- -----------------

             Stockholders' equity:
             Common stock (no par):
                Class A.  Authorized 10,000 shares; issued and outstanding
                   100 shares at September 30, 1998 and December 31, 1997,
                   respectively                                                           206,622         206,622
             Paid-in capital                                                                  858             ---
             Parent General Communication, Inc. Class A common stock held in
                treasury, 145,190 shares at September 30, 1998                              (568)             ---
             Retained deficit                                                             (7,941)         (2,183)
                                                                                   ----------------- -----------------
                   Total stockholders' equity                                             198,971         204,439
                                                                                   ----------------- -----------------
             Commitments and contingencies (note 4)
                   Total liabilities and stockholders' equity                    $        630,014         545,302
                                                                                   ================= =================
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       4
<PAGE>
<TABLE>

                           GCI, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>

                                                             (Unaudited)                         (Unaudited)
                                                          Three Months Ended                  Nine Months Ended
                                                            September 30,                       September 30,
                                                         1998           1997                1998              1997
                                                     -------------- ---------------    ---------------- -----------------
                                                              (Amounts in thousands, except per share amounts)
<S>                                                <C>                     <C>               <C>               <C>  
Revenues:
   Telecommunication services                      $       48,282          44,662             141,133           126,018
   Cable services                                          14,484          13,294              42,726            41,005
                                                     -------------- ---------------    ---------------- -----------------
     Total revenues                                        62,766          57,956             183,859           167,023

Cost of sales and services                                 29,690          28,868              86,360            85,814
Selling, general and administrative                        23,004          19,535              66,881            53,850
Depreciation and amortization                               8,342           5,767              25,004            17,495
                                                     -------------- ---------------    ---------------- -----------------

     Operating income                                       1,730           3,786               5,614             9,864

Interest expense, net                                       4,987           4,588              14,698            12,765
                                                     -------------- ---------------    ---------------- -----------------

     Net loss before income taxes and
       extraordinary item                                 (3,257)           (802)             (9,084)           (2,901)


Income tax benefit                                        (1,181)           (307)             (3,326)           (1,049)
                                                     -------------- ---------------    ---------------- -----------------

     Net loss before extraordinary loss on
       early extinguishment of debt                       (2,076)           (495)             (5,758)           (1,852)

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

     Net loss                                      $      (2,076)           (928)             (5,758)           (2,285)
                                                     ============== ===============    ================ =================

Basic loss per common share:
   Net loss before extraordinary loss              $     (20,760)         (3,390)            (57,580)          (13,130)
   Extraordinary loss                                         ---         (4,330)                 ---           (4,330)
                                                     -------------- ---------------    ---------------- -----------------
     Net loss                                      $     (20,760)         (7,720)            (57,580)          (17,460)
                                                     ============== ===============    ================ =================

Diluted loss per common share:
   Net loss before extraordinary loss              $     (20,760)         (3,390)            (57,580)          (13,130)
   Extraordinary loss                                         ---         (4,330)                 ---           (4,330)
                                                     -------------- ---------------    ---------------- -----------------
     Net loss                                      $     (20,760)         (7,720)            (57,580)          (17,460)
                                                     ============== ===============    ================ =================
</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, 1998 AND 1997
<CAPTION>

                                                                                                          Parent
                                                                                                          Class A
      (Unaudited)                                                                                         Common
      (Amounts in thousands)                              Shares of Class         Class A                 Stock
                                                             A Common             Common       Paid-in    Held in    Retained
                                                               Stock              Stock        Capital    Treasury   Deficit
                                                         --------------------------------------------------------------------
      <S>                                                       <C>              <C>              <C>      <C>       <C> 
      Balances at December 31, 1996                             ---              $     ---        ---        ---         ---
      Net loss                                                  ---                    ---        ---        ---     (1,746)
      Shares issued to parent General
         Communication, Inc.                                    100                205,870        ---        ---         ---
                                                         --------------------------------------------------------------------
      Balances at September 30, 1997                            100              $ 205,870        ---        ---     (1,746)
                                                         ====================================================================

      Balances at December 31, 1997                             100              $ 206,622        ---        ---     (2,183)
      Net loss                                                  ---                    ---        ---        ---     (5,758)
      Contribution from parent
         General Communication, Inc.                            ---                    ---        858        ---         ---
      Purchase of parent General Communication, Inc.'s
         Class A common stock                                   ---                    ---        ---      (568)         ---
                                                         --------------------------------------------------------------------
      Balances at September 30, 1998                            100              $ 206,622        858      (568)     (7,941)
                                                         ====================================================================
</TABLE>
      See accompanying notes to consolidated financial statements.



                                       6
<PAGE>
<TABLE>
                           GCI, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                              (Unaudited)
                                                                                            Nine Months Ended
                                                                                             September 30,
                                                                                         1998           1997
                                                                                     -------------- ------------
                                                                                      (Amounts in thousands)
        <S>                                                                       <C>                <C> 
        Cash flows from operating activities:
             Net loss                                                             $       (5,758)      (2,285)
             Adjustments to reconcile net loss to net cash provided by
               operating activities:
                 Depreciation and amortization                                             25,004       17,495
                 Deferred income tax expense                                                 (10)        3,956
                 Deferred compensation and compensatory stock options                         290           44
                 Bad debt expense, net of write-offs                                         (70)          312
                 Other noncash income and expense items                                       127          ---
                 Loss on early extinguishment of debt                                         ---          701
                 Change in operating assets and liabilities (note 2)                      (8,253)      (4,930)
                                                                                     -------------- ------------
              Net cash provided by operating activities                                    11,330       15,293
                                                                                     -------------- ------------

        Cash flows from investing activities:
                 Purchases of property and equipment, including
                   construction period interest                                         (130,167)     (40,699)
                 Restricted cash investment                                                39,406     (40,253)
                 Payment of undersea fiber optic cable deposit                                ---      (8,247)
                 Purchases of other assets                                                (2,991)        (935)
                 Notes receivable issued                                                    (939)        (596)
                 Payments received on notes receivable                                      1,095            7
                                                                                     -------------- ------------
              Net cash used in investing activities                                      (93,596)     (90,723)
                                                                                     -------------- ------------

        Cash flows from financing activities:
               Long-term borrowings - Senior Notes                                            ---      180,000
               Long-term borrowings - bank debt and leases                                 89,219       80,700
               Repayments of long-term borrowings and
                 capital lease obligations                                                  (494)    (229,887)
               Capital contribution from parent General Communication, Inc.                   175       46,256
               Payment of debt issuance costs (note 3)                                    (1,615)      (9,251)
               Purchase of parent General Communication, Inc. common stock                  (568)          ---
                                                                                      ------------- ------------
            Net cash provided by financing activities                                      86,717       67,818
                                                                                      ------------- ------------

            Net (increase) decrease in cash and cash equivalents                            4,451      (7,037)

            Cash and cash equivalents at beginning of period                                3,048       13,349
                                                                                      ------------- ------------

            Cash and cash equivalents at end of period                            $         7,499        6,312
                                                                                      ============= ============
</TABLE>
See accompanying notes to interim condensed consolidated financial statements.



                                       7
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


(1)        General

           (a)  Organization

           GCI, Inc., an Alaska  corporation,  was incorporated in 1997 and is a
           wholly owned subsidiary of General Communication,  Inc. ("GCI"). GCI,
           an  Alaska  corporation,   was  incorporated  in  1979.  All  assets,
           liabilities and operating activities of GCI not conducted through its
           subsidiaries were transferred to GCI, Inc. effective January 1, 1998.

           GCI Holdings,  Inc. ("Holdings") is a wholly owned subsidiary of GCI,
           Inc. and was incorporated in 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, GCI, Inc.,  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.  GCI,  GCI,  Inc.,  Holdings and GCC also provide
           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
           its 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.

           GCI Transport Co.,  Inc.,  Fiber Hold Co., Inc., GCI Fiber Co., Inc.,
           and  GCI  Satellite  Co.,  Inc.,   all  Alaska   corporations,   were
           incorporated   in  1997  to  finance  the  acquisition  of  satellite
           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 Co.,  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 in note 4. Alaska United is a
           partnership  wholly owned by the Company  through GCI Fiber Co., Inc.
           and Fiber Hold Co., Inc.



                                       8                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


           (b)  Net Loss Per Common Share
<TABLE>
           Shares used to  calculate  net loss per common  share  consist of the
           following (amounts in thousands):
<CAPTION>
                                                           Three Months Ended                  Nine Months Ended
                                                              September 30,                      September 30,
                                                         1998             1997              1998             1997
                                                     -------------- -----------------    ------------- -----------------
                 <S>                                      <C>              <C>                <C>             <C>     
                 Weighted average common shares
                   outstanding                            100              100                100             100
                                                     ============== =================    ============= =================
</TABLE>
           Basic  and  diluted  loss per  share  calculations  are based on GCI,
           Inc.'s  outstanding  shares of common  stock  which are not  publicly
           traded. GCI, Inc. has no outstanding common stock equivalents.

           (c) Reclassifications

           Reclassifications  have been made to the 1997 financial statements to
           make them comparable with the 1998 presentation.

           (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 nine-month period ended September 30, 1998
           are not  necessarily  indicative  of the results that may be expected
           for the year ended December 31, 1998. For further information,  refer
           to the financial  statements  and footnotes  thereto  included in the
           Company's  annual report on Form 10-K for the year ended December 31,
           1997.



                                       9                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


(2)        Consolidated Statements of Cash Flows Supplemental Disclosures
<TABLE>
           Changes in operating assets and liabilities consist of:
<CAPTION>
                Nine-month periods ended September 30,                              1998           1997
                --------------------------------------
                                                                              --------------- --------------
                                                                                 (Amounts in thousands)
                 <S>                                                        <C>                     <C>
                 Increase in receivables                                    $        (6,803)        (6,583)
                 Increase in prepaid and other current assets                          (294)          (866)
                 Increase in inventory                                                 (233)        (1,624)
                 Increase in accounts payable                                            223          1,165
                 Increase in accrued liabilities                                         440          2,301
                 Increase (decrease) in accrued payroll and payroll
                     related obligations                                               1,343           (70)
                 Increase (decrease) in accrued interest                             (3,633)            648
                 Increase in deferred revenues                                           970            428
                 Increase in other liabilities                                             3            ---
                                                                              --------------- --------------
                                                                            $        (7,984)        (4,601)
                                                                              =============== ==============
</TABLE>
           Holders of the Company's $10 million  convertible  subordinated notes
           exercised  their  conversion  rights in January 1997 resulting in the
           exchange of such notes for  1,538,457  shares of GCI's Class A common
           stock.

           The Company  received  income tax refunds of $3,750,000  and $180,000
           during the  nine-month  periods  ended  September  30, 1998 and 1997,
           respectively. No income taxes were paid during the nine-month periods
           ended September 30, 1998 and 1997.

           Interest  paid  totaled   $24,058,000  and  $15,324,000   during  the
           nine-month periods ended September 30, 1998 and 1997, respectively.

           During the  nine-month  period ended  September  30, 1998 the Company
           funded the employer  matching  portion of the Employee Stock Purchase
           Plan by issuing a dividend to GCI in exchange  for GCI Class A Common
           Stock valued at $414,000.



                                       10                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


(3)        Long-term Debt

           In January 1998,  Alaska United closed a $75 million  project finance
           facility  ("Fiber  Facility") to construct a fiber optic cable system
           connecting Anchorage, Fairbanks, Valdez, Whittier, Juneau and Seattle
           as further described in note 4. The Fiber Facility provides up to $75
           million in  construction  financing  and will bear interest at either
           Libor plus 3.0%, or at the Company's choice,  the lender's prime rate
           plus 1.75%.  The interest rate will decline to Libor plus 2.5%-2.75%,
           or at the Company's  choice,  the lender's prime rate plus 1.25%-1.5%
           after  the  project  completion  date and when  the loan  balance  is
           $60,000,000  or less.  Alaska  United is required to pay a commitment
           fee  equal  to  0.375%  per  annum  on  the  unused  portion  of  the
           commitment.  The  Fiber  Facility  is a  10-year  term  loan  that is
           interest only for the first 5 years.  The facility can be extended to
           a 12  year  term  loan at any  time  between  the  second  and  fifth
           anniversary  of closing the  facility if the Company can  demonstrate
           projected   revenues  from  certain  capacity   commitments  will  be
           sufficient  to pay all  operating  costs,  and interest and principal
           installments based on the extended maturity.

           The  Fiber  Facility  contains,  among  others,  covenants  requiring
           certain intercompany loans and advances in order to maintain specific
           levels of cash flow  necessary to pay operating  costs,  interest and
           principal  installments.  Additional  covenants pertain to the timely
           completion  of certain  project  construction  milestones.  The Fiber
           Facility also contains a guarantee that  requires,  among other terms
           and conditions,  Alaska United complete the project by the completion
           date and pay any non-budgeted costs of the project. Alaska United was
           in compliance with all covenants during the period commencing January
           1998 (date of the Fiber Facility) through September 30, 1998.

           All of Alaska United's assets, as well as a pledge of the partnership
           interests' owning Alaska United, collateralize the Fiber Facility.

           The Company was in compliance  with all covenants of its senior notes
           and senior credit facility through September 30, 1998.

  (4)      Commitments and Contingencies

           Deferred Compensation Plan

           During 1995, the Company adopted a non-qualified,  unfunded  deferred
           compensation  plan to provide a means by which certain  employees may
           elect to defer receipt of designated  percentages or amounts of their
           compensation  and to provide a means for certain  other  deferrals of
           compensation. The Company may, at its discretion, contribute matching
           deferrals  equal to the rate of  matching  selected  by the  Company.
           Participants  immediately  vest  in all  elective  deferrals  and all
           income and gain attributable thereto.  Matching contributions and all
           income and gain  attributable  thereto  vest over a six-year  period.
           Participants may elect to be paid in either a single lump sum payment
           or annual  installments over a period not to exceed 10 years.  Vested
           balances  are payable  upon  


                                       11                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


           termination of employment,  unforeseen  emergencies,  death and total
           disability.  Participants  are general  creditors of the Company with
           respect to deferred compensation plan benefits. Compensation deferred
           pursuant  to the plan  totaled $0 and $89,000  during the  nine-month
           periods ended September 30, 1998 and 1997, respectively.

           Satellite Transponders

           The  Company  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 launch of the  satellite in August 1998  failed.  The Company did
           not assume  launch risk and the launch has been  rescheduled  for the
           fourth   quarter  of  1999.   The  Company  will  continue  to  lease
           transponder  capacity until the delivery of the  transponders  on the
           replacement satellite.  The balance payable upon expected delivery of
           the transponders during the fourth quarter of 1999 in addition to the
           $9.1  million  deposit  previously  paid totals  approximately  $43.5
           million.

           Litigation

           The  Company is from time to time  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, 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 Reregulation

           Beginning  in  April  1993,  the  Federal  Communications  Commission
           ("FCC")  adopted   regulations   implementing  the  Cable  Television
           Consumer  Protection and  Competition  Act of 1992 ("The Cable 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 


                                       12                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


           petition with the APUC.  At September  30, 1998,  the State of Alaska
           has rate regulation  authority over the Juneau system's basic service
           rates. (The Juneau system serves  approximately 8.4% of the Company's
           total basic service  subscribers  at September  30,  1998.)  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, a  telecommunications  bill 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.

           Undersea Fiber Optic Cable Contract Commitment

           The Company  signed a contract in July 1997 for  construction  of the
           undersea   portion  of  a  $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.  Subsea  construction
           efforts began in September 1998 with commercial  services expected to
           commence in January or February 1999.  Pursuant to the contract,  the
           Company made progress  payments of $9.1 million during the year ended
           December  31, 1997 and $75.9  million  during the  nine-month  period
           ended September 30, 1998. The Company will pay the remaining  balance
           in  installments  through January 1999 based on completion of certain
           key  milestones.  Approximately  $39.4  million of proceeds  from the
           senior notes  offering,  net of the $9.1  million paid in 1997,  were
           contributed to Alaska United. The use of such proceeds was restricted
           to funding the  construction  and deployment of the fiber optic cable
           system  and was  reported  as  Restricted  Cash  in the  accompanying
           Interim Condensed  Consolidated  Financial Statements at December 31,
           1997. In January 1998, the Company  secured up to $75 million in bank
           financing to fund the expected  remaining  cost of  construction  and
           deployment  (see note 3), of which $54.2 million has been borrowed at
           September 30, 1998.


                                       13                            (Continued)
<PAGE>
                           GCI, INC. AND SUBSIDIARIES

          NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


           Fiber Capacity Exchange

           The  Company  and Kanas  Telecom,  Inc.  ("Kanas")  signed a contract
           November 21, 1997 that  provides for an exchange of fiber optic cable
           capacity between Anchorage and Fairbanks via Valdez.  The Company and
           Kanas will trade unused fiber capacity connecting Fairbanks,  Valdez,
           Whittier  and   Anchorage.   Each  company  will  provide  their  own
           electronic  equipment to place their fiber into service.  The Company
           will  provide  Kanas  with  unused  fiber  capacity  from  Valdez  to
           Anchorage.  Kanas will provide the Company with unused fiber capacity
           between Valdez and Fairbanks.



                                       14
<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.

                      FACTORS AFFECTING FUTURE PERFORMANCE
                         AND FORWARD LOOKING STATEMENTS

        Certain  statements  in this  quarterly  report on Form 10-Q  constitute
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation Reform Act of 1996 ("Securities Reform Act"). These statements may be
preceded  by,  followed  by,  or  include  the  words   "believes,"   "expects,"
"anticipates," or similar expressions.  For those statements, the Company claims
protection of the safe-harbor for  forward-looking  statements  contained in the
Securities Reform Act. Such forward-looking statements involve known and unknown
risks,  uncertainties  and other  important  factors that could cause the actual
results,  performance and achievements of the Company,  or industry results,  to
differ materially from future results,  performance or achievements expressed or
implied by such statements. The reader is cautioned that important factors, such
as the following risks,  uncertainties,  and other factors, in addition to those
contained  elsewhere  in this  document,  could  affect  future  results  of the
Company, its long-distance  telecommunication  services,  local access services,
and cable services and could cause those results to differ materially from those
expressed in the forward-looking statements:

           - Material adverse changes in the economic  conditions in the markets
             served by the Company
           - Regulatory and competitive  environment of the business segments in
             which the Company operates
           - Uncertainties  inherent  in new  business  strategies,  new product
             launches and development  plans,  including local access  services,
             Internet  services,  PCS services,  digital video  services,  cable
             modem services, and transmission services
           - Rapid technological changes
           - Development and financing of telecommunication,  local access, PCS,
             and cable networks and services
           - Future financial  performance,  including  availability,  terms and
             deployment of capital
           - Availability of qualified personnel
           - Changes in, or failure,  or inability,  to comply with,  government
             regulations,  including,  without  limitation,  regulations  of the
             Federal  Communications  Commission,  the Alaska  Public  Utilities
             Commission, and adverse outcomes from regulatory proceedings
           - Competitor  responses  to the  Company's  products and services and
             overall market acceptance of such products and services
           - The  Company's  responses  to  competitive  products,  services and
             pricing
           - The cost of the Company's year 2000 compliance efforts
           - Uncertainties in federal military spending levels and military base
             closures in markets in which the Company operates



                                       15                            (Continued)
<PAGE>
      These forward-looking  statements (and such risks, uncertainties and other
factors)  are made only as of the date of this report and the Company  expressly
disclaims any obligation or undertaking to disseminate  any updates or revisions
to any  forward-looking  statement  contained  in this  document  to reflect any
change in the  Company's  expectations  with regard to those  statements  or any
other change in events,  conditions or circumstances on which any such statement
is based.


                                    OVERVIEW

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.,  now MCI  WorldCom  ("MCI")  and  Sprint  Corporation  ("Sprint")).  These
services accounted for approximately  90.7% of the Company's  telecommunications
services   revenues   during  the  third   quarter  of  1998.   The  balance  of
telecommunications services revenues have been attributable to corporate network
management contracts,  telecommunications  equipment sales and service, Internet
services and other  miscellaneous  revenues (including revenues from prepaid and
debit calling  cards,  the  installation  and leasing of  customers'  very small
aperture  terminal  ("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 long distance  telecommunication  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, fisheries,  government and United
States military spending.

      The Company's long distance  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 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 third  quarter of 1998,  local access  charges
accounted for 41.3% of telecommunications  cost of sales and services, fees paid
to other long distance carriers represented 33.4%,  satellite  transponder lease
and undersea fiber maintenance costs represented 9.2%,  enterprise  services and
outsourcing  costs   represented  6.4%,   cellular  costs  accounted  for  3.6%,
telecommunications  equipment  costs  accounted for 3.6%, and Internet and other
costs accounted for the remaining 2.5% of  telecommunications  cost of sales and
services.

      The  Company's  long distance  telecommunications  selling,  general,  and
administrative  expenses have consisted of operating and  engineering,  customer
service, sales and communications,  management information systems,  general and
administrative,  and  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,  insurance  and  property  taxes).  A
significant portion of long distance  telecommunications  selling,  general, and
administrative  expenses, 25.4% during the third quarter of 1998, represents the
cost of the Company's advertising, promotion and market analysis programs.



                                       16                            (Continued)
<PAGE>
      Long distance  telecommunications  services face  significant  competition
from AT&T  Alascom,  Inc.,  long-distance  resellers,  and from local  telephone
companies  that have  entered  the  long-distance  market.  The number of active
long-distance  customers billed by the Company has decreased  approximately 4.5%
during the third quarter of 1998,  has decreased  approximately  6.7% during the
first  three  quarters  of  1998,  and has  decreased  approximately  8.3%  from
September  30,  1997.  Gains in the  number of  commercial  and  small  business
customers  billed  were  more  than  offset  by a  reduction  in the  number  of
residential  customers  billed.  Increased usage volumes and traffic carried for
other common carriers have generally offset usage  reductions  attributed to the
decrease  in the number of active  residential  customers  billed.  The  Company
believes  its  approach to  developing,  pricing,  and  providing  long-distance
telecommunication  services  will  continue  to  allow it to be  competitive  in
providing those services.

      Cable  services.   During  the  third  quarter  of  1998,  cable  revenues
represented  23.1%  of  consolidated   revenues.  The  cable  systems  serve  26
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 third
quarter of 1998  programming  services  generated  85.3% of total cable services
revenues,  equipment  rental and  installation  fees  accounted for 7.8% of such
revenues,  and advertising sales and other services  accounted for the remaining
6.9% 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' cost of sales and selling,  general and  administrative
expenses have  consisted  principally  of  programming  and copyright  expenses,
labor, maintenance and repairs,  marketing and advertising,  rental expense, and
property  taxes.  During the third  quarter of 1998  programming  and  copyright
expenses  represented  approximately  40.0% of  total  cable  cost of sales  and
selling,  general and administrative  expenses.  Marketing and advertising costs
represented approximately 9.6% of such total expenses.

      Cable services face competition from alternative  methods of receiving and
distributing  television signals and from other sources of news, information and
entertainment.  The Company believes its cable television services will continue
to be competitive based on providing, at reasonable prices, a greater variety of
programming  and other  communication  services  than are  available  off-air or
through  other  alternative   delivery  sources  and  upon  superior   technical
performance and customer service.

      Local access services.  The Company began offering local exchange services
in Anchorage  during late September 1997 and provided  service to  approximately
26,700 lines at September 30, 1998.  Approximately  2,500  additional lines were
sold and awaiting  connection at September  30, 1998.  Local  exchange  services
revenues totaled $2.7 million during the third quarter of 1998 representing 4.4%
of total third quarter 1998 revenues.



                                       17                            (Continued)
<PAGE>
      During  the third  quarter  of 1998  operating  and  engineering  expenses
represented approximately 10.7% of total local access services cost of sales and
selling,  general and administrative  expenses.  Marketing and advertising costs
represented approximately 7.8% of such total expenses, and customer service, and
general and administrative  costs represented  approximately 81.5% of such total
expenses.

      The Company  expects that its local  exchange  services  will  continue to
generate  operating losses during 1998 and a portion of 1999.  Factors that have
the greatest  impact on year-to-year  changes in local access services  revenues
include the rates charged to customers and the number of customers served.

      The Company's local access services face significant  competition from the
Anchorage Telephone Utility ("ATU") and AT&T Alascom,  Inc. The Company believes
its   approach   to   developing,    pricing,   and   providing   local   access
telecommunication  services  will  continue  to  allow it to be  competitive  in
providing those services.

      In  October   1998  the   Municipality   of  Anchorage   approved   Alaska
Communications  Systems,  Inc.'s ("ACS") offer to acquire the operations of ATU.
ACS is an  entity  formed  by Fox  Paine &  Company,  LLC  ("Fox  Paine")  and a
management team led by former executives of Pacific Telecom,  Inc. ("PTI").  The
sale of ATU was  approved  by the  citizens of the  Municipality  in April 1998.
Consummation  of the  transaction  is subject to  regulatory  approval and other
conditions.

      Century Telephone Enterprises, Inc. ("CenturyTel") reported in August 1998
that it  entered  into a  definitive  agreement  to sell the stock of its Alaska
operations  to ALEC  Acquisition  Corporation  ("ALEC").  ALEC is led by  former
executives of PTI and Fox Paine.  It is anticipated  that the  transaction  will
close in first  quarter  1999,  subject to  regulatory  approvals  and customary
closing conditions. CenturyTel acquired the Alaska properties as part of the PTI
acquisition completed in December 1997.

      Management  of  the  Company  does  not  believe  the  sale  of ATU or the
CenturyTel  properties  will have a  material  adverse  effect on the  Company's
financial position or results of operations.

      Internet services. The Company's statewide SchoolAccess services (Internet
access and related products and services for Alaska schools)  commenced  January
1998. Internet  SchoolAccess  revenues totaled $613,000 during the third quarter
of 1998 representing  1.0% of total revenues.  The Company began offering retail
Internet  services  in April  1998.  Factors  that have the  greatest  impact on
year-to-year  changes in Internet services revenues include the rates charged to
customers and the number of customers served.

      The Company  competes  with  several  Internet  service  providers  in its
markets. The Company believes its approach to developing, pricing, and providing
Internet services will continue to allow it to be competitive in providing those
services.

      PCS  services.  The  Company  began  developing  plans  for  PCS  wireless
communications service deployment in 1995 and subsequently conducted a technical
trial of its candidate technology.  The Company has invested  approximately $2.1
million in its PCS license at September 30, 1998.  PCS licensees are required to
offer service to at least one-third of their market population within five 



                                       18                            (Continued)
<PAGE>
years or risk losing their  licenses.  Service must be extended to two-thirds of
the  population  within 10 years.  The  Company is  currently  reevaluating  its
wireless strategy and expects to complete such reevaluation  within the next six
months.  The Company expects that its wireless  strategy will allow retention of
the PCS license pursuant to its terms.

      Other expenses and net loss.  Depreciation  and  amortization and interest
expense on a consolidated  basis is expected to be higher in 1998 as compared to
1997 resulting  primarily from additional  depreciation on 1997 and 1998 capital
expenditures and additional outstanding long-term debt. As a result, the Company
expects that it will continue to record net losses in 1998 and into 1999.

                              RESULTS OF OPERATIONS
<TABLE>
      The following table sets forth selected  Statement of Operations data 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)
<CAPTION>
                                                                                               Percentage Change
                                                                                          Nine Months   Three Months
                                        Nine Months Ended      Three Months Ended          1998 vs.       1998 vs.
                                          September 30,           September 30,           Nine Months   Three Months
(Unaudited)                              1997        1998        1997        1998             1997           1997
                                         ----        ----        ----        ----             ----           ----
<S>                                  <C>         <C>         <C>         <C>              <C>             <C>
Statement of Operations Data:
Revenues
     Telecommunications services        75.3%       73.6%       76.6%       72.5%             7.6%           2.5%
     Cable services                     24.6%       23.2%       22.9%       23.1%             4.2%           9.0%
     Local access services               0.1%        3.2%        0.5%        4.4%         2,176.9%         976.1%
----------------------------------------------------------------------------------------------------------------------
Total revenues                         100.0%      100.0%      100.0%      100.0%            10.1%           8.3%
     Cost of sales and services         51.4%       47.0%       49.8%       47.3%             0.6%           2.8%
     Selling, general and
        administrative expenses         31.8%       36.4%       33.3%       36.7%            25.8%          19.1%
     Depreciation and amortization      10.4%       13.6%       10.0%       13.3%            43.3%          45.0%
----------------------------------------------------------------------------------------------------------------------
Operating income                         6.4%        3.0%        6.9%        2.7%          (47.1)%        (57.0)%
Net loss before income taxes           (1.2)%      (4.9)%      (0.9)%      (5.2)%           341.6%         513.4%
Net loss                               (1.0)%      (3.8)%      (1.3)%      (5.2)%           229.8%         168.9%
Other Operating Data:
Cable operating income (1)              26.3%       12.9%       19.5%       13.0%          (48.8)%        (27.4)%
Local operating loss (2)             (640.4)%    (148.9)%    (165.1)%    (105.5)%           429.3%         587.9%
<FN>
--------------------------
(1) Computed as a percentage of total cable services  revenues.  
(2) Computed as a percentage of total local access services revenues.
</FN>
</TABLE>


                                       19                            (Continued)
<PAGE>
THREE MONTHS ENDED  SEPTEMBER 30, 1998  ("1998")  COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997 ("1997")

      REVENUES.  Total  revenues  increased  8.3% from $58.0  million in 1997 to
$62.8 million in 1998.  Long  distance  transmission  revenues from  commercial,
residential,  governmental, and other common carrier customers remained constant
at  $41.3  million  in 1998 as  compared  to  1997.  Interstate  minutes  of use
increased 3.9% to 166.6 million minutes in 1998 while intrastate  minutes of use
increased 2.6% to 35.7 million  minutes in 1998. The Company's  average rate per
minute on long distance traffic decreased 7.8% from $0.180 per minute in 1997 to
$0.166  per  minute  in 1998.  The rate per  minute  decrease  offset  increased
interstate  minutes of usage  resulting in constant long  distance  transmission
revenues in 1998 as compared to 1997.  Revenues  derived from the  Company's new
Internet service  offerings  totaled $1.1 million in 1998 as compared to $29,000
in 1997.

      Cable revenues  increased 9.0% from $13.3 million in 1997 to $14.5 million
in 1998.  The number of homes passed by the cable systems and basic  subscribers
increased approximately 7,140 and 4,130, respectively,  at September 30, 1998 as
compared to September 30, 1997. Increases  attributable to subscriber growth and
rate increases offset pay-per-view and premium service revenue decreases.

      The Company began offering  competitive local access services in Anchorage
in  September  1997,  with 1998  revenues  totaling  $2.7 million as compared to
$255,000 in 1997.

      COST OF SALES AND  SERVICES.  Cost of sales  and  services  totaled  $28.9
million in 1997 and $29.7 million in 1998.  As a percentage  of total  revenues,
cost of sales and services  decreased  from 49.8% in 1997 to 47.3% in 1998.  The
decrease in cost of sales and services as a percentage  of revenues is primarily
attributed  to: 1)  reductions  in access  charges  paid by the Company to other
carriers  for  distribution  of its  traffic,  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, and 3) changes in the Company's product mix.

      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  general  and
administrative  expenses  increased  19.2% from  $19.3  million in 1997 to $23.0
million in 1998, and, as a percentage of total revenues, increased from 33.3% in
1997 to  36.7%  in  1998.  This  increase  resulted  primarily  from  operating,
engineering,  sales, customer service and administrative costs totaling $627,000
in 1997 as compared to $3.4 million in 1998  associated with the Company's local
access  services  segment which  initiated  service in September 1997. The third
quarter increase was necessary to provide the operations,  engineering, customer
service and support  infrastructure  necessary to accommodate expected growth in
the Company's local access services customer base.

      DEPRECIATION  AND  AMORTIZATION.  Depreciation  and  amortization  expense
increased  43.1% from $5.8 million in 1997 to $8.3 million in 1998. The increase
is attributable to the Company's $64.6 million  investment in facilities  during
1997 for which a full year of depreciation  will be recorded during 1998 and the
1998 facilities investment of $130.2 million through September 30.



                                       20                            (Continued)
<PAGE>
      INTEREST EXPENSE, NET. Interest expense, net of interest income, increased
8.7% from $4.6 million in 1997 to $5.0 million in 1998.  This increase  resulted
from  increases in the  Company's  average  outstanding  indebtedness  resulting
primarily  from the purchase  and  construction  of new long  distance and local
telecommunication  equipment and  facilities and expansion and upgrades of cable
television facilities.

      INCOME TAX BENEFIT.  Income tax benefit increased from $192,000 in 1997 to
$1.2  million in 1998 due to an increase in the net loss before  income taxes in
1998 as compared  to 1997.  The  Company's  effective  income tax rate  remained
constant at approximately 36.2% in 1998 as compared to 1997.

NINE MONTHS  ENDED  SEPTEMBER  30, 1998  ("1998")  COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997 ("1997")

      REVENUES.  Total revenues  increased  10.1% from $167.0 million in 1997 to
$183.9 million in 1998.  Long distance  transmission  revenues from  commercial,
residential,  governmental,  and other common carrier  customers  increased 5.0%
from $116.9 million in 1997 to $122.8 million in 1998. This increase reflected a
7.2% increase in interstate  minutes of use to 496.4 million  minutes and a 2.4%
increase in intrastate  minutes of use to 103.6 million  minutes.  Long distance
revenue  growth in 1998 was  largely due to a 12.0%  increase  in revenues  from
other common  carriers  (principally  MCI and Sprint) and private line services,
from $55.2 million in 1997 to $61.8 million in 1998. The Company's  average rate
per minute on long  distance  traffic  decreased  4.5% from $0.177 per minute in
1997  to  $0.169  per  minute  in  1998  primarily  due to the  introduction  of
additional discounted  residential,  commercial and international calling plans.
Revenues derived from the Company's new Internet service  offerings totaled $3.0
million in 1998 as compared to $88,000 in 1997.  Local access services  revenues
totaled $5.8 million in 1998 as compared to $255,000 in 1997.  Product sales and
network  services  revenues  increased  15.6% from $7.7  million in 1997 to $8.9
million in 1998,  primarily  due to  increased  network  services  revenues  and
SchoolAccess revenues in 1998 as compared to 1997.

      Cable revenues  increased 4.1% from $41.0 million in 1997 to $42.7 million
in 1998.  The number of homes passed by the cable systems and basic  subscribers
increased approximately 7,140 and 4,130, respectively,  at September 30, 1998 as
compared to September 30, 1997. Increases  attributable to subscriber growth and
rate increases offset pay-per-view and premium service revenue decreases.

      COST OF SALES AND  SERVICES.  Cost of sales  and  services  totaled  $85.8
million in 1997 and $86.4 million in 1998.  As a percentage  of total  revenues,
cost of sales and services  decreased  from 51.4% in 1997 to 47.0% in 1998.  The
decrease in cost of sales and services as a percentage  of revenues is primarily
attributed  to: 1) a refund  received  in the  first  quarter  of 1998  totaling
approximately  $1.1  million  from a local  exchange  carrier  in respect of its
earnings that exceeded regulatory requirements,  2) reductions in access charges
paid by the  Company to other  carriers  for  distribution  of its  traffic,  3)
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, and 4) changes in the Company's product
mix.



                                       21                            (Continued)
<PAGE>
      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  general  and
administrative  expenses  increased  26.0% from  $53.1  million in 1997 to $66.9
million in 1998, and, as a percentage of revenues,  increased from 31.8% in 1997
to 36.4% in 1998. This increase resulted from:


             -  Operating,    engineering,    sales,    customer   service   and
                administrative  costs  totaling $1.8 million in 1997 as compared
                to $8.8  million in 1998  associated  with the  Company's  local
                access  services  segment which  initiated  service in September
                1997.

             -  Increased  telecommunication  segment  operations,  engineering,
                general and  administrative  expenses  totaling $30.3 million in
                1998 as  compared  to $26.9  million  in 1997  due to  increased
                personnel  and other  costs in  customer  service,  engineering,
                operations,  accounting,  human resources, legal and regulatory,
                and  management   information  services.   Cost  increases  were
                associated  with  the  development,   introduction,  or  planned
                introduction, and support of new products and services including
                rural message and data telephone services, PCS services, digital
                video  services,  cable modem services,  and Internet  services.
                Increased customer service expenses were associated with support
                of  increased  sales  volumes  and  expenditures  necessary  for
                continuing  integration of customer  service  operations  across
                product lines.

             -  Increased   telecommunication  segment  sales,  advertising  and
                telemarketing  costs  totaling $10.4 million in 1997 compared to
                $12.8 million in 1998.  Increased  selling costs were associated
                with the  introduction  of  various  marketing  plans  and other
                proprietary  rate  plans and cross  promotion  of  products  and
                services.

             -  Increased  cable  segment  selling,  general and  administrative
                costs  totaling  $14.0 million in 1997 compared to $15.0 million
                in 1998,  primarily  due to  increased  sales,  advertising  and
                telemarketing costs.

      DEPRECIATION  AND  AMORTIZATION.  Depreciation  and  amortization  expense
increased  42.9%  from  $17.5  million  in 1997 to $25.0  million  in 1998.  The
increase is attributable to the Company's $64.6 million investment in facilities
during 1997 for which a full year of  depreciation  will be recorded during 1998
and the 1998 facilities investment of $130.2 million through September 30.

      INTEREST EXPENSE, NET. Interest expense, net of interest income, increased
15.7%  from  $12.7  million  in 1997 to $14.7  million  in 1998.  This  increase
resulted  from  increases  in the  Company's  average  outstanding  indebtedness
resulting  primarily from the purchase and construction of new long distance and
local  telecommunication  equipment and facilities and expansion and upgrades of
cable television facilities.

      INCOME TAX BENEFIT. Income tax benefit increased from $0.7 million in 1997
to $3.3  million in 1998 due to an increase in the net loss before  income taxes
in 1998 as compared to 1997. The Company's  effective  income tax rate increased
from  36.2%  in 1997 to  36.6%  in 1998  due to the  increased  net loss and the
proportional amount of items that are nondeductible for income tax purposes.



                                       22                            (Continued)
<PAGE>
      As a result of its  acquisition  of the Cable  Companies,  the Company has
available  net operating  loss  carryforwards  for income tax purposes  totaling
$37.6  million  at  September  30,  1998  which  begin to  expire in 2004 if not
utilized. The Company's utilization of these carryforwards is subject to certain
limitations pursuant to section 382 of the Internal Revenue Code.

      The amount of deferred tax asset considered realizable,  however, could be
reduced  in the near term if  estimates  of future  taxable  income  during  the
carryforward  periods are  reduced.  The Company  estimates  that its  effective
income tax rate for financial  statement  purposes will be approximately  37% in
1998. The Company  expects that its  operations  will generate net income before
income  taxes  during  the  carryforward  periods to allow  utilization  of loss
carryforwards for which no allowance has been established.

                 FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
<TABLE>
      The following chart provides  selected  unaudited  statement of operations
data from the Company's quarterly results of operations during 1997 and 1998:
<CAPTION>
                                                       General                                             
                                                  Communication, Inc.                GCI, Inc.
                                          ----------------------------        -----------------------
(Unaudited)                                      First         Second          Third          Fourth           Total
                                                Quarter        Quarter        Quarter         Quarter           Year
                                          ------------------------------------------------------------------------------
                 1997                                   (Dollars in thousands, except per share amounts)
                 ----
<S>                                     <C>                    <C>            <C>              <C>          <C> 
Revenues
  Telecommunications                      
   Services                             $        39,225         42,131         44,407          42,271        168,034
  Cable services                                 13,656         14,055         13,294          14,160         55,165
  Local access services                             ---            ---            255             355            610
                                          ------------------------------------------------------------------------------
Total revenues                                   52,881         56,186         57,956          56,786        223,809
Operating income                                  3,292          2,786          4,023           5,518         15,619
  Extraordinary item, net of income 
   tax benefit                                      ---            ---           433               88            521
Net income (loss)                       $         (525)          (832)          (772)             102        (2,027)
                                          ==============================================================================
Basic net earnings (loss) per share     $       (5,250)        (8,320)        (7,720)           1,020       (20,270)
                                          ==============================================================================
Diluted net earnings (loss) per share   $       (5,250)        (8,320)        (7,720)           1,020       (20,270)
                                          ==============================================================================


                                       23                            (Continued)
<PAGE>
                                                                            GCI, Inc.
                                          ------------------------------------------------------------------------------
(Unaudited)                                      First         Second          Third          Fourth           Total
                                                Quarter        Quarter        Quarter         Quarter           Year
                                          ------------------------------------------------------------------------------
                 1998                                   (Dollars in thousands, except per share amounts)
                 ----
Revenues
  Telecommunications
   Services                             $        42,937         46,852         45,538                        135,327
  Cable services                                 14,201         14,041         14,484                         42,726
  Local access services                           1,014          2,048          2,744                          5,806
                                          ------------------------------------------------------------------------------
Total revenues                                   58,152         62,941         62,766                        183,859
Operating income                                  2,437          1,447          1,730                          5,614
Net loss                                $       (1,616)        (2,066)        (2,076)                        (5,758)
                                          ==============================================================================
Basic net loss per share                $      (16,160)       (20,660)       (20,760)                       (57,580)
                                          ==============================================================================
Diluted net loss per share              $      (16,160)       (20,660)       (20,760)                       (57,580)
                                          ==============================================================================
</TABLE>

      Total  revenues  for the  quarter  ended  September  30,  1998 were  $62.8
million,  representing a 0.2% decrease from total revenues in the second quarter
of 1998 of $62.9  million.  This  decrease in total  revenues  resulted from the
following:

             -  A 3.0% decrease in telecommunications services revenues to $45.5
                million in the third quarter of 1998 from $46.9  million  during
                the second quarter of 1998.  This decrease is attributable to 1)
                a reduction in the average rate per minute billed by the company
                during  the third  quarter  of 1998 of  approximately  $0.003 as
                compared  to the second  quarter of 1998 (a 1.8%  decrease),  2)
                reduced  SchoolAccess  revenues  as  expected  during the summer
                months while public  schools are not in session,  and 3) reduced
                product  sales and network  services  revenues.  Decreases  were
                offset in part by an  increase  in minutes  of  traffic  carried
                during the third  quarter of 1998 of  approximately  3.9 million
                minutes  as  compared  to the  second  quarter  of  1998 (a 1.9%
                increase).

             -  An increase in local access services  revenues totaling $696,000
                in the third  quarter of 1998 as compared to the second  quarter
                of 1998 (a 34.0% increase).

             -  An increase in cable services  revenues totaling $443,000 in the
                third quarter of 1998 as compared to the second  quarter of 1998
                (a 3.2% increase).

      Cost of sales and  services  for the  quarter  ended  September  30,  1998
totaled $29.7 million, representing a 1.0% increase from total cost of sales and
services in the second quarter of 1998 of $29.4 million. Increased cost of sales
resulted primarily from a change in the Company's product mix.

      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 winter months because  consumers  spend more time at home and tend
to watch more television during these months.  Local service  operations are not
expected to exhibit 


                                       24                            (Continued)
<PAGE>
significant  seasonality.   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

      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.  This new standard requires  companies to disclose
segment data based on how management makes decisions about allocating  resources
to segments and how it measures segment performance. SFAS 131 requires companies
to  disclose  a  measure  of  segment  profit  or  loss,   segment  assets,  and
reconciliations to consolidated totals. It also requires entity-wide disclosures
about a company's  products and services,  its major  customers and the material
countries  in which it holds  assets  and  reports  revenues.  Statement  131 is
effective for financial  statements  for periods  beginning  after  December 15,
1997.  Management of the Company  expects that adoption of SFAS No. 131 will not
have a  material  impact on the  Company's  year-end  1998  financial  statement
disclosures.

      In February  1998,  the  Accounting  Standards  Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement  Benefits." SFAS
132  standardizes the disclosure  requirements  for pensions and  postretirement
benefits where practical.  It also eliminates  certain  disclosures and requires
additional information on changes in benefit obligations and fair values of plan
assets.  The  Company  will  adopt  SFAS  132 in  its  1998  year-end  financial
statements.  SFAS  132 is not  expected  to  have a  significant  effect  on the
Company's pension and postretirement benefit plan disclosures.

      In April 1998,  the American  Institute of  Certified  Public  Accountants
(AICPA) issued  Statement of Position  ("SOP") 98-5,  "Reporting on the costs of
Start-Up  Activities".  SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs and requires costs of start-up  activities
and  organization  costs to be expensed as incurred.  SOP 98-5 is effective  for
financial  statements  for fiscal  years  beginning  after  December  15,  1998.
Management of the Company expects that the adoption of SOP 98-5 will result in a
one-time  expense of  approximately  $375,000  (net of income tax effect) in the
first  quarter of 1999  associated  with the write-off of  unamortized  start-up
costs.

                         LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  first three  quarters of 1998  ("1998")  cash  provided by
operating  activities totaled $11.3 million, net of changes in the components of
working capital.  Sources of cash during 1998 included  long-term  borrowings of
$89.2 million and payments  received on notes receivable  totaling $1.1 million.
The Company's expenditures for property and equipment, including construction in
progress,  totaled $40.7 million and $130.2 million for the  nine-month  periods
ended  September  30,  1997 and 1998,  respectively.  Uses of cash  during  1998
included  repayment  of  $494,000 of  long-term  borrowings  and  capital  lease
obligations,  payment of deferred debt issuance costs totaling $1.6 million,  an
increase  in  other   assets  of  $3.0   million,   and   purchases  of  General
Communication,  Inc.'s  common stock to fund  deferred  compensation  agreements
totaling $568,000.



                                       25                            (Continued)
<PAGE>
      Net receivables increased $6.8 million from December 31, 1997 to September
30, 1998 resulting  from  increased  revenues in 1998 as compared to 1997 and an
increase in refundable income taxes in 1998.

      Accrued  interest  decreased  $3.6  million  from  December  31,  1997  to
September  30, 1998  resulting  from payment of Senior Note accrued  interest in
January 1998  totaling $8.8  million,  offset by interest  accrued on additional
indebtedness outstanding during 1998 as compared to December 31, 1997.

      Working  capital at  September  30, 1998  totaled  $9.5  million,  a $14.5
million  increase from the working  capital  deficit of $5.0 million at December
31, 1997. The increase in working capital is primarily  attributed to 1) payment
of accounts  payable at December 31, 1997 with cash  generated by 1998 operating
activities, 2) payment of amounts accrued for facilities expansion and equipment
at December 31, 1997 with cash generated by 1998  operating  activities and cash
obtained  through the  Company's  credit  agreements,  and 3) increases in trade
accounts receivable and refundable income taxes.

      On January 27, 1998 Alaska  United  closed a $75 million  project  finance
facility ("Fiber  Facility") to construct a fiber optic cable system  connecting
Anchorage, Fairbanks, Valdez, Whittier, Juneau and Seattle (see notes 3 and 4 to
the accompanying Notes to Interim Condensed  Consolidated Financial Statements).
The Fiber Facility provides up to $75 million in construction financing and will
bear  interest  at either  Libor  plus 3.0%,  or at the  Company's  choice,  the
lender's  prime rate plus 1.75%.  The  interest  rate will decline to Libor plus
2.5%-2.75%,  or at the Company's choice, the lender's prime rate plus 1.25%-1.5%
after the project  completion  date and when the loan balance is  $60,000,000 or
less.  Alaska  United is  required to pay a  commitment  fee equal to 0.375% per
annum on the unused portion of the  commitment.  The Fiber Facility is a 10-year
term  loan that is  interest  only for the first 5 years.  The  facility  can be
extended  to a 12 year  term  loan at any time  between  the  second  and  fifth
anniversary  of closing the  facility if the Company can  demonstrate  projected
revenues  from  certain  capacity  commitments  will  be  sufficient  to pay all
operating costs, and interest and principal  installments  based on the extended
maturity. $54.2 million was borrowed under the facility at September 30, 1998.

      The Fiber Facility  contains,  among others,  covenants  requiring certain
intercompany  loans and  advances in order to maintain  specific  levels of cash
flow  necessary to pay operating  costs,  interest and  principal  installments.
Additional  covenants  pertain  to the  timely  completion  of  certain  project
construction  milestones.  The Fiber  Facility  also  contains a guarantee  that
requires,  among other terms and conditions,  Alaska United complete the project
by the completion  date and pay any  non-budgeted  costs of the project.  All of
Alaska United's assets, as well as a pledge of the partnership interests' owning
Alaska United, collateralize the Fiber Facility.

      The Alaska United  project will provide a high  capacity  fiber optic link
between  Fairbanks,  Anchorage,  Valdez,  and Juneau,  Alaska,  and the lower 48
states through Seattle,  Washington. Its initial capacity will be more than five
times the capacity of Alaska's  current  undersea fiber to the lower 48. After a
preliminary route survey was completed and initial cost components determined, a
detailed sea floor survey was commissioned. On August 1, 1997 the Company issued
a  down  payment  to  Tyco  Submarine  Systems,   Inc.  to  begin  construction.
Manufacturing  of the cable and its  electronics  has been  completed  and cable
deployment  commenced  in September  1998.  Cable  


                                       26                            (Continued)
<PAGE>
deployment is expected to be complete in December 1998. Testing will occur after
that, and services are expected to commence in January or February 1999.

      The Company was  notified  in August  1998 that a potential  customer  for
Alaska United's fiber services  (AT&T) has selected  another carrier to meet its
immediate needs for additional fiber capacity to and from Alaska.  AT&T informed
the Company  that it elected to lease a minimum  amount of capacity  for a short
term and that the Company will have the opportunity to provide fiber capacity in
the future.  According to public  announcements  made by the other carrier,  the
other carrier's  facilities  were under  construction at September 30, 1998 with
service  expected to commence in 1999. The Company will use  approximately  half
the capacity of the Alaska United project to carry its own traffic,  in addition
to its existing  owned and leased  facilities.  While the Alaska United  project
would have  received a financial  benefit  from  carrying  AT&T's  traffic,  the
project  can  be  supported   solely  by  the  Company's  own  network  capacity
requirements.  GCI  continues to pursue  opportunities  to sell  capacity on its
system to AT&T and others.

      The Company 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 launch of the  satellite  in August 1998
failed.  The  Company  did not  assume  launch  risk  and the  launch  has  been
rescheduled  for the fourth  quarter of 1999. The Company will continue to lease
transponder  capacity until the delivery of the  transponders on the replacement
satellite. The balance payable upon expected delivery of the transponders during
the fourth  quarter of 1999 in addition to the $9.1 million  deposit  previously
paid totals approximately $43.5 million.

      The  Company's   expenditures   for  property  and  equipment,   including
construction  in progress,  totaled  $130.2 million and $40.7 million during the
first three  quarters of 1998 and 1997,  respectively.  The Company  anticipates
that its  capital  expenditures  in 1998 may  total as much as  $170.0  million,
including  approximately  $125.0  million  for new  undersea  fiber  optic cable
facilities.  Planned capital expenditures over the next five years include those
necessary  for  continued  expansion of the  Company's  long  distance and local
exchange  facilities,  the  development and  construction of a PCS network,  and
continued  upgrades to its cable television plant. The Company expects to pay an
additional $43.5 million to purchase seven satellite  transponders in late 1999.
Sources of funds for these planned capital  expenditures are expected to include
internally  generated  cash  flows and  borrowings  under the  Company's  credit
facilities  including  borrowings  under the new $75 million  project  financing
described above.

      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.  Management  anticipates that cash flow generated by the
Company and borrowings  under its credit  facilities  will be sufficient to fund
capital expenditures and its working capital requirements.  Should cash flows be
insufficient  to  support  additional  borrowings,  such  investment  in capital
expenditures will likely be reduced.

                                 Year 2000 Costs

      The "Year 2000" issue affects the Company's  installed  computer  systems,
network elements,  software  applications,  and other business systems that have
time-sensitive  programs  that may not properly  reflect or  recognize  the year
2000. Because many computers and computer  applications 


                                       27                            (Continued)
<PAGE>
define  dates by the last  two  digits  of the  year,  "00" may not be  properly
identified  as the year 2000.  This error  could  result in  miscalculations  or
system failures.

      The  Company  has  established  a year 2000 task force to  coordinate  the
identification,  evaluation,  and  implementation  of changes to  financial  and
operating  computer  systems and  applications  necessary to achieve a year 2000
date   conversion  with  no  effect  on  customers  or  disruption  to  business
operations.  These  actions  are  necessary  to  insure  that  the  systems  and
applications will recognize and process the year 2000 and beyond. Major areas of
potential  business  impact have been  identified  and are being  assessed,  and
initial  conversion  efforts  are  underway  using both  internal  and  external
resources.

      The Year 2000 issue may also affect the systems  and  applications  of the
Company's  customers  and  vendors.  Non-compliance  of  customers,  vendors and
business partners systems and applications may affect the Company through common
electronic  interfaces to switching,  billing and other systems.  The Company is
contacting  others  with whom it conducts  business  to receive the  appropriate
warranties  and  assurances  that those third parties are, or will be, Year 2000
compliant.

      The total cost of modifications and conversions is not known at this time.
The Company's  management estimates that the incremental cost of compliance over
the cost of normal  software  upgrades  and  replacements  and its effect on the
Company's future results of operations totals approximately $1.3 million in 1998
and $4  million  in 1999,  subject  to  further  review  as part of the  ongoing
detailed conversion planning. The cost of modifications and conversions is being
expensed as incurred. 1998 Costs incurred through September 30 totaled $687,000.

      If  compliance  is not  achieved in a timely  manner,  the Year 2000 issue
could have a material effect on the Company's  operations.  However, the Company
is focusing on identifying and addressing all aspects of its operations that may
be  affected  by the  Year  2000  issue  and is  addressing  the  most  critical
applications  first. As a result, the Company's  management does not believe its
operations will be materially adversely affected.

      Contingency  plans are being prepared to handle the most reasonably likely
worst case  scenarios.  The Company  expects to have  completed  and tested such
plans by the end of the second quarter of 1999.

      Funds for year 2000 costs are expected to be provided  from the  Company's
operating  activities  and  credit  facilities.   Management  must  balance  the
requirements for funding  discretionary  capital expenditures with required year
2000 efforts given its limited resources.

                                    Inflation

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



                                       28                            (Continued)
<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, 1998 - None


           ---------------------
           * Filed herewith.



                                       29
<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 12, 1998                   By:   /s/  Ronald A. Duncan
-----------------------------------                -----------------------------
               (Date)                              Ronald A. Duncan, President
                                                   and Director
                                                   (Principal Executive Officer)



         November 12, 1998                   By:   /s/  G. Wilson Hughes
-----------------------------------                -----------------------------
               (Date)                              G. Wilson Hughes, Vice 
                                                   President and Director



         November 12, 1998                   By:   /s/  John M. Lowber
-----------------------------------                -----------------------------
               (Date)                              John M. Lowber, Secretary, 
                                                   Treasurer and Director
                                                   (Chief Financial and
                                                   Accounting Officer)


                                       30